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wrote a column · Dec 7, 2021 20:21

[Market Watch] The game industry annual conference is about to be held. What is the direction of the industry?

According to a report by the Securities Times on December 6, the 2021 China Game Industry Annual Conference is scheduled to be held in Guangzhou from December 14 to 16. The theme of the conference is “Abide by Regulations, Empower Multiple Empowerment, and Actively Integrate into the New Wave of Digital Economy”. The game industry annual conference has been held once every year since 2004. The participants mainly include game industry leaders, industry association leaders, and domestic business executives, etc., and is one of the most influential conferences in China's game industry. With game editions suspended for several months, how important is this major conference in the game industry to the game industry? According to the third quarter earnings report, what is the current state of the game industry? In the face of stricter industry regulations, what is the likely future direction of development? Key Industry Conference: Development Trend Vane The Game Industry Annual Conference is an important conference for the game industry. We review the conference themes of the past five years: 2016 and 2017, focusing on pioneering and innovation, putting content first, and highlighting original products; the 2018 conference emphasized that the game industry should adhere to social benefits first, take the cultural responsibility of “going global”, and announce that the version number should restart review and distribution; the 2019 conference emphasized “protecting the physical and mental health of minors” and “improving the working mechanism of equal emphasis on approval and supervision”; the 2020 conference focused on “pursuing high-quality development and bravely assuming corporate responsibility”. Looking back at the main themes of the past five conferences, they have all been implemented as industrial policies or important directions one after another, and are of great guiding significance for industrial development.
According to a report by the Securities Times on December 6, the 2021 China Game Industry Annual Conference is scheduled to be held in Guangzhou from December 14 to 16. The theme of the conference is “Abide by Regulations, Empower Multiple Empowerment, and Actively Integrate into the New Wave of Digital Economic Development”. The participants mainly include game industry leaders, industry association leaders, and domestic business executives.It is one of the most influential conferences in the game industry in China.
With game editions suspended for several months, how important is this major conference in the game industry to the game industry? According to the third quarter earnings report, what is the current state of the game industry? In the face of stricter industry regulations, what is the likely future direction of development?
Key Industry Conference: Development Trend Vane
The Game Industry Annual Conference is an important conference for the game industry. We review the conference themes of the past five years: 2016 and 2017, focusing on pioneering and innovating, putting content first, and highlighting independent originality and creating quality products; the 2018 conference emphasized that the game industry should adhere to social benefits first, take the cultural responsibility of “going global”, and announce that the version number should restart review and distribution; the 2019 conference emphasized “protecting the physical and mental health of minors” and “improving the working mechanism of equal emphasis on approval and supervision”; the 2020 conference focused on “pursuing high-quality development and bravely assuming corporate responsibility”.Looking back at the main themes of the past five conferences, they have all been implemented as industrial policies or important directions one after another, and are of great guiding significance for industrial development.
This year's game industry conference will be held in Guangzhou from December 14th to 16th. Guidance from relevant departments in the middle of the year emphasizes enhancing cultural awareness, adhering to quality strategies, and insisting on protecting the healthy growth of young people. Juvenile protection policies continued to be introduced during the year to further regulate industry development and guide enterprises to assume social responsibility. CITIC Securities believes thatThe policy tone, regulatory guidance, version news, etc. of this game industry annual conference will have an impact on the subsequent secondary market situation. Key regulatory instructions will also guide the industry's subsequent policy trends and development direction, and require close attention.
Behind the end of the edition
The background of this year's conference is that the industry is trending tightly, which makes the significance of the orientation and importance of this conference even more prominent.
It is an industry consensus that the current environment in the game industry is tight.Judging from the number approval situation, in 2018-2020, the number of game editions issued by the Press and Publication Administration was 2,064, 1507, and 1,405 respectively. By now in 2021, the number of editions distributed has been declining year by year. Since July 22 of this year, no new version information has been announced recently. As of December 6, a total of 755 game versions have been released in 2021. It has 679 Chinese game versions and 76 imported games.
According to a report by the Securities Times on December 6, the 2021 China Game Industry Annual Conference is scheduled to be held in Guangzhou from December 14 to 16. The theme of the conference is “Abide by Regulations, Empower Multiple Empowerment, and Actively Integrate into the New Wave of Digital Economy”. The game industry annual conference has been held once every year since 2004. The participants mainly include game industry leaders, industry association leaders, and domestic business executives, etc., and is one of the most influential conferences in China's game industry. With game editions suspended for several months, how important is this major conference in the game industry to the game industry? According to the third quarter earnings report, what is the current state of the game industry? In the face of stricter industry regulations, what is the likely future direction of development? Key Industry Conference: Development Trend Vane The Game Industry Annual Conference is an important conference for the game industry. We review the conference themes of the past five years: 2016 and 2017, focusing on pioneering and innovation, putting content first, and highlighting original products; the 2018 conference emphasized that the game industry should adhere to social benefits first, take the cultural responsibility of “going global”, and announce that the version number should restart review and distribution; the 2019 conference emphasized “protecting the physical and mental health of minors” and “improving the working mechanism of equal emphasis on approval and supervision”; the 2020 conference focused on “pursuing high-quality development and bravely assuming corporate responsibility”. Looking back at the main themes of the past five conferences, they have all been implemented as industrial policies or important directions one after another, and are of great guiding significance for industrial development.
And in this general environment, Caixin Securities believes that leading developers will benefit even more.The agency believes that in the context of total game volume control and stricter content censorship, small vendors at the end are continuously being eliminated, market concentration continues to be concentrated, and the operating cycle of boutique games is getting longer, and leading manufacturers with more capital and human resources and stronger R&D capabilities are expected to benefit from this.
The gaming sector is a sub-sector of the media industry. Judging from the financial situation published in the three quarterly reports:In terms of revenue, the gaming sector achieved revenue of 22,531 billion yuan in the third quarter of 2021, with year-on-year growth rates of 9.37% and 8.55%, respectively; in terms of net profit to mother, only the gaming (12.99%) and radio and television sectors (192.91%) achieved positive year-on-year net profit growth in the single quarter.
According to Caixin Securities, the decline in the overall profit level is mainly due to high purchasing volume costs and an increase in the period cost ratio due to increased investment in R&D. However, looking at a single quarter, as the high base effect of the epidemic subsided, purchases in the early days of the launch of new products began to be recovered, and the game sector's performance began to pick up in the second quarter, and the month-on-month revenue growth rate in the third quarter was corrected.
According to a report by the Securities Times on December 6, the 2021 China Game Industry Annual Conference is scheduled to be held in Guangzhou from December 14 to 16. The theme of the conference is “Abide by Regulations, Empower Multiple Empowerment, and Actively Integrate into the New Wave of Digital Economy”. The game industry annual conference has been held once every year since 2004. The participants mainly include game industry leaders, industry association leaders, and domestic business executives, etc., and is one of the most influential conferences in China's game industry. With game editions suspended for several months, how important is this major conference in the game industry to the game industry? According to the third quarter earnings report, what is the current state of the game industry? In the face of stricter industry regulations, what is the likely future direction of development? Key Industry Conference: Development Trend Vane The Game Industry Annual Conference is an important conference for the game industry. We review the conference themes of the past five years: 2016 and 2017, focusing on pioneering and innovation, putting content first, and highlighting original products; the 2018 conference emphasized that the game industry should adhere to social benefits first, take the cultural responsibility of “going global”, and announce that the version number should restart review and distribution; the 2019 conference emphasized “protecting the physical and mental health of minors” and “improving the working mechanism of equal emphasis on approval and supervision”; the 2020 conference focused on “pursuing high-quality development and bravely assuming corporate responsibility”. Looking back at the main themes of the past five conferences, they have all been implemented as industrial policies or important directions one after another, and are of great guiding significance for industrial development.
One sentence conclusion: Judging from the financial situation, gaming is the sub-sector with the greatest potential in the media sector.
The way out for the game industry
The game industry has broad market prospects, but in the current context of the domestic industry environment becoming more severe, where is the way out for game companies?
Recently, Chen Junting, president of Google Greater China, said at the Google Developers Conference that Chinese game developers have a share of over 23% of the overseas game market, ranking first in the world.
What cannot be overlooked is that overseas markets are already an important source of revenue for games developed independently by China.According to statistics from the Game Industry Committee, the overseas sales revenue of Chinese games reached 5.57 billion US dollars in the first half of this year, an increase of 20.2% over the previous year, and continued to grow rapidly.
In recent years, the development costs of online games have risen to varying degrees. “Genshin”, which is popular all over the world, is a good example. The production team of 300 people and the R&D investment of 100 million US dollars declared to the market that high investment in R&D and the strength of overseas markets can also create a “myth” of a phenomenal product.
Meanwhile, during this year's edition discontinued, NetEase's “Harry Potter: The Awakening of Magic” and Tencent's “League of Legends Mobile Game” successively boosted the market with 1 billion sales and impressive earnings reports.
Some people say that the results produced by these games may be an isolated case. So, from an overall analysis of the industry, are there any prospects for overseas solutions?
Let's take a look at the market.
According to Newzoo statistics, the global game market is estimated to be 175.7 billion US dollars in 2021, mobile games will be 79 billion US dollars, tablet games will be 11.6 billion US dollars, and the total size of tablet+mobile games will be 90.6 billion US dollars. It is the only game type that achieved positive year-on-year growth in 2021, with a 4.4% year-on-year increase, and the proportion of mobile games in the total game scale reached 51.6% for the first time, showing a continuous upward trend.
However, the total number of domestic mobile game users is close to the ceiling, and the growth rate is slowing down year by year.According to Gamma data, China's game market is expected to exceed 290 billion yuan in 2021; of these, the mobile game market will exceed 230 billion yuan, corresponding to a year-on-year growth rate of about 9.69%, accounting for a year-on-year increase of 4.07cpt to 79.31%. In terms of user size, the number of mobile game users reached 654 million in 2020, a year-on-year growth rate of 4.84%. The overall penetration rate is becoming saturated, and user growth is slow.
If the domestic growth rate is slowing down, if you look at the market background in addition to the regulatory environment, “going overseas” may be a more suitable solution for game companies, but judging from current data, game companies have already begun to increase overseas investment.
According to Gamma data, in 2018, the overseas revenue of games developed by China reached 9.6 billion US dollars, a year-on-year growth rate of 15.8%, surpassing the domestic mobile game market revenue growth rate for the first time; it is estimated that in 2021, overseas revenue from games developed by China will exceed 17 billion yuan, corresponding to a year-on-year growth rate of 10.03%, which is better than the domestic market overall.
According to Sensor Tower statistics, the total turnover ratio of China's top 30 mobile game companies in the global market has increased quarterly since 2020 Q1. As of the latest 2021 Q3, it has reached 32.8%, up 6.8 percentage points from 26% in 2020Q1.
According to a report by the Securities Times on December 6, the 2021 China Game Industry Annual Conference is scheduled to be held in Guangzhou from December 14 to 16. The theme of the conference is “Abide by Regulations, Empower Multiple Empowerment, and Actively Integrate into the New Wave of Digital Economy”. The game industry annual conference has been held once every year since 2004. The participants mainly include game industry leaders, industry association leaders, and domestic business executives, etc., and is one of the most influential conferences in China's game industry. With game editions suspended for several months, how important is this major conference in the game industry to the game industry? According to the third quarter earnings report, what is the current state of the game industry? In the face of stricter industry regulations, what is the likely future direction of development? Key Industry Conference: Development Trend Vane The Game Industry Annual Conference is an important conference for the game industry. We review the conference themes of the past five years: 2016 and 2017, focusing on pioneering and innovation, putting content first, and highlighting original products; the 2018 conference emphasized that the game industry should adhere to social benefits first, take the cultural responsibility of “going global”, and announce that the version number should restart review and distribution; the 2019 conference emphasized “protecting the physical and mental health of minors” and “improving the working mechanism of equal emphasis on approval and supervision”; the 2020 conference focused on “pursuing high-quality development and bravely assuming corporate responsibility”. Looking back at the main themes of the past five conferences, they have all been implemented as industrial policies or important directions one after another, and are of great guiding significance for industrial development.
So what are the prospects for overseas markets next?
According to predictions from China and Thailand, the CAGR of the domestic mobile game market is expected to be around 13% in the next 3 years, corresponding to the estimated size of 51.5 billion US dollars in 2024, then the remaining portion is the potential scale of domestic overseas sales, which is 69.1 billion US dollars.This is 4.5 times the size of overseas revenue in 2020,That is, by 2024, domestic game sales will account for 44.4% of total overseas mobile game sales, an increase of 10 percentage points over 2021.
And judging from the game genre,The most popular genre is cosplay (32.38%), while East Asia and Southeast Asia are regions with strong preferences in role-playing. In particular, the East Asian market accounts for 53.18% of role-playing game spending, and the Southeast Asian market also accounts for 33.34% of role-playing game spending.
In terms of investment targets, in addition to NetEase and Tencent, the author selected several A-share listed companies for reference:
$Zhejiang Daily Digital Culture Group (600633.SH)$：Wingman Network, a wholly-owned subsidiary of the company, is deeply involved in the field of Internet casual games and actively lays out overseas game markets. It has achieved success in many segments, and will also actively explore products that match future social development trends to continuously improve competitiveness.
$37 Interactive Entertainment Network Technology Group (002555.SZ)$：Adhering to the refined operation idea of “product+traffic+user”, the company has successively launched excellent game products of various genres and themes, such as “Glory Archangel”, “Dora Continent: Awakening”, “Peerless Fairy King”, and “Dora Continent: Conquest of Spirits” in July, which has the highest share of the mobile game distribution market in China.
$Yoozoo Interactive (002174.SZ)$：The company is deeply involved in cards and SLG tracks, and is operating more than 30 games. The main products include the self-developed card game “Junior Three Kingdoms” represented by the “Junior” series, “Junior Three Kingdoms 2,” “Junior Three Kingdoms: Zero,” and “Junior Journey to the West”, and the self-developed game “Game of Thrones: Winter Is Coming” with SLG gameplay.
Author: Hsu Yu-yao
Risk Disclaimer: The above content only represents the author's view. It does not represent any position or investment advice of Futu. Futu makes no representation or warranty.Read more
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