Tencent in Talks With Meta to Sell Quest 2 in China
Major news outlets including Reuters and the Wall Street Journal are reporting that Chinese tech and entertainment conglomerate Tencent is currently in talks to sell Meta Quest 2 VR headsets in the Chinese market. The Reuters report quotes three people who are familiar with the matter.
According to the reports, these talks began last year and have been going on in recent months. A source with knowledge of the matter is quoted as saying that these talks are still in the early stages and the two parties are yet to agree on the details.
The discussions were initially reported by The Wall Street Journal and the Chinese outlet 36Kr.
Tencent is currently the biggest video game publisher in the world and had set its eyes on developing virtual reality hardware and software but reports emerged in the last few days that the company had decided to scrap its virtual reality project and had told staff in the VR team to find new employment opportunities due to concerns about profitability and the cost of investment.
The Chinese media outlet 36Kr reports that only a few employees will stay at Tencent’s fledgling XR division to assist in the launch of the Meta headset.
Both Meta and Tencent are reportedly collaborating for the localization and adaptation of the software for the market in China.
Both Meta and Tencent have previously entered into partnerships for Chinese market offerings. Tencent entered into a partnership with Nintendo in 2019 for the distribution of Nintendo Switch in the Chinese market. In 2018, Meta launched the Oculus Go headset in the Chinese market under the name “Mi VR Standalone” in collaboration with Chinese electronics giant Xiaomi.
According to the latest reports, the two companies have been making preparations for the launch of Quest in China for the past four months. These preparations are reportedly being steered by the Qualcomm executive who was also in charge of the company’s partnership with Nintendo. In spite of these plans, it still isn’t clear whether the Quest 2 headset will actually be released in China. Tencent is yet to comment on the these rumors.
The latest reports highlight Tencent’s determined but largely fruitless efforts at developing market-ready virtual reality hardware. Tencent’s strengths have typically been in software and with its hardware efforts stillborn, it views its partnership with Meta as a pathway into the VR hardware market without having to build its own hardware.
Tencent has had past forays into the VR hardware market. It attempted to acquire the Chinese virtual reality headset maker Pico but it was eventually outbid by TikTok parent company, Bytedance.
Bytedance reportedly coughed out $1.3 billion for the acquisition of Pico although the VR hardware manufacturer was valued at just $360 million at the time.
Tencent also attempted to build a foundation for its VR hardware development ambitions with the acquisition of two other companies, but these efforts also came to naught. Tencent’s next project to create a separate XR division with 300 employees was also unsuccessful with reports emerging last week that the company was scrapping that project which led to the laying off of most of the skilled workers working at the department.
Tencent’s main strength in the XR market is its software portfolio. The 36Kr reports that the company could be planning its own virtual reality content and that some of this content might be launched in the Western markets.
A partnership between Meta and Tencent will definitely result in some power shifts. The Chinese market is currently dominated by Bytedance with its Pico headsets and the entry of the Meta headsets will create some serious competition.
Bytedance is yet to launch in the U.S. market and its Pico headset is only sold in Europe and select Asian markets.