"Text and Image | Tang Jie"

Whether it's Game Science as a company or the gamers who have hyped up "Black Myth: Wukong," it's unlikely anyone anticipated the massive discussion and attention the game's release would generate. Even the stock prices of companies unrelated to the game skyrocketed. Looking at the state of the capital market in recent weeks, it truly embodies the saying:

"When there's no tiger in the mountains, the monkey becomes the king."

From a self-media perspective, it's hard not to be tempted by such an influx of traffic. After completing the first three chapters of the game, I was preparing to write something when I realized I was already drowning in an ocean of content. Just within our own circle, there are guides on how to invest after watching "Black Myth," analyses of how much electricity it takes to beat the game and implications for the renewable energy sector, and debates on whether the game signals the dawn of the single-player game era...

To be honest, as a game, "Black Myth: Wukong" has been endowed with so much anticipation and significance that I wonder how the main creative team at Game Science feels about it. However, in light of the various reactions to "Black Myth" and the potential industry changes it may bring, as well as the thoughts it inspires, it's worth having a serious discussion.

01 Understanding Everything Through a Chinese Lens

The buzz surrounding "Black Myth: Wukong" in the gaming industry may soon fade, but the thoughts it provokes will linger.

A cultural product's popularity either reflects current social trends (like Wolf Warrior) or represents the "greatest common divisor" across all cultural circles (like The Wandering Earth franchise). "Black Myth" encompasses both, which explains the almost universal appreciation and praise from both official and grassroots levels. This also exemplifies the ultimate pursuit and charm of games as the ninth art:

Everyone can find themselves reflected in it.

The entire game incorporates the cultural essence of Confucianism, Buddhism, and Taoism. The first chapter uses the stories of Black Bear Spirit and Abbot Jinchi to examine the "obsession" within human hearts. The second chapter delves into whether good and evil stem from the heart or one's innate nature. The third chapter elevates the narrative from the individual to all beings, posing the question of whether all beings can be saved through a bizarre and surreal story.

The interrogation of human nature is eternal and transcends cultural boundaries, but its expression in the gaming realm as a "Chinese style" is quite rare:

What is the true meaning of "stern means, compassionate heart"? What does it mean to truly let go of worldly desires and dry up the sea of dust? What is the true path to enlightening the world? The journey to retrieve the Buddhist sutras spans ten thousand eight hundred li, driven by the belief that all beings suffer. But what exactly is the suffering of all beings, and where does it come from?

There are no definitive answers to these questions, but pondering them can enrich and diversify your understanding of yourself, business, and society. Meanwhile, the reality we are currently experiencing provides a new empirical evidence for the suffering of all beings.

In the second quarter of this year, despite a year-on-year growth rate exceeding 20% in the same period last year, Walmart China's revenue grew by 17.7% year-on-year to reach $4.6 billion (approximately RMB 33 billion). In today's seemingly pessimistic consumer sector, the growth of a consumer enterprise like Walmart China (whose incremental growth is primarily driven by Sam's Club) that does not compete on low prices is undoubtedly subverting the perception of investors focusing on Chinese e-commerce regarding "consumption downgrade".

However, this is just the tip of the iceberg in China's consumer market.

The truth is that among the various industries experiencing hardships in China over the past two years, the consumer sector has been particularly affected by the perception of "consumption downgrade." Another aspect of this trend is the competition among e-commerce platforms based on low prices. Nowadays, while Alibaba no longer pursues absolute low prices, JD.com and Pinduoduo are still focused on this strategy.

Perhaps surprisingly, these two companies that continue to emphasize low prices achieved remarkable net profit growth in the second quarter.

Pinduoduo's revenue reached RMB 97.06 billion in the second quarter, up 86% year-on-year but falling short of expectations. However, its net profit was RMB 32.0094 billion, up 144% year-on-year, significantly exceeding expectations. On the other hand, JD.com reported a net profit of RMB 12.64 billion in the second quarter, up 92.1% year-on-year, also exceeding expectations and setting a new record high for the company.

Both companies' financial reports reveal that their strong bargaining power with suppliers and effective cost control measures allowed them to maintain low prices while ensuring profitability.

Some may ask if cost reduction is something many investors are reluctant to see, especially in the current sluggish consumer environment, where growth is highly anticipated. Is it sustainable to exert extreme pressure on the supply chain and drastically cut expenses?

Let me tell you: There is no limit to this trend.

National platforms like Pinduoduo and JD.com already have significant influence and control over upstream suppliers. As long as price pressure continues to be exerted by consumers, there will always be room for cost reduction in an oversupplied market.

Perhaps one day, you'll be asked to do a day's work for just ten yuan. If you refuse, many others will take your place.

Everyone can feel the chill, which is the process of being squeezed, the very essence of "suffering."

The strong resonance triggered by understanding everything through a Chinese lens makes it difficult for "Black Myth: Wukong" not to succeed.

02 Dawn Breaks

Returning to the game itself, the spring has arrived for Game Science.

In many articles, Game Science and its founder Feng Ji are described as "brave souls determined to challenge the impossible in the industry." Such content often includes the following viewpoints:

Developing 3A single-player games is too risky, akin to gambling, and not as profitable as earning quick money from mobile games. The buy-to-play business model is on the verge of being phased out, and the future mainstream will be subscription-based services like Netflix. The success of "Black Myth" cannot change the current state of the industry, and its achievement is an unrepeatable miracle, among others.

To sharply critique these viewpoints, borrowing a line from the game's villain, Huang Mei, would be:

They're all bullshit.

Firstly, from a cultural and entertainment industry perspective, developing 3A games offers the highest probability of profitability. Simply put, as long as a company has the capability to create a 3A game, and it's not terrible, it's basically a sure bet. For comparison, in 2023, there were five Hollywood blockbusters that lost over $100 million, but strictly speaking, very few 3A games have actually lost money.

Secondly, the buy-to-play model will not be phased out in the present or future but is instead an inevitable choice for the business model of single-player games. Unlike film and television works, game development involves multiple rounds of public testing and player feedback before official release, making it less of a "black box." The revenue cycle is also much longer than that of typical film and television works, giving players ample information to make informed purchase decisions.

Lastly, while I may not have complete faith in China's game development teams, I do believe in the profit-seeking nature of capital. In April this year, NetEase's Wuxia game "The Legend of Condor Heroes," which received an investment of RMB 1 billion, failed to make an impact upon release and barely registers on the bestseller charts. The mobile game and cross-platform online game sectors are already overcrowded, and high revenue requires high investment. No investor is foolish enough to believe that mobile games offer high capital efficiency.

The term "3A" is a marketing concept rather than a product standard, roughly referring to "A lot of money," "A lot of resources," and "A lot of time." Similar to the term "blockbuster" in the film industry, it's a promotional and marketing term rather than a guarantee of product quality or content.

The 3A game with the highest investment in 2023 was "Marvel's Spider-Man 2" produced by Sony, with a development cost of $300 million. According to interviews with Feng Ji, the development cost of "Black Myth" is estimated to be between RMB 300 million and RMB 400 million, roughly $42 million to $56 million. Some games with lower costs include "Elden Ring," whose estimated development cost might be as low as $10 million to $20 million, lower than that of "Black Myth."

According to current standards in developed countries, only games with investments exceeding $100 million can be considered 3A, making "Black Myth" technically not a 3A game. Therefore, discussing China's game industry and "Black Myth" from a 3A perspective is quite imprecise. It's better to evaluate the game from two dimensions: its genre (single-player game) and business model (buy-to-play).

From the perspective of China's single-player game sector, the success of "Black Myth" is inseparable from two crucial prerequisites: a vast market capacity and a well-established industrial chain.

In terms of market capacity, according to Statista, China's single-player game market is worth over $2 billion, growing 20-fold in the past seven years, making it one of the fastest-growing segments in China. There are many single-player game developers in China, but most are small-scale operations. Few have the resources to invest time and money in "big-budget" productions.

In several public interviews, Feng Ji acknowledged this "gap." At least since the inception of "Black Myth" in 2018, he recognized that China had a significant base of single-player gamers but lacked games tailored to Chinese tastes and based on Chinese culture and stories. There were no companies capable of producing such games on par with international blockbusters.

Moreover, despite a lack of experience in developing single-player games, the industrial chain is not entirely blank. Whether in animation or games, Chinese studios specializing in art and modeling have become the backbone of the global industry chain in recent years, renowned for their high production standards and low prices. Both accumulated technology and talent help companies address a significant portion of their cost challenges.

"Black Myth," with a cost of just a few million dollars, delivers a quality that rivals games costing hundreds of millions. The game is filled with intricately carved and painted ancient Chinese architecture, not to mention the gameplay. This level of commitment is impressive. As such, the success of "Black Myth" is not a fluke but a result of various factors, including market capacity, the vision and capabilities of the creative team, and industrial chain support.

With a vast single-player game market and a gradually strengthening industrial foundation, the success of "Black Myth" sets a benchmark and drives the industry forward. It's safe to say that the era of industrialization for single-player games in China has begun, and we can expect more entrants in the future.

Disclaimer: This article is for learning and exchange purposes only and does not constitute investment advice. We welcome likes, views, shares, and your support is our motivation to keep updating! ???? Star and follow our Tangping Index to never miss a hard-hitting update.