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Editor: Xia Yijun

The gaming industry needs a savior.

With the doubling of game license supply and the emergence of high-quality blockbusters, the gaming industry has not recovered as strongly as expected. In the first half of the year, the domestic game market grew by only 2.08% year-on-year.

More troubling is that years of stagnation in game innovation combined with declining consumer spending power have led to a sharp decline in the ROI of game projects, directly affecting industry profits. In the first quarter, the net profit of A-share listed game companies fell by 24% year-on-year.

Does the gaming industry urgently need a savior at this point? Is "Black Myth: Wukong," which has set multiple single-season game records, one?

This article holds the following views:

1. Success is not replicable. The initial burst of enthusiasm for the first 3A game and the game's long-term investment are the foundations of "Black Myth: Wukong's" success. Not only is enthusiasm difficult to sustain, but the 7-year development time and 200-400 million yuan in research and development costs are also rarely matched by other companies willing to take such a high-risk gamble.

2. Developing mobile games remains the most cost-effective option for game companies. The high-investment, buy-to-play business model of 3A games makes them less profitable. In a relatively profit-driven market, developers often choose to quickly create mobile games using templates, which is faster and easier to monetize.

3. It cannot save the gaming industry. The core reason for the gaming industry's stagnation is declining user spending power and aesthetic fatigue, leading to lower ROI and higher risks for games. This is not a problem that can be solved by a single game.

/ 01 / Success Is Not Replicable

The success of "Black Myth: Wukong" speaks for itself. A key point is that three days after its launch, global sales of "Black Myth: Wukong" exceeded 10 million copies. Based on the global minimum price of 268 yuan per copy, the game's global revenue exceeded 2.6 billion yuan.

What level is this? Previous domestic standalone games could only sell around 100,000 copies.

Unfortunately, the success of "Black Myth: Wukong" is difficult to replicate. Its success stems primarily from two factors: the initial burst of enthusiasm for the first 3A game and the game's high quality.

For a long time, 3A games were exclusively produced abroad, and no domestic company could make one. Few companies dared to take such a high-risk gamble.

Therefore, as the first domestic "3A masterpiece," "Black Myth: Wukong" is regarded highly by the entire gaming industry and player community. Long-time gamers who have been disappointed by the lack of domestic 3A games finally have a game they can emotionally invest in.

However, this also means that future 3A games may not receive the same level of emotional investment.

While emotional investment is a bonus, the root of "Black Myth: Wukong's" success lies in its long-term, high-investment development. The game has been in development since 2017, with the entire team working on it for seven years. In terms of investment, Feng Ji revealed that the development cost per hour of gameplay exceeded 20 million yuan, resulting in an overall development cost of at least 300-400 million yuan for a game with over 20 hours of gameplay.

Few other companies can afford to take such a high-risk gamble with such a long development timeline. The development cycle alone deters many game companies, as 3A games typically take at least four years to develop, while "Black Myth: Wukong" took nearly seven years.

Why does it take so long? Any game worthy of being called a 3A title is a collection of countless details. Developers must construct a virtual world from the ground up, starting with individual elements like grass and trees.

For example, in the first chapter of "Black Myth: Wukong," there's a scene where the monkey picks up a knife. To ensure the monkey can smoothly walk over, grasp the knife, pull it out of the ground, and place it in its ear – with a focus on the walking and knife-drawing actions – the development team spent two to three months fine-tuning these seemingly insignificant movements to make them look smooth and natural.

However, major domestic game companies are often constrained by strict business considerations and shareholder profit expectations, making them hesitant to spend such a long time on development.

The 300-400 million yuan development cost also deters most companies from entering the market. While major game companies can afford such investments, they often choose more cost-effective projects, such as mobile games, given their comparable investment requirements.

/ 02 / Developing Mobile Games Remains the Most Cost-Effective Option for Game Companies

Game quality and commercial success are not always synonymous.

3A games represent the pinnacle of game development. However, their high investment and buy-to-play business model make them a less-than-ideal business venture: they require hundreds of millions of yuan in development costs but generate revenue only once, requiring massive sales to break even.

The founder of a game company once stated that 3A games require internationalization to recoup their investments. "Only by generating international revenue can you sell millions or tens of millions of copies to core gamer groups and potentially break even," they said.

In contrast, free-to-play mobile games with in-app purchases offer a different story. By reskinning and tweaking existing games with minimal investment, developers can attract players to spend money on in-game items and generate hundreds of millions or even billions of yuan in revenue.

This means that under comparable investment levels, mobile games outperform 3A games in terms of commercial success.

For example, Goldman Sachs predicts that "Black Myth: Wukong" could sell 20 million copies, generating over 5 billion yuan in revenue. While this sales forecast is objective compared to top 3A titles, it pales in comparison to the long-running mobile game "Honor of Kings." In the first half of 2023, "Honor of Kings" generated $961 million on the App Store and Google Play, surpassing the potential final sales of "Black Myth: Wukong" over its entire lifetime.

In this context, 3A games' high investment and long development cycles create an uncertain market where even minor missteps can result in wasted investments and wasted youth.

This means that in China's relatively profit-driven market, smaller developers often opt for faster and more profitable mobile and online games by using templates. Even ambitious major companies often adopt agile development and incremental updates to quickly iterate, fix issues, and add new content to adapt to market demands and player preferences.

For example, after "Genshin Impact" launched, miHoYo consistently engaged players and generated revenue by regularly releasing new maps, characters, and storylines.

Under these circumstances, major companies like Tencent and NetEase likely have the capability but lack the motivation and courage to develop 3A games, instead choosing to focus on mobile and online games for steady profits.

/ 03 / It Cannot Save the Gaming Industry

After the explosion of popularity for "Black Myth: Wukong," a long-neglected question resurfaced: Does China's gaming industry still have a place in the investment landscape?

"No," said Zhuang Minghao, an investor focused on the gaming sector, without hesitation. "There will not be a wave of gaming startup investments in China in the short term, let alone a wave of 3A game startup investments."

Even after producing a phenomenal hit, the gaming industry struggles to attract investor interest. This is because the gaming industry is facing a bottleneck.

Despite the doubling of game license supply and the emergence of high-quality blockbusters, the gaming industry has not recovered as strongly as expected. In the first half of the year, the domestic gaming market grew by only 2.08% year-on-year. NetEase's blockbuster "Legend of the Condor Heroes" also underperformed. The declining profits of game companies are even more troubling, with net profits of A-share listed game companies falling by 24% year-on-year in the first quarter.

The current gaming market urgently needs a savior, but "Black Myth: Wukong" is not it. The gaming industry's weakness stems from a combination of consumer aesthetic fatigue and declining spending power, leading to lower ROI for game projects.

For example, "Azur Lane" in 2017 generated over 100 million yuan in revenue in its first month with a development cost in the millions, while "Arknights" in 2019 leveraged a development cost of less than 40 million yuan to generate 500 million yuan in its first month. In contrast, the most popular anime game of 2022, "Deep Space Eyes," cost nearly 100 million yuan to develop but only generated just over 100 million yuan in its first month.

While "Black Myth: Wukong" may temporarily alleviate aesthetic fatigue, its unfavorable business model exacerbates the decline in ROI. This underscores that the gaming industry's declining ROI and increasing risks cannot be solved by "Black Myth: Wukong" alone.

Ultimately, in a sufficiently large market, the success or failure of one or two games cannot alter the status quo. When "The Wandering Earth" was first released, many believed it opened the door to Chinese science fiction. However, what happened afterward?