Although the global gaming market declined for the first time in 2022, sports simulation games still thrived.
Affected by the economic environment, regulation and the epidemic, the actual sales of China's game market in 2022 fell by 14.4% year-on-year, and the scale of the global game market also ushered in the first decline, with a year-on-year decrease of 6.96%. However, the sports simulation game market still maintained a growth rate of more than 10%.
Wangchen Technology, a company listed on the main board of Hong Kong, China (02458. HK) also shows the rapid growth of its SPG games. In 2022, the operating income of Wangchen Technology will be 638 million yuan, a year-on-year increase of 38.7%, which is significantly ahead of the market average.
Although SPG games are not as "shocking" as games such as MMORPG, SLG and RTS, they have the characteristics of long life cycle, so that the games developed and operated by Wangchen Technology maintain steady growth. More importantly, as the link between SPG and reality, the AI technology developed by Wangchen Technology will open up new growth points with the increase of service scenarios.
The effect of fission self-propagation promotion gradually emerged
In 2022, nearly seventy percent of domestic game listed companies will have a decline in operating income, and the voices of cutting projects, layoffs, and reducing costs and increasing efficiency throughout the year, but the sharp increase in revenue and gross profit of Wangchen Technology shows that the company has stepped out of its own development rhythm in the segment of sports games.
In terms of regions, in 2022, Wangchen Technology's overseas revenue will be 154 million yuan, a year-on-year increase of 42.8%, local revenue will be 484 million yuan, a year-on-year increase of 37.6%, and the overall gross profit margin will be 52.2%, an increase of 4 percentage points over the previous year, and the gross profit will be 333 million yuan, a year-on-year increase of 50.4%.
Although the company's adjusted net profit last year was only 42.45 million yuan, it was mainly due to the company's vigorous expansion of overseas markets resulting in an increase in overseas purchase expenses, coupled with the holding of the World Cup last year, the company also carried out large-scale advertising, which led to a doubling of marketing expenses. However, the game to go overseas and with the help of world sports events marketing is a systematic, long-term, sustainable marketing, with a global brand communication volume, and at the same time has a "long-term" brand communication effect, enhance global awareness, promote scale growth of the commercial value will appear quarter by quarter, in the first quarter of this year, Wangchen Technology's football game "Best Club" flow has also increased by more than 100% compared with the first quarter last year, and the marketing expenses invested in 22 years have begun to show results.
Compared with the revenue of each game, the product "Football Master" that has been in operation for nearly 10 years achieved revenue of 108 million yuan, accounting for 17.1% of the total revenue; NBA Basketball Masters, which has been in operation for 6 years, achieved revenue of 156 million yuan, accounting for 24.4% of the total revenue. The revenue of "Best 11 - Champion Club", launched in 2020, doubled its revenue to 312 million yuan, a year-on-year increase of 110.6%, accounting for 48.8% of the total revenue. In the fourth quarter of last year, the newly launched "Best Club" also achieved an income of 61.85 million yuan, which made a good start. Among them, the gross profit margin of "Football Master" and "Best 11" has increased compared with the previous year. "Best Club" is even more stable at 62%.
Operational data also performed well. The overseas ARPPU of "Football Master" has risen year by year and stabilized between 700-1500, and the overseas ARPU has stabilized between 11-20; NBA Basketball Master's overseas ARPU has risen year by year and stabilized between 65-80; The total number of overseas players of "Best 11 - Champion Club" exceeded 8.6 million, and the total number of players at home and abroad of "Best Club", which has only been online for a few months, has reached 3.7 million.
Considering that Wangchen Technology's games have a short overseas time, an overseas publishing team was established in 2021, but due to the excellent quality of games, from the perspective of changes in gross profit margin and overseas ARPU, the company has gradually become familiar with its playing style in overseas markets, and has explored low-cost promotion and operation and maintenance experience.
In particular, the performance of "Best 11 - Champion Club" is eye-catching, this game has only entered the overseas market in 2021, after landing in the Japanese market last year, it has been listed in the top 3 of Japan's IOS sports game best-selling list within a week of its launch, and has also achieved the first place in the Google Store and iOS Store sports game download lists in Southeast Asia, Latin America, Europe and North America, with DAU stable at more than 200,000.
Overall, "Best Club", which was launched in the second half of last year, still has great growth space and potential in existing markets, especially in Chinese mainland and Western Europe, and the scale of DAU can hit 200,000; The 22-year benchmark of overseas games and doubling its revenue "Best 11-Champion Club" will rely on successful experience to further develop the European (Germany, France) and Middle East markets in 23 years, and the scale of DAU can reach the 400,000 mark, continuously expanding the international influence and market reputation of Wangchen Technology's products.
In addition, this year's Wangchen Technology's new baseball game "MLB Clutch Hit Baseball" has been launched for Canadian testing, and "NBA Operation Basketball" and "Project: Fishing" are in the development stage, and are expected to be launched in the end of 23 or the first half of 24. It is conceivable that with the increasing richness of game categories, upgrading to "all-category sports suits" and multi-platform promotion can help Wangchen technology products form a fission-type self-propagation promotion effect, and this "long-tail effect" will linearly increase the company's revenue and user scale in the future, and reduce unit sales costs.
Continue to consolidate official authorization barriers + core technical barriers
Different from the explosive revenue effect brought by core categories such as MMORPG and SLG, if SPG games want to succeed, they must first obtain the official authorization of various mainstream sports events, leagues and clubs in the world. Last year, Wangchen Technology spent nearly 60 million yuan in copyright fees, a year-on-year increase of 23%, and successfully added/renewed the license fee of 43.16 million yuan, which is the most authorized game manufacturer in the field of SPG games in China, second only to EA Sports in the world.
Up to now, Wangchen Technology owns 9 sports-related intellectual property rights, as well as official authorizations from sports leagues including FIFPro, NBA, NBPA, MLB and other sports leagues, as well as football giants such as Manchester City, Borussia Dortmund, Barcelona, Juventus, Bayern Munich, Paris Saint-Germain, etc. The barrier to official authorization is strong.
With the continuous expansion of copyright, it provides momentum for Wangchen Technology's multi-category strategy, and the combination of licensing with real sports stars and trademarks makes the game have a strong sense of substitution, and also provides a trust certificate for operation and publicity, and provides a foundation for IP-derived gameplay.
Secondly, the SPG market is a slow hot market, and the operator must have long-term operation ideas, form large-scale existing users, and at the same time gain insight into new needs, continuously iterate and innovate, and expand the segmented user base on a large scale.
The operating conditions of Wangchen Technology confirm this market law. Since its launch in 2014, "Football Master" has firmly occupied the top 4 places in domestic football games, and its influence has also increased the "Best 11 - Champion Club" released in 2020, making it enter the domestic football game head market in one fell swoop in the year of its launch. The success of these two games eventually led to product evolution, the birth of Best Club, and the advancement of the target market.
Therefore, the official authorization of the whole product + "long-life endogenous iterative research and development" is the key competitiveness of Wangchen Technology, which opens up a broad expansion space for the user market.
The data shows that due to the company's sufficient reserves, Wangchen Technology expanded the number of R&D personnel in 2022, with R&D expenses increasing by 38.8% year-on-year to 87 million yuan, and the benefits and salaries of R&D personnel increased by nearly 200 million yuan throughout the year, greatly accelerating the R&D progress of "MLB Baseball Master", "NBA Operation Basketball" and "Project: Fishing" mentioned above; In addition, Wangchen Technology has also increased investment in the research and development of general technologies, including accelerating the improvement of AI algorithms, graphics rendering technology, data and middleware platforms.
Wangchen Technology continues to increase R&D investment in R&D, iterating existing products, launching new stars, new systems, new gameplay and other content, while replicating categories, upgrading game quality and competitiveness, and gradually forming technical barriers. And this technical barrier comes at the cost of long-term high investment of human and material resources.
According to the data, Wangchen Technology has built the largest SPG game optical motion capture base in Asia, and has obtained 1 million sets of recorded actions in 4 years of recording time, with more than 1.2 million data volumes. With high-intensity investment, EA completed nearly 10 years of data accumulation in only 3 years, and was not inferior to European and American competitors in terms of scene character rendering, modeling, real-time decision-making, AI, frame synchronization PvP, and cross-platform support.
In particular, "Best Club" has achieved the same picture quality of FIFA on PS5 with PS5 5% performance on mobile devices, and its performance in PVP drop rate, picture quality, delay and other aspects has far exceeded that of competitors on the same platform.
AI not only improves efficiency, but also creates new growth points
Game application AI technology is not a new topic, and as early as many years ago, Wangchen Technology has begun to include important AI technology reserves such as the research and development of AI engines for sports events and the realistic restoration of AI technology in three-dimensional arena.
For investors, the use of AI technology to improve the efficiency of development and iteration is only one aspect, and the imagination of AI in Wangchen Technology is even broader.
The AI weapon that Wangchen Technology is proud of is Arena4D, and this technology is based on massive event data collection, on the basis of which the virtual space event reconstruction and rendering, and then 4D visual event analysis and front-end interface. Last year, Wangchen Technology used this technology to achieve "event reproduction" and "game restoration" in "Best Club".
The application of massive data + AI in offline real markets such as sports analysis, sports decision-making and sports training is expected to bring a new incremental market to Wangchen Technology.
According to overseas data, the global sports analytics market reached $890 million in 2021, of which the compound growth rate of the sports analytics market in the United States alone reached 27%, and software companies continue to catalyze the upgrade of sports analysis capabilities through big data, artificial intelligence and machine learning, generating valuable insights into various parameters of the entire team, individual players, weather, and stadium conditions to plan better strategies and provide solutions for managers, stakeholders, coaches and players.
Especially in the soccer market, there is a huge amount of global data on soccer game applications, such as player performance, passing trends, acceleration, and touchdown passes, which are being aggregated for AI-based processing. Currently, the European Football League market is actively developing and utilizing data analysis software to plan strategies and player lineups.
For example, SAP SE provides German Bundesliga clubs with a solution using SAP SE that helps football coaches and managers dynamically visualize formations, matches, and strategies. GOOGLE DEEPMIND HAS APPLIED TECHNOLOGY TO SOCCER AND EMPHASIZED THAT APPLYING ADVANCED AI TECHNOLOGY TO SOCCER HAS THE POTENTIAL TO TRANSFORM PLAYERS, POLICYMAKERS, FANS AND BROADCAST PLATFORMS, REVOLUTIONIZING THE FORMAT AND OUTCOME OF GAMES.
At present, the domestic sports analysis software market is in the ascendant, under the promotion of the national fitness plan, the government will continue to invest a lot of money to promote the development and upgrading of the sports industry, the future professional events will further increase, the Chinese Super League, CBA and other institutions for professional analysis software is also strong, in turn also require related software companies must have massive industry data and solid AI technology.
Looking at the domestic market, there are very few companies in China that meet this condition, and Wangchen Technology is one of them, even if the sports analysis software market size is 200 million US dollars, it can create continuous revenue increments for Wangchen Technology.
Since on the one hand, Hong Kong stocks are still in a illiquid financial cycle, on the other hand, the product types of Wangchen Technology are different from other game companies, and the efficiency of expenses lags behind, making the company less conspicuous in terms of profit performance, and the value of the "first share of sports games" listed in Hong Kong is dusted, but from the insight of copyright and technology into its value, it will continue to deepen the moat in the slow pace in the future and construct a unique competitiveness.
In the long run, sports have always been an indispensable "faith" of human life. The ultra-long cycle characteristics of SPG games, coupled with the application of Wangcheng Technology in massive data accumulation and AI technology, can effectively reduce unit development and operating costs, extend to multiple market segments with multiple categories and platforms, and are expected to expand to the sports analysis track to create new growth points.