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A year after "breaking up" with NetEase, Blizzard wants to return.
According to authoritative ** reports, Blizzard has been negotiating with a number of game manufacturers, including NetEase and Tencent, about the return of the national server, but there is no confirmed partner and specific return time.
NetEase said in its 2022 financial report that during the period from 2020 to 2022, the revenue from ** games accounted for the total revenue5% and 95%。In addition to Blizzard, NetEase** Games partners include Marvel, Microsoft and Warner Bros. Games.
Games contribute nearly eighty percent of revenue
NetEase currently has four major business segments – games and related value-added services, Youdao, cloud**, innovation and other businesses. According to the results announcement for the third quarter of 2023, NetEase's net income in the third quarter was 27.3 billion yuan, an increase of 11 percent year-on-year6%；Attributable net profit was 783.7 billion yuan. Among them, the net income of games and related value-added services was 217800 million yuan, Youdao's net income is 153.9 billion yuan, cloud ** net income of 197.3 billion yuan, and net income from innovation and other businesses was 197.9 billion yuan.
Previously, NetEase had tried to diversify to reduce its reliance on the gaming business. At the beginning of 2019, Ding Lei proposed "games, e-commerce, education, and ** as NetEase's four strategic deployments."
Specifically, the education sector is supported by Youdao, which has become NetEase's first independently listed business segment. However, until now, Youdao has not yet made a profit. According to Youdao's financial report, in the third quarter of 2023, the company's net loss from continuing operations attributable to ordinary shareholders was 10.3 billion yuan. The hematopoietic capacity of the education sector is insufficient, and NetEase is still needed for blood transfusion.
*The plate is cloud** (09899..)hk）。In 2021, Yun** was listed on the Hong Kong Stock Exchange, becoming NetEase's second independently listed business segment. According to its 2023 interim report, the net profit of Yun** in the first half of the year was 29.4 billion yuan, to achieve a turnaround. and Tencent** (01698., which has also been listedHK) compared to its revenue of 142 in the first half of the year900 million yuan, much higher than the cloud**.
The e-commerce sector once carried Ding Lei's ambition of "rebuilding a NetEase". In 2015, NetEase Koala was launched, and NetEase Yanxuan was launched the following year. At the 2016 World Internet Conference, Ding Lei also said that he hoped that in the next 3 to 5 years, NetEase Kaola Overseas Shopping could reach a scale of 50 billion to 100 billion yuan in the market, and create another NetEase in the field of e-commerce.
In 2017, NetEase began to disclose the operation of its e-commerce business - e-commerce net income of 1167 billion yuan, a year-on-year increase of 157%, contributing 2157% of total revenue. In the following year, the growth rate of e-commerce business revenue fell to 648% and income 1923.6 billion yuan, accounting for 2864%。However, in two years, the gross profit margin of NetEase's e-commerce business has increased from 103% fell to 8%, and low gross profit margin also dragged down NetEase's net profit.
In 2019, NetEase Kaola sold to Ali for $2 billion, and NetEase's financial report no longer discloses the e-commerce business separately, and NetEase Yanxuan is classified as an innovative business and others. At the moment of e-commerce involution, NetEase's presence in the e-commerce field is already very small.
After a few "tosses", games are still NetEase's basic disk - in the third quarter of 2023, games contributed nearly eighty percent of revenue.
The absence of new games is embarrassing
In its Q3 2023 report, NetEase also highlighted the growth that games have brought to the company's overall revenue – a strong and increasingly rich portfolio of gaming products delivered excellent results in the third quarter.
Previously, NetEase's gaming life was not easy. In the past, Tencent relied on the two major games of "Honor of Kings" and "Peace Elite" to firmly occupy the leading position in domestic games, and then there were cutting-edge game manufacturers represented by miHoYo to stand out in the subdivisions of the two-dimensional and female-oriented tracks. NetEase's "Wilderness Action", "The Day After Tomorrow", "Harry Potter: Magic Awakening" and other games have started high and gone low.
This also led to fluctuations in NetEase's revenue growth. From 2020 to 2022, the revenue growth rate of NetEase Games will be ., respectively9%, the growth rate is gradually declining. During the same period, NetEase's overall revenue growth also declined, and the same period was .1%。
In order to focus more on the game business, in the second quarter of 2022, NetEase changed the name of the ** game services segment to games and related value-added services, and adjusted certain business lines related to or affiliated with games from innovation and other businesses to this segment, including NetEase CC live streaming and other value-added services.
Until the appearance of "Egg Boy Party", which launched the open beta in May 2022, brought new growth to NetEase Games. In its 2022 financial report, NetEase said that "Egg Boy Party" has reaped strong revenue and user growth, becoming the game with the highest daily active users of any game in NetEase's history. In the ** meeting,Ding Lei said that the users of "Egg Boy Party" are mainly students, and a large number of "post-00s" have become loyal players.
According to official data, the MAU (monthly active users) of "Egg Boy Party" has exceeded 100 million in August this year, and the number of UGC maps in the game has also exceeded 100 million. At the same time, according to Sensor Tower data, as of July 2023, "Egg Boy Party" has ranked second in the DAU list of iOS mobile games in China for 7 consecutive monthsIn November, "Egg Boy Party" still ranked in the top 10 mobile games in China App Store in terms of revenue.
However, "Egg Boy Party" also faces some problems. Recently, some official media reported that many parents of minors reported that there were loopholes in "Egg Boy Party", and the recharge card for minors was not strict, and the amount of recharge for children was large, which brought losses to the family. Although the game provides a channel for parents to appeal, it still faces the problem of difficulty in refunding.
On December 8, "Egg Boy Party" responded to these problems, saying that it had further upgraded the anti-addiction system for healthy games and launched three major "anti-addiction" measures, including omni-channel access to the face recognition mechanism for high-risk groups, the establishment of an exclusive customer service entrance for underage refunds on the whole platform, and the launch of one-click prohibition of recharge and game ban.
In addition to "Egg Boy Party", NetEase also needs to face the lack of new games. According to the official display of NetEase Games, NetEase currently operates more than 100 games. However, in the financial report, the games that often "show their faces" are still the "Journey to the West" series born in 2001 and the "Fantasy Journey to the West" series launched in 2004. In June 2023, the mobile game "Against the Cold" was launched, and it is still among the top three mobile games in China in terms of mobile game revenue. However, it is a mobile portation of the terminal game "Against the Cold", which was launched in 2018, and it is unknown whether it can maintain its long-term popularity.
How to seek long-term operation?
From the current point of view, "Egg Boy Party" has become a new opportunity for NetEase.
In the past, NetEase was mainly good at RPG games with high ARPU (average revenue per user), and there were shortcomings in the field of casual games with high DAU (daily active users) and low ARPU. The emergence of "Egg Boy Party" also allowed NetEase to complete a "breakthrough", but it is still under a lot of pressure.
On the one hand, casual games, as a major category of games, currently have a growth rate much higher than the overall game market. According to the CITIC report, from 2021 to 2022, the growth rate of China's casual mobile game market will be 1742%、-0.61%, which is higher than the overall growth rate of China's mobile game market of 757%、-14.4%。From 2018 to 2021, China's casual mobile game revenue increased year by year, from 21000000000000000000000000000000000000000000000500 million yuan, with a compound annual growth rate of 1817%。In 2022, the proportion of the casual mobile game market to the mobile game market also reached the highest value in the past five years1784%。
At the same time, in recent years, casual games have become popular, such as "Ball Battle", "Jump", "Legend of Bow and Arrow", "Sheep is a Sheep", etc., which have gradually moved towards high-quality products, making the user penetration rate continue to increase. From 2020 to 2022, the scale of China's mobile leisure users is relatively stable, with a penetration rate of 80%.
On the other hand, the casual party games represented by "Egg Boy Party" have game content such as multiplayer simultaneous level breaking and competition, and have extremely high interactivity. To a certain extent, these characteristics have also led to the spread and promotion of the game.
As a result, party games have become a key category. Since 2022, in addition to "Egg Boy Party", there are games such as "Goose and Duck Kill", "Space Operation", and "Party Star" online. In September 2023, Tencent also officially announced its party game "Yuan Dream Star", which is expected to be launched on December 15. According to public information, "Yuan Dream Star" is one of Tencent Games' key new products this year, and it is also regarded as the next national mobile game to relay "Honor of Kings". To some extent, it will also be a direct competitor to "Egg Boy Party".
The future growth space of casual games and the outstanding performance of "Egg Boy Party" have made NetEase pay more attention to game operations. At the 2022 performance meeting, some investors pointed out that the turnover data of some products of NetEase Games declined rapidly in the past, and asked the management how they thought of the later performance of "Egg Boy Party". "We will not make the same mistakes we made before. We really hope that this game (i.e. Egg Boy Party) will be a pleasant family experience for users. We will invest more R&D efforts and management to do a good job in the long-term service of this game, which means at least 10 years. I believe that we have this ability, just like "Fantasy Journey to the West" can do it for 20 years. ”
Perhaps for the current NetEase, it doesn't matter whether it can re-cooperate with Blizzard. While continuously launching new games, strengthening its long-term business capabilities is NetEase's primary goal to ensure its game status and maintain revenue growth.
Author丨Chen Xiangyu.
*丨Exploration Finance (ID: teccj6).