From electronic opium to capital chasing deer to the current market carnival, games have been given more meaning beyond their own categories.
It's usually a great tool to pass the time in everyone's spare time, finding a wild king in Honor of Kings and showing off a good gun in CS:GO. But with the development of AI technology, games have made waves in the field of capital.
In the past month, the game index has soared 35%, and it has risen 7% every day for two consecutive trading days.What makes many "players" adrenaline rise is not the tense competitive game, but the red and green high and low candlesticks. There are more posts discussing the value of game investment in various stock bars than technical posts discussing game strategies.
The madness of capital seems to have kicked off a new era of games, and behind the curtain, is it the flowers all over the mountains, or the ruined scene where the north wind is raging?
(Game Index intra-year trend, source Wind, as of 2023.4.6)
Below, we will analyze the investment value of the game field from the policy, technical, emotional and fundamental aspects, I hope you can read it patiently, you will definitely gain something.
Policy: Policies ushered in a sweet period
Policies have a great impact on the development of games.
More than 20 years ago, the little bully learning machine that swept the country was lonely due to a paper ban, and the entire game industry has not slowed down for several years.
(Childhood memories of the little bully learning machine)
In recent years, the policies that have had a greater impact on the game industry mainly include "ban on minors" and "stop issuing version numbers".
Underage groups are the main audience of the game, but the bottom line is that underage players do not contribute much profit. In the case of Tencent, the turnover of domestic non-adult players accounts for only 6% (data source Tencent's 2020 quarterly report).
Speaking of which, the image of the core krypton guy who shakes people to attack Sand City is too different from the student group.
Let's talk about the version number. Only when a game has a version number can it be officially launched and operated on major domestic platforms, and can it have a variety of profit channels such as krypton gold, buyout, and pay-by time. To put it bluntly, with the version number, the game has the right to breathe.
After the first quarter of 2018, the application and distribution of game version numbers were stopped. Over the next three quarters, the gaming index plummeted 40 percent.
The game version number is stopped, more affect the emergence of new products, that is, the impact on small companies without die-hard loyalists and no representative products is greater (there is no chance of turning over), just imagine, if Mihayou's Genshin did not apply for a version number, now there will be one less giant in the game circle.
Therefore, every edition winter is an opportunity for industry restructuring. In 2018, the two big factories of Tencent and NetEase took 80% of the revenue, and the strong is Hengqiang.
Since the second half of last year, the game version number has begun to be issued normally, and the number of version numbers has begun to increase recently, and the dark cloud of version number suspension has gradually dispersed.
(Source: State Press and Publication Administration)
The more games there are, the market competition is more intense. Moreover, the game field has entered the era of stock competition. In the first half of 2022, the sales revenue of the domestic game market was about 150 billion, a year-on-year decrease of 1.80%; Game users decreased by 0.13% year-on-year. Revenue and the number of users have both declined, and the "demographic dividend" of the game industry has basically disappeared!
In order to make the cake bigger, the policy has been relaxed a little. In September this year, esports will be registered as an official event at the Hangzhou Asian Games. In order to prepare, at the end of March, the National E-sports Development Research Institute of China Central Radio and Television Corporation was inaugurated. From electronic opium to official competitions, the image of esports at the national level has changed dramatically.
(LOL was performed as a show at the Asian Games, and the Chinese representative won the championship in this event)
However, the registration of the Asian Games and the establishment of the Esports Development Institute are things that have long been established. At the end of 2020, the entry of esports into the Asian Games was made public, and at that time the game index went all the way down.
Although the current policy is conducive to the development of the game industry, it is not enough to say that the policy is the main engine of the game rise.
Technical: Technology landing still has to wait
The technical aspects mentioned here are mainly the impact of artificial intelligence on the game industry.
The game is an art that combines multiple elements such as art, music, and dialogue.
In terms of art, AI painting has been accomplished, what you think, what you can paint, in a few seconds, you can complete the workload of an original artist for several days;
In terms of dialogue, it is AIGC's masterpiece, and it is also the key to breaking the circle of artificial intelligence, which will improve the game's plot gameplay. Hardcore players abroad have connected ChatGPT to the high-freedom game "Horse Riding and Slashing 2" to improve the interactivity of NPCs.
All kinds of artificial intelligence tools will improve the efficiency ceiling of game companies, reduce costs and increase efficiency, and games seem to have more investment value. To put it bluntly, the explosion in the field of games in this round is inseparable from the drive of the field of artificial intelligence.
However, in assembly line production, games are more like industrial products and less artistic quality. There is no shortage of "skinning games" in China, with these tools, the previous rough skinning page game has become a more exquisite skinning page game, in addition to increasing the aesthetic fatigue of players, it does not help much to improve the profit of the game.
Whether the game can become popular, its core gameplay is the key, many old games more than ten years ago still make many players love it, such as "The Legend of Jin Yongqun". In addition, there are some games that do not require too beautiful graphics and plots, such as "Football Manager".
Technological breakthroughs have indeed been of great help to certain types of games, such as orange light word games and some love cultivation games, but the proportion of revenue from these games is not high.
(Talk about a cyberromance)
In addition, if you look at the announcements of listed game companies, you will find that the use of meta-universe and artificial intelligence technology has already begun, and the market has not reacted before...
It is still too early to talk about the earth-shaking transformation of the game field by artificial intelligence.
Emotional side: Trading enthusiasm has been the highest in the past three years
Recently, the daily turnover of the game sector is about 30 billion, accounting for more than 3% of the turnover of Big A, the highest in the past three years. Considering that the market value of the entire sector is about 450 billion, the turnover rate is not low.
(Source: Wind, as of March 31, 2023)
Strangely, the market value of the gaming sector in the past three years has been in place. In the "mask era", big home makers have more opportunities to contribute profits to the game industry, but the market value of the sector has been down, and the market value has slowly recovered until the third quarter of last year.
The largest ETF in the gaming sector is the Huaxia CSI Animation and Games ETF. The ETF's share soared in March, the highest since listing.
(Source: Wind, as of March 31, 2023)
Or buy stocks directly, or buy funds indirectly, everyone's enthusiasm for buying games has been high since March, pushing the trading enthusiasm of the entire sector to the highest point in nearly three years! But since the end of last year, if you get on the bus in late March, you have indeed eaten big meat for two days, with a one-day increase of about 8% for two consecutive days. If you have a timing-picking attitude, you want to make a splash, which is a good benefit.
After all, when the tide clears, you know who is swimming naked. Moreover, the giants in the domestic game field are not listed in the big A. In other words, even if the wind comes, it is difficult for these game listed companies of Big A to support the beautiful imagination under everyone's trading enthusiasm.
Fundamentals: Performance is declining, the giants are not
A major deficiency in the domestic game field is that the two giants of Tencent and NetEase are not listed in Big A. There are no giants sitting in town, even if the benefits are frequent, the ceiling of the plate is not high.
To put it bluntly, the combined revenue of all constituent stocks of the current game index (including game and non-game business, domestic and overseas business) is not comparable to Tencent's domestic game revenue.
For example, in 2021, the revenue of all the constituent stocks of the game index was about 86 billion, while Tencent's local game market revenue was 128.8 billion.
(Main components of the game index, data as of 2023.4.6)
What supports the long-term rise in stock prices is real performance, not momentary imagination. In the past 10 years, the top 10% of individual stocks have an average growth rate of 1600% in net profit, which is higher than 90% of individual stocks! (Data as of December 31, 2021)
At present, the net profit growth rate of the main components of the game index has not improved, and even fell sharply in some years.
(Since the 2022 annual report has not been updated, only the data as of 2021)
Without giants, A-share games can be described as congenitally bad; The performance growth rate has slowed down, the acquired development is not good, and the fundamentals are not good.
As mentioned earlier, the current game market has entered an extremely fierce stock competition, and the game companies of Big A do not have an advantage in the next competitors.
Policy aspect: limit the version number, the strong are stronger; Unlimited edition number, competition is more intense, large companies have strong comprehensive strength, and it is easier to make achievements;
Technical: Putting aside the problem of technology landing, even if the technology is mature and used on a large scale in the future, there is no doubt that companies of the size of NetEase and Tencent are more likely to have technical advantages and even form technical barriers. Small companies, how can they make triple-A games?
The epoch-making changes in game technology set off by the AI frenzy are good for game giants and gamers. As for the surge of big A game stocks, this article believes that this is the rotation of funds from ChatGPT concept to big data cloud computing to games, it is a violent manifestation of market sentiment, and it has nothing to do with technology and fundamentals.
Moreover, it has nothing to do with the operation of the mechanism! Most of the time, the changes in the holdings of public funds in the game field can keep up with the market. For example, from April 2019 to June 2020, the fund bought a large number of game stocks, and then the index rose to a stage high. Another example is the whole of 2021.
This time, the index has reacted in the fourth quarter of last year, but the number of shares held by the fund is still at a stage low.
(Source: Wind, as of December 31, 2022)
In December last year, the breaking of ChatGPT has sparked discussions about AI technology, and from the perspective of public fund operations, it is clear that they do not think that this is a major benefit to the game, and the number of shares has not changed much.
Public funds have always not liked to buy games, and it is better to buy China General Internet if you have that money, after all, it is the main position of Tencent and NetEase. Since 2018, the peak of the market value of games held by public funds is only 9 billion, and the latest data is only 2.7 billion, accounting for less than 1% of the market value of the game index. (Data as of December 31, 2022)
It can be seen that not only parents do not like games, but also public funds.
This article tries to present the other side of the domestic game field to you, and hopes that you can understand as much as possible about the risks behind the benefits, and make effective decisions after comprehensively considering the risk-return cost performance of investing in games under the current increase.
Thank you for your patience after reading, your attention and forwarding is the greatest recognition of this article, thank you for your support!
Risk warning: Fund investment is risky, investment needs to be cautious. Any opinions, analyses and forecasts in this article are for informational purposes only and do not constitute any form of investment advice to the reader.