China Times (www.chinatimes.net.cn) reporter Yu Yujin reported from Beijing
Recently, the share price of game companies has been climbing under favorable conditions such as version number, and among Hong Kong game companies, the share price of IGG (00799.HK) has risen by 84.07% in the past 16 trading days, especially on April 3, the stock price rose by 29.54%. In contrast to the hot share price, IGG's just-released results were not satisfactory, with a loss attributable to shareholders of HK$504 million, compared with a profit of HK$370 million in the same period of 2021, turning from profit to loss, which is also the first annual loss after IGG's listing.
It's just that the capital market has always looked at expectations, as IGG's old game "Kingdom Age" continues to develop steadily, the new game "Doomsday" is in a stage of explosive growth, "Viking Rise" is poised to launch, IGG is favored by investors, of course, the new game also means more marketing investment, IGG's net profit in the first half of 2023 may be under pressure.
Xu Yuan, IGG's chief operating officer, said on the March 29 earnings call, "IGG invested heavily in research and development in the first two years, and this year there are two pretty good new games that will grow rapidly. One is to make up for the impact of the global economic downturn on old games, and the other is to bring the entire company's revenue to a new height. ”
Up 84.07% in 16 trading days
On April 3, Hong Kong game stocks collectively strengthened, of which IGG was far ahead, closing up 29.54% on the day.
According to the reporter, on March 31, Microsoft GDC 2023 China Tour was held in Beijing, at which experts from Microsoft and the domestic game industry demonstrated the technology and related application cases of game development tools based on AIGC technology such as Azure OpenAI, GithubCopilot, Simplygon and other game development tools in programming, game virtual players/virtual anchors, NPC interaction, content creation and game development. At present, the market believes that AI can help the game industry reduce costs and increase efficiency in many aspects such as assisted code writing, game development, NPC optimization, scene design, data analysis, and user retention.
At the same time, with the return of the game version, the good news of mobile games going overseas is frequent, and AIGC will help the industry reduce costs and increase efficiency, and the game industry has entered a new stage of development.
In the past 16 trading days (March 14-April 4), IGG has jumped 84.07%. In addition to the above industry situation, IGG's two games "Doomsday" and "Viking Rise" have also been launched for testing and promotion.
Xu Yuan said at the earnings conference that the new game "Doomsday" began to be promoted on a large scale in March this year, and the revenue soared rapidly, from about tens of thousands of dollars in early March to an average daily income of more than $270,000 on March 29.
"Another new strategy game, Viking Rise, has been tested in Europe, the United States and Southeast Asia, and the data performance and player payment are also very good, so the company is also strengthening the post-game gameplay, and expects to start a larger promotion in mid-April." Xu Yuan further said that at present, the retention of "Viking Rise" is more than 60% higher than that of "Doomsday", which has laid a very good foundation for the game.
Game industry analyst Zhang Shule said in an interview with the "China Times" reporter that there are new games that may give birth to explosive models, especially in recent years, when there is no strong SLG type explosion at home and abroad, the opening of these two games, coupled with the previous operation performance of IGG's "Kingdom Era", have stimulated the capital market.
The first loss in 9 years of listing
Although it is very hot in the secondary market, the 2022 results just released by IGG are not ideal.
According to the financial report, in 2022, IGG's revenue will be HK $4.591 billion, down 24% year-on-year from HK $6.051 billion in 2021, of which the revenue of the old game "Kingdom Age" will be HK $3.671 billion, contributing 80% of the total revenue.
Xu Yuan said that in the first half of 2022, the DAU of "Kingdom Age" fell by 25%, which also led to a decline in IGG's overall revenue, so the company increased the promotion of "Kingdom Age" in the second half of 2022, and the DAU of the game gradually stabilized, and in 2023, the company will continue to launch more innovative gameplay, and will continue to maintain the company's promotion to obtain more active users.
IGG suffered a loss of nearly HK$180 million in its main business and a loss attributable to shareholders of HK$504 million in 2022, compared with a profit of HK$370 million in the same period in 2021, which is the first loss IGG has suffered since its listing in 2013.
Xu Yuan said at the earnings conference that IGG's revenue was affected by the macro environment, with a loss of HK $180 million in its main business, and the investment was affected by the downturn in the game industry and version restrictions, resulting in a decline in the valuation of some of IGG's portfolio companies, and the company also had an investment loss of HK $330 million in 2022, so IGG lost about HK $500 million overall in 2022.
According to a report released by Newzoo, a global game consultancy, the global game market will decline for the first time in history in 2022, with revenue expected to decrease by 4.3% year-on-year to $184.4 billion.
It is worth noting that in 2022, IGG also carried out personnel optimization. At the end of 2022, IGG had 2,503 employees, compared to 3,101 at the end of 2021. However, IGG's employee-related costs increased to HK$1.3 billion from HK$1.19 billion in 2021.
IGG explained in the financial report that in 2021, in order to enrich the product matrix, the company prepared to build new R&D bases in various places and consolidate the global R&D team, which made the company's labor costs increase since the second half of 2021. In 2022, the company optimized the allocation and staffing of human resources, and the total number of employees at the end of 2022 decreased by 19% compared with the end of 2021, and the labor cost in 2022 still increased compared with 2021 due to the related expenses incurred by personnel optimization.
Xu Yuan said that the overall number of IGG is about 2,500 people, of which about 1,500 are R & D personnel, the company has done a lot of products in the past two years, products have advantages and disadvantages, this year most of the company's products will be online test, and according to the test results to evaluate the strength of each R & D team, through product performance to judge whether R & D personnel can meet the company's KPIs, if not up to standard may be optimized. "That is, the R&D team may further optimize the compression on the basis of today." He also said.
First-half results may come under pressure
The performance of 2022 is a thing of the past, and large R&D expenditures and investment losses are left in 2022, and IGG is light in 2023. However, in the first half of 2023, with the launch of new games, IGG has increased its investment, which also means that IGG's performance in the first half of 2023 may be under pressure.
At present, the IGG strategy games "Viking Rise" and "Doomsday" are in the promotion period. In addition, the action mobile game "Yeager: Hunter Legend" has been officially launched overseas on March 16, 2023.
Zhang Shule analyzed to reporters, "Strategy games often have strong and lasting vitality, and players do not have particularly strong requirements for experiences such as picture quality, but have more enthusiasm for growth and activity gameplay in the game." In the current game market, it is inevitable to form a hot start by buying volume, but if you can only rely on buying volume to maintain popularity, it will inevitably decline. ”
Some people who do not want to be named told this reporter that IGG game products are rich in reserves, as new games are launched or tested one after another, and achieve better data performance, IGG's revenue will increase, but considering the increase in new game marketing investment in 2023, profits in the first half of 2022 may be under pressure.
For the launch of the new game "Doomsday", Xu Yuan said that the advertising investment of "Doomsday" is strictly in accordance with the set KPIs, and must be returned within a few months, and the increase or decrease of advertising investment will be carried out according to the completion of the goal, if DAU and revenue have been growing, then the investment will naturally increase, and vice versa, it is a process of dynamic adjustment. "Doomsday is still growing wildly, and we expect that the investment in the next few months will be quite large, and we expect that the investment may slow down relatively in the second half of the year, allowing the game to start generating profits."
In addition, IGG will apply for two domestic versions in 2023, namely "Mythic Heroes" and "Yeager", and there are plans to apply for a version number of "Viking Rise". At present, "Mythic Heroes" has obtained a domestic game version number.
"IGG's domestic distribution strategy is also constantly being evaluated, because most of the company's games are released overseas, and if it can be successful overseas, IGG will apply for a version number in China." Xu Yuan said that although IGG has developed a lot of products, there are very few games that have applied for domestic versions, and the company pays more attention to the success rate of games, and whether "Mythic Heroes" enters the Chinese market by itself or is an agent to other game manufacturers is still being evaluated and negotiated.
On April 4, the reporter interviewed IGG on issues such as the performance of the secondary market and the layout of game products, but did not receive a reply as of press time.