Author | Mia
Edit| Akagi bottles
On the evening of May 7, Hong Kong-listed film and television company China Ruyi (0136. HK) announced that Beijing Ruyi Jingxiu Network Technology Co., Ltd. (a controlled structure entity of China Ruyi) signed an equity transfer agreement with Beijing Chaoxi Lightyear Information Technology Co., Ltd. and Beijing Youyi Technology Co., Ltd. Jingxiu Network intends to conditionally acquire 100% of the equity of Beijing Youai Mutual Entertainment Technology Co., Ltd. held by the seller at a price of 259 million yuan (adjustable). On May 8, China's Ruyi rose more than 5% intraday.
From the acquisition of Wanda Films to the acquisition of Byte's game company, "Attacking Confucianism" has made many expansions in the capital market. This acquisition, on the one hand, expanded the share of Ruyi in the game market and accelerated the layout of Ruyi's "film and game linkage", and on the other hand, it also aroused the attention of the outside world to Tencent, the second largest shareholder of Ruyi, and generally regarded it as the takeover of "Tencent" to "byte" game assets.
This is undoubtedly a happy result for all, realizing the optimal allocation and reorganization of resources: Byte further focuses on its main business through business contraction and travels lightly; With the help of Tencent's channel advantages and huge user groups, game IP can also achieve good development.
Earlier, on the day of the announcement of the large-scale business contraction, the well-known anchor "Zhang Daxian" of Tencent Games "Honor of Kings" officially announced that he would make his debut on Douyin Live, and the acquisition once again released a signal of cooperation between the two sides. The "Tou Teng War" is a thing of the past, and we may see more "Tou Teng cooperation" in the future.
The "Tencent system" then takes over the "byte system" assets
In the past three years, Love and Entertainment have changed hands twice.
Tianyancha APP shows that in April 2012, Youai Mutual Entertainment received millions of angel rounds of financing from China Soft Capital, Bridge Capital and Dexun Investment; In 2015, it received tens of millions of Series A financing from Xiaomi Group. Until September 2020 and April 2021, ByteDance acquired Youai Mutual Entertainment twice, and its shareholders were changed to Chaoxi Lightyear and Youyi Technology, both of which are subsidiaries of ByteDance, holding 94.1% and 5.9% of Youai Entertainment's shares respectively.
The acquisition announcement revealed that Youai Mutual Entertainment's after-tax profits in 2021 and 2022 will be 4.429 million yuan and 2.891 million yuan respectively. As of the end of 2023, Youai Entertainment's net assets are about 344 million yuan. The purchase price of Netcom Byte is about 4 billion. Last year, the company ranked 29th in the data.ai list of Chinese mobile game manufacturers in terms of overseas revenue.
The reason mentioned by China Ruyi in the acquisition announcement is that it believes that the core asset of Youai Interactive Entertainment is the SLG mobile game "Red Alert OL", which is derived from the classic IP of the stand-alone game "Red Alert". This is the only Red Alert mobile game in China that has been authorized by EA genuinely. Diandian data shows that since 2021, its total iOS flow has been 610 million yuan. The purchase price of 259 million reflects that Byte is eager to sell at a low price. According to industry insiders, the target is not the entire Youai Entertainment, in fact, this acquisition is only the "Red Alert OL" project of Youai Entertainment.
"Over the past three years, the performance of the "Red Alert Online" project has been stable. Based on the life cycle of simulation games, China Ruyi believes that the "Red Alert Online" project will still have considerable revenue in the future, and its R&D assets will maintain high commercial value, which is in line with the Company's acquisition criteria. ”
However, "Red Alert OL" is not the biggest hit of Love Entertainment. "Idle Girl", which landed in the Japanese market in 2017, has been ranked in the top 1 of idle games in the Japanese market for a long time, and it is still in the top 50 best-selling iOS games in Japan in the past year. According to SensorTower, as of May 6, 2024, "Idle Girl" has generated more than 11 billion yuan in revenue, mainly contributed by the Japanese market. It is reported that projects such as "Idle Girl", "Dragon's Breath: Divine Silence" and a sandbox game under development still belong to ByteDance.
This is the third time that the "Tencent Department" has made a move on Byte Game assets. ByteDance's game business, which was cut in November last year, was taken over by Tencent, including Shenzhen Gravity Studio's two-dimensional tactical competition project (S1) and Jiangnan Studio's two-dimensional open world project (J5), and was merged into Tencent's Photon Studio, and the two studios also packaged to form a new company, Saros Network Technology (Shenzhen) Co., Ltd.
There is no definite news on the sale of other game projects under ByteDance, such as the head games "Planet: Reboot", "Crystal Nucleus", "One Piece: Bloody Route", etc.
It is not difficult to see that Youai Mutual Entertainment has certain advantages in both the overseas field and the two-dimensional field. And that's what Tencent wants to strengthen. Demographic changes mean that digital content consumption is iterative, and two-dimensional games are the key to directly hitting the aesthetics of young people.
According to the just-released Q1 financial report, games account for about 30% of Tencent's revenue. In the first quarter, revenue from the international game market increased by 3% to 13.6 billion yuan, while revenue from the domestic game market fell by 2% year-on-year to 34.5 billion yuan. Behind it, the revenue of "Honor of Kings" and "Peace Elite" both declined in the first quarter, and the revenue of local games has declined slightly for two consecutive quarters. However, in the first quarter of this year, the company's domestic and international gaming market grew by 3% and 34%, both of which were better than revenue performance, but both were affected by revenue delays.
The external environment is conducive to the recovery and growth of the gaming industry. According to the data, the revenue of the game industry will exceed 300 billion for the first time in 2023, and the number of users will also hit a record high of 660 million. Regulatory policies tend to stabilize, coupled with the rapid growth of the mini game track and the gradual implementation of AI+, the supply and technology-driven game industry is expected to continue its recovery trend.
Backed by Tencent's "big tree": Confucianism's 7-fold growth of the game business
Looking at Ruyi's 2023 financial report, the game business is a particularly bright part.
According to the report, China Ruyi's game business revenue in 2023 will reach 446 million yuan, a year-on-year increase of 703%. This is also the first time that China Ruyi has separately disclosed the revenue of its game business in its financial report, indicating that its game business is on the right track.
According to the financial report, Jingxiu Games' main game business revenue comes from the two products "Troubled Times" and "Legend of the World" released in 2022, the former developer is Beijing Yule Technology Co., Ltd., which is also a "Tencent system", and the financial report mentions that the latter "is the second game officially launched after the group and Tencent Group reached an in-depth cooperation in the game field". The rest of the game business income may be related to the acquisition of Wanda Films and the income of Mutual Love Interactive.
As a company whose main business is film and television, Ruyi's game business can be said to be supported by its shareholder Tencent. Formerly known as "HengTen Network", China Ruyi, after Evergrande left the market, after a series of additional issuances and mergers and acquisitions, Tencent is currently the largest institutional shareholder of Ruyi, holding 21.97% of the shares, second only to Chairman Ke Liming (32.17%). Backed by Tencent, it is reasonable for Ruyi to vigorously develop the game business.
In the first half of 2022, the revenue of Ruyi Jingxiu's game business was 41 million yuan, of which 39.5 million yuan came from Tencent's game promotion business. And in 2023, its business will usher in a 7-fold growth.
The announcement at the end of last year has already shown the clues: as of October 2023, Jingxiu Games has completed 34 additional marketing service projects. In November last year, Ruyi raised the annual cap on payments receivable from Tencent from 700 million to 1.2 billion. The announcement mentioned that by the end of October 2023, the number of cooperative products has increased from the expected 5 to 11, and Ruyi has provided Tencent with additional marketing services such as marketing planning and online advertising resources. These additional adjustments reflect the rapid growth of its business.
This year, Jingxiu Games won the publishing rights of two blockbuster products, "Ragnarok: Love Like First Seen" and the civilization IP strategy game "World Qiyuan". The former was announced as early as 2018 at the 5th anniversary celebration of Tencent Mobile Games, and the latter is an SLG product developed by Tencent Northern Light Studio, and its own studio products were handed over to Jingxiu for distribution, which shows the close relationship between the two parties. "Ragnarok: Love Like First Seen" is endorsed by Wang Xinling, and the whole network has more than 10 million reservations, which is a blockbuster for Q1. This IP was introduced to Chinese mainland in 2003 and has a history of more than 20 years, and this mobile game has continued to dominate the list in Hong Kong, Macao, Taiwan and Southeast Asia, with a total global turnover of more than 4.3 billion.
According to the financial report, Jingxiu Games also reserves two new strategic games "Battle Road" and "Wilderness" this year, both of which have obtained version numbers and will also be launched within the year. In terms of IP reserves, Ruyi reached an agreement with Chinese Online to win the game adaptation rights of "The First God of Eternal Ages". Judging from the performance of the products that have been launched, it basically guarantees its explosive growth in 2024.
Its perennial accumulation of resources in the field of film and television is also conducive to the marketing services in the field of games, and at the same time provides convenience for content IP adaptation, bringing the imagination of "film and game interaction", and the two fields have opened up.
From the perspective of talent pool, Gong Qiao, the head of Ruyi's game, has 20 years of experience in the game field such as game development and operation, e-sports and industry investment. In June 2023, Yang Ming, head of the domestic distribution line of Tencent Interactive Entertainment Business Group, joined the board of directors of China Ruyi as a non-executive director. Yang Ming has participated in the research and development of "League of Legends" and "Dungeons & Warriors: New Century".
It is worth mentioning that Wanda Film previously acquired Mutual Love Interactive, which has been deeply involved in the online game publishing business for a long time, and has launched the animated IP adaptation mobile game "Saint Seiya", "Hulu Brothers: Seven Sons Descending Demons", "Qin Shi Mingyue: Canghai", etc., and the existing reserve projects "Full-time Mage: Hunter Master", "Shadow Fighting 3", "Tianyuan Breakthrough - Overseas", etc.
Last year, Mutual Love Interactive's overseas revenue increased significantly, from 8% of the company's total game revenue in 2019 to 30% in 2023. On January 18, 2024, it launched a small hit and idle RPG "Saint Seiya: Legend of Justice" in the Japanese market, which quickly climbed to the top three of the best-selling lists of iOS and Google Play after its launch, and has basically ranked in the TOP30 of the double-end best-selling list so far, becoming a major highlight. Wanda Film said that it will continue to increase its overseas market expansion efforts in the future, and is expected to release high-quality games such as "Full-time Mage: Hunter Master" and "Rules of Battle" at home and abroad this year.
With the entry of Ruyi into Wanda Films, Mutual Love Interactive will further complement Ruyi's game territory and bring the blessing of overseas distribution capabilities.
From this point of view, Ruyi's acquisition of Youai Mutual Entertainment is continuing its radical momentum in the game field, and it also reflects the layout of Tencent, the shareholder behind it. For Touteng, the relationship between competition and cooperation is always changing: hostility cannot last, and win-win for all parties is the general trend.