On the afternoon of August 17, Tencent announced its financial report for the second quarter ended June 30, 2022, with its operating income of 134.034 billion yuan, down 3% year-on-year; Non-IAS net profit (Non-IFRS) was RMB28,139 million, down 17% year-on-year but up 10% sequentially.
In terms of specific revenue structure, Tencent's value-added service business revenue in the second quarter was 71.7 billion yuan, and the core game business revenue was 42.5 billion yuan. Among them, the revenue of games in the local market fell by 1% year-on-year to 31.8 billion yuan, and the revenue of international games fell by 1% to 10.7 billion yuan. From the data alone, the growth pressure facing Tencent's game business is becoming more and more prominent, and it seems that it is difficult to return to the peak in a short period of time, but from the perspective of the entire game industry, a slight drop of 1% can be said to be a rare achievement in the downturn and regression of the industry.
In particular, after the implementation of the anti-addiction measures, the effect is remarkable, the loss of underage players is extremely rapid, and Tencent Games can still maintain the overall stability of the basic disk, which seems to have gradually stepped out of the haze brought by the current market environment to the game.
The basic disk of the game is still solid
In the first half of 2022, the entire game industry is in a rather severe state.
According to the "China Game Industry Report for the First Half of 2022" released by the Game Working Committee of the China Music and Digital Association, from January to June 2022, the actual sales revenue of the domestic game market was 147.789 billion yuan, down 1.80% year-on-year, which was the first year-on-year decline in recent years; At the same time, the size of game users was about 660 million, down 0.13% year-on-year.
The downturn in the domestic game market is foreseeable. Since the suspension of the game version number in July last year to the resumption of distribution in April this year, game companies large and small have been struggling to support in the torment, but even if the version number is resumed, we see that since the beginning of this year, the State Press and Publication Administration has only issued 241 domestic game version numbers. In addition, under the strictest new regulations, major head manufacturers have upgraded the anti-addiction system as required, and can play up to 3 hours a week, which makes the activity and consumption of minors greatly reduced.
Foreign markets also seem to be "the same disease pity", such as the United States, the first half of the year in the United States mobile game total revenue of 11.4 billion US dollars, down 9.6% year-on-year, only to see Q2, the US mobile game market revenue of 5.6 billion US dollars, down 11.4% year-on-year. The South Korean market performed much better than the United States, but the revenue of the mobile game market in the first half of the year still fell year-on-year, to 1.9%.
In this environment, Tencent Games' latest performance actually exceeded expectations.
Before the financial report was released, Damo expected Tencent to decline by 3% year-on-year due to the limited number of new game launches, coupled with the decline in the game time of minors. And compared with the Game Working Committee's prediction that the Q2 revenue of the domestic game industry will decline by 7% year-on-year, Tencent Games will decline by 1% year-on-year, far higher than expected, and indeed it can only be regarded as a slight drop or fine adjustment.
In the eyes of many people in the outside world, Tencent, a game giant, has abandoned high growth and gone through its peak period, but despite this, it has to be admitted that under the uncertainty brought by the superposition of multiple risks to the industry, the slight decline of Tencent Games has highlighted the stability of its basic disk.
We can see this from the comparison of the world's major game manufacturers. Not long ago, Microsoft, Sony and Nintendo all released financial reports, of which Microsoft's overall game revenue in the second quarter fell by 7% year-on-year, Sales of Sony's game division fell by 1.9% year-on-year, and Nintendo's sales in the quarter were 307.46 billion yen, down 4.7% year-on-year. Separately, Activision Blizzard, which was acquired by Microsoft, noted in its quarterly report that its net profit fell by 70% and its revenue fell by 29%.
It can be seen that under the background of the shrinking "large market" of the global game market, the revenue of Tencent Games still continues to surpass.
In an environment of economic downturn and industry obstruction, maintaining stability may be the best way to deal with risks.
Without elementary school students, the "king" is still the king
Tencent Games' steady basic disk comes largely from the continuous "blood transfusion" of its own "ace" products.
In addition to "Glory of Kings", one of Tencent's other most profitable games, PUBG Mobile, also benefits from its precise layout around the world.
Combining the data of Superdata and Sensor Tower, we can see that in the top ten most profitable free-to-play games in the world for three consecutive years from 2019 to 2021, Tencent occupies 7, 7 and 5 respectively, and in these games, the status of "Glory of kings" and "PUBG Mobile" has been as stable as Taishan. According to sensor Tower, in July, Honor of Kings grossed more than $225 million on the global App Store and Google Play, and PUBG Mobile (merging Peace Elite) at $164 million, both top and second.
As a mobile game, "Glory of the King" sits firmly in the position of the first daily active user, the first place in the iOS best-seller list, and the first position in the user's game time, and this long-term hegemony can be said to have greatly re-brushed the life cycle of the mobile game, and it and "PUBG Mobile" still lead the MOBA and shooting tracks respectively.
In addition to "Glory of Kings" and "PUBG Mobile", "Battle of the Golden Shovel" and "League of Legends Mobile Game" also contributed new strength to Tencent's game revenue in the second quarter. From the top 10 list of domestic mobile game iOS revenue in July, it can be seen that thanks to the addition of the unique content of "League of Legends" to the update in July, the activity of "Battle of the Golden Shovel" and "League of Legends Mobile Game" has increased, and the unique appeal to players has been further enhanced. Among them, according to the financial report, "Battle of the Golden Shovel" achieved the fourth best result in game duration in the second quarter of all games.
Of course, although Tencent's "ace" products are difficult to be shaken in the industry, it is an indisputable fact that Tencent's domestic and international revenue fell by 1% year-on-year, and the explanation given by Tencent in the financial report is that in addition to the decline in the number of large-scale game releases and the reduction in user consumption, there are also the impact of measures to protect minors.
However, compared with the data released by the Game Working Committee in the second quarter of the domestic game market revenue year-on-year decline of 7%, Tencent's decline is controlled at 1%, on the one hand, it may be that the length of adult users is still increasing, which to some extent offsets the impact of the decrease in underage players; In the second quarter earnings report, Tencent mentioned that "Glory of kings" and "Peace Elite" were the two games with the highest total usage time in the industry, and their respective adult user total usage time increased year-on-year.
On the other hand, the proportion of minors in Tencent's games is not very high in itself. In the second quarter of last year, Tencent disclosed for the first time the proportion of minors under the age of 12, and in the total turnover of games in the mainland, the turnover of underage users under the age of 12 accounted for 0.3%, and the proportion of underage users under the age of 16 decreased to 2.6%. This also proves once again that the main force of the game Krypton gold has always been adults.
After staying away from "primary school students", the true background of Tencent Games can be said to have been shown once through the latest financial report, which not only shows the stable basic disk of Tencent Games, but also confirms the improvement of user structure. As a leader in the implementation of head game manufacturers and anti-addiction measures, the change of Tencent games has also driven the health of the entire industry.
According to a survey by Niko Partners, a data analysis agency for the game industry, before the restriction order was issued, there were about 122 million underage players in the mainland, accounting for 60% of the total number of minors, and after the restriction order was introduced, this proportion fell to 40%, and the number of people is expected to fall to 83 million. In addition, 71% of the underage players played for less than 3 hours per week.
In the future, underage players may continue to decrease.
Steadily through a long transition period
Judging from the current situation in recent years, the game industry in the mainland is facing two turns, one is that the scale of players has reached the ceiling, the market has entered the era of stock, especially the underage players absorbed in the past have been abandoned, and the traffic anxiety of many game manufacturers has been amplified.
However, the problem is gradually being solved, for example, Tencent has previously released a data, during the fourth quarter of 2021, Tencent's domestic minors' game time fell to 0.9%, the total time fell by 88% year-on-year, the proportion of game flow fell to 1.5%, and the total flow fell by 73% year-on-year. It can be seen that the game time and flow of minors in Tencent Games have been at an extremely low level.
Second, the restriction and tightening of the version number has forced the game industry to reduce the cost of trial and error, and at the same time, the user's demand for high-quality game products has further intensified the pressure. Tencent Games has accelerated the pace of exploration on the road of high-quality products, whether it is shrinking the capital territory, slowing down the pace of the original large-scale mergers and acquisitions expansion, or focusing on self-developed games and increasing investment, in essence, it is paving the way for high-quality products, so that the development focus of Tencent Games returns to the product itself.
At the end of June, Tencent Games held the 2022 annual conference, at which more than 20 game product dynamics were exposed, including many heavy information such as 3A, UE5 self-research, and open world. For example, the martial arts open world "Codename: To Jin Yong", from the released demo, you can see that the visual effect is quite stunning.
Although technology is a support point for Tencent's self-research and upgrading, the core of high-quality games lies in creativity, and creativity is attached to people's ability to innovate.
In June, Tencent's Photonic Studio Group announced an upgrade, and the upgraded Photonic Studio Group hired many senior producers for different game types. For example, North American Lightspeed LA is led by Steve Martin, a veteran producer of the former Rockstar, focusing on the AAA development world; Founded in June 2021, Uncapped Games, with its core members from Blizzard, is primarily building RTS.
Overseas, this year Tencent has invested in six studios with AAA development strength.
For Tencent Games, high-quality products are actually not forced actions after the change of the external environment, but tencent's "only way". Because around the boutique game can be developed to a greater extent to develop and tap the long-term value of IP, help the company resist the risks brought about by changes in the external environment, through the cycle, and after the strategic position of going to sea is improved, only boutique games can attract users in overseas markets.
Glory of Kings is a prime example. Putting aside the income brought by the game's own crazy gold absorption, we see that around the IP of "Glory of the King", we have gradually formed a commercial chain involving novels, animation, film and television, tide play, virtual idols and other fields. This commercial chain not only creates new value, but also in the process of amplifying the influence of the "Glory of kings" IP, it upgrades the "glory of the king" that was originally a game IP to a comprehensive IP with richer connotations similar to Disney's.
Behind this can only rely on Tencent, which has a complete industrial chain in terms of content, live broadcasting, channels and other aspects, and opens up to each other, in other words, this is also the unique advantage of Tencent Games whether it focuses on self-research or goes to sea.
However, all this naturally needs to be based on the premise of continuous output of high-quality game products, at present, Tencent Games' leading achievements in China and overseas are more dependent on games accumulated over the years. In the future, it is foreseeable that with the implementation of various uninsured measures, the policy risks faced by the game industry will weaken, and a healthy development environment will be more conducive to the output of high-quality game products.
Just like Tencent Games, it has entered the competition of technology, creativity and game experience.
The Tao is always reasonable, and has used the name Crooked Dao, the Internet and the new media in the science and technology circle. This article is an original article, and any form of reproduction without retaining the author's relevant information is not retained.