Image source @ Visual China
Text | Market Capitalization Watch, author | Yuntan, edited by | Little City Sister
"The essence of the metaverse is to create games."
After announcing the $68.7 billion acquisition of Activision Blizzard, Microsoft CEO Satya Nadella made no secret of her desire for a metaverse: "The metacosm can put people, places, things into a physics engine, interconnected, and essentially create games." ”
Although Nadella's words are suspected of "blowing the wind" for Microsoft's metaverse strategy, it is undeniable that the game is currently the closest landing scene to the metaverse, and it is also the "key" to open the door of the metaverse.
After the giants announced that they had grabbed the beach meta universe, A-share game companies also followed up non-stop. But under the explosion, it is more necessary to think coldly.
The real situation is that the dividend has dissipated and under the pressure of policy, the real growth rate of the mainland game industry has continued to slow down. With the gradual maturity of the technology related to the metaverse, the competition in the game industry has risen to a new dimension.
But can the current hot metacosm really change the valuation logic of game stocks? Value rediscovery or new bottles of old wine?
After the big waves and sand, it is the time to go to the fake and save the truth.
Value reproduction
Roblox's listing, Facebook's name change, and Microsoft's acquisition of Blizzard are the "three milestones" of the metacosm in the gaming space.
Roblox's listed stock price rose sharply, and its market value rose to 100 billion US dollars; Blizzard's premium was 45%, and the all-cash acquisition was quite generous, and the next day Activision Blizzard's stock price rose by more than 25%; and before that, Take-Two just spent $12.7 billion to acquire mobile game manufacturer Zynga, and ByteDance acquired VR company Pico for billions of yuan. The capital market expresses the recognition of the metacosm with real money and silver.
With 150 million monthly active users, Roblox looks like an infinite "money scene"; although Blizzard has been in decline, it is after all a legend in the game of the past two decades.
Classic IP + talent means traffic guarantee and boutique output ability, which is what game companies value most. If Microsoft wins Blizzard, improves management, retains talent, and relies on its strong technology and market advantages, the meta-universe is basically reliable.
Microsoft CEO Nadella said, "This acquisition will help the world's largest software vendors enter the exciting world of games and will play a key role in the development of the meta-universe platform."
The butterfly effect on the other side of the ocean has triggered a wave of speculation in A shares.
Giants have entered the game, and policies supporting meta-universes by various departments and local governments have been continuously introduced, and the game sector that has been dormant for a long time has finally ushered in a bottoming out. The online game sector rose 24.18% in 2021Q4, leading other industries. However, at the beginning of 2022, the index has fallen by 8%.
▲The historical trend of the online game sector, source: Oriental Wealth
After combing, there are about 34 A-share game companies, but there are only a few companies that really have strength and landing.
Century Huatong's self-developed meta-universe game "LiveTopia", after logging on to the Roblox platform, the number of users has exceeded 100 million. It can be regarded as the first company in A shares to truly produce meta-universe games.
Compared with other "meta-universe" concept stocks, the meta-universe big-scale production "Brewing Master" known as Zhongqingbao looks more like a web game; 37 Interactive Entertainment only invested in VR game developer Archiact; Kunlun Wanwei said that with the help of its Opera GX browser, game engine GameMaker Studio, and game community platform GXC, it has built a meta-universe. But these are more like the "scraps" of the metaverse, still a little far from the kernel.
▲ Zhongqingbao "Brewing Master", source: Zhongqingbao official website
Tom Cat's so-called "metaverse" is the use of AR technology in the "My Tom Cat" product, and the Tom Cat IP has been living by in-game advertising for 11 years since its birth; Perfect World announced that it is exploring the possibility of metaverse applications.
How strong the rise is, how much it falls. After the beginning of 2022, game stocks were liquidated. With the release of annual reports, companies without real performance support will eventually be abandoned by the market.
The game is also rolled in
After the epidemic and the brief outbreak of the home economy, the mainland game industry fell into a dilemma of weak growth. The purchase volume is limited, the version number is compressed, the policy is regulated, and the game industry has been swept up to suffocation.
According to the "2021 China Game Industry Report", the actual sales revenue of China's game market in 2021 was 296.513 billion yuan, an increase of only 6.4% year-on-year, and the growth rate was nearly 15% smaller than that of the previous year. Compared with 2018, when the version number was discontinued for 9 months, it was only about one percentage point higher. The growth rate of the game industry in 2021 is the second lowest point in 8 years.
▲The actual sales revenue and growth rate of China's game market
"Industrial change + policy pressure + dividend fading", in the post-epidemic era, game companies hope to change their growth logic by binding the metacosm.
Roblox is a classic example of this, and the reason why it is called "the first strand of the metaverse" is mainly manifested in two aspects.
First, Roblox is a pioneer in the global UGC platform. UGC stands for "user-generated content" and Roblox provides the game infrastructure where players can enjoy original game content.
Roblox founder Dave Baszucki said: "Roblox is just a 'shepherd' for the users who create the metaverse, and we don't produce or control any content. "This model both reduces game development costs while inspiring players to create and interact.
Second, strong social attributes. Roblox is like a teen's dating and virtual world, playing games together, hosting birthday parties, and even having concerts and so on. And the more players on the platform, the stronger the sense of engagement, the more attractive it is to developers and creators. As users increase and robus spend more on the platform, the commercial value of the platform is highlighted, resulting in organic growth.
Original content + strong social networking, building Roblox's commercial flywheel. The platform uses games to attract players to experience and buy, while giving back a portion of the revenue to developers. UGC's creative incentives are superimposed on the feedback economic system to form a positive commercial flywheel effect.
In 2020, when the outbreak of the epidemic broke out, the number of Roblox users increased sharply. As of the first three quarters of 2021, the company had 47.3 million DAUs with a total user time of more than 11.8 billion hours.
According to Sensor Tower data, Roblox mobile revenue exceeded $1.3 billion in 2021, an increase of 20.3% year-on-year, ranking 4th in the world's mobile games.
▲Data source: company financial report
On the other hand, the products of A-share game companies, whether it is UGC or social attributes, are very far from the core of the metaverse.
For example, the so-called "meta-universe" of Zhongqingbao's "Master of Brewing" is actually "online brewing offline wine", claiming to "realize the dream linkage between virtual and reality". Since the version number has not yet been obtained, regardless of the various costs of online and offline and the various difficulties to be overcome, "brewing - wine" does not seem to be the true connotation of the meta-universe.
Some investors even commented: Isn't the "online brewing offline wine" of the master brewer a model with the ant forest?
At present, the only thing that can be seen is Century Huatong, and its "LiveTopia" is a successful case of using the UGC attribute of the Roblox platform, with more than 40 million monthly active users and a total of more than 100 million users, becoming the world's top three and China's first phenomenon-level products on the Roblox platform.
Moreover, "LiveTopia" has achieved profitability, and its income through virtual props such as clothing, houses, vehicles, pets, etc., will continue to expand.
Value Reshaping or Value Trap?
If spielberg's "Ready Player One" created a virtual world of 8 points; Roblox is the initial exploration of the metaverse by humans, barely passing; A-share game companies as a whole are much behind.
Especially in the current fragile market, it is a testing ground for the company's performance and strength.
Peeling off the "beautiful cloak" of the meta-universe, if the performance is not as expected, it will still be killed. Facebook's stock price plunge is a "lesson from the past."
From the perspective of the value-driven level of game companies, the UGC platform built by Roblox, as well as the reward and sharing mechanism, is actually an effective way to break the "buy volume" cycle, but unfortunately, there are very few A-share circle breakers.
"Buy volume" has always been the most important model for the promotion of mobile games in mainland China. Gamma data statistics show that in 2020, the sales expenses of A-share listed game companies will grow by as much as 35.5%, while the revenue growth in the same period will only be 23%, which shows that the pressure on player growth continues to increase.
Many companies are caught in the quagmire of buying and fighting, sales expenses are growing faster and faster, but traffic acquisition is becoming more and more difficult, and the result is that they fall into a growth dilemma, and corporate profitability is difficult to improve.
▲A-share representative game company sales expense ratio, data source: Wind
Several game companies with large A-share scales have increased their sales expense ratios in the first three quarters of 2021, and the largest 37 mutual entertainment is as high as 60%, with revenue of 12.1 billion yuan, nearly 7.3 billion yuan for market promotion.
The lower sales expense ratio of Tom Cat is mainly due to its dependence on the IP of the Tom Cat family. As a game company, the growth driver should be a steady stream of innovation, but Tom Cat's revenue source is nearly 80% of advertising revenue.
Moreover, the current game popularity duration is generally short, and it is necessary to continue to produce blockbusters or create high-quality IP in order to attract players to stop. It can be said that the characteristics of the game industry determine that it is difficult for game stocks to have a sustainable market.
At present, A-share game companies are still in a state of urgent need to break through in the inner volume, and only by truly creating a new business model and forming a real value driver can they finally break the circle and win.