On October 30, Century Huatong released its third-quarter financial report for 2024.

The report shows that in the third quarter of 2024, the company achieved operating revenue of 6.253 billion yuan, a year-on-year increase of 67.29%; net profit of 645 million yuan, a year-on-year increase of 14.95%; and net profit after deducting non-recurring gains and losses of 629 million yuan, a year-on-year increase of 34.79%. This performance firmly places it at the top of the A-share gaming sector.

This strong momentum has continued for nearly a year. In the first three quarters, the company achieved cumulative operating revenue of 15.529 billion yuan, a year-on-year increase of 58.66%; and net profit of 1.803 billion yuan, a year-on-year increase of 26.17%. This excellent performance not only consolidates the company's leading position in the A-share gaming sector but also refreshes the company's performance record since its listing.

However, if we look a little further back in Century Huatong's financial reports, we find another record. According to the company's 2022 annual report, its total operating revenue that year was 11.475 billion yuan, a year-on-year decrease of 17.62%; and its net profit attributable to shareholders was a loss of 7.092 billion yuan, the first such loss since the company's listing.

From huge losses to huge gains, although partially attributed to asset impairments in 2022, Century Huatong's gaming content development and operation capabilities have still sparked widespread doubts and discussions.

The Water Content of the A-share Gaming King

Founded in 2005, Century Huatong initially served as a secondary supplier of automotive parts, focusing on the research, development, manufacturing, and sales of automotive plastic parts and molds, including fuse boxes, automotive light trim rings, etc. The company successfully went public in July 2011.

Starting from 2014, facing pressures in the automotive parts business, Century Huatong sought transformation by acquiring gaming companies such as Tianyou Software, 7ku Network, and DianDian Interactive, establishing an internet gaming industry layout spanning from development to publishing.

Especially in 2019, the company fully acquired Shanda Games for 29.8 billion yuan in shares and cash, significantly boosting its net profit.

Shanda Games, formerly known as Shanda Interactive Entertainment, is regarded as a pioneer in China's online gaming industry, and its founder, Chen Tianqiao, is a legendary figure in the gaming industry. Over its 20-year development, Shanda Games has launched over 100 games, with over 2.1 billion registered users, including well-known titles such as "Mir 2," "Mir 3," "Bubble Fighter," "Dragon Nest," and "Final Fantasy XIV."

This acquisition caused a sensation in the gaming world, with Shanda Games' IP resources and development capabilities consolidating Century Huatong's position in the domestic gaming market and enhancing its overseas publishing capabilities.

According to a research report by GF Securities, after the consolidation of Shanda Games, Century Huatong's gaming business accounted for over 80% of its total business. At that time, Shanda Games was valued at approximately 30 billion yuan, and Century Huatong's market value was approximately 51.5 billion yuan, making it a leader in the A-share gaming sector.

However, in subsequent years, Century Huatong's revenue and net profit growth slowed down and even regressed. From 2019 to 2021, the company's revenue growth rate fell from 17.30% to -7.03%, and its net profit growth rate plummeted from 69.76% to -21.03%.

Analyzing from the product level, the main reason for Century Huatong's development hindrance lies in its transformation through acquisitions, making it difficult for the company to demonstrate obvious advantages in the self-development field in a short period. Therefore, the appeal of most of its products mainly stems from Shanda Games' original IP resources.

Taking the newly launched mobile game "Celebration of Life" during the company's first loss in 2022 as an example, although it achieved the top spot on the iOS free game ranking and second place on the overall ranking on its launch day due to the IP effect, its poor performance in core elements such as gameplay and activities frequently led to player doubts, such as "lack of gameplay innovation," "excessive pay-to-win elements," "rough modeling," and "poor interactivity," resulting in a decline in overall ratings, weak subsequent performance, and a drop outside the top 500 in the free game ranking within two months of launch.

However, if we set aside the domestic market, Century Huatong presents a different picture overseas.

According to Sensor Tower data, from January to July 2024, DianDian Interactive, a subsidiary of Century Huatong, consistently ranked among the top five in the global revenue ranking of Chinese mobile game publishers. Taking the first half of 2024 as an example, DianDian Interactive, as a wholly-owned subsidiary of Century Huatong, contributed 4.374 billion yuan in revenue and 676 million yuan in net profit, accounting for nearly 50% and over 50% of the parent company's total revenue and net profit, respectively, becoming a key pillar of the company's profitability.

The contrasting performances in domestic and overseas markets are initially puzzling. However, considering that DianDian Interactive began its overseas layout in 2010, a pioneer in China's game exports, this difference becomes easier to understand. Unlike 37 Interactive Entertainment, which primarily goes overseas through agency methods, after establishing a foothold with agency games such as "King of Avalon" and "Guns of Glory" in the early stages, DianDian Interactive has continuously strengthened its integrated research, development, and operation capabilities, enhancing its self-research and operation capabilities.

Although DianDian Interactive has always valued the overseas market and achieved remarkable results, its rapid performance growth from 2023 to 2024 still exceeded market expectations, doubling Century Huatong's overseas revenue in the first half of 2024. There are many noteworthy aspects to this.

A Trend: Seeking Mobile Game Playability from Single-player Games

DianDian Interactive's development in 2024 is quite representative, with its research and development, publishing, and market choices closely following the industry's optimal path. In research and development, the company focuses on gameplay integration; in publishing, it values the mini-game sector, with the domestic mini-program game "Endless Winter" consistently ranking first, replicating its overseas success; in the market, it has actively laid out overseas since 2010, accumulating rich research, development, and operation experience, helping 37 Interactive Entertainment accurately grasp user needs.

Among them, mini-games and overseas markets, as explicit content repeatedly mentioned by gaming companies in 2024, undoubtedly played a significant role in Century Huatong's explosive development, but this will not be elaborated here.

Let's focus on the changes in game content that are harder to observe.

An obvious change is that DianDian Interactive found a way to make its mobile games more attractive in 2023. Before that, from 2021 to 2022, although DianDian Interactive had multiple agency and self-developed products going overseas, such as "Family Farm Adventure," "Bingo Aloha - Bingo games story," "Valor Legends: Eternity," "Dragonscapes Adventure," and "Feifei's Adventure,"

Besides its agency flagship products "King of Avalon" and "Guns of Glory," only the self-developed simulation management game "Family Farm Adventure" played a significant role.

At this time, DianDian Interactive's market evaluation mainly focused on its outstanding publishing capabilities. However, due to low profit margins, its overseas game revenue growth faced obvious bottlenecks. In terms of self-development, although the company excels in simulation management games, it lacks representative works in the SLG category, which is popular in European and American markets. Therefore, although DianDian Interactive has a certain influence in the overseas market, it is still difficult to say that it firmly occupies a market share.

The turning point came with the launch of "Whiteout Survival" at the end of 2022. In 2023, the game quickly rose, ranking among the top-selling iOS games in multiple regions within half a year and consistently ranking among the top 10 in the US market.

According to Sensor Tower's 2023 overseas revenue ranking, "Whiteout Survival" ranked seventh, with a total revenue of up to 4.556 billion yuan.

In the fiercely competitive 4X SLG market, how does "Whiteout Survival" stand out?

Its core lies in gameplay innovation, especially the integration with the famous single-player strategy game "Frostpunk." Unlike traditional SLG games, "Whiteout Survival" markets itself as a survival and construction game similar to "Frostpunk" from the buy-side stage. In the early stages of the game, players need to prepare within an hour, collecting wood, upgrading furnaces, and preparing for the imminent threat of blizzards. This dramatic setup greatly attracts players.

After nearly two hours of single-player content, the game gradually unfolds the long-term gameplay of the 4X world, similar to the COK model. This design not only effectively reduces user acquisition costs but also enhances the game's early-stage fun, attracting many imitators, such as NetEase's "Frostpunk: Last Haven" and TuYou's new game "Three Kingdoms: Ice Age."

With the booming game industry and intensifying market competition, game developers are seeking innovation to attract players. Under this trend of diversification, games that integrate multiple gameplay elements have emerged, with increasing inspiration drawn from single-player games.

Besides the success of "Whiteout Survival," 2023 also witnessed the rise of vampire-like mowing games, which bought heavily on Douyin and received widespread attention. Additionally, the independent game "Backpack Brawl" became a dark horse in 2024 after its release on Steam, receiving a 90% positive player rating and selling over 640,000 copies in its first month. The appeal of this gameplay was quickly recognized by the mini-game market, with multiple "backpack-like" games successfully entering the mini-game popularity rankings from May to August 2024.

Century Huatong's explosive performance in 2024 may prove what a publishing-savvy company can achieve in the market when it finds a quality gameplay.