The game industry that was reshaped by the suspension of the version number丨Kr gold · big event

The author | Song Wanxin

Editor| Pan Xinyi

After several rumors, on April 11, the news of the re-issuance of the game version number that had been suspended for more than 8 months was confirmed.

On the same day, the AH share game sector was a carnival, A-share glacier network, Dasheng culture, Youzu network rose and stopped, Hong Kong stock B station rose more than 14% in the intraday, Tencent, NetEase rose more than 5%, and the heartbeat company rose more than 22%.

In the review list, the commonalities of the features of the 45 games are widely discussed, and factors such as the number of approvals, development companies and game types have become the incisions for the industry to try to spy on the leopard and analyze policy trends through this batch of editions.

The history of "version numbers" is not very long, and games in the PC era do not even have this concept. Until July 2016, after the relevant departments included mobile games in the scope of approval of the version number, according to the regulations, without the game version number, new games can only be publicly tested and tested internally, but they cannot open the recharge port and carry out commercial realization.

For the game industry, version numbers are the first level to make money. In just 6 years, the game industry has pressed the pause button twice in 2018 and 2021, each lasting 8 months, and the life cycle of a game generally does not exceed 3 years - "version number" has almost become a heart disease for practitioners.

Looking back, although the background of the two suspensions is different, the results have truly changed the direction of development of the industry, the way of operation and the fate of some small and medium-sized companies. Can the brief excitement of the reissuance of the version really break the long-standing tension in the market?

01 Stop the past

According to statistics, the game directly or indirectly caused the game industry to lose at least 1,000 new games, and more than 600 game companies collapsed during the year.

On March 29 of that year, the former State Administration of Press, Publication, Radio, Film and Television issued the Notice on Important Matters Concerning the Approval of Game Declarations, indicating that due to institutional reform, the progress of game approval work would be affected.

Subsequently, in June and August, the filing channels for domestic and imported games were also closed. At the same time, the State Administration of Press and Publication announced that it will implement the regulation of the total number of games, control the number of new online games operated online, "explore an age-appropriate reminder system that meets the national conditions, and take measures to limit the use time of minors."

This is the first time that the game industry has encountered targeted policy supervision, and the impact of the discontinuation of the version number on the industry is all-round. In 2018, the overall game sector fell by 36.66%, and 18 of the 53 game listed companies suffered losses, with a total loss of up to 27.04 billion yuan, of which 10 had losses of more than 1 billion yuan.

In the industry, whoever stands the highest will fall the hardest, and the first to bear the brunt is Tencent.

In 2018, Tencent launched the PUBG mobile game version (later renamed Peace Elite), and PUBG, which did not get the version number, meant that it could not contribute revenue in 2018. The later data proves that Peace Elite is the top two games in mobile game revenue with King glory for a long time.

At the beginning of the suspension, no one expected that this period would reach 8 months, and the impact would spread silently.

After the release of the version number policy, in the second and third quarters of 2018, the growth rate of Tencent's online game revenue began to slow down, and in the third quarter, as a peak season, online game revenue was 25.8 billion yuan, down 4% year-on-year. For the whole year, both the overall revenue and net profit were lower than market expectations.

Martin Lau, president of Tencent Holdings, said at the time that the inability to monetize the "eat chicken" game was one of the reasons for the poor performance.

According to Tencent's business composition in 2018, it is still a solid "game company". In March 2018, Tencent's Hong Kong stocks fell slightly by 5%; after the State Administration of Press and Publication clearly controlled the number of new online game online operations, Tencent fell by more than 20% in September and October to a minimum of HK$257.

Hong Jiajun, chief analyst of Overseas TMT of Industrial Securities, told 36Kr: "The valuation logic of the game industry in the secondary market has its particularity, because the game is extremely dependent on products, and usually the game life cycle is two to three years, so 'sustainability' has become a very important discount factor for valuation." ”

Therefore, if, due to policy reasons, the visibility of cash flow profits in the next 5-10 years becomes 3-5 years, the valuation will be halved accordingly.

But for Tencent's model of continuously expanding its territory by investment, the chain effect is constantly being amplified.

Tencent invested five investments in 2018: Shanda Games for 2.985 billion yuan, holding 12%; Investing in Douyu with US$630 million; Investing in Huya with US$460 million; Investing in Ubisoft with 2.9 billion yuan to obtain 5% shares; and investing 320 million yuan in Station B, the shareholding ratio rose to 12%.

However, due to changes in the market environment, Tencent made a total impairment provision of 17.577 billion yuan that year, which was 5 times that of the previous year, and Tencent also recognized an investment impairment of 2.1 billion yuan in the fourth quarter.

02 Reissue is not an inflection point

Since 2018, the regulatory trends in the game field related to "minors" and "anti-addiction" have hit the industry from time to time, but due to the direct stimulation of the home economy by the new crown epidemic in 2020, game stocks have achieved a rebound in the secondary market in the past two years, and from the beginning of 2019 to the end of June 2020, the overall game industry has risen by 161.65%.

Until August last year, the Notice on Further Strict Management and Effectively Preventing Minors from Addicting to Online Games clearly required minors to play time, and all online game companies can only provide minors with 1 hour of online game services from 20:00 to 21:00 every day on Fridays, Saturdays, Sundays and statutory holidays.

For Internet companies, a user's time is money. After the time of the majority of underage users was limited, the game market once again ushered in a wave of bearishness, and in order to comply with the "anti-addiction" new policy, the version number also stagnated again.

Now that the version number has recurred, the secondary market feedback shows that the game and even the Internet industry are expected to be repaired at a valuation.

Zheshang Securities analyst Xie Chen pointed out that due to the suspension of the version number, the number of new tours in the near future is small, once a company obtains a version number, it will obtain a higher ROI in terms of purchase volume and marketing, driving the company's marketing expense rate to decline for a long time. In addition, the peak of the industry space and the tightening of supervision have brought about a sharp clearance of the supply side, which has reduced the R& D expense rate of the industry's leading enterprises.

However, it is still difficult to change the status quo of the industry at one time - large companies rely less on the new version, and small companies are still difficult to bear uncertainty and are forced to play the safety card. Games seem to have become a non-cost-effective business, and for three years, companies large and small in the industry have been adjusting themselves.

After the catastrophe of 2018, Tencent, which suffered a lot, added "financial technology and corporate services" to the financial report revenue sector in the first quarter of 2019 to balance the structure of the excessive proportion of game revenue, thereby reducing the impact of stock price fluctuations caused by policies.

In the past fourth quarter of 2021, this part of the revenue surpassed the game sector for the first time, becoming the sector with the largest contribution to Tencent's revenue. This is a good fulfillment of Tencent's goal of responding to the policy, as well as a certain level of corporate transformation.

Hong Jiajun believes that although the game is still Tencent's main source of profits, from the valuation point of view, the valuation multiple will not be too high, secondly, the big manufacturer game reserve itself is relatively rich, with a large stock game market, so the release of this year's version number, will not greatly affect the revenue growth of the year.

After the news was released on the 11th, Tencent's stock price rose by 5%, relatively stable, Hong Jiajun believes that just looking at the game, it may be difficult to change the market's expectations for Tencent too much.

In addition to large factories, it is also unknown whether the version number can change the fate of small and medium-sized manufacturers. Some insiders have found that in the latest 45 versions of the release, the company behind a number of reviewed games has been "killed".

For example, Nanjing Bochuan Network Technology Co., Ltd., the operating company of "Dream Puppy", public information shows that the local supervision and administration bureau cannot be contacted through the registered residence or business premises, and Shanghai Lingyi Technology Co., Ltd., the operating company of "Little City Lord", has been deregistered in the information of two companies registered by Tianyancha, and the other official website has become a skin care brand.

What brings fear to enterprises is not the lack of version numbers, but the "uncertainty" of not knowing when to issue version numbers. For the sustainable operation of the company, many enterprises that lack capital support have voluntarily given up investment in the 8 months before the resumption of issuance.

In February this year, a two-dimensional game producer said that the version number of the two-dimensional game was not issued, and the company decided to cancel the project test, and several years of efforts were wasted. At the same time, the two-dimensional mobile game projects of game studios such as Lilith and Scattered Explosion have also broken the news of being cut.

As in 2018, the issue of "juvenile anti-addiction" has always been the focus of supervision, and the first review list after opening up is also based on this background.

Judging from the latest 45 game versions, the game type is concentrated in casual light games.

A game industry analyst told 36Kr that on the one hand, there are too many games to be squeezed for review in 8 months, and the review of casual games with smaller volumes is faster, so it may be released first, on the other hand, there are also brokerage analysts who speculate that the heavy games with a heavier tendency of "krypton" will themselves be treated harshly, so they will be suspended to "release".

Referring to the situation after the resumption of the release of the version number in 2018, this year is likely to be "first slow and then fast", first deal with the inventory, and then deal with the increment, but this also means that the pace of subsequent version number issuance is not clear, the more ranked behind, the stronger the uncertainty.

Since there is still a long period of time for the game revenue to be fed back to the financial book, even if the new game gets the version number, it will go through the links of launch, customer acquisition and conversion before making a profit.

"Look at the version number in the short term, and look at the self-research in the long term." A game industry insider summed up the core of today's competitiveness in the game industry.

However, under the increasingly strict review system, the more pre-cost AAA games, the later approval time and difficulty will be correspondingly increased, which is equivalent to the production of games that consume "people's time and money", and manufacturers need to bear the dual uncertainties of "approval" and "commercialization".

Between risk and cost, how much room is left for "boutique" games is a problem faced by all gamers.

Stay tuned for more advice