NetEase is trapped in the game

Author | Karong

Edit | Tang Fei

After Tencent, NetEase handed a pretty dazzling financial report.

On the afternoon of August 18, Netease announced the Q2 financial report of 2022. The financial report shows that Q2 NetEase's revenue was 23.2 billion yuan, an increase of 12.8%year -on -year; the continuous operating profit attributable to the company's shareholders was 4.7 billion yuan, an increase of 32%year -on -year.

In the context of the collective frustration of China -stock stocks, NetEase's revenue and net profit can maintain a dual growth trend, which seems particularly difficult.

But it is worth noting that, unlike most Internet companies relying on advertising, e -commerce, membership fees and other business models to make money. In the second quarter, the game business contributed about 80%of NetEase's income. This ratio increased by about 10%over the same period of the previous year. Essence

Putting up the game business of "supporting the family" is facing the "version number" problem in China. There are many strong opponents overseas. It is not easy to let go of your hands and feet.

Basic disconnection

From a macro perspective, NetEase Games seems to regain the high growth model.

In Q2 of 2022, Netease Games and related value -added services revenue was 18.1 billion yuan, an increase of 15.0%year -on -year. In comparison, in Q2, 2021, NetEase's online game service revenue was 15 billion yuan, an increase of only 10.8%year -on -year.

However, it is worth noting that the high growth rate of NetEase's game business is based on the "rename". In Q2 of 2022, the "online game service" business in Netease's financial report was renamed "Game and related value -added services". At the same time, the related value -added businesses such as NetEase CC live broadcast have also been classified as "innovation and other businesses" into "games and related value -added services".

In other words, the reason why NetEase's game business has a high growth rate is part of the reason for "outlet" to obtain a part of the incremental business.

It can be found that in Q2 2022, if there is no contribution to "innovation and other businesses", NetEase's online game business revenue is only 16.8 billion yuan. At the same time, even if the "innovation and other businesses" are counted, the revenue of NetEase's game business has decreased by 2.7%month -on -month, continuing the decline of the previous quarter.

Considering Q2 of 2021, NetEase's "Harry Potter: Magic Awakening" and "Ever -Robbery" have not yet been launched. Therefore, the revenue of the game business seemed to have been affectionate in two quarters.

Netease's game business stopped, and largely was because the company did not get the relevant "version number".

Picture source: National Press and Publication Agency

On August 1, 2022, the National Press and Publication Agency disclosed the fourth batch of game version number this year, and 69 games were approved, and none of them came from NetEase. In fact, since the game version number was re -released in April 2022, NetEase has missed the version number four times in a row.

In other words, even if there is a new tour in your hand, NetEase cannot be launched in a short period of time, and you can only continue to "eat old books."

After the financial report was released, Yamato announced the research report that NetEase has not yet obtained the new game version number, or the launch time of the new product was delayed. In addition, the high -based effect of "Eternal Harmony" from the second half of last year to the first half of this year decided to reduce the lower 2023 2023 2023. By 2024 game business revenue forecast. The revenue forecast from 2022 to 2024 was reduced by 4%to 5%to reflect the decline of the game revenue forecast, and the profit forecast was reduced by 1%to 4%.

What is worse is that the Chinese game industry does not have more dividends to excavate NetEase. The "2021 China Game Industry Report" disclosed by the China Soundlord Association Working Committee shows that in 2021, the sales scale of the Chinese gaming market was 296.513 billion yuan, a year -on -year increase of only 6.40%. 0.22%.

By this year, the growth of the gaming industry has even been "negative." The China Game Industry Report from January to June 2022 released by the China Audiovisual and Digital Publishing Association shows that in the first half of 2022, the sales scale of the Chinese game market was 147.789 billion yuan, a year-on-year decrease of 1.8%.

This also illustrates from the side that China's local game industry has almost touched.

Coincidentally, the game giant Tencent game also encountered similar fate. In Q2, 2022, Tencent's domestic game business revenue was 31.8 billion, a year -on -year decrease of 1%.

Seek to go to sea

For the game version number has been re -approved by the Mainland, but no large game developers such as NetEase have been on the list. Netease Management said at the telephone meeting last night that the mainland supervisory warning company should cherish the mainland market and develop better games because the version number is scarce resources. Since NetEase has not received the version number in the past year, the company should shift business development and research and development to overseas markets such as Europe, America, Japan and South Korea.

At the Q1 performance meeting in 2022, Ding Lei once said, "At present, NetEase Games overseas market revenue accounts for more than 10%. In the future, it hopes that overseas markets will account for 40%-50%."

Netease aimed at the overseas game market. On the one hand, it was because the game industry in China has already been touched, and on the other hand, it is also related to the overseas game market.

Picture source: Zhiyan Consultation

According to the Zhiyan Consultation data, it is expected that in 2024, the global gaming market will reach US $ 218.7 billion. From 2019 to 2024, the annual growth rate of the global gaming market is about 15 %.

Regarding the game business, Ding Lei said, "With our strong internal R & D team in China and a studio in Canada, Japan and the United States, and the future, NetEase will strive to create a new generation of high -quality games for the global game community." But It should be noted that although overseas cakes are good, there are many "division".

Strong enemy around

In fact, as early as 2018, Netease had begun to sound the horn of entering the overseas market. Taking "Wilderness" as an example, in 2018, about 80 % of its 465 million US dollars of revenue came from Japan.

However, the predicament of NetEase overseas markets is that on the one hand, there is no global "big market", and on the other hand, there is no rich "big product library".

According to the financial report, in 2021, Japan alone contributed 75.5%of the overseas independent distribution flow to Netease. At the same time, the three games of "Wilderness", "Fifth Personality" and "After Tomorrow" brought 83%of NetEase's overseas flow to NetEase, of which "Wild Operation" accounted for 52%.

In fact, to some extent, it also exposes the heavy IP of NetEase's overseas games and the innate disadvantages of light operations.

Based on financial reports and Qimai data, the main feature of Netease overseas games is to tend to choose to cooperate with well -known IP.

For example, on April 28, 2022, Netease launched "Dead by Daylight Mobile-Netease" in the iOS of Japan in Japan. During the first month on the line, the game has always occupied the top five of the Japanese iOS game list.

The reason why "Dead by Daylight Mobile-Netease" was born, mainly because in 2019, Netease strategically invested in developer Behavior Interactive, and then cooperated with the latter to develop IP mobile games.

Previously, "The Lord of the Rings: Rise to War" ("Ringwang: Rise Battle"), "The Lord of the Rings: Rise to War"),) "Duel" and other mobile games have followed this product strategy.

Picture source: Qimai Data

Although IP games can increase the volume of the game in the early stage, there are also shortcomings of insufficient stamina. Taking "Dead by Daylight Mobile-Netease" as an example, the current game list of the iOS region in Japan, the game has fallen to about 200.

If it is densely cooperated, NetEase can also maintain the overall attraction of overseas games, then at the level of reaching users, compared with other giants, NetEase has a lot of disadvantages.

Photo source: App Growing International Edition

According to the international version of the international version of the international version of the international version, the top 40 list of overseas market mobile game advertising in the first half of 2022 shows that NetEase has not been on the list. On the other hand, well -known domestic game manufacturers such as Tencent Games and Mihayou are at the forefront.

In addition to showing that in the overseas game market, Netease is already in a situation where strong enemies are around, and at the same time, it also shows that the overseas game market has become a "big cake" aimed at many industry players. According to the financial report, in 2021, Sanqi Mutual Entertainment ’s overseas revenue was 4.777 billion yuan, an increase of 122.94%year -on -year; shell game revenue focusing on overseas markets was 3.265 billion, a year -on -year increase of 35.6%.

Stock prices may explain some problems. After NetEase surrendered the Q2 financial report with double increasing revenue and net profit, its U.S. stocks and Hong Kong stock stock prices fell. US stock prices fell 5.97%in one day. From the perspective of the time, as of the close of the Eastern Time on August 18, NetEase's stock price was only $ 86.11/share, which fell 35.44%compared to the historical high of US $ 133.4/share on February 11, 2021.

Objectively speaking, as the header of the track, the NetEase game still has a huge amount of "below one person, above 10,000 people", but there is a large gap with Tencent in the field of going out of the sea. The "post -waves" like Lilith are coming.

How to stabilize the basic disk and find new increments, and boost investor confidence, may be a problem that NetEase needs long -term thinking in the future.

*This article is based on public information, which is only used as information exchange, and does not constitute any investment suggestions

- END -