With the emergence of a new generation of game companies and the rapid changes in the game market, it is difficult for the old game overlords to deal with it calmly for a period of time.

Contents/Shepherd Boy Learning

Editor/TV

Proofreading/Recklessness

This year, the total revenue and number of players in the global game market continue to rise, and the battle between game manufacturers at home and abroad is becoming more and more exciting.

Whoever has a more unique gameplay design, who has a more engaging story, who has more beautiful graphics and sound, and who can attract more players to stay. To this end, game manufacturers are trying their best to increase operational investment, and on the other hand, they have to deal with the cruel industry reality of rising customer acquisition costs, greater difficulty in innovation, and scarcity of professional talents.

Under high pressure, mud and sand are falling. In 2022, major layoffs in the industry loomed over game practitioners like a cloud. In 2023, a large number of new titles will be released, and the game hardware will be updated, which will be dazzling. This year, recovery has become the key word in the industry.

Changing market, "smoke-free" competition. The game has brought huge profits, but also a greater market environment and enemy diversity. Chinese game companies, represented by Tencent, NetEase, and miHoYo, have to think about how to pass the big test of new industries and users, and emerge in the international market.

Part.1

China's game industry has gone from being carved up by Japan and South Korea to blooming

The game is a big cash cow.

According to Newzoo data, the global gaming market has grown from $85 billion per year to $187 billion over the past decade, an increase of $102 billion, or +120%, equivalent to a compound annual growth rate of 8.2%. Adjusted to USD prices for 2023, this period increased by $76 billion, with a total growth rate of +68% and a CAGR of 5.2%.

Back in the early years, the market share of China's game industry was divided between Japanese and Korean game manufacturers, and domestic games accounted for less than 30% at that time.

More than ten years later, Tencent NetEase has risen, and domestic games are slowly becoming known to the whole people. By 2023, the global game market will be worth US$184 billion, with China accounting for US$42 billion, and Tencent Games will be the largest in the world, accounting for about 14% of the global share.

This is a victory for domestic game manufacturers.

In 2001, NetEase began to get involved in independent research and development of games and launched the "Journey to the West" series of games. By 2007, NetEase's strategy was to continue to deepen independent research and development, consolidate superior products, and launch new self-developed products; At that time, Shanda's product line had covered various categories such as 3D, 2D, large-scale, casual, martial arts, fantasy, sports, etc., and diversified product layout was their main strategy at that time.

Although Tencent started the game business in 2003, in the first few years, Tencent tried to catch up along the road of Shanda, Giant, and NetEase, and only in 2007 did it decide to develop the game market with a subdivision strategy and take a path that suits itself.

According to Ma Xiaoyi, senior vice president of Tencent Group, the main product in the domestic market at that time was RPG (role-playing games), and there were many types of games in the international market, including sports, racing, music, shooting and other genres. World of Warcraft, launched by United States game manufacturer Blizzard Entertainment, is particularly popular, with a large number of fans and players in China.

Later, after deciding to cut into the market segment, Tencent made the fighting category "Dungeons and Warriors", which brought huge profits to Tencent; made the shooting category "Crossfire", which became one of the most popular shooting online games in China at that time.

The subdivision strategy has laid the foundation for Tencent's subsequent game business, allowing Tencent to take root in the game market, and it is also possible for Tencent to explore and layout in different game genres.

The rest of the story is well known:

In 2017, Tencent and NetEase became the two giants of the gaming market.

According to this year's report on China's game industry, Tencent and NetEase together accounted for 67% of the revenue in China's game market, with Tencent taking 49% and NetEase taking 18%. For Tencent, this is an iconic node.

In 2018 and the following years, Tencent's popular games such as "Honor of Kings" and "Peace Elite" continued to be popular, and NetEase continued to launch popular games such as "Onmyoji" and "Wilderness Action", further consolidating their market position. During this period, some new game companies such as Eagle Horn Network, Papergames and miHoYo continued to emerge, bringing new vitality and competition to the Chinese game market, but Tencent and NetEase still maintained a high level of market share.

By the first quarter of 2023, it is reported that there is a clear 28 differentiation in China's game market, with the total revenue of the top 10 game companies reaching 81 billion yuan, of which Tencent and NetEase occupy more than 80% of the share, and Tencent's domestic market game revenue accounts for about half of the revenue of China's game market in the first quarter.

Part.2

Evergreen Games has become a Dinghai Shenshen needle that domestic manufacturers are vying to create

In the process of Tencent advancing to the first echelon, Evergreen Games plays a vital role.

At the Q3 2023 earnings call, Martin Lau, President and Executive Director of Tencent, said: "Tencent's gaming strategy is not built on releasing new games, but around making evergreen games as popular and successful as possible, while adding some equally popular and successful evergreen games. "This meeting can be said to be the beginning of the direction of Tencent's game business strategic transformation.

At the first quarter of 2024 earnings call, "Evergreen Games" once again became the focus of discussion among Tencent executives.

Since then, Tencent has commented more and more on several top Changqing products, and various performances show that the continuous focus on tapping the potential of "evergreen games" has become the core direction of Tencent's game's strategic transformation.

Compared with ordinary games, evergreen games can provide performance support and a time window for new product development for game companies, and can also attract players to return through version updates, and the cost of customer acquisition is lower in the medium and long term. The game operation strategy is also different, and the playing style of Evergreen Games has a clear goal -

The first is to continue to innovate and optimize the game;

For example, "Honor of Kings" has launched a new 10V10 gameplay on the basis of the classic 5V5 gameplay, and also launched a new hero "Son of Yuanliu".

the second is to pay attention to the operation of the team;

It not only sets up a professional and efficient operation team, but also encourages the team to constantly change the way of thinking and conduct in-depth analysis of problems;

the third is to build a diversified game ecosystem;

With a high-profile professional league, abundant product peripherals, and positive social interaction, Tencent has made the game brand penetrate into all aspects.

Fourth, global layout.

Actively go overseas with games, cooperate with international game developers, etc.

From the perspective of effect, during the National Day just past, "Glory of Kings", "Peace Elite" and "Dungeons and Warriors" were on the list of the top 3 best-selling iOS national servers, which is enough to see the applicability of the evergreen game strategy.

As peers, game manufacturers such as NetEase and miHoYo also have similar plans or initiatives to pursue the longevity of games.

NetEase attaches great importance to excellent multi-terminal layouts to extend the life cycle of games. It will also innovate and update the content of its games to keep players fresh about the games. Rising star miHoYo attaches great importance to the quality of the game's content, and it will attract players and keep them interested by constantly polishing the game's plot, characters, graphics, etc.

They are all pursuing evergreen, with different emphases.

However, although evergreen games have a longer life cycle, they still need to continue to launch new games to drive growth and cater to industry trends. For example, Tencent has launched new games such as Valorant, Ark of Destiny and Golden Shovel. According to Sensor Tower data, the revenue of "Golden Shovel Battle" increased by 96% year-on-year in the first quarter of this year, achieving double-digit growth for four consecutive quarters.

NetEase Games launched "Egg Boy Party" and "Against the Cold", the former ranked first in party games, and the latter estimated that the turnover of the whole platform in the first month was 2 billion yuan.

In addition to Genshin Impact, which has accumulated more than $4.1 billion in revenue worldwide, miHoYo will launch Honkai: Star Dome Railway in April 2023, with a total turnover of nearly 2 billion yuan in the first month.

The dual drive of evergreen games + new games has become a common strategic choice for game manufacturers.

Part.3

Go overseas and catch bigger fish

It is also a major trend for games to go overseas. There is no powerful game manufacturer who doesn't want to eat the big cake in the overseas market.

In terms of scale, the global game market size will be US$184 billion in 2023, and the overseas market size (excluding China) will reach US$142 billion, which is about 3.4 times that of China's domestic market.

In terms of growth, it is also extremely impressive. According to the report by Gamma Data, the global gaming market size is expected to reach $272.86 billion by 2024, growing at a CAGR of 9.32% from 2024 to 2029.

It is precisely because of this that each of those competing for the big cake of the international market is very strong.

Nintendo, a Japan game manufacturer, as an established game company, has many games, such as Super Mario, The Legend of Zelda, Pokémon, etc., and has a huge fan base around the world.

Korea game manufacturer Nexon has developed well-known games such as "Dungeons & Warriors", "Running Kart" and "Adventure Island". In particular, "Dungeons and Warriors" has been performing very well in overseas markets, and has formed a certain competitive relationship with the national service of "Dungeons and Warriors" represented by Tencent.

Activision Blizzard, a European and American game manufacturer, owns well-known game series such as "Call of Duty", "World of Warcraft" and "Overwatch".

These games have a huge player base and high influence around the world, and the quality and brand of their games are very strong.

There is also ByteDance, which cannot be ignored, as an emerging game company, its game layout in overseas markets is also increasing.

For Tencent, the game business going overseas is related to Tencent's international development.

At Tencent's annual meeting at the beginning of the year, Ma Huateng once again emphasized the strategic position of games going overseas. "Games are our (Tencent's) trump card business...... In fact, the game going overseas is our company's biggest hope for internationalization. ”

Tencent began to deploy overseas markets as early as 2009, but the large-scale layout began in 2011.

From the perspective of market segmentation, Tencent Games divides the global market into three major segments: mature markets in Europe, America, Japan and South Korea, domestic markets, and emerging markets such as Latin America, Southeast Asia and the Middle East.

In terms of play, Tencent adopts the three-in-one business model of "R&D + distribution + investment", and has acquired or invested in more than a dozen overseas game companies, including Riot Games (100% shareholding), Epic Games (40% shareholding), Blue Hole Company (11.5% shareholding), Ubisoft (5% shareholding), Activision Blizzard (5% shareholding), etc.

According to incomplete statistics, in the past 20 years, Tencent has invested nearly 100 overseas games in more than 80 companies.

It is worth mentioning that the overseas version of "Honor Of Kings" has expanded to 57 countries and regions, and data shows that its global revenue has exceeded 2 billion US dollars, which is one of the business cards of Tencent's self-developed games going overseas.

According to Tencent's 2023 annual financial report, Tencent Games' overseas revenue accounted for more than 30% for the first time, which can be called a milestone for Tencent Games to go overseas.

It's not just Tencent that has a brilliant performance.

According to data.ai data, in 2023, a total of 27 mobile game publishers will successfully exceed $100 million in overseas revenue. Among them, with the blessing of the two popular models of "Genshin Impact" and "Glory of Kings", miHoYo and Tencent have overseas revenues of more than US$1 billion, and Sanqi Mutual Entertainment is followed by nearly US$900 million in overseas revenue.

miHoYo, which has a different strategy from Tencent, has been going overseas for ten years, relying on the typical "IP + explosive" style of play, rarely investing and financing, concentrating on making products, and fighting to the first place on the list.

They are also overseas enterprises, they have their own strengths, and their market performance is not inferior. Because they are also overseas enterprises, they have to fight an invisible "war" overseas.

This war involves more diverse regions, more complex platforms and game types, and game companies have to face more difficulties and challenges.

Part.4

No one can get around the challenge

In the past few days, some netizens have posted on the recruitment platform that Tencent's Tianmei and Photon Studios are undergoing a large-scale adjustment. Later, the news was refuted by Tencent. But in reality, game manufacturers, adjusted, sooner or later.

There are many reasons, and a very important reason is to reduce costs and increase efficiency.

A Tencent employee said: "There is often an internal discussion that the labor costs of the two major studios of TiMi and Photon are too high, and it has been a long time since they came up with a game to make money. ”

According to statistics, Tencent's per capita cost in 2022 is about 930,000 yuan, and the game business is an important business segment of Tencent, and the salary of employees is at a high level in the company, close to or slightly higher than this figure.

In the gaming industry, high salaries for R&D personnel are common. And some successful game project teams, with more performance and bonuses, are also a reason for the increase in labor costs.

Tencent is not the only one with this problem.

It is rumored on the Internet that miHoYo will recruit the salary of this year

NetEase and miHoYo are also facing multiple pressures from the market and competition. However, compared with Tencent, the labor cost of NetEase Games may be slightly lower than Tencent, but it is still at a high level in the industry.

Compared with some waist game companies, such as Sanqi Mutual Entertainment, Perfect World, Giant Network, etc., the labor cost of NetEase Games is obviously higher. It is understood that in 2022, the per capita cost of Sanqi Mutual Entertainment will be about 436,000, while the per capita cost of NetEase will be about 790,000.

No matter how big the factory is, it is also careful to live.

"A lot of business should be cut, don't be nostalgic." On the issue of reducing costs and increasing efficiency, Ma Huateng has a resolute attitude.

With the emergence of a new generation of game companies and the rapid changes in the game market, it is difficult for the old game overlords to deal with it calmly for a period of time.

There are problems, but they are being solved. Game manufacturers, there have been springs and winters, but at least they are still on the way to spring again.

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