On April 15, Perfect World released its 2023 annual report. The focus of this annual report is not only on the performance itself, but also on the phenomena and trends reflected in the past two years. Today, the era of the digital entertainment industry as a hero with user dividend growth has come to an end, and from scale expansion to high-quality development, content and technology innovation will constitute the most critical competitiveness in the future.
The new travel cycle is gradually clear and approaching
In 2023, Perfect World will launch fewer new games. Under the trend of high-quality products in the whole industry, the R&D cycle of manufacturers is often extended. Although the long-term operation of the operating game has been carried out through content updates and refined marketing, it still cannot fully offset the impact of the lack of new products.
Judging from the financial report, this impact is reflected in all aspects such as revenue, net profit attributable to the parent company, and cash flow. The company's annual revenue was 7.791 billion yuan, basically the same as that of the same period last year; The net profit attributable to the parent company was 491 million yuan, a large decrease from the same period last year.
Comparing historical performance vertically, 2023 is the bottom of the performance in recent years, second only to 2021. In that year, due to product cycle and other reasons, the company made an annual profit of 369 million. However, as the performance of new games such as "Fantasy New Zhuxian" and "Tower of Fantasy" continued to stabilize, the performance of the following year rebounded rapidly, achieving a profit of 1.377 billion yuan in 2022.
It is a common phenomenon in the gaming industry that a successful hit can drive a company's performance.
In today's competitive environment of rapid iteration, the life cycle of game products is shortening and the success rate is decreasing. Since all manufacturers have to face the test of product strength and weakness cycle, why can companies such as Tencent, NetEase, and miHoYo continue to grow in the stock market?
The answer is to increase the probability of success of new products and extend the life of explosive models by coming up with more than one head boutique, and multi-layout, so as to smooth the performance curve.
For Perfect World, it does not have the most abundant funds, but it does not lack the ability to create explosive models, at least on the MMO track. So far, the seven self-developed products with the highest turnover have a total of more than 45 billion, and many of them are close to or exceed the 10 billion level, and these products are still in operation and play a long-tail effect.
So, for a vendor like Perfect World, the real question is:
How to expand product lines and expand new categories while maintaining the original advantageous categories? How to reduce gaps, so that different types of products can be rotated and incrementally superimposed? Only in this way can we meet the challenges of the product life cycle and form a more ideal and positive cycle growth model.
To this end, in recent years, Perfect World has made a series of adjustments to its game business, proposing a two-dimensional strategy of "iterative upgrading of classic categories + breakthrough transformation of innovative categories", which has also achieved some results.
"Tower of Fantasy" and other products have verified the company's global, multi-terminal and innovative R&D and distribution capabilities, which is also where Perfect World's confidence lies.
Although the product cycle has caused a lot of short-term performance fluctuations, the advantages of self-research are still there, and the reserve products are abundant, so we have the confidence to get out of adversity. Now, what Perfect World needs is time to gradually launch new products and let the market test them.
According to the annual report, Perfect World is currently experiencing a strong new travel cycle, which is becoming clearer and closer.
In February, "One Punch Man: World" was open beta in Southeast Asia, Europe and the United States; On April 12, "Persona: Phantom of the Night" was the first public beta in China, which is also the latest new game of Perfect World. Before the open beta, the number of pre-orders on the whole network exceeded 15 million, and after the public beta, it topped the free overall list of the App Store, and ranked 8th on the best-selling iOS game list the next day. On April 18, the game will be officially launched in Hong Kong, Macau, Taiwan and South Korea.
The domestic terminal game product "Zhuxian World", which is quite concerned in the market, has also been tested externally many times, and the data retention is good; "Perverse Million King Arthur: The Ring" has recently completed paid tests in Hong Kong, Macao and Taiwan, and "Zhuxian 2", "Light Ink Cloud Town" and "Codename Barbarian" will also start a new round of testing in the near future.
In addition, there are also "Gods and Demons Continent", "Codename New World", "Codename YH", "Codename Z", "Spirit Cage", etc., which are in research and development, promoting the improvement of the game business structure and quality.
There was concern that Perfect World's organizational restructuring would lead to downsizing. Judging from the data released in the annual report, the total number of employees by the end of 2023 is 5,754, which is not much change from 6,061 a year ago. However, in terms of internal organizational structure, a flatter management model has been implemented to improve quality and efficiency, shorten the decision-making chain, reduce communication nodes, and improve the efficiency of resource allocation, so as to strengthen the ability of project output.
Technology and content innovation are the biggest variables
Despite the fluctuation in performance, Perfect World has maintained a steady level of dividends, with a cash dividend of RMB 0.46 per share (tax included) and a total cash dividend of RMB 873 million. Since Perfect World's listing on the A-share market in 2014, the total cumulative dividend amount has accounted for more than 50% of the net profit attributable to the parent company, reflecting the return to shareholders and long-term confidence.
In addition to the performance, there are many industry and trend highlights in Perfect World's annual report. For example, mini-games, micro-dramas, live-action interactive video works, e-sports, and artificial intelligence provide new sources of long-term value.
In the 2023 micro-short drama trend, Perfect World has launched 9 micro-short dramas, among which "Full-time Househusband Training Plan", "Awaken the Love Brain" and "The New Year" have all been on the top 1 of the most popular short dramas on Douyin after their launch, and "The Little Lady in the House" and "Bright Moon Flowing Fire" have reached the top 1 on Youku's short drama popularity list.
In terms of mini games, Perfect World also has multiple teams that have integrated the advantages of film and game linkage genes and are doing internal innovation. For Perfect World, the greatest value of making these lightweight products in addition to the traditional heavy games and high-quality TV dramas is not only to follow the trend to find new increments, but also to make up for the problems of long cycles, limited production capacity and insufficient ways to monetize IP copyrights, which is expected to open up new traffic models and new space for IP copyright monetization.
In terms of e-sports, Tencent and NetEase are both pursuing breakthroughs, hoping to take the Asian Games as a new starting point and grasp the new opportunities for the international development of e-sports.
After "Dota" won the gold medal in the Asian Games, Perfect World has further promoted the internationalization and sports of its events. At the end of this year, Perfect World will host the CS Major, the highest level of CS competition, in Shanghai, which is the first time that the tournament has come to Asia.
In line with the needs of business development, Perfect World's AI technology empowerment strategy, which has been continuously improved in the past year, has continued to be implemented in the past year.
In June last year, Perfect World joined Microsoft Labs in the field of AI and participated in the Azure Open AI Acceleration Program. In February this year, the company's self-developed Perfect World intelligent character dialogue algorithm completed the filing. In March, the NVIDIA AI Conference announced that "Zhuxian World" was officially connected to NVIDIA's Audio2Face technology, which is a generative AI that can easily convert audio into animation technology.
Overall, in the short term, Perfect World still needs to think about how to quickly get out of the performance trough by opening up the new travel cycle, but in the long run, finding the source of innovation power may be the only way to cultivate future competitiveness.
According to market analysts, the digital content industry should see more "opportunities" in the face of uncertainty in the future. Technology and content innovation is the trend of the entire industry, and it is also the biggest variable for future development. Only by paying enough attention to this, and finally presenting it to users, can we strengthen and continue the lifeblood of the enterprise.