Tencent launches party game 'DreamStar', analysts say poses a threat to NetEase

By Josh Ye

HONG KONG (Reuters) - Chinese tech giant Tencent Holdings on Friday launched "DreamStar", a new party game that has been widely anticipated by users and pegged by analysts to pose a threat to domestic arch rival NetEase.

"DreamStar", in which gamers play as cartoon characters to race in an obstacle course, is seen as Tencent's move to take on NetEase' massively popular game "Egg Party", a surprise hit which has helped lift NetEase shares by more than 40% this year.

JPMorgan analysts said in a note on Thursday that the launch of "DreamStar" could impact NetEase revenue by 2% to 3%. The bank also trimmed its forecast for NetEase revenue for the next two quarters by 4% and 5% respectively.

"Egg Party" is forecast to be on track to earn an annual revenue between 7 billion yuan and 8 billion yuan ($980 million and $1.1 billion) this year, according to a Goldman Sachs note.

As Tencent's answer to "Egg Party", Goldman expects "DreamStar" to earn between 5 billion and 6 billion yuan in its first year.

NetEase's market capitalisation reached $67 billion on Friday, a day after surpassing food delivery giant Meituan to become China's fourth-biggest internet company.

Tencent remains China's biggest internet company. It is the world's biggest video games provider and it operates China's leading social network app WeChat.

Tencent has been in search for new hit gaming titles as competition from other game developers like NetEase and miHoYo, producer of "Genshin Impact", intensifies. Tencent unveiled its most ambitious console title, "Last Sentinel", this month.

($1 = 7.1252 yuan)

(Reporting by Josh Ye; Editing by Tom Hogue)