The current game market has entered the era of inventory from increments, and the core of traffic growth has gradually tended to “quality of content products + brand siphon effect.” In this market context, integrating into the new wave of digital economy development and demonstrating the positive potential for the future has become the inevitable way out for the development of the current domestic game industry
From a macro point of view, the current game market has entered the era of inventory from increments, and the core of traffic growth has gradually tended to “quality of content products + brand siphon effect.” In this market context, integrating into the new wave of digital economic development and demonstrating the positive potential for the future has become the inevitable way out for the development of the current domestic game industry. This also makes “Metaverse”, “going to sea” and “differentiation” become important keywords for the development of the domestic game industry in 2021.
Entrance to “Metaverse”
This year, since Facebook changed its name to Meta to fully bet on Metaverse, the global Internet industry has set off a “metaverse upsurge.” Since the core of Metaverse is a virtual space based on the real world, the product form of the game is similar to Metaverse.
Therefore, the game is the underlying logic of the Metaverse to build the virtual world, and at the same time, the Metaverse is further extended on the basis of the game. Therefore, the game is also known as the entrance to the “Metaverse”. From the perspective of “Metaverse”, discovering the changes that have taken place in the game industry this year will help investors understand the cutting-edge trends in the subsequent development of this industry.
In terms of hardware, the game hardware related to the Metaverse concept is nothing more than AR and VR devices. In recent years, as the C-end acceptance of VR and AR equipment has gradually increased, the path to cost reduction has been proven, and the commercial feasibility of Metaverse access equipment will soon be verified.
Therefore, this year’s investment and financing activities in the game field have significantly increased their preference for XR equipment. Starting in the fourth quarter of 2020, a number of VR/AR content and hardware companies have completed large amounts of financing. In the whole year of 2021, large-scale mergers and acquisitions investment in this industry showed a rapid growth trend, and an investment and financing boom was ushered in in April, August and November.
According to incomplete statistics, there were 29 global VR/AR investment and financing events in November 2021 alone, of which 12 were domestic, Kunyou Optoelectronics, which completed nearly 400 million yuan in B+ rounds of financing, ranked first; 17 foreign financings were invested by Tencent Ultraleap, which was jointly led by British Patient Capital and China Merchants Bank, ranked first with a D round of 82 million US dollars. It is worth mentioning that the total investment and financing of the VR/AR industry last year was only 2.1 billion yuan, a total of 54 transactions. In other words, the total amount of financing in these three months exceeds that of last year.
From the perspective of investment targets, with the rise of the Metaverse concept, the game industry, as an important promoter of Metaverse ecological development, is also focusing on participating. Many domestic game companies have deployed Metaverse-related fields. The existing layout is mainly divided into four Sector: underlying architecture (such as blockchain, NFT), back-end infrastructure (such as 5G, cloud), front-end equipment (such as AR/VR, wearable devices), scene content (such as game content).
Statistics show that about 40% of China’s listed game companies have established Metaverse business layouts in different fields, including Tencent (00700), NetEase (NTES.US), Century Huatong (002602.SZ), and China Mobile Games (00302). In addition to the content layout of representative game companies such as China Qingbao (300052.SZ), some companies have also made significant investments in the fields of XR, artificial intelligence, and cloudification. Zhitong Finance APP observed that among A-shares, game stocks accounted for about 24% of the “Metaverse concept stocks”, and consumer electronics accounted for about 19%, nearly half of the total.
In the Hong Kong stock market, Tencent is undoubtedly the investment target closest to the concept of Metaverse.Judging from Tencent’s own technical reserves, data shows that Tencent has more than 24,000 published patent applications in the field of Metaverse in 126 countries/regions around the world. Among them, invention patents accounted for 99.74%. Tencent’s patent layout in this field is mainly concentrated in professional technical fields such as data processing, blockchain, server, artificial intelligence, image processing, and virtual scenes.
On the content side, the closest trend between Tencent and “Metaverse” is that the platform and content business group (PCG) successively launched three types of “Metaverse” products: NokNok, a social game product that focuses on pixel style, and Q, which focuses on interest. Dimensional and QQ channel functions that are being tested in QQ.
It is not difficult to see that domestic game companies have developed correspondingly in terms of the two essential rules and computing power of Metaverse, which also means that the application scenarios of domestic Metaverse will be implemented faster in the future and have certain investment prospects.
Games “going to sea” has become an important trend
Similar to the development of domestic innovative drugs, after the domestic game market was affected by the release of version numbers and the killing of the stock market, a large number of game companies began to seek products to go overseas in order to maintain their upward growth curve by expanding overseas markets.
According to the “White Paper on Global Mobile Games Purchase Volume in the First Half of 2021” previously published by AppGrowing, the growth rate of domestic mobile games going overseas has shown rapid growth in recent years, reaching 33% in 2020. Data-driven have put forward higher requirements.
According to App Annie estimates, mobile gaming spending is expected to exceed US$120 billion in 2021. In the first half of 2021, there are 810 games with an average monthly user spending of more than $1 million. It can be seen that mobile games are still a booming market.
In this market, China’s mobile games continue to grow and now account for 23% of overseas user spending. China’s overseas mobile game user expenditures accounted for the share of the overseas mobile game market, steadily increasing at an average year-on-year rate of three percentage points.
In the first half of this year, spending by overseas users of Chinese mobile games increased by nearly 47% year-on-year. In the regional head market, the performance of China’s mobile games is also remarkable. For example, a total of 8 games in the first half of the year entered the top 30% list in the United States. Latin America and Japan have also become the new focus of Chinese companies, with an increase of more than 20% compared to before the epidemic.
Judging from the data in the second half of this year, in terms of overseas manufacturers and products, Mihayou returned to the top list of overseas publishers. According to the sensor tower data, the overseas revenue of the mobile terminal of “Yuan Shen” increased by 60.5% from the previous month; Tencent “PUBGMobile” came from Turkey’s revenue accounted for 21.8%, surpassing the United States for the first time as the highest-income market; Xindong.com re-entered the Top 30, mainly from the Southeast Asian market’s revenue contribution; Mutong Technology’s “Mobile Legends” continued to increase revenue in the Indonesian and Malaysian markets, driving the ranking of manufacturers Enter TOP10.
Looking at the whole year, in 2021, China’s self-developed game overseas market’s actual sales revenue reached US$18.01 billion, a year-on-year increase of 16.59%. Although the growth rate has dropped by about 17% year-on-year compared with the severe epidemic in 2020, my country’s games have gone overseas in the past five years. The average increase in share has steadily increased.
Among the major overseas game companies, the investment targets of A-shares are mainly: Sanqi Mutual Entertainment (002555.SZ), Perfect World (002624.SZ), Gigabit (603444.SH)’s Thunder Game and Youzu Networks (002174.SZ). The main investment targets of Hong Kong stocks are: Tencent, IGG (00799) and Xindong Company (02400).
Channels and content are going to differentiate
When the increase in game users slows down, it means that the entire market has no room for new increments, and stock competition has become the mainstream of the market. Judging from the current market situation, the development of the game industry is already in a slowing down trend.
Statistics show that in 2021, the number of game users in China will maintain a steady growth, with the number of users reaching 666 million, a year-on-year increase of 0.22%. At the same time, in 2021, the actual sales revenue of the Chinese game market will be 296.513 billion yuan, an increase of 17.826 billion yuan over 2020 and a year-on-year increase of 6.40%.
In the context of gradual fierce competition in the stock market, content has begun to have a certain right to speak, and this has also driven the differentiation of channels and content in the domestic game market.
Zhitong Finance APP observed that in September this year, the century court trial of “Epic VS Apple” ushered in preliminary results. According to the verdict, from December 9 this year, Apple (AAPL.US) will no longer be allowed to prevent developers from guiding users to use third-party payments. This means that Apple’s 30% tax policy has breached.Since then, on a global scale, the relationship between channels and vendors has been reshaping, and vendors no longer need to be subject to the traditional sloping division mechanism, such as three to seven and five to five. This year, the commissions of some distributors have been reduced to 20%~30%.
From a macro point of view, the current game market has entered the era of inventory from increments, and the core of user traffic growth has gradually tended to “game content boutique + platform brand siphon effect.” With the rising cost of game development and the formation of a new generation of manufacturers and channels, it means that the era of games where content is king has come.
Therefore, at the current node of the transition from “channels as king” to “content as king”, TapTap, an anomaly among domestic Android distribution channels, has received more attention. Unlike Apple’s mandatory rake and the domestic hard-core alliance’s “five-five share” rake policy, TapTap’s core operating strategy is “zero share without intermodal transportation.” Compared with other channel parties that rely on the rake model, TapTap’s biggest difference is that it does not do game intermodal business and only charges advertising fees.
Zhitong Finance APP learned that the current number of TapTap monthly active users has exceeded 25 million. In addition, high verticality, activeness and high quality have always been the core characteristics of TapTap users. These advantages have further magnified the value of TapTap’s video content. This also makes Xindong a good investment target in the field of distribution channels in the era of high-quality games.
In terms of game content, the superior segmentation of the track is becoming an important breakthrough for major game companies to develop their efforts towards boutique products.
From the perspective of market audiences, segmentation needs are in a stage of continuous generalization and expansion. If manufacturers’ products can seize opportunities for innovation of varying degrees, they can accurately compete in the segmentation track and take advantage of a new Products are used to establish new fusion gameplay and themes of products, and torn a hole in the category influence of old products.
Since the beginning of this year, Tencent, NetEase, and Perfect World, three major players in the domestic game market, have taken turns to release a new round of intensive stock products. A total of nearly 100 new games will be gradually launched in the next two to three years. From an overall perspective, these three future product basic disks present the characteristics of complete categories and excellent competitive products. The impact includes sub-categories such as open world, two-dimensional, and feminine.
As mentioned above, the current game live broadcast market has entered the era of inventory from increment, and the core of traffic growth has gradually tended to “quality of content products + platform brand siphon effect.” The “Metaverse”, “going to sea” and the “differentiation” of channel content reflect that the current game industry is actively looking for three major directions to achieve a breakthrough from the stock market, and investors may be able to find the future in-depth from these three keywords. A weather vane for investment in the gaming industry.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/look-at-the-game-sector-in-2021-from-three-key-words-metaverse-going-to-sea-and-differentiation/ Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.