Since late September, the A-share market has experienced significant fluctuations, and the game sector has also undergone a thrilling rollercoaster ride.

During this period, the A-share game sector performed robustly as a whole, with most individual stocks achieving positive growth.

Specifically, during the general rally from September 24 to October 8, all 19 game stocks showed significant gains, with an average cumulative increase of over 46%, except for Caesar Culture, which underperformed due to suspected financial fraud. In contrast, Perfect World's share price increased by 25.53% during this period, slightly below the overall market performance.

However, due to this relatively stable performance, Perfect World's share price decline during the subsequent market adjustment was also relatively small. Its share price has stabilized recently, seemingly awaiting a signal from the game market.

From late September to late October, Perfect World's two core products, "Zhu Xian World" and "Yi Huan," entered the testing phase.

According to the "Important Capitalized R&D Projects" section of Perfect World's 2024 half-year report released on August 27, the company has decided to suspend large-scale investments in some ongoing projects due to unsatisfactory test data. After a series of optimizations, almost all of Perfect World's existing products can be considered core products with high potential, and the market is eagerly awaiting feedback on these projects.

This development also signals that Perfect World is facing its first major test during its transition period after changes in leadership, layoffs, and anti-corruption measures.

Layoffs, leadership changes, and anti-corruption efforts in Perfect World in 2024

Perfect World's 2023 financial report, released in April this year, exposed the company's recent "weakness" under the spotlight.

The report showed that Perfect World's annual revenue reached 7.791 billion yuan, a slight increase of 1.57% year-on-year, indicating almost stagnant growth. More significantly, the company's net profit attributable to shareholders plunged by 64%, leaving only 491 million yuan, highlighting a severe erosion of profitability.

What concerns the market even more is that despite its poor performance, Perfect World's investment in research and development (R&D) remains substantial. In 2023, the company's R&D costs reached 2.195 billion yuan, ranking first among the 26 listed companies in the media-game II industry in terms of R&D investment (classified by SWS Research's secondary industry classification). However, this high investment did not translate into corresponding revenue growth, raising questions about the company's content capabilities.

Faced with difficulties, Perfect World took decisive steps towards transformation in 2024. The company reassessed its ongoing R&D projects and decided to suspend large-scale investments in underperforming ones to reduce the R&D burden.

According to the 2024 half-year report, "Project 2" under "Important Capitalized R&D Projects" was suspended due to unsatisfactory test data. It is rumored that this project may involve three ongoing projects mentioned in the 2023 annual report: "Perfect New World," "Codenamed New World," and "Linglong," as they were not mentioned in subsequent reports.

Accompanying the project adjustments were personnel optimizations. The financial report explicitly mentioned "personnel optimization" and "team adjustment" measures and revealed plans for intensive integration of office spaces, with some offices being vacated.

These adjustments drew widespread public attention in June, with topics such as "over 1,000 layoffs" and "two out of three buildings emptied" becoming hot topics in the industry. However, from a deeper perspective, these adjustments effectively reduced Perfect World's cost expenditures in the second quarter after deducting non-recurring gains and losses.

Concurrently, Perfect World's internal management underwent significant changes.

In July, Perfect World announced that Xiao Hong had resigned as CEO due to work arrangements but retained his position as a director. Meanwhile, Lu Xiaoyin also stepped down as co-CEO but continued to serve as a director. Upon nomination by the chairman and approval by the nomination committee of the board of directors, Gu Liming, who was previously the company's senior vice president, was officially appointed as the new CEO.

In August, Perfect World issued an internal anti-corruption announcement, exposing corrupt practices involving a senior art director from its Nebula Studio and a producer and two lead artists from the former Bard game project team, demonstrating the company's commitment to anti-corruption efforts.

Layoffs, leadership reshuffles, and anti-corruption actions demonstrated Perfect World's determination to reinvent itself and reshape the company. These initiatives have fostered new expectations for Perfect World's development in the market.

Moreover, in July, Perfect World released the PV for "Yi Huan," which immediately became a trending topic. As of now, the official video on Bilibili has received 6.22 million views, resulting in over 2.8 million pre-orders for the game in its first week.

This achievement not only raised market expectations for the game but also successfully halted the continuous decline in Perfect World's share price since the company released its 2024 half-year earnings forecast on July 9. After the release of the first PV and in-game footage for "Yi Huan," the company's share price rebounded rapidly, closing nearly 5% higher that afternoon, fully demonstrating the market's high expectations for this new game.

As the end of October approaches, several core products, including "Yi Huan" and "Zhu Xian World," are about to face the moment of truth when expectations are met or unmet.

Will the reinvented Perfect World satisfy the market?

What are the prospects for this village's hope?

In September, Perfect World officially launched the first round of testing recruitment for its highly anticipated game "Yi Huan." Although the official testing date has not arrived, the game was showcased at the Tokyo Game Show (TGS) with the latest demo version, featuring a main storyline with combat, free exploration in a city, and four selectable characters.

According to players who participated in the demo, the production quality of "Yi Huan" indeed meets domestic top standards but does not showcase the so-called revolutionary production value promised in the PV. Many players' expectations were actually based on misunderstandings arising from vague presentations in the PV.

Specifically, players' expectations for a "second-generation GTA" stemmed primarily from the vehicle system in "Yi Huan." However, in the actual game, vehicles cannot be accessed anywhere on the map like in GTA but must be summoned using items in the player's inventory.

Players' expectations for "Yi Huan" as an "open-world" game were fueled by scenes in the PV showing characters freely rotating their cameras and walking on walls, demonstrating the openness of the game map. However, this effect is limited to specific areas and can be seen as a special "ladder" mechanism.

Based on these feedbacks, the quality of "Yi Huan" meets Perfect World's standards for premium products but is not yet sufficient to form a significant advantage that could single-handedly turn the company's market fortune around.

On the other hand, it is worth noting that the third beta test for "Zhu Xian World" officially began today. Previously, the second beta test of "Zhu Xian World" in December 2022 sparked heated discussions across the internet, with several well-known streamers, including PPD, joining the game on Douyu, pushing it to the top of the platform's PC game popularity rankings. However, the final game performance was disappointing, indirectly leading to a decline in market sentiment towards Perfect World's MMO products.

Now, almost ten months later, "Zhu Xian World" is undergoing its third beta test. According to feedback from players who participated in the first day of testing, "Zhu Xian World" has made significant progress in both character and scene modeling compared to the second beta test. Issues such as "static combat" and "uninterruptible skill charging" that were criticized during the second beta test have been comprehensively optimized, resulting in a vastly different gaming experience.

However, it is evident that the third beta test has garnered much less attention than the second. If the game is to continue carrying the banner of domestic MMO PC games, it needs to deliver even more surprises in the future.

"Yi Huan" and "Zhu Xian World" will serve as the most direct tests of the new Perfect World's content capabilities. Their final performance will undoubtedly attract significant attention from both the industry and gamers.