Have you ever had a dream of being in a world? Have you ever been troubled by the fact that the chivalrous person who "serves the country, the people, and friends and neighbors" has nowhere to rest? Then, the "Fairy Sword" series of games may become the place where your soul rests. And the manufacturer behind the scenes that can make Xia Zhe’s Jianghu dream materialize is China Mobile Games.
Two years ago, China Mobile Games spent a huge amount of money to buy the mainland rights of the Fairy Sword IP. Within two years, China Mobile Games continued to launch new games in the Fairy Sword series. Among them, "The Legend of Sword and Fairy" launched by the company in June this year ranked first on the free list of the APP Store in mainland China in the first month of its launch. Shortly afterwards, China Mobile Games also disclosed its 2023 interim results. Overall, China Mobile Games' financial data in the first half of the year turned a loss into a profit, and its operating data recovered significantly.
Among them, IP business has grown significantly. Data shows that in the first half of 2023, China Mobile Games’ IP licensing revenue was 59.81 million yuan, a year-on-year increase of 94.4%. As one of the blockbuster IPs of China Mobile Games, the Fairy Sword series has always received special attention from the market.
So, in the game, the fairy sword is the dream maker of heroes; outside the game, what role does the fairy sword play in the "jianghu" of China Mobile Games?
China Mobile Games turned a loss into a profit in the first half of the year, achieving a net profit of 56.82 million yuan attributable to the parent company
In the first half of 2023, benefiting from the return to normalized issuance of game licenses, the frequency of new products in the domestic game market has been much higher than in previous years, high-quality new games have performed outstandingly, and the domestic mobile game market has strong momentum of recovery. Data shows that my country’s mobile game market revenue in H1 2023 was 106.705 billion yuan, a month-on-month increase of 29.21%.
Driven by the rebound in the domestic gaming industry, many mid-level gaming companies such as Kaiying Network, Xindong Company, China Mobile Games, iDreamWorld, and Zenyou Technology have all achieved profits. Among them, as shown in the figure below, among companies that are also turning losses into profits, only China Mobile Games' revenue has achieved a year-on-year growth of more than 20%. Data show that China Mobile Games achieved revenue of 1.535 billion yuan in the first half of the year, a year-on-year increase of 24.6%; net profit attributable to the parent company was 56.82 million yuan, and adjusted net profit was 76.17 million yuan, turning losses into profits year-on-year.
Extending the timeline, from a vertical comparison, China Mobile Games' revenue in the first half of this year is also close to the average level. Data shows that from 2020 to the first half of 2022, the average revenue of China Mobile Games is 1.685 billion yuan.
In addition, several key operational indicators of China Mobile Games have also improved positively. In the first half of 2023, China Mobile Games added 48.683 million new registered users, an increase of 26.9%, the average monthly active users (MAU) was 15.627 million, an increase of 22.3%, and the average monthly paying users (MPU) was 1.132 million. up 20.2%. Among them, the growth rate of the company's users is significantly higher than the growth rate of users in the game industry. Data shows that the number of game users in my country in the first half of the year was 668 million, a year-on-year increase of 0.35%.
In short, the significant improvement in various data indicates that China Mobile Games' performance is returning to normal, and such results are also related to the company's business adjustments. Semi-annual report data shows that in the first half of 2023, among the three major businesses of China Mobile Games, the game publishing business, which has always been the company's revenue pillar, has seen a decline in its revenue share, from 82.7% in the same period last year to 79.3% this year.
However, the proportion of the other two major businesses, game development and IP licensing, has increased. Data shows that the proportion of game development business increased from 14.8% in the same period last year to 16.8% this year; IP licensing business increased from 2.5% in the same period last year to 3.9% this year. Among them, the revenue growth rate of IP licensing business is much higher than that of game development business. Data shows that in the first half of 2023, China Mobile Games’ game research and development business revenue increased by 42.1% year-on-year, and IP licensing business revenue increased by 94.4% year-on-year.
The high growth of nearly 100% naturally quickly attracted the attention of the market. In this regard, Xiao Jian, executive director, chairman and CEO of China Mobile Games, said at the performance conference: "We believe that IP will definitely become an important factor in competition in the game industry. Resources and Barriers.”
So, why does China Mobile continue to bet on IP? What is the magic of IP?
The magic of IP goes round and round, how much is the Fairy Sword IP worth?
As game users gradually transform from an incremental market to an existing market, although the game market continues to recover this year and the number of new products has surged, game content lacks innovation, homogeneity is serious, and competition is fierce. Due to oversupply, it has become an industry consensus that game manufacturers’ purchasing volume and customer acquisition costs will increase.
Faced with the increasingly obvious trend of increasing purchase volume costs, in order to achieve more long-term development, China Mobile Games has chosen to use "IP" to alleviate financial pressure.
The reason is that according to the "2022-2023 Mobile Game IP Market Development Report" data, the overall payment rate of mobile IP users is close to 90%, while the payment rate of mobile non-IP users is less than 65%. As a veteran in the mobile game IP licensing business, China Mobile Games can be said to have the right time. Nowadays, games supported by IP can achieve higher monetization.
This is because on the one hand, in the long term in the future, due to the gradual increase in the difficulty of obtaining high-value IP, it will become increasingly difficult for latecomer game companies to obtain core IP resources, and IP resources will gradually become a kind of hard power. , becoming the moat of a game company.
China Mobile Games has the advantages of early layout and strong IP reserves in IP games. It is reported that China Mobile Games has laid out the IP industry as early as 2014. As of the end of 2022, China Mobile Games has a total of 55 authorized IPs and 68 self-developed IP reserves, making it the game company with the largest IP reserves among Chinese game companies that have disclosed the number of IPs. . Currently, the company has as many as 132 IPs.
On the other hand, the reason is that IP series games themselves are well-known, and the huge fan base allows IP games to have their own traffic pool, which allows companies to reduce "buying costs" and relieve financial pressure in the early stages of new game promotion. For example, "The Legend of Sword and Fairy" officially launched by China Mobile Games on June 9 this year is a good example. The game still achieved a revenue of over 200 million in the first month without the use of plug-ins such as "hiring spokespersons and large-scale brand advertising for brand exposure".
At the same time, China Mobile Games also holds the top IP - Xianjian IP. The company can build a strong moat through Xianjian IP. It is reported that Fairy Sword IP has a 28-year development history, and according to the original warehouse IP data platform, today, 28 years later, the IP index of "Legend of Sword and Fairy" still exceeds 99.05% of its competitors, and it has always ranked first in the IP market.
Taking advantage of the solid traffic advantage of "Sword of Immortality", China Mobile Games has continued to make new moves, and in March this year announced its new game "World of Immortal Sword", which it spent 300 million yuan to create. After the official live PV of "World of Sword and Fairy" was released, in just a few hours, it became a hot search on Weibo and the popular list on Station B, and also topped the TapTap reservation list.
Behind the high popularity is the fact that "World of Sword" has undergone large-scale innovations compared to other IP products, and its excellent production has been recognized by fans. It is reported that "World of Sword" is China's first open-world metaverse game with a Chinese style of fairy tales. It has introduced a number of innovative technologies such as 24-hour lighting, AI game characters, high-definition custom appearance, and UGC creation tools into the game, and will Achieve cross-platform and multi-terminal experiences including cloud and VR, allowing users to get rid of device limitations and obtain an immersive gaming experience.
At the same time, China Mobile Games has also made innovations in the community to further strengthen fan stickiness. It is reported that the official community App "Xianjian Alliance" has opened registration in April 2023 and will become the main discussion community for IP fans in the future.
Although the game's high popularity and rich "after-sales service" have allowed the market to see the huge potential for future performance growth of China Mobile Games, the revenue of new IP-adapted games is currently declining. According to Gamma data, as of the end of 2022, the proportion of IP-adapted new game revenue has declined for five consecutive years. Therefore, many investors are worried about whether the commercial value of "World of Sword" can be consistent with its popularity.
Regarding this point, the Hong Kong Stock Research Institute believes that judging from the high growth in sales of Fairy Sword derivatives, the commercial value of "World of Fairy Sword" is expected to continue to rise. It is reported that "World of Fairy Sword" has deliberately opened up the field of offline entertainment in terms of derivatives. The real-life Sword and Sword entertainment project "Hangzhou Xixi Fairy Sword Town" has entered the final stage and will be put into trial operation in 2023. Data from the Yuancang IP data platform for a recent statistical period show that the total sales volume of Sword and Fairy Tale derivatives on the e-commerce platform increased by 94.48%, of which the total monthly transaction sales on the Taobao platform were 1.067 million.
To sum up, China Mobile Games not only has the advantage of large number of IP layouts, but also has the top-notch advantage of Xianjian IP, which has both national popularity and commercial value. Therefore, in the second half of the year, after the well-produced "World of Sword" is launched, with the support of its huge fan base, it is expected to become a new growth pole for China Mobile Games' performance.
Summarize:
In the first half of the year, against the background of the overall recovery of the gaming industry, China Mobile Games achieved solid performance, with operating data recovering significantly and returning to the track of profitability. Among them, the rapidly growing IP licensing business has attracted market attention.
This is because the game industry has picked up in the first half of the year. New games have surged and homogeneity has become serious. The market has transformed from an incremental market to a stock market. The purchase costs of game companies have continued to increase. IP games, because of their huge fan traffic pool, can Reducing the company's purchase cost to a certain extent has become a favorite of many mid-level game companies.
China Mobile Games, as one of the early mid-level companies that laid out the IP industry, has already built an IP moat. In the second half of the year, after the release of the top IP "World of Sword" new game, it is expected to bring greater performance to China Mobile Games. contribute.
Author: Buffett's Destiny
Source: Hong Kong Stock Research Institute