On July 12, the third batch of domestic online game licenses was issued this year. Stimulated by the positive news, the Wind online game index rose by 2.32% on Wednesday, which can be said to bring another "spring breeze" to the game industry in the second half of the year.
But looking back on the first half of 2022, the game industry is still relatively difficult. Wind data shows that from 2022 to July 4th, 40 A-share listed companies have been delisted, of which at least 6 are game companies.
Under the grim situation, Tencent increased its game overseas while reducing costs and increasing efficiency. Netease expanded its game types and at the same time, high-quality self-research has become a new force. That's where their hope lies.
As the leading companies in A-share games, how are Sanqi Interactive Entertainment, Perfect World, and Youzu Online doing in their games? In the first half of the year when confidence in the game market was frustrated, how should game manufacturers find a certain direction in an uncertain market?
The A-share game sector is in a downturn, and Sanqi Mutual Entertainment can withstand the pressure?
Due to the restart of the review of the game version number, the game industry has gradually ushered in some "warm currents". But it will take time for the good news to reach the end of the industry chain. At present, domestic game companies still need to tighten their belts to live.
Since the beginning of this year, the domestic game industry has experienced a rare situation of both revenue and users falling. According to Gamma Data's "Research Report on Enterprise Development During the 2022 Epidemic", the number of users in the game market has not increased but decreased. The number of game users in China decreased by 0.04% year-on-year in March and 0.01% year-on-year in April.
In this context, the revenue and net profit of most listed game companies have declined to a certain extent in the first quarter of this year, but some game manufacturers have resisted the pressure, such as 37 Interactive Entertainment, Perfect World and Yingying Network. Sanqi Mutual Entertainment’s net profit growth in the first quarter reached 550.8%, while Perfect World and Yingying Network’s net profit growth in the first quarter reached 81% and 66.7% respectively.
On the evening of July 11, Sanqi Mutual Entertainment (002555.SZ) released the 2022 semi-annual performance forecast, saying that during the reporting period, the company’s net profit attributable to the parent was 1.60 to 1.70 billion yuan, a year-on-year increase of 87.4% to 99.1%. The net profit attributable to the parent was 840-940 million yuan, a year-on-year increase of 14.0%-27.6%, and a month-on-month increase of 10.5%-23.7%.
Although data performance cannot be the only indicator for judging a game company, it is particularly important for game companies to adjust their development strategies in a timely manner during the throes of the industry. Going back to Sanqi Mutual Entertainment, why does it perform better than its peers? Behind the brilliant results, how many directional indicators of many game companies can we dig out?
Use distribution as a breakthrough to go overseas, and integrate research and operation to increase quality
As the number of domestic game users has stagnated, expanding new markets + reducing costs and increasing efficiency has become the only choice for many game companies. Going overseas and making games high-quality has also become the determined direction of game manufacturers. For Sanqi Mutual Entertainment, it has been 10 years since it went overseas, and it has accumulated and laid out for a certain period of time in the development of high-quality games, which may be the key to its response to risks.
On the one hand, the domestic game market is a stock market, but overseas is an incremental market, and various game types have many possibilities.
Take Tencent as an example. At present, Tencent has opened game studios in Los Angeles, Seattle, Singapore and many other places. At the same time, it has also reached cooperation with many foreign game studios, providing technical support and being able to enter overseas markets more reasonably; and Game manufacturers like Mihayou open up the market through self-developed game works going overseas.
Each game manufacturer has a different focus when going overseas, while Sanqi Mutual Entertainment focuses on distribution. Judging from the brand structure of Sanqi Mutual Entertainment, in the current game business, except for 37 Games, which is a research and development brand, 37 online games, 37 mobile games and 37GAMES are all publishing brands.
For some game companies lacking publishing experience, choosing a publisher that is highly compatible with their own game types and has a certain market in the target region will undoubtedly get twice the result with half the effort for their games to go overseas.
However, overseas markets are complex, and players in different regions have different preferences. Therefore, game manufacturers must consider local policies, game categories, and target market users when releasing games. Faced with these difficulties, Sanqi Mutual Entertainment adopts the strategy of "adapting measures to local conditions" to make efforts on the product side and distribution and promotion side.
The strategy of adapting measures to local conditions not only saves 37 Interactive Entertainment a lot of invalid "buy volume" costs, but also maximizes the use of existing resources to expand new businesses and projects.
For example, in the field of metaverse, according to Sanqi Mutual Entertainment’s 2021 financial report data, currently Sanqi Mutual Entertainment has completed investments or acquired metaverse-related concept companies including Archiact, Wave Optics, Raxium, Digilens, Chenjing Technology, Yingmu Technology, Optical Zhou Semiconductor, Jingzhan Semiconductor, Kuaipan Cloud Games, etc., are also good for the subsequent Sanqi Mutual Entertainment’s deep cultivation of the Metaverse.
Taking publishing as a breakthrough to go overseas is more stable than research and development, because game development requires more investment and time, and the cycle is longer. And as far as the results are concerned, the development of a game also has many uncertainties, which is good for large manufacturers, but for small and medium game manufacturers, it will place more emphasis on the company's ability to resist risks. As a "back-end" procedure of game companies, publishing requires less time cost and capital chain risk than R&D.
It’s just that for Sanqi Mutual Entertainment, under the trend of going overseas, both top players and middle-tier game manufacturers are paying more and more attention to distribution channels. There are more overseas opportunities but also greater challenges.
On the other hand, in order to get out of the embarrassing situation of "quantity over quality", many game manufacturers began to change their thinking and began to focus on extending the full life cycle of games.
For example, Netease Games, many games use big IP to create high-quality games, such as "Harry Potter", "Pokémon Adventure", "Marvel Showdown" and many other games are all changed through classic IP , among which "Harry Potter: Magic Awakening" gained 15 million pre-order users before it went online. Sanqi Mutual Entertainment chose to integrate research and operation, paving the way for high-quality games.
In the view of Songuo Finance, the integration of research and operation can greatly enhance a company's independent innovation ability. In this mode, a virtuous cycle mechanism can greatly reduce the communication cost of game companies from R&D to distribution and operation. Cost reduction can improve the efficiency of the entire process, which is conducive to promoting product operation and maintenance and inventory stability.
In order to ensure the efficiency of R&D and the integration of resources, 37 Interactive Entertainment has also established a project lifecycle management process for game R&D, which runs through multiple links such as creativity-project approval-process-evaluation, and realizes risk control throughout the R&D process. While effectively controlling costs, it can also improve the success rate of product development.
Take "Douluo Continent: Battle of Soul Masters" as an example, this game can be regarded as a representative work of Sanqi Interactive Entertainment in the "integration of research and operation" strategy. In terms of research and development, this game is developed with a next-generation 3D engine and uses PBR technology; in terms of distribution and operation, a series of AI big data analysis systems headed by "Athena" have greatly improved the game development and version iteration process efficiency and success rate.
It is reported that "Douluo Continent: Battle of Soul Masters" unifies technical documents and underlying logic, clarifies the next-generation industrial R&D process, and forms a reusable system. This also means that if Sanqi Mutual Entertainment develops and operates the same type of games, it will greatly reduce the time cost, and at the same time, there will be traces to follow in the development.
Of course, compared with Tencent and Netease, these two major companies have greater advantages than Sanqi Mutual Entertainment in terms of influence, resources, R&D, etc. in the integration of research and operation, which is for Sanqi Mutual Entertainment It is also a big test.
On the whole, the integration of going overseas, research and operation can be regarded as a path that 37 Interactive Entertainment has found after exploring the game industry for so many years, which is suitable for its own development. Although the competition is still fierce, it can at least hold its own position. Especially now that the development of the game market is constantly changing, the industry is moving towards standardized development, and the actions of game companies are not only at the game level.
The value of game manufacturers is magnified due to the accumulation of accumulation?
Previously, Ma Xiaoyi, Senior Vice President of Tencent, said at the 2022 Tencent Game Conference: "With the continuous advancement of technology and the upgrading of our understanding, games will definitely be integrated into more economic development and social life, releasing a greater scientific and technological strength and richer value".
Gamma data "2021 China Game Industry Corporate Social Responsibility Survey Report" shows that in 2021, the social responsibility index of China's game industry reached 13.4, which has maintained an upward trend for three consecutive years, and the social responsibility performance of China's game industry continues to improve. The social responsibility undertaken by game companies has been recognized by the outside world, and it is inseparable from their efforts.
Among them, ESG, as a new concept that has swept the global market in the past few years, represents the sustainable development needs of enterprises, industries, society and even all mankind, and is also favored by game manufacturers. The 2021 ESG report released by Tencent also shows that its Sustainable Social Value Business Unit has spent RMB 695 million on sustainable social value innovation and the "Common Prosperity Special Plan".
Before, the outside world’s perception of games was still just for fun, and game companies just wanted to make money from users. This point of view is not wrong, but now many game companies use games to repay the society to assume social value, and there are even many "non-business" actions.
For example, some game manufacturers now pay attention to the educational function of games when developing games. There are also many games on the market that combine traditional culture such as Romance of the Three Kingdoms and Water Margin, allowing users to learn traditional culture while playing games. . Or the game manufacturer integrates some valuable and socially meaningful things into the game, which plays an entertaining role.
As an early group of companies in the game industry that paid attention to and conducted ESG ratings, 37 Interactive Entertainment was the first company to receive an A in the MSCI ESG rating. Not long ago, Sanqi Mutual Entertainment released the 2021 Social Responsibility Report, explaining its practice and phased achievements in corporate governance, innovation empowerment, and value co-creation.
It is reported that Sanqi Mutual Entertainment has focused on multiple aspects such as data information security, user privacy protection, employee career development, and low-carbon transformation since it focused on ESG. For example, in the work of carbon reduction and environmental protection, in 2019, Sanqi Interactive Entertainment invited SGS, an international authoritative third-party certification organization, to collect and measure carbon data within the company, and based on this, made a plan to achieve corporate carbon emissions by 2025. Neutral promise.
Nowadays, more and more game companies have a broader understanding of the company's value, and the released games are gradually integrating with more social issues and practical applications, thus demonstrating a wider and more diverse social value and long-term layout.
epilogue
Just as Wu Xinxin, Vice President of Netease Game Market, said in an interview: "As the game industry continues to develop and progress, games have already broken away from a single entertainment model and entered every aspect of people's lives."
Now, the game is not just a tool for entertainment and leisure, it has become a digital tool for cultural inheritance and positive education. As the connection between games and real life becomes closer, the economic and social dual value of games will become the focus .
Whether it is seeking new growth overseas, or continuing to deepen diversification and high-quality products, for game manufacturers, they are building and improving their own economic and social attributes, and in these long-term achievements, they are also further. It confirms the more far-reaching value of game companies.
Article source: Songguo Finance