A rumor shook the Shanghai game circle, going to sea or becoming a new magic weapon

Author/ Author of Finance & Economics Weekly Ma Ce

Editor/ Dong Yuqing

The news that "the entire Shanghai game industry is in a big layoff" went away more than a week ago, and the news not only caused concerns, affected the secondary market shock, but also caused panic because of the transmission of rumors.

According to the news, many game companies, including NetEase, Lilith, and IGG, are cutting self-developed projects or laying off employees. There is also a bigger bear behind the layoffs - there is news that the game "version number will be discontinued all year round" in 2022. On February 21, the day the news was issued, Hong Kong game stocks fell sharply, of which Tencent Holdings fell by more than 5%, Station B fell by nearly 10%, and stocks such as Heartbeat Company and NetEase Games also showed different degrees of decline.

Soon, the rumors attracted several major game manufacturers such as Tencent to urgently refute the rumors. Tencent said that the so-called "heavy hammer" is a rumor, and the account that spread the rumor was quickly cancelled after Tencent's official appearance. In fact, it is true that no game numbers have been issued in the past seven months, but the relevant authorities have never said that they will not issue version numbers throughout the year. Behind the sharp decline in the industry is mainly the market panic.

On the evening of February 21, relevant people from the State Press and Publication Administration also responded that there was no clear response, and you can pay attention to the announcement information on the official website, but at present, it is still receiving the version number application of the game company normally.

The game version number is equivalent to the license for the game to operate compliantly. Whether you can get the version number is related to whether the game product can be put into operation. It can be said to be the lifeblood of every game in China that wants to be commercialized, and it also affects the nerves of the industry. The suspension of the version number is a major negative for large listed companies, and it may be a major adjustment for small and medium-sized teams.

According to public information, since July 22, 2021, when the State Press and Publication Administration announced the list of online games approved for that month, the approval information of game version numbers has been suspended for more than seven months. This is also another "long suspension" since March 2018, when the game version was completely suspended for 9 months due to regulatory restructuring.

For this kind of excessive association, there is a high praise answer on Zhihu, to the effect that the leader of the game company held an internal meeting, thinking that the direction of the game developed was not right or the market prospects were not good, coupled with the severe adjustment situation, it was not good to get the version number, and decided to stop the development in time; the news gradually spread, and in the ears of the employees, the main reason became that the project itself could not get the version number; and then passed on to the outside, directly evolved into the same type of game without issuing the version number.

Industry insiders agree with this view, believing that it is a more appropriate reflection of the current situation of the game industry. But the rumors are getting more and more outrageous, but they also reflect the fragile side of the industry itself.

Quiet waiting

Game practitioner Wu Yong first heard rumors of a version reboot in October 2021. After that, there were rumors of resumption of distribution every month.

Wu Yong was originally more optimistic. In his cognition, since the long suspension in 2018, although the total number of games reviewed has been reduced year by year, the game version number has been approved and issued in an orderly manner. "It should be necessary for the protection of minors." He had previously expected the suspension not to be long.

By the end of 2021, the game industry has not had the news of version number approval for nearly half a year. Near the Spring Festival of 2022, microsoft's $68.7 billion acquisition of Activision Blizzard broke the silence of the game circle, and Wu Yong also forwarded relevant news reports at that time, but the caption had nothing to do with the acquisition itself - I hope that the Year of the Tiger will issue more domestic version numbers, which is also the voice of many domestic gamers.

Wu Yong told caijing weekly that when the relevant departments did not update the version approval information for several months in a row, the industry inevitably entered a state of anxiety. "Companies can't always rely on old games, and not all companies have old games to rely on. Especially now, when it will be issued, you can't predict. ”

The impact of the suspension of the version number on the industry can be referred to in 2018. In March of that year, due to the reform of state institutions and the adjustment of regulatory authorities, the distribution of game version numbers was completely suspended, and it was not resumed until the end of December of the same year. Tencent also couldn't get the version number at that time, resulting in the mobile game "PUBG: Stimulating the Battlefield" (later re-versioned as "Peace Elite") for a long time and could only be in the testing stage.

In fact, 2018 was a pubgic year for the gaming industry. The suspension of the version number coupled with the adjustment of the specifications for products such as mobile games without a version number has made the domestic game industry enter a cold winter this year, and the growth rate of mobile game revenue has fallen by more than 60% compared with the previous year. According to CCTV News, 42% of the domestic listed game companies in the first three quarters of 2018 saw a decline in net profit.

"2018 was an important watershed year." A game media person analyzed the weekly magazine "Finance world". According to statistics, the approval of games before 2018 was relatively relaxed, and the number of game version numbers issued in 2017 exceeded 9300. However, the cumulative number of distributions in 2018 shrank to 2,064. Since then, the total number of version numbers issued has decreased year after year, and the number of game version numbers issued in 2019 and 2020 is 1570 and 1405 respectively. By 2021, this number is almost "waist chopping", only 755.

"The version number is suspended + minor control + the skin changing game is severely cracked down, and it may not be realistic to expect (after this restoration) to issue more version numbers." The analyst said. The version number Winter, which began in 2021, is generally considered to be related to the protection requirements of minors.

In 2021, anti-addiction censorship of minors' protection and gaming goes one step further. The newly revised Law on the Protection of Minors adds a number of provisions in the field of game compliance for the protection of minors' information and the prevention of Internet addiction. At the end of August 2021, the State Press and Publication Administration issued the Notice on Further Strict Management and Effectively Preventing Minors from Addicting to Online Games, requiring online game companies to significantly reduce the time for providing online game services to minors, limiting the provision of 1 hour per day between 8:00 and 9:00 pm on Fridays, Saturdays and Sundays.

This has been called the strictest new game rule in history in the industry.

The cold winter of the version will undoubtedly have a business impact on many game companies. "That's equivalent to costing more than half a year for each new game." Independent game developer Zhang Yi told the "Finance world" weekly that the game company of the friend around him has experienced greater business difficulties, before the friend and his team spent a lot of time and energy to adjust the game to meet the declaration requirements, because of the change of the version number policy, I don't know when it will be reviewed, and the feedback of the version number agency is "waiting".

"He had planned to cost it for a year and a half to two years, but now it's likely to increase to a time cost like two and a half to three years." Zhang Yi said that pressure came invisibly.

However, in a previous interview, Cui Xiaochun, vice president of Tencent Interactive Entertainment, also told Caijing Tianxia Weekly, "With the introduction of rules, such as the 830 new regulations, or some previous rules gradually formulated and implemented, for the game industry, it is a good protection mechanism, but also a reassuring pill for more game manufacturers, so that everyone can develop healthily." "Tencent took effect in accordance with the latest rules for all of its Chinese mainland online games, including the hit games "Glory of Kings" and "Peace Elite" only 26 hours after the issuance of the 830 regulations.

As early as 2018, Ma Xiaoyi, the general manager of Tencent Games and senior vice president of Tencent Group, repeatedly talked about the issue of "social responsibility of games", believing that with the continuous growth of the scale of games and their penetration into people's lives, games inevitably have to assume certain social responsibilities. "I think that with 'Glory of Kings' as a landmark milestone, the entire Chinese game industry needs to sign an industry contract with the public." In 2000, there were only 15 million gamers in the country, but now that number is as high as 500-600 million, Ma said.

Small and medium-sized manufacturers need to make choices

The virtual economy triggered by the epidemic has made the game industry enter a significant period of prosperity after 2020. Transmitted to Shanghai, a city with a fairly developed game industry, in 2021, the climax of the robbery war will rise, and the million annual salary digging will once become a topic. Scarce jobs in the local game industry, such as engines, art, TA (technical art), etc., have generally ushered in a 20%-30% salary increase.

The reason for the robbery is that the performance of game companies in 2021 is generally good, and there are a lot of budgets to recruit people, but game talents are scarce. In Shanghai, game manufacturers such as Mihayou, Lilith, Eagle Corner Network, and Paper-folding Games have developed rapidly, and their gold-sucking strength has been comparable to that of Internet manufacturers. Among them, with the popularity of "Original God", according to the data of "Shanghai Top 100 Enterprises", its operating income in 2020 has reached 10.128 billion yuan.

At the most optimistic time, the bosses of game manufacturers will gather together and ridicule each other's positioning - Mihayou is Xujiahui stupid donkey (Polish game developer CDPR), Lilith is Caohejing Blizzard, heartbeat is Zhabei Nintendo, giant is Songjiang supercell, to compare domestic games are moving towards the trend of boutique, each manufacturer is trying to find their own characteristics.

Also in 2021, Zhang Yi, full of confidence, left a major game factory in Shanghai and has been seeking independent development. But now, he felt the need to think about it.

"How to make a game with the strength of a company, and make several games at the same time with several studios, how to choose for a small factory or a new team in the future?" He asked rhetorically. Compared with tencent, NetEase and other large game manufacturers with strong financial resources, the two roads seem to be not easy for small manufacturers, the former needs sufficient financial protection, while the latter requires more version number resources.

Only the big factories still have the ability to take care of it. "At least in the domestic market, it will lead to higher concentration and stronger head." The anti-risk ability of the big factories is strong in itself, leaving aside the version number reserve, with the game matrix that already has the version number in operation, they are the long-term beneficiary. ”

In his view, in the current environment, the operating cycle of the games that have been launched will be extended as long as possible. Often, the more games with such characteristics, the larger the volume, and the requirements for R&D investment and talent support are often higher. It is difficult for small manufacturers to have enough resources to make a large game with a particularly long operating cycle.

In the early years of the mobile game industry, it paid attention to "channel is king", which means that even games with poor quality can be promoted through channels, which is commonly known as buying, and succeed in the market in a simple and rude way of reversing the flow. According to public reports, even in 2019, the mobile game purchase market still has a scale of 60 billion.

But now, the domestic game market tends to mature, the trend of boutique is becoming more and more significant, the competition is gradually fierce, and the difficulty of a game from research and development to success has increased sharply. "If you want to succeed in the market, it will inevitably require you to have a higher investment in quality, higher and higher development costs, and higher and higher demand for talents." Zhang Translation said, "It turns out that everyone may make a game of millions, and it is expected to make tens of millions, which is also a success." Now it may be tens of millions of games, many of the big factories are hundreds of millions or hundreds of millions of yuan of investment, then you may have to earn hundreds of millions of yuan, or even more than a billion yuan to be considered successful. ”

However, the game has always been a low success rate of the industry, the current situation, he believes that the big manufacturers will shrink, the final destination of small and medium-sized manufacturers is not to be acquired by the big manufacturers, or to be eliminated.

In fact, the number of new game enterprise registrations in China has shown a significant downward trend in recent years. Enterprise investigation data shows that in the past three years, the number of domestic mobile game-related enterprise registrations has been decreasing. In 2019, there were 1282 new mobile game-related enterprises, and 572 new ones were added in 2020, a year-on-year decrease of 55.38%. Only 464 new ones will be added in 2021.

In the interpretation of many people, the tightening of the version number will help to eliminate the "garbage game" and make the industry move towards green quality. But the industry is not entirely optimistic about this.

"Will there be a market full of fine products?" A game practitioner took the film industry as an example and told the weekly magazine "Finance and Economics" that his understanding was, "Many good films are also piled up on the basis of poor films. "But the boutiques are only a minority. What he means is that on top of the overall reduction in the total, the number of quality games may also decrease.

AZGames, the owner of B Station UP and an independent game developer, released a video at the end of 2021 about his experience of waiting for the version number. His video was uploaded in the early hours of Christmas, when he made a game Called Master pottery that had been waiting for 477 days without results. The experience of AZGames is a true portrayal of many gamers in the past year. According to Tianyancha data, from July to December 2021, a total of 14,000 game-related companies were written off.

But it is unavoidable that the Chinese game market has indeed ushered in explosive growth in the past few years.

According to the "January-June 2021 China Game Industry Report", in the first half of 2021, China's game users reached 667 million, an increase of 1.38% year-on-year; of which, the actual sales revenue of the game market was 150.493 billion yuan, the highest in the calendar year, and five years ago this figure was still 60.51 billion yuan.

Specific to several major domestic game manufacturers, as of Q3 2021, Tencent's game revenue in the first three quarters of 2021 reached 131.5 billion yuan; not long ago, NetEase also released its 2021 annual financial report, of which the game business annual net income was 62.8 billion yuan, accounting for about 70% of its total revenue. Followed by 37 Interactive Entertainment, Century Huatong and other enterprises, the annual revenue scale is also more than 10 billion.

In the view of Zhang Yijun, first vice chairman of the China Audio-Visual and Digital Publishing Association and chairman of the Game Working Committee of the China Audio-Visual and Digital Publishing Association, "It is foreseeable that with the change of demographic structure, the competition in the game market will become more intense in the future, and the requirements for enterprises and products will also rise." ”

For the gaming industry, there is also a time when it should change.

"Just do a good job of going to sea"

Talking about the impact of the suspension of the version number, Ying Shuling, chairman of Hero Interactive Entertainment and CEO of VSPN, told the "Finance world" weekly, "Just do a good job of going to sea." ”

Since there is no restriction on the issue of version number in overseas markets, going to sea has become one of the few new development options for some game companies.

A small game company in Shanghai began to deploy overseas markets last year, and this year's going to sea has accelerated. The company's partner told caijing weekly, "Increasing overseas attempts was an increment for many game companies, but now if the overseas market cannot be opened, it is related to the development and survival of the enterprise." ”

In the past year of exploration at sea, his direct feeling is that the big manufacturers are also increasing their determination to go to sea, "going to sea, or going to sea to acquire, Tencent, NetEase has acquired many overseas high-quality studios." ”

In December 2021, Tencent set up an overseas game distribution brand with offices in Amsterdam and Singapore, the Netherlands. Not long ago, at NetEase's 2021 fourth quarter and annual financial report, NetEase CEO Ding Lei also specifically talked about "there has been no release number in China for a long time", saying that overseas market development and producer investment is NetEase's very firm strategic policy, which will gather the world's top game talents and accelerate the game to go global.

An employee of a major game factory gave feedback to the "Finance world" weekly that the domestic game market will be affected and adjusted, coupled with the encouragement of the overseas policy, many high-quality talents are also "more willing to fight overseas".

The shift to overseas markets is a major trend in the domestic game market. According to market research reports, in the past 5 years, the sales revenue and share of domestic games have been steadily increasing. According to the "2021 China Game Industry Report", the actual sales revenue of China's self-developed games in overseas markets in 2021 reached 18.013 billion US dollars, an increase of 16.59% year-on-year. Last year's two-dimensional mobile game "Original God", which was fired, topped the 2021 revenue list of China's overseas mobile games with a score of 406 million US dollars. Shouldering the heavy responsibility of cultural output is the high hope given to domestic games outside of making money.

However, at present, the pattern of domestic overseas manufacturers has also initially emerged, and the experience and model of Mihayou, Lilith, Funplus, etc. have matured. They go out to sea to explore early and have a first-mover advantage. But more small and medium-sized manufacturers, today on the road to the sea, facing the pressure is not the past, the games they produce go to sea, in addition to the problem of whether the water and soil can be satisfied, but also face the sense of oppression from the top manufacturers represented by Tencent and NetEase.

The above-mentioned Small Shanghai team that went to sea has already tested one or two games overseas, but the construction of overseas teams is relatively lagging behind, and in the competition for talents, the pressure from more big manufacturers has been felt. The treatment they can provide can only be in the middle and lower reaches, and their competitiveness is limited compared to many large factories. "Talents like technology and art can get millions of dollars a year." The aforementioned partners said.

The demand characteristics of talents in the game industry change with the ups and downs of the industry, and in 2017, the two-dimensional game talents were hot, and the talents that went overseas from 2019 were robbed. It is foreseeable that the overseas game market competition will become more and more intense.

The overseas market is large, and it is an important way out for domestic games, but it does not mean that it can be easily successful. "For example, the original team that only did domestic work had to transform all of them to overseas, which is actually quite difficult." Zhang Yi believes that "the chances of success may not be as good as if you continue to stick to the domestic market." ”

(Wu Yong and Zhang are translated as pseudonyms in the text)

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