Source: Visual China
On December 22, the State Press and Publication Administration drafted the "Measures for the Administration of Online Games (Draft for Solicitation of Comments)" (hereinafter referred to as the "Measures"), which are now open to the public for comments.
The Measures put forward a number of rectification instructions for the operation of online games, covering various fields such as game content, user consumption, game currency issuance and trading, and virtual props extraction.
Source: National Press and Publication Administration
Affected by this, the game sector of A-shares and Hong Kong stocks fell sharply. As of the close, A-shares Sanqi Mutual Entertainment, Kaiying Network, Yao Ji Technology, Electric Soul Network, etc. collectively fell to the limit, and Hong Kong stocks Bilibili fell 9%, Tencent fell 12%, and NetEase fell 24%.
How does the new rule affect the gaming industry?
After combing the "Measures", Titanium Media APP believes that it will first affect the waist and tail game manufacturers, followed by the head manufacturers.
Specifically, Article 18 of the Measures states that online games shall not set up inducing rewards such as daily login, first recharge, and continuous recharge. All online games must set user deposit limits and publicize them in their service rules.
The former covers almost all game products that adopt the GaaS model in China, while the latter focuses on high ARPU products, such as MMO games and SLG games led by "Legend-like".
In a nutshell, this article focuses on the game's To C revenue. This will have a significant impact on waist and tail game manufacturers who are unable to make big DAUs and can only focus their energy and resources on high ARPU games. Most of the games of small factories adopt the mode of "100 zero krypton players + 10 small krypton players + 1 heavy krypton player", and then complete the copy and paste of the mode by adding servers to achieve the profit goal. If the restrictions are lifted, the profitability of these products will be greatly reduced.
Compared with waist and tail manufacturers, the IP reserves of the leading manufacturers are more abundant, and the strong diversion ability makes them have a high DAU product matrix. In terms of revenue generation, they don't rely solely on players to pay, and To B income is also an important part. According to the project manager, Tencent's tactical competitive mobile game "Peace Elite" is basically quoted at the level of more than one million.
Source: Peace Elite Official Blog
In the Measures, Article 25 that may have a significant impact on the leading manufacturers is that the same enterprise shall not operate online game currency issuance and online game currency trading services at the same time. However, NetEase's virtual props trading platform "Treasure Pavilion" is an important part of its game marketing business.
"Treasure Pavilion" is a derivative product of NetEase's popular game IP "Fantasy Journey to the West", which has been officially established since 2008. In the "Treasure Pavilion", players can trade virtual items and game accounts in the game, and settle directly in RMB.
With the blessing of the "Treasure Pavilion", "Fantasy Journey to the West" has become a means of livelihood for some "civilian" players, and wealthy krypton players can save the time and cost of experiencing the game.
According to the 2022 global mobile game revenue list released by the data website Magic, the annual revenue of the mobile game version of "Fantasy Journey to the West" is about 600 million US dollars. As NetEase's most profitable game, the "Fantasy Journey to the West" series can bring NetEase nearly 20 billion yuan in revenue every year.
Source: Fantasy Journey to the West PC official blog
Up to now, "Treasure Pavilion" has transformed from the "Dinghai Shen Needle" of "Fantasy Journey to the West" into NetEase's full-platform virtual props trading platform, which currently covers a total of 18 terminal games and 27 mobile games under NetEase. Therefore, whether the operation of the "Treasure Pavilion" remains smooth is directly related to the revenue of NetEase's game sector.
It remains to be seen whether the "same enterprise" referred to in Article 25 of the Measures can be circumvented by registering a subsidiary, and it remains to be seen further.
In addition to the above-mentioned parts, the Measures also provide instructions for adjusting game testing and Mini Program games. As Article 21 [Technical Test Specifications] points out, the number of test users for online games shall not exceed 20,000, and the data of test users shall be deleted.
In the past, some game companies would open the closed beta test without deleting files in the later stage of the game's closed beta, and provide rebates for players' closed beta recharges after the open beta. This is done in order to improve user conversion, and secondly, to hedge risks based on the issuance of version numbers. But with the promulgation of the "Measures", this road will be blocked from now on.
In addition, mini-program games, which have become a hot spot in the game industry this year, will also be further regulated. Article 63 of the "Measures" proposes that the management of domestic Mini Program online games with no storyline, simple gameplay, and no top-up consumption shall be separately provided for by the competent department of publication in accordance with the "Regulations on the Administration of Publications" and the principles of these Measures.
According to the "2023 China Game Industry Report", the revenue of the domestic mini program game market in 2023 will be 20 billion yuan, a year-on-year increase of 300%. Behind the rapid growth of revenue is the proliferation of buying volume, which many users have been very troubled by. This situation may improve after the supervision of the sub-category of Mini Program games is strengthened.
How do game manufacturers respond?
According to incomplete statistics from Titanium Media APP, more than 10 listed game concept companies, including Kaiying Network, Sanqi Mutual Entertainment, Yao Ji Technology, and Huicheng Technology, have responded to the "Measures".
In the capital market, Kaiying Network in A-shares was the first to respond to the new regulations. Kaiying Network said that it has no substantial impact on the company's operation at present. The company will carefully study and Xi research, and actively follow up feedback.
In addition, XD, a well-known game publicity and distribution platform, said that it will actively cooperate with the implementation of the new regulations, and its self-developed products will never rely on strong operational methods such as rebates on first charges and daily check-ins. The company will fully implement the spirit of the new regulations and specific measures to jointly promote the healthy development of the industry.
As one of the world's largest game manufacturers, Tencent Games also made a statement.
On the afternoon of the 22nd, Zhang Wei, vice president of Tencent Games, said: "Since the release of the new regulations on uninsured goods in 2021, Tencent has been strictly implementing the management requirements, and the game time and consumption data of minors are currently at the lowest level in history. The draft of the new management measures does not fundamentally change the key elements of the game, such as the business model and operation rhythm. The regulatory authorities have issued a draft of the new management measures to solicit opinions from the industry and society, which is believed to be more conducive to the orderly and healthy development of the game industry. Tencent Games will continue to adhere to the high-quality strategy of technological innovation and culture, and with the support of the competent authorities, it will practice the high-quality development of China's game industry. ”
After the close of Hong Kong stocks today, Tencent Holdings announced that it had repurchased about 3.59 million shares today, costing a total of about HK $1.001 billion, with a price range of HK $263.8 - HK $317.
On NetEase's side, after its Hong Kong stock closed at HK$122.0 per share, the company's market value evaporated by a total of about HK$128.156 billion today. In terms of U.S. stocks, NetEase was trading at $81.64 per share premarket, down 21.81%. NetEase has not responded to the Measures.
In addition to responding to the voice of the capital market, some game companies have quickly made corresponding adjustments in the gameplay.
Although the Measures are still only in the stage of soliciting comments, they have already begun to have an impact on the products to be issued. According to Yicai, the production company of a game released today is working overtime to revise a game because the "daily check-in" and some other settings do not meet the requirements of the "Measures".
What are the potential positives?
In fact, from the Notice on Further Strict Management to Effectively Prevent Minors from Becoming Addicted to Online Games issued in August 2021, to the Regulations on the Protection of Minors Online issued in October this year, to today's Measures for the Administration of Online Games (Draft for Solicitation of Comments), it is clear that the regulatory authorities have always maintained a strict attitude towards the game industry.
Behind this attitude is a change in the development trend of the mainland game industry. With the reduction of the demographic dividend and the cultivation of players' payment Xi, the call for "game quality" has become more and more obvious, and the inferior products with serious homogeneity have begun to be gradually abandoned by the times, and this elimination process is becoming faster and faster.
In the face of this trend, Ma Xiaoyi, senior vice president of Tencent, said at the 2023 Tencent Games press conference: "Tencent Games is transforming from a platform-based company to a product-based company. ”
At this year's TGA, Tencent announced its new work "The Last Sentinel". According to Photon Studios, which is responsible for the project, this will be the studio's first triple-A open-world game. In addition to investing in "Black Myth: Wukong" in the development of the Institute of Game Science, Tencent is about to usher in two triple-A masterpieces in the next few years.
Concept art of "The Last Sentinel", source: "The Last Sentinel" official X account
Judging from the content of today's "Measures", if the "Measures" are officially implemented in the future, it will bring severe challenges to the retention and transformation of game products, thereby promoting game manufacturers to invest more energy and resources in content and operation to obtain users with higher payment frequency and a longer game life cycle. Looking at this from a long-term perspective, this is also good for the gaming industry.
In addition, after an afternoon of turmoil, the voice of "doves" finally came. According to The Paper, an insider from the Game Working Committee of the China Audio and Digital Association said: "Since it is a draft for comments, it shows that all walks of life can speak freely at this stage, so as to make it feasible and more perfect." From this point of view, the end result may not be as bad as the outside world thinks.
(This article was first published on the Titanium Media APP, author|Wu Yixiao, editor|Li Chengcheng)