Trump’s WeChat ban could affect everything from Spotify to League of Legends

Trump’s WeChat ban could affect everything from Spotify to League of Legends

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Last night, the Trump administration issued a pair of stunning executive orders against Chinese technology companies, banning US deals with the companies after a deadline of September 20th. Most of the immediate focus has been on TikTok, which was targeted through its parent company ByteDance — but the second-order could have a far more unpredictable impact, targeting text app WeChat and its parent company Tencent.

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Also Read: TikTok Must Be A Microsoft-owned Company Or Be Blocked In The US

Tencent is one of the largest tech companies in the world, and it’s spent the last few years buying stakes in video game studios, music companies, and social media apps. It’s bigger than ByteDance, and with significant ownership stakes in Snap, Blizzard, Spotify, and others, it’s far more embedded in the global tech industry. Yesterday’s order made those connections much more dangerous, even if they fall outside the narrow legal consequences of the order. As Tencent responds and its business partners are forced to choose sides, the consequences could be far broader than the White House realizes — and far more damaging to the average consumer.

For now, the main concern is WeChat, Tencent’s China-based chat app. The executive order is intended to target WeChat specifically, an anonymous White House official told LA Times reporter Sam Dean. However, we won’t know until the 45-day grace period is up which “transactions” are prohibited — for instance, whether it applies to money sent through WeChat or whether it will apply to money transferred between Tencent subsidiaries. “We are reviewing the executive order to get a full understanding,” a Tencent representative told The New York Times.

WeChat is the dominant chat app in China and a ubiquitous tool for payments, shopping, and business transactions. Many companies large and small are run almost entirely through it, and its immense footprint in China has led to some spillover usage in the United States. (Analysts estimate there are around 1.5 million US WeChat users, compared to 1 billion in China.) WeChat is also deeply embedded in China’s various systems of censorship and surveillance, and there are real security concerns for the minority of users outside China. If all the order does is block Americans’ ability to use WeChat, the impact will be fairly limited.

But even if President Trump means to limit the impact to WeChat, it’s not clear he’ll be able to. The order’s language is broad, invoking the International Emergency Economic Powers Act to prohibit “any transaction that is related to WeChat by any person, or concerning any property, subject to the jurisdiction of the United States, with Tencent Holdings Ltd, or any subsidiary of that entity, as identified by the Secretary of Commerce.” (That bolding is ours.) And we won’t know how strict the Department of Commerce will be about enforcing that rule until the enforcement starts.

Also Read: Trump threatens TikTok will be ‘close down’ on September unless an American company buys it

Much of the impact will also be out of Trump’s control. We don’t know how banks and app stores will respond to the order or how Tencent itself is likely to retaliate. Any business with a Tencent ownership stake is potentially implicated since an abrupt departure of Tencent from the market could throw their financial situations into chaos in a global economic crisis. It’s hard to say precisely what the impact will be, but the sheer scope of the company’s investments shows how ugly things could get.

Here is a non-exhaustive list of the companies and properties that Tencent owns or has investments in:

  • Tencent owns 100 percent of Riot Games, the developer of League of Legends
  • Tencent is the largest minority owner in Fortnite and Unreal Engine developer Epic Games, with a 40 percent stake
  • Tencent owns more than 80 percent of Supercell, the studio behind Clash of Clans
  • Tencent publishes the mobile version of PUBG in China and owns more than 11 percent of developer Bluehole
  • Tencent has single-digit stakes in various game studios, including Blizzard, Ubisoft, and PlatinumGames
  • There’s another Tencent messaging app called QQ with several hundred million users, although it predates WeChat and originated as an ICQ-style instant messenger service for Windows
  • Tencent’s production company and distributor, Tencent Pictures, is involved in major Hollywood productions like Wonder Woman, Venom, Terminator: Dark Fate, and the upcoming Top Gun: Maverick. It also acts as a major film distributor within China and owns minority stakes in a range of smaller production companies.
  • Last year, Tencent struck a $1.5 billion five-year deal with the NBA to stream its games in China
  • Snapchat owner Snap sold a 12 percent stake to Tencent in 2017
  • Tencent owns about 14 percent of Kakao, which runs the Kakao Games platform and Kakao Talk, the most popular chat app in South Korea
  • This year, Tencent bought a 10 percent stake in Universal Music Group
  • Tencent has a 9 percent stake in Spotify, with the two partnerings on Tencent Music in China

To be clear, Trump’s order doesn’t mean that the new Top Gun will instantly disappear from the release schedule or that Snap will be kicked off the App Store. But doing business with Tencent just got much more complicated, and a lot of the companies’ deals may fall through as a result. That could mean the NBA losing hundreds of millions of dollars in the middle of a pandemic that has left many team organizations scrambling for cash — or throwing streaming payments into chaos at a time when musicians are unable to tour.

The impact is particularly serious in gaming. If banks stop transmitting payments to Tencent, then companies like Riot and Supercell could be affected immediately — and games like League of Legends and Clash of Clans could face the kind of operational problems they’ve never dealt with before. Even if the White House doesn’t intend to remove them from app stores, those decisions will ultimately be made by Apple and Google — and as we saw in the Huawei fiasco, they can be notoriously gun-shy when it comes to sanctions law.

Also Read: League of Legends world championship will be held in Shanghai

It’s also not clear whether a limited ban makes sense. If the ban is limited to WeChat, the obvious question becomes why the Trump administration would also be comfortable with Tencent having such deep involvement in so many businesses that operate in the US. The concerns expressed over TikTok sending user data to China could surely apply to League of Legends and beyond, for example.

Also Read: Trump Says Yes To Microsoft TikTok Deal (T&C Apply)

Even if the impact is limited to WeChat, it would put Apple in a uniquely difficult position. The company has been highlighting WeChat in its keynotes and product demonstrations for years now — even when it’s primarily targeting a Western audience. If Apple is forced to remove WeChat from the App Store — as it likely will be — consumers in China are going to stop buying iPhones. An iPhone without WeChat would be even less useful in China than a Huawei phone without Google is in the West.

The implications of the executive order aren’t fully known yet. But it’s clear that this is a huge provocation against Tencent, and more are likely to follow. While TikTok might get the mainstream attention in the US, the fallout from this attack on WeChat is likely to be far more significant. The Chinese diaspora in the US will find it more difficult to communicate with relatives, and US businesses will find it more difficult to reach Chinese consumers. And if the Trump administration can do this to WeChat, which of Tencent’s other properties could be next?

Keywords: trump wechat, trump wechat ban, wechat banned, wechat ban in us

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