According to a report from Reuters, Tencent has scrapped an unannounced mobile game based on the popular Nier franchise. The project, in development for nearly two years, was ultimately axed due to difficulties finding a profitable monetization model and disagreements over royalty fees.
According to the original report, sources familiar with the project revealed that a playable internal demo showcasing the game’s combat and story elements had already been created. However, Tencent struggled to identify a suitable monetization strategy to offset the high development costs and licensing fees associated with the Nier IP. The company reportedly did not like Square Enix’s 15% to 20% standard royalty fees, proposing a lower figure below 10%.
While it may not seem like much to give up 15%, you have to remember that Apple and Google take away 30% before that. Considering that you’re only working with 70% of the pie, 15% becomes 21.42% of what’s left. That’s a lot to give up to a company that’s only letting you use their IP. Tencent would try to profit from 55% of the revenue before deducting how much it costs to market and advertise the game.
This cancellation marks a setback for Tencent’s mobile gaming strategy, which has heavily relied on adapting successful console and PC titles for mobile platforms. While past endeavors like PUBG Mobile have proven lucrative, recent releases have fallen short of expectations, prompting Chairman Pony Ma to acknowledge the challenges the company’s gaming business is facing.
Mobile games are no longer cheap to pull off, and not being able to use a popular licensed game will hurt Tencent. Rising development costs, fierce competition, and saturated markets are making it increasingly difficult for companies to profit from licensed IP titles. It’s not like they can just think up another Genshin Impact.
Tencent will likely rely on their other IP mobile games lined up for release in 2024 and 2025, including titles based on Delta Force, Need for Speed, and Assassin’s Creed.
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