Tencent eyeing 'reel' glory

Liu Cuiping, an analyst at entertainment market researcher EntGroup Inc, said: "Though internal competition is part of Tencent's culture, it rarely uses it on such a large scale. This means the movie business really matters to the company."

Hao Qian, an analyst with Analysys International, a market research firm, said significant differences exist between the two new companies.

"Tencent Pictures boasts a wealth of intellectual property rights, from which a range of entertainment products can be produced, such as movies, games, and TV dramas, while Penguin Pictures' strength lies in its channel resources. It is an important platform to promote movies," Hao said.

But it still is not clear how Tencent Pictures and Penguin Pictures will cooperate with each other.

"If the relationship between the two units cannot be managed properly, they may cannibalize each other's market shares," Hao said.