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Going abroad is driving the growth of the domestic game industry.

According to the "China Game Industry Report for the First Half of 2024", in the first half of this year, the actual sales revenue of the domestic game market was 147.267 billion yuan, an increase of 2.08% year-on-year. The actual sales revenue of domestically developed games in the Chinese market was 117.736 billion yuan, a decrease of 3.32% year-on-year; the actual sales revenue of domestically developed games in overseas markets was US$8.554 billion, an increase of 4.24% year-on-year.

Self-developed games have achieved higher growth rates overseas than domestically. Game companies that have deployed overseas have also benefited from this.

In the first half of this year, Century Huatong achieved revenue of 9.276 billion yuan, an increase of 53.33% year-on-year; net profit attributable to shareholders of listed companies was 1.158 billion yuan, an increase of 33.41% year-on-year. With this achievement, Century Huatong became the top-earning A-share game company in the first half of this year. Among them, the overseas market contributed to Century Huatong's growth - export sales revenue was 5.019 billion yuan, an increase of 115.28% year-on-year, accounting for 54.11% of total revenue.

As the global game industry becomes increasingly competitive, can Century Huatong sustain this overseas growth rate?

01

Hits Drive Growth

According to records, Century Huatong was listed on the A-share market in 2011, when the company was still a second-tier supplier of automotive components, mainly providing indirect support to well-known vehicle manufacturers such as Shanghai Volkswagen, Shanghai General Motors, FAW-Volkswagen, Dongfeng Motor Group, etc.

In 2014, Century Huatong acquired 100% of the equity of Shanghai Tianyou Software Co., Ltd. and 100% of the equity of Wuxi 7ku Network Technology Co., Ltd. Since then, Century Huatong has continued to acquire companies in the game industry, including Xiamen Qiyou, Shengfeng Network, Chongqing Manxiangzu, Shenzhen Youying, Wenmai Interactive, and others.

Century Huatong has stated in its financial reports that the company plans to expand and strengthen its game industry through acquisitions and reorganizations, integrate resources, and optimize the layout of industrial structure and product mix classification.

In 2018, Century Huatong acquired Dian Dian Interactive Beijing and Dian Dian Interactive Cayman for consideration of RMB 100 million and RMB 6.825 billion, respectively, making Dian Dian Interactive a wholly-owned subsidiary. According to records, Dian Dian Interactive is one of the earliest game companies that integrates R&D, publishing, and operation for the overseas market.

Starting from this year, Century Huatong's game business also ventured into overseas markets - export sales revenue reached 4.515 billion yuan, an increase of 7329.49% year-on-year, accounting for 55.58% of total revenue.

In 2019, Century Huatong acquired 100% of Shengyue Network's equity for a total investment of RMB 29.803 billion, becoming the largest A-share game company. In its annual report for that year, Century Huatong stated that from 2014 to 2019, the company underwent significant asset restructuring and successfully acquired 100% equity in seven companies, including 7ku Network, Tianyou Software, Dian Dian Interactive, and Shengyue Network, transforming its main business from automotive components to a dual focus on automotive components and online games.

In its 2021 annual report, Century Huatong stated that in terms of its "globalization" strategic layout, on the one hand, the company will introduce more self-developed products targeting overseas markets to increase its market share and further increase investments in overseas markets in the future; on the other hand, it will strengthen cooperation with global game IPs.

In overseas markets, "Lords Mobile," "Guns of Boom," "Fifi and the Flowertots," and "Shining Nikki" have achieved impressive results. In 2021, Century Huatong's export sales revenue was 5.684 billion yuan, an increase of only 0.43% year-on-year. By 2022, Century Huatong's overseas performance remained unsatisfactory - export sales revenue was 4.04 billion yuan, a decrease of 28.92% year-on-year.

It is worth noting that since 2020, Dian Dian Interactive has shifted from agency publishing to self-developed and self-published games. In April 2022, the agency publishing contracts for "Lords Mobile" and "Guns of Boom" expired, which also affected Century Huatong's overseas performance.

It wasn't until "Whiteout Survival" became an overseas hit. According to Sensor Tower data, "Whiteout Survival" was launched in overseas markets in February 2023 and continued to see revenue growth throughout the year, ranking seventh in overseas mobile game revenue. With this game, Dian Dian Interactive's overseas revenue in 2023 nearly tripled that of 2022, making it the publisher with the highest overseas revenue growth in 2023, jumping 13 places to fifth place in the revenue rankings.

As a result, Century Huatong's export sales once again achieved growth, with revenue of 6.115 billion yuan in 2023, an increase of 51.35% year-on-year.

In the first half of this year, "Whiteout Survival" maintained its popularity. Century Huatong stated in its financial report that based on data from multiple third-party mobile app market research institutions, "Whiteout Survival" consistently ranked first in China's overseas mobile game revenue rankings and successfully entered the top 10 global mobile game revenue rankings. Another new game, "Truck Star," achieved monthly revenue of over RMB 10 million globally within four months of operation. Dian Dian Interactive not only ranks consistently among the top five Chinese mobile game publishers globally but also ranks among the top 10 globally.

These achievements have also driven the growth of Century Huatong's overseas game market. In the first half of this year, Century Huatong's export sales revenue was 5.018 billion yuan, an increase of 115.28% year-on-year.

However, as a game industry that relies heavily on "hits," if Century Huatong's "Whiteout Survival" fails to maintain its popularity or the company fails to develop new hit games, its growth may decline.

02

Overseas Markets Face Stock Competition

Judging from the revenue changes of Century Huatong in recent years, the emergence of hit games is crucial. Whether it can maintain stable growth depends on the length of the game's life cycle and the emergence of new hit games, which is not easy in the current market competition.

According to the "2023 Game Lifecycle Insight Report" jointly released by Gama Data and Tencent Cloud, the difficulty of new game breakthroughs has continued to increase in recent years, with the number of new games and the proportion of revenue continuing to decline. The proportion of revenue from new games among the top 100 revenue-generating games has dropped from over 25% in 2019 to less than 10% in 2022. The gameplay and cultural themes of existing market products tend to be rigid, making it significantly harder for similar new products to acquire users compared to the past, and revenue stability has also declined.

In terms of revenue stability, the overall life cycle curve of the top 10 new games in terms of revenue in the first month of 2022 declined rapidly, with revenue generally declining to less than 10% of the first month's revenue six months after launch.

This shows that the life cycles of most games are shortening nowadays, and it is by no means easy to have a hit game that consistently contributes stable revenue.

In addition, overseas markets also face challenges such as localization difficulties, changing user demands, and fierce market competition.

In the first half of this year, the United States, Japan, and South Korea remained the main overseas markets for Chinese mobile games, accounting for 33%, 15.66%, and 8.82% of the total, respectively, for a combined share of 57.48%. However, the "2023 Global Mobile Game Market Enterprise Competitiveness Report" points out that China, the United States, Japan, and South Korea remain the top four mobile game markets globally, accounting for 77.9% of the global mobile game market. In recent years, the size of the head mobile game market has changed little and has gradually entered a state of stock competition.

At the same time, in addition to the Japanese and South Korean markets, the number of Chinese self-developed products in the top 200 revenue-generating games in key markets has increased to varying degrees. However, in terms of product revenue, the revenue share of Chinese self-developed products has generally declined.

Obviously, Chinese game companies can find more game markets in the United States, Japan, and South Korea, but competition has become increasingly fierce. Therefore, emerging markets such as Southeast Asia and Latin America have also become key areas of deployment in recent years. However, these markets face more complex cultural and consumption differences, making localization and operation more challenging.

In terms of market competition, major domestic game companies have long ventured overseas. Tencent's "PUBG MOBILE," NetEase's "Knives Out," and miHoYo's "Genshin Impact" and "Honkai: Star Rail" have more substantial financial resources and accumulated game players, giving them advantages in early player acquisition and later daily operations in some cases.

A report by data.ai revealed that global mobile game user spending decreased by 2% to US$107.3 billion in 2023, with downloads dropping to 88 billion. Globally, it has become increasingly difficult to consistently capture gamers' attention. Century Huatong, which has once again achieved overseas growth through "Whiteout Survival," still needs new achievements to prove its strength.

Author | Fanie

Source | WhaleDimension (ID: WhaleDimension)

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