According to industry analysts, China Mobile Games still faces problems such as lower-than-expected market performance of IP games, lack of representative works with greater influence, and increased difficulty in obtaining IP licenses.
Editor’s note: This article is from Blue Whale Finance, the author of India.
On October 31, the China Mobile Games will be officially listed on the Main Board of the Hong Kong Stock Exchange. The fundraising scale will range from HK$1.01 billion to HK$1.31 billion. This time, the China Mobile Games introduced 7 basic investors, including Fast Hand Technology, Handan, Reading Group, and Sanqi Mutual Entertainment. The total investment amount is HK$250 million.
The Chinese mobile game, established in 2011, is not a recruit in the capital market. In September 2012, the China Mobile Games was split from the First Video Group and listed on the NASDAQ exchange in the United States, becoming the first mobile game company to log on to NASDAQ. In August 2015, the China Mobile Games delisted from Nasdaq on the grounds of seeking a higher valuation. Since the Nasdaq delisted, it has submitted a prospectus to the Hong Kong Stock Exchange. This is the third time that the Chinese mobile game has submitted relevant documents, and finally hopes to continue the listing dream.
However, industry analysts believe that China Mobile Games still faces problems such as lower-than-expected market performance of IP games, lack of representative works with greater influence, and increased difficulty in obtaining IP licenses.
Following IP to build a moat, still facing problems such as “representative work”
China Mobile Games will position itself as an IP gamer and mobile game publisher. IP, games, distribution channels, and players form the entire industry chain of mobile games. Focus on working with popular IP copyright parties involved in famous cultural products and works of art.
The prospectus shows that from 2016 to 2018, the revenue of China Mobile Games was 1.01 billion, 1.012 billion, 1.596 billion yuan, and the net profit was 189 million yuan, 265 million yuan, and 316 million yuan. In the first half of 2019, the revenue from continuing operations in the first half of 2019 was approximately RMB 1.529 billion, representing a year-on-year increase of 127.2%.
China Mobile has 255 million registered users. As of the first half of 2019, the number of mobile users (MAU) was 14 million, with an average monthly paid user (MPU) of 1.02 million and a new registered user of 40 million. In terms of user fees, according to the report of Analysys think tank, as of June 30, 2019, the middle handThe average paying user conversion rate for the tour was 7.3%.
China Mobile has more than 31 IP licenses and 68 proprietary IPs covering animation, online literature and gaming. Among them, including many well-known game IP, such as “New Paladin”, “Naruto – Ninja Master”, “Choice of Heaven” and so on. According to the Analysys think tank, from 2015 to June 30, 2019, among all Chinese independent mobile game publishers, China Mobile Games has the most issued IP games.
The famous economist Song Qinghui told reporters that IP is still very important to game products. It can not only effectively reduce the user’s access cost, but also increase the user experience in the game process and reduce the learning cost of the game. The IP adaptation game has a high commercial value and currently has a major share of the game market. It is more costly for game makers to produce original games, and IP adaptation games have the original basic fans, which generally achieve better results and reduce promotion costs.
It is understandable to rely on IP reserves to build a moat. However, it is undeniable that the games made by the Chinese mobile games lack “explosive models”, and there are few well-known masterpieces. The effect of having the most IP number is doubtful.
According to the “China Mobile Game Rankings for September 2019” published by IDC, the comprehensive monthly ranking, ios monthly ranking, and Android monthly rankings are three TOP10, and no one game is selected. In fact, the reporter has found a list of major mobile games, and the top five to ten are almost impossible to find games for the game.
The Chinese mobile game does not effectively develop IP resources although it holds multiple IPs. Industry insiders say that in order for IP to show the most value, it takes an equal amount of effort to adapt. The mobile game has a large number of IPs, but from the prospectus, the mobile game does not have a large number of authorizations and adaptations of all IPs. In addition to the regular IP adaptation game business, the focus is on the “Swordsman”. On the big IP, focus on long-term layout.
Investment and financing expert Xu Xiaoheng said that because IP itself has popularity and fans, it is relatively easy to quickly realize, but also because most CPs that purchase IP are over-reliant on IP, which is a shackle of product quality.
How to create a pop-up game to increase awareness and maximize the value of IP is undoubtedly a major problem to be solved.
In addition, China Mobile Games also faces compliance issues, and there are corresponding risks in its prospectus: we will continue to evolve and evolve the laws and regulations governing mobile games, which may make it difficult for us to obtain or maintain all applicable License and approval.
The game is now a big industry, but it has always been influenced by national policies and is very sensitive to the impact of regulation. Xu Xiaoheng said that the strict approval system is a big barrier in front of game manufacturers, and the approval process is rather cumbersome. This has put a lot of pressure on the game industry’s special mobile game companies..
The competition in the domestic mobile game market is fierce, and small and medium-sized game makers “sand the survival”
According to the “China Game Industry Development Report (2019)”, China’s local game industry market has formed a situation in which one enterprise is unique and the two heroes compete. In 2018, among the top 50 game products in each platform revenue, Tencent’s games Product operating revenue accounted for 65.2% of the total, the second place is Netease games, accounting for 15.4%, the combined income of the two companies accounted for up to 80.6%.
The report pointed out that as Tencent and NetEase accounted for 80% of the market share, the remaining 20% of the market is the space for other hundreds of listed companies and all the small and medium-sized companies that are not listed. The small and medium-sized game companies are innovative and even living space. A severe test.
As of 2018, there were 626 million Chinese game users, with an annual output value of 214.44 billion yuan, and the annual output value accounted for 23.6% of the world. Due to the disappearance of demographic dividends, the impact of new platforms such as short videos on user time differentiation and lack of innovation drivers, the constraints on the development of China’s game industry have become increasingly prominent and have begun to enter a period of slow development.
In the international market, small and medium-sized game companies have new development space, and Chinese products have become the first choice for mobile game companies. According to the data, in 2018, the mobile games independently developed by Chinese local enterprises earned US$6.92 billion in overseas markets, which was about 47.06 billion yuan, an increase of 23% over 2017.
However, as the Chinese mobile game market gradually matures, almost all R&D companies are caught in a lack of innovation, and the homogenization trend is serious. Channels and publishers value the game’s data and payment status, making it easier to develop innovative games than to continue to push traditional mobile games that have undergone market testing. In order to get resources and reduce the burden of research and development, R&D companies are investing less and less in innovative games.
Analysys analyst Liao Xuhua told the Blue Whale TTM reporter that the main industry feature is that it will continue to shuffle, and fewer and fewer manufacturers will lack product capabilities. The core problem facing game companies is products, products that cannot be found or can’t be made, or products that are too competitive.
“If small and medium-sized game companies want to develop in the long run, they must insist on making products instead of playing traffic. On the other hand, they must have their own competitive advantages and become members of the ecosystem of large publishers, whether they are cooperation or investment. Find the backing.” Liao Xuhua said.
The game industry entered a period of pain last year due to the suspension of approval of the version number. Nowadays, with the relaxation of the game version in the first half of 2019, the domestic game industry is still ushered in a new round of recovery. At this time, whether the mobile game in the Hong Kong stock market can bring surprises still needs time verification.