Text | Eye entertainment
As the time enters May, the major listed game companies have basically handed over their financial reports for the first year after the epidemic. Here's the big picture:
According to the "2023 China Game Industry Report" released by the Game Publishing Working Committee of the China Audio-video and Digital Publishing Association, the actual sales revenue of the domestic game market in 2023 will reach 302.964 billion yuan, a year-on-year increase of 13.95%, and the number of users will reach 668 million, a year-on-year increase of 0.61%.
This data shows that the gaming industry is still maintaining a solid growth trend.
However, according to the information of the 43 listed game companies that have made their annual reports public, the cumulative game revenue of listed game companies in 2023 will reach 365.108 billion yuan, an increase of only 5.5% compared with 345.949 billion yuan in 2022.
It undoubtedly shows that the competition between game companies is becoming more and more fierce.
Among them, the net profit of 26 companies increased, and the game business of 22 manufacturers declined as a whole. This figure reflects the growing fragmentation within the gaming industry, with some companies growing with excellent gaming products and marketing strategies, while others are struggling due to poor product quality and poor marketing.
It must be pointed out that the market share of listed game companies is still gradually expanding, and the past two years will become a critical period for market reshuffle.
Specific to the financial reports, the proportion of mini games and AI technology mentioned in the financial reports has increased significantly, and they have become the winners and losers of the current competition among game manufacturers.
01 The performance of listed game companies in 2023
In 2023, the game industry as a whole will continue to maintain a growth momentum, judging from the financial reports of major game listed companies, Tencent and NetEase still occupy the leading position in the market with an absolute advantage, and their revenue scale and profitability are at the forefront of the industry.
As a leading enterprise in the domestic game industry, Tencent's online game business achieved revenue of 179.9 billion yuan in 2023, a year-on-year increase of 5.3%, providing strong support for its leading position in the global game market. It is worth noting that Tencent's overseas game business is growing rapidly and has become a new growth point for Tencent.
NetEase, which is neck and neck with Tencent, has also achieved outstanding results in 2023. A number of games such as "Against the Cold" and "Egg Boy Party" performed well, and its game business revenue reached 81.6 billion yuan, a year-on-year increase of 9.43%. NetEase has maintained a leading position in the gaming market with its strong R&D capabilities and rich product lines. At the same time, we should pay attention to NetEase's application of AI technology, and the full implementation of AI technology in the production end of NetEase's games will help NetEase maintain its advantages in R&D for a long time.
In the "Super 10 Billion Club", in addition to Tencent and NetEase, Sanqi Mutual Entertainment and Century Huatong have also successfully entered it. With its unique operation strategy and diversified product lines, Sanqi Mutual Entertainment has achieved a game business revenue of 16.547 billion yuan, while Century Huatong is one of the few companies to achieve "double profit", which is mainly due to the outstanding performance of Diandian Interactive in overseas markets. "Endless Winter", which has recently topped the WeChat mini game, is the mini program version of Diandian's dark horse product "Whiteout Survival" in the overseas market.
According to Sensor Tower's January 2024 Global Revenue Ranking of Chinese Mobile Game Publishers, Whiteout Survival retains the top spot in the global SLG mobile game best-selling list. However, while the leading companies are stable, the differentiation within the industry is becoming more and more obvious.
With high-quality products and services, some companies have achieved both revenue and net profit growth. For example, companies such as Giant Network, Glacier Network and Shenzhou Taiyue have all seen growth in revenue and net profit; However, due to the intensification of market competition and the fact that the products do not adapt to the market, some companies have experienced a decline in revenue or even losses, and this differentiation phenomenon has been reflected in the financial report data of Sanqi Mutual Entertainment and Perfect World. Although Sanqi Mutual Entertainment is still at the forefront of the industry in terms of revenue scale, its net profit has declined. This may be related to factors such as fierce competition in the market, rising costs, etc. Perfect World, on the other hand, experienced sluggish revenue growth and a sharp decline in net profit. The financial reports of these two companies reflect two major difficulties in the current game industry: first, the fierce competition in the market, resulting in sluggish revenue growth; Second, the cost has risen, especially the cost of buying volume, which has challenged profitability.
At the same time, some small and medium-sized game companies have also shown strong profitability. Companies such as Keying Network and Gigabit have achieved a net profit of more than 1 billion yuan with their unique game products and innovative operation strategies. The success of these companies proves that gaming is still a content industry, and that innovation and differentiation are effective ways for small and medium-sized game companies to overtake in corners.
02 What are the new changes in the game market after the epidemic?
The differentiation phenomenon reflected in the performance of domestic game listed companies in 2023 is essentially caused by the new changes in the game market after the epidemic.
We can summarize it as: the requirements have become higher, the promotion has become more difficult, the overseas volume has changed, and the market has become more segmented.
1. The quality requirements are improved, and the development cost is increased
In the post-epidemic era, the domestic game market has entered the stage of stock competition, and users' requirements for game quality are increasing day by day. As a result of this change, game development companies need to invest more resources to improve the quality of their games, including art design, game experience, and storytelling.
At the same time, as technology continues to evolve, the technical support required for game development becomes increasingly complex, further increasing development costs. These factors have led to the dilemma of rising development costs and declining net profits for some game companies.
2. It is more difficult to promote, and net profit is squeezed
Along with the increase in user demand, there is also the channel through which users acquire the game. In order to attract users, game companies have to increase their investment in marketing.
However, with the intensification of market competition, the cost of user acquisition continues to rise, which makes the marketing effect of some companies unsatisfactory, resulting in a decline in revenue and net profit. For example, Tianyu Digital, Tom Cat and other companies have suffered from poor marketing results, resulting in a year-on-year decline in net profit attributable to the parent company or even a loss from profit to loss.
3. The competition in overseas markets is intensifying, and it is necessary to be cautious in the face of the increasingly fierce competition in the domestic market, and many game companies have begun to set their sights on overseas markets. However, the overseas market is no longer the blue ocean it used to be. The game companies represented by Diandian Interactive, a subsidiary of Century Huatong, have taken the lead and gained a firm foothold in the overseas market. They have successfully gained user recognition by deeply understanding the cultural and policy environment of the target market, adjusting product strategies and marketing strategies. In some areas, it has even become the ruler of a certain track.
This also means that later game companies will not only have to face the problems caused by cultural differences and policy environment factors in different countries and regions, but also have to compete fiercely with these companies that have been rolled ashore.
4. Market segmentation has intensified and vertical fields have been deeply cultivated
The diversification of user needs has become a new focus for some small and medium-sized game companies. In an increasingly competitive market, gaming companies need to find new growth opportunities to stay competitive. By deeply cultivating vertical market segments, such as party games, two-dimensional games, and female-oriented games, game companies can meet the needs of different types of players and improve user stickiness and loyalty. At present, these market segments have shown high growth potential and have become new growth points for some game companies.
03 AI technology and mini-games become winners and losers
In the financial reports of listed game companies in 2023, "AI" and "mini games" are definitely high-frequency words in the financial reports. With the rapid progress of science and technology and the diversification of consumers' entertainment needs, AI technology and mini games are leading the domestic game market to experience a new transformation. Among them, the value of AI technology is mainly reflected in the reshaping of the game industry ecology. At present, the four listed game companies in China have mentioned that AI technology has become an important driving force for their business growth.
For example, Tencent actively applies AI technology in game development and operation, and improves the user experience of games through intelligent matching, behavior prediction and other technical means.
Sanqi Mutual Entertainment makes full use of the advantages of AI technology in game development and operation, and accurately optimizes game content, gameplay, and interface through intelligent data analysis, improving the playability and attractiveness of the game. At the same time, AI technology has also helped Sanqi Mutual Entertainment achieve precision marketing and user portraits, improving marketing effectiveness and user conversion rate.
Another game giant, Century Huatong, also emphasized the importance of AI technology in its financial report. By introducing AI algorithms, the company has achieved accurate delivery and personalized recommendations for in-game ads, improving the click-through rate and conversion rate of ads. At the same time, AI technology has also helped Century Huatong optimize the game development and testing process, reducing development costs and risks.
As an emerging field in the game industry, mini games have attracted the attention and love of a large number of users due to their lightweight, high stickiness and strong social characteristics. According to the "2024 Mobile Game Industry Insight Report" recently released by QuestMobile, the Mini Games market is growing rapidly, with 750 million active users of WeChat Mini Games, a year-on-year increase of more than 20%, higher than that of App mobile games.
According to the financial reports of a number of listed game companies, Mini Games have become an important engine for their business growth. Taking IGG as an example, the company revealed in its financial report that its mini game business revenue has achieved significant growth in 2023. Through the launch of a variety of innovative gameplay and highly interactive mini-game products, IGG has successfully attracted the attention of a large number of young users. Mini games not only provide a new way for user acquisition, but also innovate in the monetization model. For example, Giant Network's performance in the field of mini games is eye-catching, with a turnover of more than 300 million in the first month after the launch of its IP mobile game "Primal Journey", and a turnover of more than 1.5 billion in the whole year. This achievement, in addition to benefiting from the quality of the game, is more important because it has found a new profit model in the field of mini games. Therefore, on the whole, in the context of intensified market competition and rising costs, the game industry still shows a strong growth momentum. However, the industry is becoming increasingly fragmented, requiring gaming companies to constantly innovate and adapt their strategies to adapt to the rapid changes in the market. Judging from the trends they present, AI technology and the mini game track may be the key to the changes in the industry in 2024.