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Chinese Gaming Industry: "Go Big or Go Home"




On February 13, the "2022 China Games Staying Report" released by the Chinese Game Industry Annual Conference showed that the actual sales revenue of China's independent research and development game market in 2022 was US $ 17.346 billion, a decrease of 3.7% year -on -year, which is the first decline since 2014.


The scale of the global game market in 2022 also declined. In this context, Chinese game companies have faced problems such as high localization, internationalization, changes in overseas legal policies and overseas channels, and intensified overseas competition.


For the future overseas market, Guo Weiwei, CEO of Xishanju, believes that although China's overseas games have done an excellent job in the past three years, they still have a long way to go for Chinese game companies.


Dong Bin, deputy general manager of Q1.com, said that although it is already too crowded in terms of "going global" for the gaming industry, it still has great opportunities if we improve product quality.


“Going Global” Is More Urgent Than Ever for Gaming Companies


In the past ten years, the achievements of Chinese games have been evident to all. In 2022, the sales revenue of China's independent research and development of overseas markets reached 17.346 billion. In 2012, this data was $ 570 million.


In ten years, the income of Chinese games has increased by nearly 31 times.


Appmagic data released TOP30 highest global mobile game publisher in 2022. Among them, there are 7 Chinese game manufacturers on the list. Tencent, Netease, and Mihayou have won the top three in one fell swoop. The three companies created an annual income data of $ 10.347 billion.


But at the same time, game players continue to face challenges. In the face of unfamiliar, vast, and regional culture, it is even more of an obstacle to publicizing and localization. In the first half of 2022, 18 listed game companies that had disclosed overseas income, 2/3 of overseas revenue decreased year-on-year. Some people in the industry have three points behind the deep burning analysis. There are three reasons behind it. The economic downturn, intensified competition, and rising buying costs.


With Apple and Google's successive changes to user privacy policies, the "game buying volume" has been dramatically affected. In the past, many Chinese game players got used to the growth pattern of spending money to buy accurate traffic, putting advertisements to acquire users, and users coming to the game to pay so that ROI can be profitable. But now, this is no longer possible, which has caused much confusion and the loss of many players.


At the same time, the development of the gaming industry in China is limited by policies. In addition to the policy regulation of the protection of minors, game products are not easy to go online in China. Under the pressure of many policy factors and the environment, Chinese game manufacturers have become game companies' long-term strategic growth points.


Dividends Disappear; Where Is the Next Growth Driver?


The scale of Chinese game users has officially entered the era of the stock market. In 2022, the number of game users in China will be 664 million, a year-on-year decrease of 0.33%.


Netease CEO Ding Lei previously stated that the future goal is to increase the company's game revenue from overseas markets to 40% to 50%, making Netease a real game maker. According to NetEase's previous data, overseas revenue is only 10%, and Tencent's overseas game revenue has accounted for 30%.


NetEase has been investing aggressively in the past two years, accelerating its efforts towards its business goal of 50% of its overseas revenue. In the second quarter of last year, NetEase announced its studios in the United States successively. Before that, NetEase established two overseas studios in Japan and one in Montreal, Canada. NetEase currently has a total of overseas studios.


Tencent has invested in game giants such as Riot Games and EPIC overseas. Still, in the past year, investment in overseas game manufacturers has been accelerating. In August last year, a subsidiary of Tencent and Sony jointly invested in From Software, the developer of "Elden's Ring" from Japan, becoming the second and third shareholders. Soon afterward, Tencent invested in Ubisoft, a veteran French game company, and continued to expand its layout in overseas game markets.


From the investment perspective, developed countries are the markets that the two leaders mainly focus on. Gamma data shows that in 2022, China’s overseas mobile games revenue will mostly come from the United States, Japan, and South Korea. These three countries are the main target markets for Chinese game companies to go overseas, and their combined revenue accounts for 56.40%. The US market accounted for 1%, the Japanese market for 17.12%, and the Korean market for 6.97%.


However, in 2022, the income growth rate of the United States, Japan, South Korea, and other countries will all decline. The decline in the British and German markets will be more prominent, and the reduction will exceed the exchange rates of local currencies such as the Japanese yen, Korean won, euro, and British pound in 2022. Fluctuation is also one of the factors affecting the income of overseas games.


As for the future growth point of overseas markets, gamma data analysis believes that the emerging game markets in the Middle East, Africa, Southeast Asia, Latin America, and other regions have great potential and are expected to become the growth point for Chinese games to go overseas. In the past year, mobile games in the Middle East, Africa, Latin America, and Southeast Asia grew by 11.1%, 6.9%, and 5.1%, respectively.


Take the Brazilian market as an example. As Latin America's top mobile game market, China's self-developed products in 2022 are not outstanding in the Brazilian market; however, Chinese self-developed games perform well in some segmented tracks. , "In 2022, among the 12 SLG products in the top 100 in Brazil's sales volume, 11 of them are products developed by Chinese companies."


But in 2023, UBS Securities China Internet, media, and education industry analyst Liu Yaokun is not optimistic about whether the income of game companies going overseas can turn to growth. He said that, on the one hand, the overseas economic situation would have some pressure on Chinese game manufacturers going overseas. However, inflation in the markets of developed countries is still a big problem, and the economy may further decline based on 2022, which has a strong positive correlation with game consumption.


According to Liu Yaokun's analysis, the top two companies' layout for going global starts in 2019, and a good game development cycle generally takes five years. The return on the investment won't show until 2024 or 2025.


 

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