Shulou(Shulou.com)11/24 Report--

"did Sega win the mainframe war?"

"No, Sony and Nintendo are fighting for supremacy now."

In July this year, the animation "Uncle returned from another World" launched by Netflix became a dark horse. After the return of his uncle who was hit by a car accident 17 years ago, what bothers him most is Sega's defeat in the mainframe war. In fact, the game industry has changed its owners after several years, from Atari to Nintendo and Sony to Microsoft and Tencent.

In 1971, it was a wonderful year for the gaming industry, when Computer Space, the first consumer video game in human history, was born, while the arcade version of Cosmic War developed by Nolan Bushnell and Ted Barney, the former owner of Jobs and the two founders of Atari, became the first video game to be mass-produced and sold commercially.

In the same year, domestic game "Godfather" Ma Huateng was born in Basuogang, Dongfang County, Guangdong Province, and a month before Pony, another boy, Ding Lei, was born in Ningbo, Zhejiang Province. In 1995, Ma Huateng, then the stationmaster of Huiduo Network Shenzhen Station, received an unemployed young netizen who "Nanpiao" went to Shenzhen. Because he could not stand the dull and boring life, Ding Lei ignored the opposition of his family. He just resigned from the iron rice bowl as an engineer of Ningbo Telecom Bureau. This is their first meeting and the starting point of the love and hate story between them.

Ding Lei founded NetEase in 1997, and Ma Huateng, who also founded Tencent a year later. However, no one thought that an instant messaging company and an Internet community enterprise would play games in portals, music, games and other fields in the future.

The winter of 1999 was particularly long, when Sega, the great hero of the old console game, became even more heroic. Sega's local sales in Japan were very poor, and what bothered the president of Sega in Japan was the rumor that Microsoft was developing its own game console, Xbox. The two are close partners, and Zhaoichiro has no doubt about such rumors. after all, Bill Gates copied the idea of the graphical interface of Jobs' system and came up with a lesson from the Windows system.

* at the end of the first generation Xbox, there were several more Japanese at the gate of Microsoft headquarters than in previous years. Microsoft could buy Sega with only 2 billion yuan, but Gates did not accept "surrender." he thought that only Nintendo could defeat Sony, DC could not stop PS2, Sega just needed to be the third party of Xbox and feel at ease to make a wedding dress for Microsoft. Facts also proved that Bill Gates was not mistaken.

In 2001, Sega chose to leave the game console "War" with love and sadness. it was also in this year that NetEase acquired Tianxia Technology and set up an online game division. Of course, this is another story.

As a former company that mainly provided arcade entertainment services to US troops stationed in Japan after World War II, Sega's rise and fall was a microcosm of game companies of that era. Even if Sega's name has long been sealed in the long river of history, it is still an unavoidable topic for the game industry, and its experience of rise and fall is worth learning from.

01. The inherent logic of the vigorous development of the game industry in Dajiang East is that economic progress has driven people's pursuit of spiritual entertainment, and the Internet is the catalyst to accelerate this reaction.

In 1999, Chen Tianqiao, who was bent on building China's "online Disney" with a financing of US $3 million from Chinanews.com, resigned from his job as director of Jinxin Trust Office and set up Shanda Network. But in less than two years, only 300000 of 3 million were squandered, but it was with this remaining 300000 that Chen Tianqiao won the agency of the South Korean game Legend and became the first "legend" in the domestic Internet game industry.

During this period, a number of game companies enjoy the rapid rise of Internet dividends, and those Internet companies standing under the tuyere of the times have the ability to win easily. The leader of China's game industry has changed ownership several times in just a few years, from Shanda and NetEase to giant and Tencent. The myth of the richest man of Ding Lei, Chen Tianqiao and Ma Huateng has also brought countless dreamers to the game industry.

Today, it seems that the competition in the game industry is no longer fierce, but a solid pattern has been formed, and even some large families who have entered the game late have failed to enter the industry with a whole body of traffic. Data also show that real revenue in China's game industry fell 1.8% year-on-year in the first half of 2022, and users also fell 0.13% year-on-year.

"A total of one stone in the world game, NetEase Tencent monopolizes eight fights, and the rest is divided into two fights"; although it is a joke, it accurately describes the current pattern represented by Tencent and NetEase. However, the so-called stable pattern is only an illusion under the background that the version number is difficult to be obtained. the game industry has experienced ups and downs for decades, the ability to create wealth can be called the most on the Internet, and the situation of factions is complex.

Players in the game industry are generally divided into three categories: research and development, agents and channels, but there are also many players who hold several positions. In these three capabilities, product research and development capability is the absolute core, in the game industry is always the product is justice, the product is victory. Based on this understanding, New position takes the two product indicators of "product power" and "product line" as dimensions, and the game industry can be divided into the following according to Boston matrix analysis:

A, industry leader (many product lines, strong competitiveness)

Tencent, NetEase

B, large but not strong (many product lines, general products)

Most of them are traditional A-share listed game companies, such as Sanqi Mutual Entertainment, Perfect World, Gibbit, Century Huatong, Yaoji Technology, Kunlun Wanwei, etc.

C, strong but not big (few product lines, strong core competitiveness)

Emerging game companies such as Miha you, Lilith, Paper folding, Eagle Horn, etc., represented by the "four Little Dragons" in Shanghai.

D, the end of the industry (the product line is too few and the competitiveness is low)

Mainly Mini Game, but also some Internet companies, such as Ali, Kuaishou and so on.

(product power, that is, the profitability, playability, innovation, user retention and other indicators of a game; product line, that is, the types of games under the game company, the distribution of users, the number of tracks covered and other indicators. )

* Boston matrix chart of the game industry. With the overall advantages of the new site system in research and development, agents and channels, the throne of Tencent and NetEase is unshakable for the time being. Although the emerging game companies represented by Miha you have strong products, some players have even become a climate by popular games, but either the product line is too narrow, or the audience is too small, and there is little chance of reaching the top in the short term. The most interesting ones are the old game companies that are big but not strong.

As forerunners, they have long enjoyed the dividends of the industry, and the details are still profound; on the other hand, they are also under the washing of the times and the market, no longer the grand occasion of that year. Nowadays, these established game companies not only have to face the downward pressure from the two giants Tencent and NetEase, but also have to deal with the coveted by emerging game companies. It can only be said that the life of the average student is always the hardest.

In order to survive and even return to the center of the game, some of them clung to their market share and were forced into a buying crisis, while others took the initiative to seek change in order to survive with a broken arm, a situation similar to that of Shijiahe at that time. At the same time, these established game companies can also be called the mainstay of the industry. "the warm ducks in the river are the first to feel the smell of spring", and their trends are also of great research value. This article will discuss this group of "middle-class students" in the game industry.

02. The main business is abandoned and the sideline drag is the same as Ding Lei and Ma Huateng. Chi Yufeng, the founder of Perfect World, was also born in 1971. Chi Yufeng, who graduated from Tsinghua University, has always been what his parents call "other people's children". No one thought that such a "high achiever" would lead such a tortuous life that he would eventually be connected with the game industry.

Chi Yufeng's character can be seen when he was in college, such as investing in stocks, selling newspapers, and running a chemical factory. Like Liu Qiangdong, he also repaired computers and wrote software after graduation, and his first venture all ended in failure. Then he earned the first bucket of gold in his life by virtue of Hong en's educational computer software, but the trajectory of his life was completely changed by several Tsinghua brothers who knocked on his door.

In 2004, with his younger brother Zulong Studio, Chi Yufeng set up perfect Space-time Network Technology Co., Ltd., with the addition of excellent IP such as "Wulin Weizhuan" and "Zhu Xian", the company successfully rang the bell on NASDAQ in just three years. It is the success of these games that made Chi Yufeng realize the importance of excellent film and television IP. In 2008, Chi Yufeng set up perfect film and television, opening the linkage of movies and games, which also became the beginning of its decline.

The profiteering industry, premature success, and the addition of the halo of Tsinghua, the entrepreneurial team, made Chi Yufeng particularly infatuated with recruiting Tsinghua students, and even went to the alma mater campus to recruit students most of the time. But the result is that Perfect World has never made much progress in the game field, resulting in the most popular game IP for a long time is still "Perfect World" and "Zhu Xian" developed by Zulong Studio.

* Chi Yufeng, on the contrary, as Perfect World wantonly expanded his business territory, Chi Yufeng's focus gradually shifted to investment and film and television. Finally Zulong studio left, Perfect World game development speed significantly slowed down, and then gradually lagged behind.

In the game field, indulge in a set of methodology that has made achievements in the past, always unwilling to go out of the comfort zone; outside the game, blindly open up other business, but not out of the second curve is a drag on the main business. This is one of the reasons why Perfect World got into trouble, and it is also a trap that many established game companies, such as Century Huatong and Yaoji Technology, have not been able to escape.

From the product analysis, Perfect World was the first innovative enterprise in China to independently develop 3D game engine, and now Perfect World is a stubborn enterprise that has not been able to break through the shackles of MMORPG games in PC games and mobile games. Whether it is SLG games, MOBA games, card games, PLAYERUNKNOWN'S BATTLEGROUNDS games, or the rise of the original two-dimensional open games, Perfect World did not make a product that can be played. As if there was a "hoop spell" on the head, a popular style game eventually became the name of the company, and became the pinnacle of the game.

According to the financial report, Perfect World's total revenue in the first half of 2022 was 3.923 billion yuan, down 6.73 percent from the same period last year, of which revenue from the film and television business was only 120 million yuan, down 83 percent from the same period last year. It is not difficult to see that the film and tourism linkage has been shattered, and even the film and television business has become a "drag".

It is worth mentioning that Perfect World made a good profit this year, with the company's overall net profit of 1.137 billion, of which the net profit of the game sector was 1.183 billion yuan, up 429.73% from the same period last year. Such a surge is not only due to a low base, net profit of only 260 million yuan last year, but also because the game "Magic Tower", which was only tested in December last year, has become a popular style, and this game is also known as "the core is still MMORPG, but put on the cloak of open world games."

* Magic Tower Game Map trying to get out of its past success and escape from its comfort zone may also be a good medicine for the disintegration of Century Huatong and Yaoji Technologies; or before that, if the "other" business that is a drag on the main business can be optimized first, it may also help them to breathe a sigh of relief: century Huatong's auto parts business and Internet data center project have been affected by the epidemic, and delivery is seriously lagging behind. Yao Ji Technology's poker business was affected by rising raw material prices and a year-on-year decline in gross profit margin, which in turn dragged down the entire market.

In addition to "the main business is resting on its laurels and the sideline is expanding blindly", another big problem faced by established game companies is the lack of traffic. One of the connotations of the peak of Internet traffic is the traffic explosion, which has reached the critical level of life, how can there be a lack of traffic? In fact, e-commerce, games, advertising are big consumers of traffic, and even the Internet companies themselves are basically playing games.

In the final analysis, established game companies have more or less enjoyed the "Internet dividend", but they did not become Internet companies in the end. Instead, they were finally taken by Internet companies and easily harvested their past victories and current profits. Take Sanqi Mutual Entertainment as an example. In 2021, Sanqi Mutual Entertainment surpassed Century Huatong and became the game company with the highest revenue of A shares with 16.3 billion yuan, but behind the splendor was the "sky-high" marketing cost of 9.1 billion yuan.

On the evening of October 10, Sanqi Mutual Entertainment disclosed its performance forecast for the third quarter of this year. It is expected that net profit will drop by 30.83% 42.36%, which is interpreted as "affected by the progress of the launch of new products." But obviously, the market does not recognize this reason, the next day the opening of Panax notoginseng stocks directly fell the limit, in the face of "buying too much" surging questions, Panax notoginseng entertainment finally admitted and promised to reduce costs through digital marketing and precision marketing in the future.

In fact, established game companies do not need investors to remind them that they have already begun to work on traffic when they are in trouble. E-commerce industry "live with goods" fire, game companies are also following suit, trying to generate "live buying". According to the statistics of massive engine, more than 40% of the companies started the marketing mode of "short video + live broadcast" last year.

But everyone knows that the money-for-growth model can't last long, especially in the gaming industry. Because from a deep point of view, the fixed traffic of games is always firmly in the hands of channels such as social platforms, game platforms and app stores, and the amount of traffic paid for is unsustainable and the conversion rate is high and low. Under the cycle, the flow problem is also a cost problem, which will evolve into profit and budget problems, which will eventually lead to R & D problems.

After the profits of established game companies have been compressed, their budgets will be tighter and the tilt of resources will be more obvious after profits are harvested, while those projects with more potential often mean longer R & D cycles and more capital investments. it is even difficult to set up a project with a limited budget. It can be predicted that in the future, these manufacturers will be more and more lack of high-quality, popular style of good games.

And only popular games with their own popularity can break the strong correlation between traffic marketing and the increase in users. Moreover, with the increasingly stringent examination and approval of domestic game version numbers, the trial and error opportunities of established game companies in China have also been affected, and many manufacturers have simply rushed overseas with the upsurge of going out to sea, North America, Europe, Southeast Asia, and the Middle East. Can the former aristocracy of these game industries and today's "middle students" smoothly run to the other side?

03, do not go out to sea comfort zone from the market scale point of view, the global game market revenue of 180 billion US dollars in 2021, China's game revenue of only 296.5 billion yuan. By contrast, the overseas game market is more than three times that of the domestic game market. There is no doubt that the overseas market is a broader blue ocean.

But established game companies soon found that overseas is not pure land, no matter where the market, in addition to local competitors, but also have to encounter the original domestic competitors. Whether they are industry leaders such as Tencent and NetEase, or strong but small industry upstarts such as Miha Youyou, it is obviously easier to copy their successful experiences overseas.

Tencent has always been a buyer. Over the past 10 years, the "deep-pocketed" Tencent traded time for space and spent 100 billion yuan on investing in overseas game companies. In terms of performance, Tencent firmly ranked first in the income of domestic overseas manufacturers; NetEase was slightly calm, but also chose his own best method of play. self-building and acquisition, overseas game studios continue to be born and become the engine on NetEase's warships.

And Miha tourists, simply popular style games at home and abroad take all, even the original god has always been overseas income higher than the domestic market. The game industry is the most about product power. Without the ranking of capital and the many constraints faced by giants at home, the new rich in the industry are like a fish in water overseas. The most intuitive performance is that Miha Youyou and Lilith closely follow Tencent to occupy the Top3 of 2021 overseas manufacturers' income.

But these two types of players need to consider not only the present, but also poetry and distance when going out to sea. For the giants, the large investment not only makes a profit, but also focuses on the deep technology accumulation of overseas companies and the huge user data behind it. For the upstart, the unshakeable leading throne at home has the possibility to be realized overseas, in addition to popular styles, we also need to pay attention to brand image, product coverage, attack and defense with giants and other issues.

For established game companies, there are not so many twists and turns. The most realistic need for them to go out to sea is to seek the second growth curve as soon as possible to ease the pressure of domestic competition. To put it bluntly, it is to make money. What to make money and what to do is the best choice. Similarly, the old game companies are "big but not strong". In addition to the accumulation of wealth accumulated during the profiteering period of the industry, it also includes factors such as resource accumulation and user feelings, which are difficult to transplant to overseas markets. therefore, there is a more comprehensive transformation of the basis and necessity to do what to make money.

But obviously, not all established players are willing to make such a choice. In terms of the results, although the positioning and playing methods of the products of different companies are different, generally speaking: players who actively seek change after going out to sea have achieved good results; players who are still unwilling to go out of their comfort zone and continue to use the old style of play seem a little uncomfortable.

Century Huatong's games go out to sea mainly rely on little interaction, the latter is good at simulation business games, after the acquisition of century Huatong in 2018 did not update its main direction, while simulation business games compared with overseas popular SLG games are relatively lacking in popularity and money-attracting ability. This has also led to a slow decline of 5.807 billion yuan and 5.66 billion yuan in overseas revenue for several years, although Century Huatong's overseas game revenue is about 5.5 billion yuan in 2021.

While Gibbit and Perfect World, who were at a loss in the choice of new games after going out to sea, chose to continue to focus on the MMO games they were good at, such as "ask questions", "The Demi-Gods & Semi-Devils" and so on. But such games are not popular in the mainstream market, and going out to sea is often blocked. Perfect World went out to sea earlier, starting to focus on overseas markets as early as 2006, but "got up early in the morning and caught up with an evening set", resulting in the fate of many overseas game studios being closed or sold.

In sharp contrast with these families is the mutual entertainment of Panax notoginseng, which can be described as "what to earn money to do". Panax Notoginseng Mutual Entertainment started with ARPG games in China and has been deeply cultivated in this field, but it quickly laid out the mobile game market after going out to sea, and then switched to the field of SLG, which is more favored by overseas players. The most successful game under Panax Notoginseng Mutual Entertainment is "Puzzles & Survival", which belongs to the combination of SLG and Sanxiao, and Sanxiao is also one of the most popular game modes overseas, such as the popular "Sheep has a Sheep" in China this year.

* "Puzzles & Survival" game as of July 2022, this game has brought 4.63 billion yuan of flow to Panax notoginseng mutual entertainment, with a maximum of nearly 300 million yuan per month. In 2021, the total income of Sanqi Mutual Entertainment overseas business soared by 122.94% compared with the same period last year, achieving triple-digit growth for two consecutive years, reaching 4.777 billion yuan, which is close to Century Huatong.

Obviously, Century Huatong, Perfect World and Gibbit, who went out to sea with the echelon, have slowly begun to fall behind.

As Lilith CEO Wang Xinwen mentioned when sharing the experience of game going out to sea at the 2020 annual meeting of China's game industry, "the essence of globalization is to try our best to localize it." The premise of the success of a game at sea requires not only the strength of the game products, but also the localization of the game. Due to the great differences in culture, habits and preferences of different user groups, it is impossible to mechanically apply the successful mechanism of domestic or overseas markets directly to other markets, so it is necessary to formulate corresponding localization service strategies for specific markets.

Century Huatong, Perfect World, Gibbit and other established manufacturers, indulged in the past methodology in China, chose to go to sea only to comply with the trend, still failed to get out of the comfort zone, it can be said that "out of a false sea". If changes are not made as soon as possible, the situation they will face in overseas markets may be even more difficult than at home in the future.

Finally, when Microsoft acquired Bungie and transplanted the Halo game to its host Xbox, Apple lost not only an excellent game company, but also the valuable PC market attached to the game. The entertainment attribute of the game makes it unique in all Internet applications.

Today's domestic game industry is no longer a myth of wealth creation, and it has long been difficult to achieve popular styles by hormonal stimulation or flow irrigation. the former, such as Huang Zheng, who played games such as "underworld" and "my sister", has now created pinduoduo and retired quietly, while the latter, such as "time Killer", beats its four major game studios.

The giants are still determined to forge ahead, but most of the more dangerous established game companies rely on buying to maintain the status quo and gradually become opportunities to make money for advertising companies, and the final outcome may be the loss of research and development ability to be strangled by the times.

If you don't want to go out of your comfort zone, even if you choose to go out to sea, it's more like comforting yourself, changing a turtle shell and continuing to curl up. Just like the plan of "to change and vibrate at the same time and solve the dilemma" in the Ming Dynasty, the self-rescue which seems reasonable but does not solve the root of the disease will eventually fail. Like Sega at that time, the "middle students" of these games industry were once equally brilliant, and whether they will decline in the future will be tested by time.

* the pictures and the pictures in the article come from self-made and Internet.

This article comes from the official account of Wechat: new position NewPosition (ID:xinlichangNP), author: VV, Editor: Li Fan

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