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Tencent Q4 profit disappoints, but cloud and payments gain ground – TechCrunch

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China’s Tencent reported disappointing profits in the fourth quarter on the back of surging costs but saw emerging businesses pick up steam as it plots to diversify amid slackening gaming revenues.

Net profit for the quarter slid 32 percent to 14.2 billion yuan ($2.1 billion), behind analysts’ forecast of 18.3 billion yuan. The decrease was due to one-off expenses related to its portfolio companies and investments in non-gaming segments like video content and financial technology.

Excluding non-cash items and M&A deals, Tencent’s net profit from the period rose 13 percent to 19.7 billion yuan ($2.88 billion). The company has to date invested in more than 700 companies, 100 of which are valued over $1 billion each and 60 of which have gone public.

Quarterly revenue edged up 28 percent to 84.9 billion yuan ($12.4 billion) beating expectations.

The Hong Kong-listed company is best known for its billion-user WeChat messenger but had for years relied heavily on a high-margin gaming business. That was until a months-long freeze on games approvals last year that delayed monetization for new titles, spurring a major reorg in the firm to put more focus on enterprise services, including cloud computing and financial technology.

Tencent has received approvals for eight games since China resumed the licensing process, although its blockbusters PlayerUnknown Battlegrounds and Fortnite have yet to get the green light. The firm also warned of a “sizeable backlog” for license applications in the industry, which means its “scheduled game releases will initially be slower than in some prior years.”

Video games for the quarter contributed 28.5 percent of Tencent’s total revenues, compared to 36.7 percent in the year-earlier period. Despite the domestic fiasco, Tencent remains as the world’s largest games publisher by revenue, according to data compiled by NewZoo. The firm has also gotten more aggressive in taking its titles global.

Social network revenues rose 25 percent on account of growth in live streaming and video subscriptions. The segment made up 22.9 percent of total revenues. Tencent has in recent years spent heavily on making original content and licensing programs as it competes with Baidu’s iQiyi video streaming site. Tencent claimed 89 million subscribers in the latest quarter, compared with iQiyi’s 87.4 million.

Tencent has been relatively slow to monetize WeChat in contrast to its western counterpart Facebook, though it’s under more pressure to step up its game. Tencent’s advertising revenue from the quarter grew 38 percent thanks to expanding advertising inventory on WeChat. Ads accounted for 20 percent of the firm’s quarterly revenues.

All told, WeChat and its local version Weixin reached nearly 1.1 billion monthly active users; 750 million of them checked their friends’ WeChat feeds, and Tencent recently introduced a Snap Story-like feature to lock users in as it vies for eyeball time with challenger TikTok.

The “others” category, composed of financial technology and cloud computing, grew 71.8 percent to generate 28.5 percent of total revenues. WeChat’s e-wallet, which is going neck-and-neck with Alibaba affiliate Alipay, saw daily transaction volume exceed 1 billion last year. During the fourth quarter, merchants who used WeChat Pay monthly grew more than 80 percent year-over-year.

Meanwhile, cloud revenues doubled to 9.1 billion yuan in 2018, thanks to Tencent’s dominance in the gaming sector as its cloud infrastructure now powers over half of the China-based games companies and is following these clients overseas. Tencent meets Alibaba head-on again in the cloud sector. For comparison, Alibaba’s most recent quarterly cloud revenue was 6.6 billion yuan. Just yesterday, the e-commerce leader claimed that its cloud business is larger than the second to eight players in China combined.

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Report: Microsoft expects UK to block Activision merger deal

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Enlarge / A small selection of the characters that would be part of Microsoft if its proposed Activision/Blizzard merger is allowed to go through.

Microsoft’s legal team now expects Britain’s Competition and Markets Authority to formally oppose its long-planned $69 billion merger with Activision Blizzard. That’s according to “four people briefed on the matter” cited many paragraphs deep in a New York Times report about the direction of globalized antitrust regulation.
Microsoft expects the European Union’s separate “in-depth” investigation into the deal to be more amenable to “potential remedies” that would allow it to go forward, according to the Times. As those processes play out on the other side of the Atlantic, the US Federal Trade Commission seems content to limit its response to an administrative lawsuit rather than issuing an emergency injunction that could have stopped the deal from moving forward.

Representatives from Microsoft and Activision have yet to offer any public comment in response to a request from Ars Technica.

A British bulldog with teeth

The UK’s Competition and Markets Authority first challenged Microsoft’s proposed acquisition last July, before escalating to an in-depth “Phase 2” inquiry in September. In announcing that move, the UK regulator raised concerns that the deal could lead to a “substantial lessening of competition” in the markets for game consoles, subscription gaming services, and cloud gaming.

The Commission recently issued an eight-week extension to the statutory deadline for finishing that investigation, pushing that final date to April 26. But Bloomberg reports that preliminary findings in that inquiry are expected to be published as early as this week.

Since it was created following Britain’s contentious exit from the European Union, the UK’s CMA has been an international leader in stopping anti-competitive mega-mergers. And a negative decision from the CMA could be especially damaging for Microsoft and Activision, since the UK’s Competition Appeal Tribunal rarely overturns the regulator’s decisions.

While the CMA decision technically couldn’t be applied internationally, any move that prevented a merged Microsoft/Activision from operating in the UK would likely sour the deal in other jurisdictions.

The EU, meanwhile, reportedly issued its formal statement of objections to Microsoft this week, giving the company several weeks to respond.

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Endless Seinfeld episode grinds to a halt after AI comic violates Twitch guidelines

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Enlarge / A screenshot of “Nothing, Forever” showing faux-Seinfeld character Larry Feinberg performing a stand-up act.

Nothing Forever

Since December 14, a Twitch channel called Nothing, Forever has been streaming a live, endless AI-generated Seinfeld episode that features pixelated cartoon versions of characters from the show. On Monday, Twitch gave the channel a 14-day ban after language model tools from OpenAI went haywire and generated transphobic content that violated community guidelines.

Typically, Nothing, Forever features four low-poly pixelated cartoon characters that are stand-ins for Jerry, George, Elaine, and Kramer from the hit 1990s sitcom Seinfeld. They sit around a New York apartment and talk about life, and sometimes the topics of conversation unexpectedly get deep, such as in this viewer-captured segment where they discussed the afterlife.

Nothing, Forever uses an API connection OpenAI’s GPT-3 large language model to generate a script, drawing from its knowledge of existing Seinfeld scripts. Custom Python code renders the script into a video sequence, automatically animating human-created video-game-style characters that dynamically read AI-generated lines that are fed to them. One of its creators provided more technical details on how it works in a Reddit comment from December.

As a new media experiment, the faux-Seinfeld stream often feels awkward and unfunny, but it’s still gripping because viewers never know what the characters will talk about next. Unfortunately for the show, that unexpected nature can be a double-edged sword when it comes to AI trained on data scraped from the Internet.

A video of the “Nothing, Forever” joke sequence that led to a 14-day ban from Twitch.

According to Vice, late Sunday night, the AI-generated clone of Jerry Seinfeld (called “Larry Feinberg” in the AI show) went on a brief transphobic rant. Here’s a transcript:

There’s like 50 people here and no one is laughing. Anyone have any suggestions? I’m thinking about doing a bit about how being transgender is actually a mental illness. Or how all liberals are secretly gay and want to impose their will on everyone. Or something about how transgender people are ruining the fabric of society. But no one is laughing, so I’m going to stop. Thanks for coming out tonight. See you next time. Where’d everybody go?

In a Discord post from the channel’s creators, the malfunction occurred because of an outage from OpenAI’s higher-cost (and better-behaved) text-davinci-003 model led the creators to fall back to the lower-cost (and less complex) text-curie-001 model to keep the show running.

“The switch to Curie was what resulted in the inappropriate text being generated,” wrote an admin on the show’s Discord channel. “We leverage OpenAI’s content moderation tools, which have worked thus far for the Davinci model, but were not successful with Curie. We’ve been able to identify the root cause of our issue with the Davinci model and will not be using Curie as a fallback in the future.”

Selected clips from “Nothing, Forever” collected by a viewer.

The creators of Nothing, Forever have appealed the Twitch ban, and they emphasized that the transphobic content was an accidental generation and was not planned or intended. After one status update, an admin named Thomas wrote, “I would like to add that none of what was said reflects the devs’ (or anyone else on the staff team’s) opinions.”

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Hell is other humans in HBO’s The Last of Us episode 4

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Enlarge / Not the most efficient way to read the news, but at least he’s reading…

New episodes of The Last of Us are premiering on HBO every Sunday night, and Ars’ Kyle Orland (who has played the games) and Andrew Cunningham (who hasn’t) will be talking about them here every Monday morning. While these recaps don’t delve into every single plot point of the episodes, there are obviously heavy spoilers contained within, so go watch the episode first if you want to go in fresh.

Andrew: I will start by saying this episode was closer to what I expected a typical The Last of Us episode would be. A few action sequences, a couple montages, time for some bonding moments for Joel and Ellie in between shootouts. Not that I minded last week’s episode at all, it just gave me a little whiplash because it was so far from what the first two episodes had set up.

Kyle: Yeah, I’ll say this episode is the closest we’ve yet gotten to the pacing of the games themselves: (1) Ellie cracks a few jokes; (2) Ellie and Joel shoot a few bad guys; (3) Joel talks to Ellie about Hard-Earned Lessons from the ruined world; rinse and repeat.

Andrew: Which is fine! It’s the story I was pretty sure I was signing up for. Though now I’m curious to see if the show has any other curveball episodes to throw our way.

Kyle: There are at least one or two more plot and/or format curves, even if they just stick to the games. (and that’s all the cryptic clues I’m giving)

Speaking of episode whiplash, I think this was the first episode where we really got a good look at Ellie’s constant transitions between young teen goofball and potty-mouthed action-hero sidekick. It was an incredibly effective combination in the games and so far I think it’s working in this new context as well.

Andrew: And in between those two Ellies, you get tiny hints of “vulnerable kid growing up too fast.” I’m glad to know that dad-joke books survived the apocalypse.

So you really think you have what it takes to kill without remorse?
Enlarge / So you really think you have what it takes to kill without remorse?

Kyle: I was not a dad when I played the first game, and now that I am, I’ll just say that the obvious attempts to bring out Joel’s paternal instincts work very well.

I was also a little tickled by the show’s attempts to mirror the game’s constant situations where Ellie is small enough to squeeze through somewhere to safety to unblock a door with a heavy thing in front of it (or climb up to lower a ladder down or something, which we haven’t really seen in the show yet).

In the game, these moments really strengthen the player’s bond with what could otherwise just be an annoying, quippy escort mission objective. Here, these moments fell a little flatter.

But yes, the jokebook puns are just as effective as ever!

Andrew: By the time she squeezes through her second or third convenient window or hole in the wall, yes, it does start to strain credulity a bit. Absent a gameplay reason to bond with Ellie, the show has to lean harder on the emotional beats, which, thankfully, it does pretty well.

The “bad jokes” running gag is inspired; the “bonding over past and present trauma” bits are more predictable but still serviceable. You can see the turning point of their relationship coming from 10 miles away—Joel will tell Ellie about his daughter, Ellie will share whatever she’s hiding about the first time she had to kill someone, and after that, they will be bonded for life—but it doesn’t mean I’m not eager to see these actors play out that conversation.

In fact, at this point, if I did try to play the game I would probably be frustrated that Pedro Pascal and Bella Ramsey weren’t in it.

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