Southern Finance All-Media Reporter Wu Liyang and Intern Dong Siyu reported from Shanghai
Editor's note:
During the mid-reporting season, the Digital Entertainment Research Group of 21st Century Business Herald Nancai Regtech Research Institute will conduct a comprehensive analysis of the performance of A-share/Hong Kong-listed game companies, and deeply observe the performance of new games in the first half of the year, the changes in the buying market, the contribution of games going overseas to performance, follow-up game reserves, and how AI technology improves the efficiency of business development.
Going overseas is not only the hottest keyword in the domestic game market, but also contributed to many game companies' games in recent years is the main incremental source of the tightening period, but since 2023, the overseas market seems to have reached the peak in stages, the dividends of mature markets in Europe, the United States, Japan and South Korea have faded, the cost of buying volume has risen, and the general growth of major manufacturers' overseas performance no longer exists.
In the fifth part of the series, we will turn our attention overseas, review the challenges faced by major game manufacturers in the first half of the year when expanding to the middle of globalization, and discuss the direction of leading the next stage of games to sail overseas.
After experiencing a market recession in 2022, the domestic game industry began to recover slowly in the first half of 2023, but when the eyes turned to overseas, the overseas market that has been soaring in recent years seems to have not fully recovered from last year's pains, and the former blue ocean market has become more difficult to operate under the increasingly fierce market competition.
This change is also reflected in the overseas revenue data of domestic manufacturers in the first half of the year, Southern Finance All Media reporter combed the performance of 15 game companies in the first half of the year and found that manufacturers with head products in overseas markets still maintained a good momentum of going overseas, but the more obvious consequence of the head effect is the general decline in the income of mid-waist manufacturers, how to maintain the profitability of existing products and find new overseas growth points, has become the focus of attention of overseas manufacturers.
Data source: The 2023H1/(Q1&Q2) performance reports of each company are not completely collated
Divergence of overseas performance
On the whole, the overseas game market gradually stopped the downward trend in 2022 in the first half of the year, but the overall market environment is obviously not as fast as the growth rate in 2020 and 2021, and the overseas expansion of Chinese manufacturers has also slowed down.
According to the "2023 Game Overseas Trend Insight White Paper" released by Meetgames, the domestic revenue of domestic self-developed mobile games in the first half of 2023 was 224.5 billion yuan, and the overseas revenue was 17.5 billion US dollars (about 122.5 billion yuan), accounting for 33.3% of the total revenue of domestic self-developed mobile games, an increase of 1% month-on-month. It is estimated that the total overseas revenue of domestically developed mobile games may exceed 35 billion US dollars throughout the year. According to data released by Sensor Tower, in the first half of 2023, China's mobile games attracted more than US$7.5 billion overseas, accounting for 24% of the total revenue of the overseas mobile game market.
Specific to the company level, the grand situation of each overseas business during the market rise is gone, and under the background of shrinking market scale and diversified audience demand, the performance of different manufacturers has begun to diverge.
From the financial report data of 15 game companies, 7 companies have seen an increase in overseas revenue, and 8 companies have seen a decline in overseas revenue. It is worth mentioning that most of these growth companies are due to the fact that they have not explored overseas markets and have a small revenue base, and after the beginning of overseas business during the reporting period, overseas revenue has soared.
On the one hand, manufacturers with key products with long-term operations in overseas markets tend to perform more satisfactorily. For example, Tencent, as the largest game manufacturer in China, released a financial report showing that Tencent's overseas market revenue in H1 2023 will be 25.9 billion yuan, a year-on-year increase of 22.6%.
Specific to the second quarter, Tencent's domestic game market revenue was 31.8 billion yuan, down 9.4% year-on-year; International game market revenue was 12.7 billion yuan, a year-on-year increase of 19%; Overseas game revenue accounted for 28.5% of total game revenue, up from 27.3% in the first quarter.
Kunlun Wanwei's overseas business revenue reached 2.02 billion yuan in the first half of 2023, a year-on-year increase of 21%, and overseas business accounted for 83% of total revenue, a further increase of 9 percentage points year-on-year.
It should be pointed out that as a domestic veteran manufacturer, Kunlun Wanwei has undergone years of transformation, and the proportion of game revenue in its main business has decreased year by year, and the top three products in its revenue sources are social network products and online advertising services for search engine revenue. Its financial report specifically disclosed the revenue data of its important browser product Opera, which showed that in the first half of 2023, Opera achieved operating income of 150 million US dollars (about 1.037 billion yuan), a year-on-year increase of 34%, which greatly supported its overseas revenue growth.
However, on the other hand, many established manufacturers showed stagnant growth or even decline in their overseas performance in the first half of the year. The overseas market revenue of Xindong Network, Zulong Entertainment, Youzu Network and CMGE all declined by more than 10%, and the overseas income of Sanqi Interactive Entertainment, which currently has the highest market value in the A-share online game sector, has also stagnated its growth, while Century Huatong and Perfect World have each experienced a decline of varying degrees.
The decline in overseas revenue also affected the performance of some of the revenue indicators of these companies, for example, Xindong Network mentioned in its financial report that the low amount of game operation revenue in the reporting period was mainly due to the decrease in revenue of "Ragnarok M" in overseas markets.
"Compared with the previous two years, the overseas market is really much more difficult to do." A game market practitioner based in Shanghai pointed out in an exchange with reporters that in the first half of the year, mature markets such as Europe, the United States, Japan and South Korea generally contracted, and the unit price of buying volume further increased.
"The pain point of game overseas buying is due to the influence of multiple industries and trends." In an interview with the reporter of Southern Finance and Economics All Media, the relevant person in charge of Mobvista pointed out that on the one hand, with the increase of overseas manufacturers in recent years, the supply and demand of advertising channels are imbalanced, and user attention is becoming more and more scarce, making the purchase of advertising resources expensive and fiercely competitive; On the other hand, the requirements for overseas data security and privacy protection have become more stringent, and Apple's Google privacy protection policies have been introduced one after another, which not only reduces the accuracy of advertising traffic, but also pushes up the cost of buying volume, and the more companies that rely on private data as advertising targeting, the greater the pressure on customer acquisition costs.
Look for new increments
It is worth noting that whether from the store revenue side or the manufacturer's financial report, most of the mature operating products that have been released for a period of time are supporting overseas revenue data, and it is becoming more and more difficult for Xinyou to enter the forefront of the gold list, and the competition trend of overseas game market stock has been further strengthened.
As early as 2022, the trend of head solidification of overseas manufacturers has emerged, and the top three products in 2022 overseas revenue "Genshin", "PUBG MOBILE" and "State of Survival" are also the top three in revenue in 2021, and only 9 of the top 30 products in overseas revenue are new games, most of which come from the head overseas manufacturers.
The importance of mature games is also fully reflected in the financial reports disclosed by various companies. For example, Tencent's most important overseas product "PUBGMobile", as of June 2023, the total overseas revenue of the game has exceeded 4 billion US dollars; Tencent mentioned in its earnings report that "the signs of declining player activity after the epidemic have faded, especially on PUBG MOBILE".
The "Global Mobile Game Market Data Report for the First Half of 2023" released by Diandian Data pointed out that the solidification of mobile game themes and gameplay, and the lack of innovation are the fundamental reasons for the concentration of category revenue on top products. Especially for casual games, due to the simple gameplay and strong reproducibility of the game itself, a large number of homogeneous products emerge one after another, making players reduce their expectations for new games and return to the head product.
The emphasis on mature products and long-term operations is also transmitted to all stages of manufacturers' decision-making. In an interview with Southern Finance All Media reporter, Mobvista also said that established overseas manufacturers with a certain scale and mature products will pay more attention to the stability of recycling, and ensure market share and recycling performance through continuous purchases; From new launches to long-term operations, the overall purchase cycle of games has shown a shortening trend, and the rapid recovery ability of new games has become a common assessment requirement, and some game manufacturers will be more strict in the assessment of data indicators in the early stage of new games (especially during the testing period).
It quoted Mobvista's recently released "White Paper on Domestic Mobile Games Going Global - Global Buying Guide" as saying that the key to high-quality games lies in the upgrade of user experience. There is no version pressure in the overseas market, but it does not mean that it can be won by volume, especially for some small and medium-sized enterprises, every project should be taken seriously. The essence of the game is still cultural art, and only high-quality boutiques can survive in the battlefield of multiple suburbs.
In this context, the new product promotion model of rapid stacking and transformation is no longer feasible, and domestic overseas manufacturers are also trying to open up new overseas paths in terms of product form, market selection and operation, and find new incremental space outside the stock competition.
For example, at the recent Cologne Game Show, Kunlun Wanwei exhibited the AI game "Club Koala", which provides players with an AI-empowered no-code UGC game editor, trying to open another overseas track through artificial intelligence empowerment.
Deploying overseas studios and acquiring mature development teams and IP are also important ways for domestic manufacturers to seek international operations. Since the beginning of this year, Tencent has successively acquired or invested in well-known game developers such as Techland, the developer of "Dying Light", the parent company of the well-known Galgame game developer Key, and NetEase's acquisition of Canadian game developer SkyBox Labs, all of which show the global R&D layout of domestic leading manufacturers.
"On the one hand, direct acquisition or participation in mature overseas developers can help domestic manufacturers quickly complete their R&D capabilities in specific types of products or markets, and on the other hand, it is also conducive to diversifying R&D risks and increasing overseas market share through more diversified product layout." A practitioner in the game industry in Guangzhou said in an exchange with reporters that investing in an IP or team with an existing market foundation is often regarded as a more secure choice by manufacturers than investing in the development of a completely original new game from scratch.
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