In 2024, the gaming industry is recovering from a difficult situation.
According to the 2023 annual game industry report, the actual sales revenue of the mainland game market exceeded the 300 billion yuan mark for the first time, reaching a new high. But judging from the two big news at the end of the year, the corners of the mouth that have just been raised seem to be lowered again: the Internet giant ByteDance officially announced the divestment of the game business, which can almost be called a "strong man's broken wrist";
But even so, the big manufacturers have not stopped expanding their game territory. Looking back on the past year, although Tencent's foreign investment has slowed down, it is moving in a more comprehensive and detailed direction, while NetEase has taken the sword, recruiting troops in overseas markets and building 3A studios.
In the fierce battle of the second dimension, Tencent came to "roll a volume" again
Tencent's outbound investment this year has plummeted to 37 from more than 90 last year, which is also the lowest point in Tencent's investment history in the past decade, and its investment narrowing trend has been extended into 2023.
However, gaming remains a key area for Tencent's investment. According to the statistics of the game matrix, Tencent has 13 game-related investment and mergers and acquisitions this year, which is almost halved compared with last year, but still accounts for nearly 1/3 of the total investment events this year.
Judging from the results of the statistics in the form alone, Tencent will once again focus on the investment of two-dimensional games in 2023. According to statistics, Tencent has invested in 17 ACG companies in 21 years, including Scatterblast and Deep Blue Interactive. In the near term, they have also come up with works such as "Girls' Frontline 2: Pursuit" and "Back to the Future: 1999".
Perhaps it is still to be digested, Tencent will only invest in one two-dimensional game company in 2022, that is, Shift Up, which produced the hit "Goddess of Victory: Nikki". "Goddess of Victory: Niki" has not only become an overseas two-dimensional benchmark that Tencent often "praises by name" in its financial reports, but also brought quite a generous return in terms of income.
In 2023, Tencent seems to have put the two-dimensional layout on the agenda again, in addition to increasing its stake in the South Korean developer Shift Up, it has also invested in manufacturers like Kuluo that specialize in the two-dimensional track, and Wangyuan Shengtang and Hangzhou Yuzun also have their own two-dimensional products.
Kulo relied on "Battle Twin Pamish" to occupy a place in the two-dimensional territory, and his reserve of "Ming Tide" also has an irresistible attraction for Tencent. Netelement Shengtang has the IP of "The Legend of the Ancient Sword" and the product reserve of "Baijing Corridor".
Tencent invested in the network element Shengtang as early as 20 years, and time has passed, and now Tencent values the product "Baijing Corridor". It is understood that "Baijing Corridor" will be officially launched in January 2024, and its official website currently has 15 million pre-orders, which seems to be Tencent's next two-dimensional main product. Tencent's last investment at the end of the year was given to Shengtang, the network element that owns "Baijing Corridor", which shows Tencent's confidence in this product.
It is also worth mentioning that this year, the president of Japan's Visual Arts, Takahiro Baba, will retire and transfer all his shares to Tencent, and Visual Arts will become a subsidiary of Tencent.
You may be unfamiliar with Visual Arts, but when it comes to "Key" and its masterpieces "Air" and "Clannad", you may be familiar with it. "Air" and "Clannad" were originally just Galgames, and it was only after they were animated that they enjoyed a certain popularity among the new generation of two-dimensional groups.
The focus of Tencent's investment in Visual Arts is not on Galgame, which has "withdrawn from the environment". Instead, it is largely due to Visual Arts' other mobile game, "Scarlet Sky". According to data provided by Sensor Tower, in the year from February 2022 to January 2023, Crimson Sky earned more than $200 million in game revenue, surpassing the previous Goddess of Victory: Nikki, published by Tencent Level Infinite. Relying on "Goddess of Victory: Niki", Tencent has rarely tasted the sweetness on the two-dimensional track, and this time it will naturally not let go of "Scarlet Sky", which has the ability to absorb gold without falling behind.
Tencent has carried out a closer layout in the field of two-dimensional and beautiful girl mobile games this year. In the short term, Tencent will acquire a number of game developers who have successful experience and IP advantages in this field, in order to obtain the operating rights of their mature products and obtain economic returns. From a longer-term strategic point of view, with the deepening of cooperation with these ACG manufacturers, Tencent's measures this year will undoubtedly be able to accumulate strength for the follow-up, in order to gain a firmer and deeper foothold in this track.
Outside of the two-dimensional and mobile game fields, Tencent has not stopped expanding, but due to the overall tightening of investment, Tencent's overseas investment this year has been step-by-step, compared with last year's investment in 16 overseas teams, Tencent's investment in overseas game manufacturers has plummeted to only 7 cases this year.
On the one hand, this year's wave of overseas layoffs has made Tencent more cautious in investment to a certain extent. For example, Epic Games, in which Tencent owns nearly half of the shares, laid off 830 employees at once this year. CEO Tim Sweeney said in an open letter that Epic Games was "struggling to make ends meet" and had to lay off employees to stabilize its financial situation.
On the other hand, Tencent's strategy of reducing costs and increasing efficiency continues. After 21 years of large-scale investment, Tencent's investment focus in the past two years has gradually shifted to hardware and new tracks.
For example, Quell, which invested this year, is a fitness hardware company. Quell said the funds will be used for the development of its first game, Shardfall, as well as its new project, as well as the mass production of Quell's fitness hardware, Imapct, a resistance training device for tactile sensor handles.
On the positive side, Tencent's investment in triple-A games has been outstanding in previous years, and this year it has also reaped a new round of results.
For example, Mundfish, which Tencent has participated in supporting for 21 years, has come up with a masterpiece like "Atomic Heart" this year. In addition, Larian, the developer of this year's Game of the Year "Baldur's Gate 3", Tencent Cloud Europe BV, a subsidiary of Tencent, also holds a 30% stake in it. and Remedy Entertainment, the developer of "Alan Wake 2", also received investment from Tencent in 2021 and 2022 respectively.
In terms of future layout, Tencent unveiled several new works with great potential at TGA this year. First up is Photon Lightspeed LA's premiere of Last Sentinel, led by legendary producer Steve C. Martin, who worked on GTA5 and the Red Dead Redemption series. Sharkmob and 10 Chambers have unveiled new titles such as Exoborne and Den of Wolves, respectively, and 10 Chambers has developed products such as GTFO, which will undoubtedly further enrich the Level Infinite lineup. It is worth mentioning that at the Cologne Game Show, Level Infinite also announced 15 products, and behind Level Infinite, it is actually Tencent's "investment + distribution" logic.
Liu Ming, CEO of Tencent Interactive Entertainment's international game business, said in an interview that Tencent Games hopes to promote the establishment of a global game ecosystem and empower partners to achieve global business success by leveraging Tencent Games' advantages - game as a service (GaaS), online operations, data analysis and publishing capabilities.
Overall, in the context of the overall tightening of investment, Tencent has still adopted a two-wheel driven investment strategy of "short-term income combined with long-term value-added" this year. In the short term, it will focus on winning popular "IP", and in the long term, it will prefer to establish its own distribution system around the world, use a mature operation model with top game production technology to pave the way for the future, and then feed back to Tencent's game ecology and form a closed loop.
Nine sons overseas in a row, NetEase vows to enter the 3A market?
NetEase continued its global and differentiated investment strategy this year. But a big change is that NetEase has barely invested in the domestic game market this year, and all of its nine game investments (excluding VR games) this year have been launched for overseas teams.
In the last year, NetEase invested in two domestic companies, Reasoning Master and Xuanqi Technology, and increased its stake in Ember Technology. The first two are in the field of board games and game art, respectively, and the latter is developing a console game.
In the past two years, the domestic market has been in a period of stock, and large manufacturers have a basic consensus on this, judging from the performance of last year and this year, NetEase's investment in the domestic market has almost stagnated, and it has shifted its focus to the international market.
NetEase Ding Lei said in last year's conference call, "At present, NetEase Games' overseas market revenue accounts for more than 10%. In the future, we hope that the overseas market will account for 40%-50%. ”
In terms of specific overseas strategies, NetEase still focuses on relying on PC and console games to open up overseas markets. However, compared with last year's investment and mergers and acquisitions in overseas studios, NetEase is more inclined to build its own first-party studios this year, and tilts its resources to 3A producers. Except for SkyBox Labs, which was acquired in January this year, the next 8 studios were basically established by NetEase, and all of these teams have a background in triple-A game production.
As mentioned above, the overseas situation is still severe, the wave of layoffs is still continuing, and there is a large outflow of triple-A talents from foreign games, which is a good opportunity for NetEase to take the opportunity to expand its army. Rather than acquiring or investing in an established team, NetEase chooses to make a smaller bet on partnering with the industry's top talent, and the establishment of a new studio can provide a large number of jobs. At the same time as the wave of layoffs, NetEase posted a large number of job postings on LinkedIn, so this year's foreign situation has not slowed down the pace of NetEase's overseas expansion.
For example, this year, Ubisoft has "optimized" nearly 100 people in Montreal, and NetEase's new studio in Montreal, Bad Brain Games, has recruited many senior Ubisoft game developers, and the studio members have participated in the production of many games such as "Far Cry 2", "Children of Light", "Just Dance", "Splinter Cell 5", "Splinter Cell 6" and so on.
For example, in August this year, NetEase's T-Minus Zero had just been announced, and Bioware had laid off nearly 50 employees. T-Minus Zero has a veteran like Jeff Dobson, who has 26 years of gaming experience at Bioware and has served as an art director, so it's no surprise that he has been able to recruit some experienced employees with his personal influence.
Despite its strength and abundance of talent, NetEase's investment is unlikely to yield results in the short term. According to the official website of Netease Games, NetEase has invested in a total of 15 studios overseas in the past two years, but none of them have officially launched related works, but have more or less announced ongoing projects, which belongs to the stage of "new folders". For example, Fantastic Pixel Castle, the studio founded by Ghost Crab, is currently working on an MMO game codenamed "Ghost", Jar of Sparks is focused on creating the next generation of narrative-driven action games, and Bad Brain Game Studios is developing a story-driven action-adventure game......
At this stage, NetEase's investment model focuses more on long-term support for potential independent game studios, rather than pursuing short-term gains. Years of cases have proved that if there is a lack of talents with game research and development quality, it is difficult to come up with high-quality triple-A game works in the short term simply by throwing money. NetEase focuses on finding a team that really understands games and has R&D capabilities, and makes all-round reserves for its own technology and products, rather than just staying at the level of investing funds.
As one of T-Minus Zero's executives noted, "Many companies are scaling back their operations right now. If they don't have any new work to launch in a few years' time, it's going to be a bit more difficult. NetEase, on the other hand, is able to accumulate new game titles. ”
epilogue
Although the scale of the game industry has grown, the policy and capital environment have brought uncertainty to the future development. Major factories need to find new growth points, and they also need to adjust their investment strategies in a timely manner, and small and medium-sized factories need to strengthen their own hard power in order to get through the unstable period together.
On the other hand, the number of edition numbers issued in 2023 will once again exceed 1,000, releasing a positive signal, Blizzard NetEase's rumored reconciliation signal makes players full of expectations, and manufacturers at home and abroad are actively looking for "flintstones" in new markets, etc.
All in all, 2024 will be an exciting year to look forward to, and hopefully the Chinese gaming market will enter a new growth space.