It's important to make a positive change
The Tencent we are familiar with is back.
Just yesterday (May 14), Tencent released its financial report for the first quarter of 2024, and the entire group achieved revenue of 159.5 billion yuan and net profit of 50.3 billion yuan in Q1, an increase of 6% and 54% year-on-year, respectively.
As for the game business segment, which the author mainly focuses on, there is also good news. In fact, before the release of the financial report, many brokerages predicted that Tencent's game business would pick up, but the revenue of the game business would decline by 1% year-on-year. However, the actual performance exceeded market expectations, with local game turnover increasing by 3% year-on-year, and overseas game turnover increasing by 34%.
In addition, Supercell has recently achieved a full recovery of its evergreen games. In this regard, Tencent's management believes that if an evergreen game stagnates, then the problem is not the game itself, but the operation team. Tencent President Martin Lau emphasized that after changing the way of thinking and letting the right people run the game, positive results are often seen very quickly.
At the same time, he also said that Tencent will focus on implementing its existing game strategy, reducing the risk of the game business by adjusting its game operation ideas, and focusing on fewer but bigger and better quality games, so that more of its products can grow into evergreen games.
When asked about his views on the turnover share ratio, Martin Lau said: "We believe that the current revenue share ratio of app stores to app providers (including Tencent) is too high, both in China and in international markets. But for now, in terms of our business plan, we assume that these revenue share arrangements will remain the same. ”
The local performance has rebounded steadily, and self-developed new products still need to wait
If the game business is split, Tencent's local game market will achieve revenue of 34.5 billion yuan in Q1. However, when it comes to specific games, the two ace products of "Honor of Kings" and "Peace Elite" have dropped their chains.
According to the financial report, the turnover of "Glory of Kings" was due to the high base in the same period last year, resulting in a year-on-year decline in revenue in the current period. "Peace Elite" is because of the weak commercial content in the second half of last year, which has a chain impact on the revenue of Q1 this year, and it also fell year-on-year.
In fact, the two leading products maintained a leading position in daily activity but experienced stagnation in revenue, which was mentioned in the March annual report. This also made the argument of Tencent Games in the market rise again some time ago. However, Tencent Games still used the Q1 financial report to shatter these criticisms.
First of all, for the two products themselves, they immediately returned to growth in March, benefiting from the new pace of commercialization and game content design. And after entering Q2, with large-scale updates and activities, the growth trend of the two is likely to continue.
In addition, most of the decline in revenue has been offset by revenue contributions from Valorant and Ark of Destiny, as well as the strong growth of Battle of the Golden Shovel. According to Data-eye data, the revenue of the three games "League of Legends Mobile Game", "Golden Shovel Battle" and "Dark Zone Breakout" in January and February all achieved double-digit growth. Among them, "The Battle of the Golden Shovel", "Dark Zone Breakout", and "Crossfire: The King of Gunfights" hit a record high in Q1.
Therefore, the author believes that the decline in revenue of "Honor of Kings" and "Peace Elite" is only a short-term fluctuation, not that the game has entered the end of its life cycle. The steady recovery in local gaming performance is just the beginning, and the gaming business will return to growth in the coming quarters.
In contrast, what is more noteworthy in the entire financial report may be the performance of Tencent Games on the new product side. From late December last year to March this year, Tencent Games has launched three new games: "Yuanmeng Star", "Baijing Corridor" and "Ni no Kuni: Staggered World". Among them, the performance of the Spring Festival file of "Yuan Dream Star" is quite good.
Judging from the performance of the list, Ni no Kuni, which is represented by Netstone, although it has an excellent skin of Ghibli painting style, the more traditional MMORPG gameplay is not as attractive to current players as before. After the game was launched, it reached the top of the free list and the best-selling list of No. 45, but it fell out of the statistical range of the double list a month later.
In contrast, after the launch of "Baijing Corridor", it reached the highest 9th place on the best-selling list, which should be a product that contributed to part of the revenue increase. Although the game also experienced an acceleration in the ranking after the first month, the game was able to return to the best-selling list in a short period of time after each release and new card pool, indicating that the game has really captured a core group of paying players.
However, it should be noted that in addition to "Yuan Dream Star", the other two are agent products. And if you start counting from this year, Tencent Games has not yet launched a large-scale and weighty self-developed game. And this may also be why, Tencent's first game for the summer file, came up with a king bomb like DNF mobile games.
The evergreen game is more powerful, and the DNF mobile game takes the lead
Judging from the situation in the past few years, after experiencing a wave of performance peaks in Q1, the overall situation in Q2 will be relatively peaceful, and the release updates and activities of key popular games will often become a major attraction in the second quarter.
At present, "Glory of Kings" maintains a stable new rhythm on the skin, and at the same time, this year's Kuromi linkage and the May Five Friends Day version have achieved a good out-of-the-circle effect. "Peace Elite", on the other hand, has returned through the 5th anniversary theme version and popular skin voting, and has achieved good revenue performance recently.
As for the 4.8 version of "Golden Shovel Battle" and the launch of the fifth Open Tournament, and "League of Legends Mobile" came out with the well-received Shadow Isle Fantasy Night, these versions and activities have successfully boosted the game turnover in a short period of time. Based on these four products that have long been rooted in the top 10 of the iOS best-selling list, they are also nicknamed the new "four masterpieces" of Tencent Games.
It is worth mentioning that "Dark Zone Breakout", which has been repeatedly praised before, has also launched a new version of "Agent" and a new season of S8. After more than 2 years of launch, this steady shooting game has not only stabilized its best-selling ranking at around 20, but will also launch a stunning PC version in the future, which is expected to become Tencent's leading product in the shooting field. In addition, products including "CrossFire: Gunfight King", "Naruto", "QQ Dazzling Dance" and other products have also been launched. It is foreseeable that these evergreen games will continue to be the mainstay of Q2 performance.
However, as of now, Tencent Games Q2 has not launched a new game, and the recently launched PC "Sword and Soul" nostalgic service is not a new game in the strict sense. However, the author believes that during Q2, Tencent Games is expected to launch 3 products. First of all is Dungeons & Warriors: Origins, which will be released on May 21.
Speaking of DNF mobile games, manufacturers and capital markets have attached great importance to it, and the stock price is the most obvious example. Many practitioners believe that the performance of Tencent's game business will be significantly released in Q2.
Of course, after a quarter of silence, Tencent Games' new products in Q2 will obviously not be limited to DNF mobile games. The MMORPG game "World of Taris", developed by Excellent Games, is also a product that has attracted the attention of players. It is reported that the game launched a short-term test that lasted only 2 days on May 13, and from the perspective of product completion, it may be officially launched in June.
Overseas continues to soar, and the mini-game runs all the way
Of course, in addition to the local game business closest to players, there are some data worth paying attention to in this financial report, such as the 34% year-on-year growth rate of overseas game business and the revenue of 13.6 billion yuan. Apparently. A large part of the growth of the total turnover of the game business comes from the outstanding contribution of the overseas game business. In the annual report in March, Tencent Games also announced that the proportion of overseas revenue exceeded 30% for the first time.
It can be said that overseas business is the most potential growth potential of Tencent Games, although the global game market has not yet come out of the contraction channel, Tencent Games still relies on the excellent performance of its products to absorb more market share.
According to the financial report, in addition to ace games such as "Valorant", "Goddess of Victory: Nikki" and "PUBG Mobile", the return of popularity of Supercell's games is the main factor for the growth of revenue in this period. In particular, Brawl Stars saw more than twice as many daily active users overseas as the same period last year, and four times the turnover of the same period last year.
Brawl Stars is a bestseller worldwide
And this is not just the recovery of a single product, including a number of Superce games such as Tribal Success and Clash Royale, all of which have achieved significant user and revenue recovery in the global market. The new work "Squad Busters", which will be launched at the end of May, also has a high probability of becoming a new hit and directly driving the growth of overseas game business.
It should be pointed out that most of the R&D companies of these products are Tencent through investment to bring mature teams under its command, which is more like epitaxial development. In fact, Tencent has not been left behind in building capacity that is more endogenous and in line with traditional understanding. "Last Sentinel", launched by Photon LA Studio, is the fruit of Tencent's continuous investment in the console and triple-A fields. With the extension and interweaving of the two paths of extension and endogenous, the author believes that the global expansion of Tencent Games may enter a new stage.
In addition, another data to note in the financial report is the rapid growth of gross profit and net profit. Compared with the same period last year, Tencent's gross profit increased by 23% in a single quarter, and its gross profit margin increased from 45% to 53%. Single-quarter net profit increased by 54% year-on-year. In this regard, the reason given in the financial report is that several sources of high gross margin revenue have achieved rapid growth, one of which is the service fee of the mini game platform.
In fact, in the 2023 Q2 financial report, Tencent pointed out that WeChat Mini Games have a strong "gold absorption power", which can generate high gross profit margins and distribution and advertising revenue with platform economic effects. Based on this, we can also see that in the past year, Tencent's attention and investment in the mini game business have been continuously upgraded.
In March of this year, WeChat launched a Mini Game Growth Incentive Program: IAA game developers who do not belong to the chess and card category can receive up to 40% of the advertising incentives. Driven by the development of the Mini Game platform, Tencent's advertising business also achieved a significant growth of 26% in the current period, and the advertising expenses from the game industry have increased significantly.
Considering that the current WeChat mini game focuses on the IAA type, in order to convert more users into gamers and make the cake of the mini game track bigger. The author believes that platform service fees and game industry advertising fees can maintain a rapid growth trend for a long time in the future.
Therefore, on the whole, with the dual promotion of local and overseas, it is foreseeable that Tencent's game business will resume growth in the next few quarters, and the top games of its various tracks are also expected to become evergreen games.