Douyu’s shares surged 18 per cent in pre-market trade in New York, while Huya soared 15%. Tencent climbed 2 per cent to a two-week high in Hong Kong.
“As the major shareholder of both platforms, Tencent would benefit because a merger would remove unnecessary competition between them,” Bloomberg Intelligence analyst Vey-Sern Ling said.
“The enlarged scale can also help to drive cost synergies and fend off emerging competitors.”
Tencent and DouYu representatives declined to comment, while Huya spokespeople didn’t respond to requests for comment.
Tencent’s shoring up its home-market position against the backdrop of a Trump administration increasingly hostile toward Chinese tech companies.
WeChat has a limited US presence and Trovo Live, a mobile-focused game-streaming service for American consumers, is only in its initial stages.
China’s game-streaming market is estimated to generate 23.6 billion yuan ($3.4 billion) in revenue this year, according to iResearch. The country’s streaming networks
live and die by the popularity of star players and the virtual tips and gifts that fans buy for them, leading to intense bidding wars for the most-recognized names. Companies
like Google-backed Chushou TV shuttered their services after failing to secure new money, while NetEase Inc.’s CC Live has found a small niche in broadcasting its in-house titles.
Already featuring Tencent’s marquee games like PUBG Mobile and Honor of Kings, Huya and DouYu have established a clear lead as the top two platforms. Nevertheless, revenue growth slowed down for both in recent quarters as users shifted their attention to ByteDance’s Douyin, the Chinese twin to the globally popular TikTok short-video service. A merger would help them lower broadcast and content costs at a time when rival video services like Kuaishou and Bilibili Inc -- both also backed by Tencent -- intensify their efforts to compete for more gaming content.
In April, Tencent bought an additional stake in Huya for about $260 million from Joyy Inc., boosting its voting power in the platform to more than 50%. When asked about the possibility of a merger with Huya, DouYu founder and Chief Executive Officer Chen Shaojie told analysts on a March earnings call: “We believe it’s Tencent’s vision.”