Twitch-like Penguin Esports never achieved a substantial market share in China, but Tencent already owns the country’s two largest game streaming platforms, Douyu and Huya, via previous acquisitions. Together, the two services commanded over 70% of the game streaming market in China, said China’s market regulator last July.

The termination of Penguin Esports is likely due to a handful of challenges. The platform faces rising competition from Bilibili, which is known for its popular user-generated video streaming service, and Kuaishou, the short video app that’s the nemesis of Douyin (TikTok’s Chinese version).

Both Bilibili and Kuaishou, which respectively has a current market cap of $10 billion and $40 billion, have been investing heavily in live hosts and exclusive streaming rights. On top of that, the ongoing gaming license freeze in China has intensified competition between platforms as hosts are running out of content to talk about.

Lastly, the combined monopolistic position of Douyu and Huya makes Penguin Esports look superfluous inside Tencent. And one should be reminded that Tencent also owns a stake in both Bilibili and Kuaishou.

Loyal users will lament the end of Penguin Esports and some employees from the department might be let go. But overall, Tencent has little to lose by closing the platform down.

The bigger setback for Tencent is perhaps Beijing’s move to block the merger between Douyu and Huya, which was proposed in August 2020. Amid the Chinese government’s wide-ranging actions to rein in the power of internet giants, the decision didn’t come as a surprise.

“This has the effect of eliminating or restricting competition,” the authority said of the potential merger. “It’s not conducive to fair market competition, or the healthy and sustainable development of the online gaming and game streaming industries.”