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These days, the game industry is having a hard time. Last year,830 new regulations restricted the time minors played games. Subsequently, the approval of the game version number (equivalent to the game's "business license") was suspended, and the launch of the new game was suspended.
Source: Xinhua Net
However, since April this year, the game version number has been restored. Optimists believe that the game industry has survived the short-term pain of consolidation. But unfortunately, this does not mean that there will be a bottoming out.
Because the fundamental problem of the game industry is not just tightening regulation.
The two little brothers in the game world, Perfect World (002624) and Kunlun Wanwei (300418), perfectly interpret the hardships of the game track. If you open the financial report, you will find that these two companies are worse than the other.
First, the growth encountered bottlenecks, and the industry was not optimistic
The mainland game market can be roughly divided into two camps (page games and other games account for a relatively small proportion). One is mobile games, that is, mobile games. The second is the client game, that is, the end game. Nowadays, mobile games have peaked, and the end games have shrunk. The overall situation of the game industry is not optimistic.
1. End-swim atrophy
From the front end of the tour is the only one, the market share can reach 80%+. However, with the popularity of smartphones and the rise of mobile games, the market share of end-game is now less than 20%.
The most important thing is that the terminal travel market has shrunk significantly.
In 2020-2021, due to the impact of the epidemic, the home economy is prevalent, and the game industry as a whole is positive. However, this failed to save the decline of the end game, and the market size fell below 60 billion in one fell swoop.
2. Mobile games peak
There is no doubt that mobile games are now the hope of the whole village in the game industry.
Compared with the end game, the mobile game is still very competitive. In particular, in 2020, sales revenue increased by 33% year-on-year. But don't be too happy too soon, look at the number of users, only increased by 4.8% year-on-year.
What does this say?
First, the growth rate of users is significantly smaller than the growth rate of revenue, indicating that the main people who play games are still the original people. Revenue increased only because of the increase in revenue from games contributed by unit users.
And this data will inevitably gradually decline with the resumption of work and school.
Second, under the epidemic, everyone is staying at home. But the number of people who played the game increased by only 4.8%. It can be seen that this market is likely to be approaching the bottleneck of user growth.
And this problem, in fact, has long been a sign. Excluding the special growth in 2020, the year-on-year growth rate of households has plummeted in recent years. Moreover, the absolute scale of user growth is also shrinking.
Source: Game Working Committee, Cinda Securities
This is the root of the restriction on the development of the game.
Second, market competitiveness, both fail
Game track, the cake is so big. Therefore, even the game revenue of goose factory in China is difficult to maintain positive growth. However, for small businesses, there is still room for growth. For example, if you can grab the market of the goose factory, it is easy to double.
In short, the growth of enterprises depends on competitiveness. Unfortunately, Neither Perfect World nor Kunlun Wanwei possess such strength.
1. Growth is an accident, decline is the norm
As mentioned earlier, the game industry has seen a significant increase in market size in 2020. In 2021, it barely maintained a high base and did not fall back. If this result is a pass, then Perfect World can have a maximum of 50 points, and Kunlun Wanwei may only have 30 points.
2020 is the year of increased number of gamers and increased game duration. But it was clear that these people did not choose Kunlun Wanwei. In 2020, Kunlun Wanwei's game revenue actually fell by 19% year-on-year. It can be seen that Kunlun Wanwei is quite competitive in the game track.
Source: iFinD, Perfect World (left) Kunlun Wanwei (right)
In contrast, Perfect World's results are much better. At least in 2020, game revenue has clearly pulled up a notch. Unfortunately, it did not hold up in 2021, down 20% year-on-year.
It seems that the growth in 2020 is an accident, and the decline in 2021 is the norm.
After excluding the accidents in 2020, Perfect World's game revenue in recent years has barely maintained steady growth. In the long run, survival may not be a problem, but it is difficult to grow.
2. Perfect World's performance is against the sky, hiding mysteries
Seeing this, some people may question it. On July 15, Perfect World released its semi-annual results forecast. It is expected that the net profit attributable to the mother will increase by more than 3 times, and it is expected to double by 15-16 times after deducting non-profit. This achievement, not only growth, is simply against the sky. How can it be said that there is no growth?
Source: Perfect World's first half of 2022 results forecast
But behind this figure, including the overseas game project disposal revenue of 400 million, compared with the same period last year disposal loss of 270 million. That is to say, one positive and one negative, non-recurring profit and loss has caused at least a small gap of 700 million.
The disposal of overseas projects also revealed a message. In the context of the increasing saturation of the local market, game manufacturers have begun to seek overseas layout. But Perfect World's frequent handling of overseas projects shows that it is not so easy to enter the world.
3. Kunlun Wanwei had no choice but to change lanes, and the decline did not decrease
Despite the difficult situation, Perfect World still has to make a living from games, accounting for 87% of revenue. Fortunately, Perfect World Profitability is online. In 2021, the gross profit margin of the game was 66.62%, far exceeding Kunlun Wanwei's 42.37%.
Kunlun Wanwei also seems to have recognized its weak competitiveness and low gross profit margin, so it has expanded many business lines through acquisitions. Game revenue accounted for only 16% in 2021.
Source: Collation of public information
However, after the completion of the acquisition, Kunlun Wanwei on the one hand generated nearly 4 billion yuan of goodwill. On the other hand, the performance did not meet expectations.
In the first half of 2022, Kunlun Wanwei's net profit attributable to the mother is expected to decline by 35.95% to 41.96% year-on-year. According to its explanation, it was mainly invested in Didi that caused a loss of 428 million yuan (8.026 billion yuan was fined today). But even excluding the recurring profit and loss, it still fell by 10.06%-17.88%.
In the end, it is still the decline of the main business of the game. Diversified transformation has not created synergy with the main business. I don't know how many can be equal to 1+1 in the end?
Third, whether it is good or bad, leave it to time
Today, the gaming track faces three major risks.
- First, the policy risks of the game industry. Although the game version number was resumed, the direction of stricter supervision remained unchanged;
- Second, the slowdown in user growth may become the root cause of restrictions on the development of the industry.
- Third, once it turns to the stock game, market competition will inevitably intensify. At that time, the strong may be able to remain strong, but the weak can only be eliminated.
Between kunlun dimensions and perfect worlds, the latter may be the strong one. But looking at the entire market, Perfect World's competitiveness is still low, and its international entry is not as smooth as imagined.
Perfect World also has a side line, that is, film and television drama production. This business can share IP with the game and develop synergistically. However, from the data point of view, the revenue scale of film and television dramas is getting smaller and smaller, and the gross profit margin is getting lower and lower. Seriously pulled down the overall profitability of Perfect World.
Source: iFinD, revenue (left) gross margin (right)
Kunlun Wanwei, on the other hand, has strategically abandoned the dominance of the game and chosen diversification and transformation. But also be vigilant, M&A business is likely to fall short of expectations.
There are eggs in the nest, and there may not be a chance to be born.
Note: This article does not constitute any investment advice. The stock market is risky, and you need to be cautious when entering the market. There is no harm in buying and selling.