Author: Hong Yuhan
"In 2016, there were 20,000 game companies in the country, and by the end of 2017, there were only a few thousand. Then I had a sense of crisis." Lynch, chairman and CEO of Travellers Network (002174.SZ), recalled the second half of 2017, the first time he had ever felt a little "cold".
As a loyal post-80s gamer, Lynch began to realize in the crisis that after the dividend period, the quality of the game is the lifeline of the company.
"Companies that do not pay attention to product quality are doomed to be eliminated. Only companies that understand the users, understand the nature of the industry, and focus on the product can seize the opportunity of change and grow." In the second half of 2017, Lynch launched a major adjustment within the company. "We realized earlier that the current problem was also a lucky thing to adjust for half a year before changing it. Some companies in the same industry did not react until the first half of this year, and it is already a little late in the current market situation. Lynch said.
In the first half of fiscal year 2018, Youzu Network reported total operating income of 1.787 billion yuan, an increase of 6.38% over the same period of last year, and net profit of shareholders of listed companies was 493 million yuan, an increase of 45.21% over the same period of last year.
According to the China Game Industry Report from January to June 2018, the actual sales of China's game market in the first half of 2018 reached 105 billion yuan, an increase of 5.2% compared with the same period last year, a serious slowdown of 26.7%. Among the 54 gaming companies that reported in succession at the end of August, revenue fell by half year-on-year, and net profit fell by 22 companies, nearly half by more than 50%.
On October 19, 2011, Marie Mikel, a partner of KPCB and known as the "Internet Queen," released a report on the upcoming rise of the mobile Internet at the Web 2.0 Summit in San Francisco. A month later, Kai-fu Lee, founder and CEO of Innovation Works, described the development of China Mobile Internet as "spreading" at the 2011 China Mobile Developers Conference. 4G, which is increasingly popular in China, has opened the era of navigation in mobile Internet.
"From 2014 to 2017 is the most rapid development of mobile Internet." Lynch said. The increase of smart phone shipments has also created the prosperity of China's game market. Statistics show that from 2008 to 2017, China's game market sales revenue increased from 18.56 billion yuan to 203.61 billion yuan, nearly 10 times, and has become the world's largest game market.
"During that period, there were 7,800 game companies in a high-tech zone in Chengdu, and the whole industry was exciting. Our marketing strategy was also simpler, because each game returned in an average of one or two months, and the game was profitable regardless of whether it had IP or not, and the strategy was not that important at that time. Lynch said.
In the carnival of industry, Lynch, a veteran game lover, sniffed the crisis sensitively. "Many movies and TV dramas are also popular, and there will also be IP derivative games online. Movies and TV plays are very delicate in quality and market packaging, but these games are often of poor quality. Lynch believes that if this is a common phenomenon in the industry, then a catastrophic turning point will emerge.
As a player, Lynch understands that users need high quality games. But during the industry outbreak, both within the industry and within the company, the focus is on changes in the data.
"I often say one thing is that all sentient beings fear fruit and Bodhisattva fear. Whether income growth or regional data discrepancy is the result of products. So it took me several months to get the company back to the product and put the product at the core and the user at the root. This is the idea of "lean growth" that we have repeatedly mentioned. Lynch talked about it.
In the game business intensive farming at the same time, the network is also "big data" strategy began to enter the harvest period. Travel network report shows that big data business has achieved large-scale breakthroughs in revenue from scratch.
In Lynch's view, the current big data is a tuyere, and the travelers in this area made a layout ahead of time. In 2015, the nomads acquired Palm Tao Technology, whose MOB service platform now covers 8.4 billion mobile devices worldwide, with a significant data width advantage. At the same time, after years of accumulation, the consumer behavior and consumption logic in the entertainment state, especially in the vertical scene of the game, Lynch thinks that compared with the general game business, the tourists have a deeper understanding. "We think this logic of behavior reflects a person's most authentic mindset, so this accumulation can help us do things that ordinary game companies can't do." Lynch feels that if you say that in the past few years, the big data business is still in the storage stage, starting in the second half of 2017, the value of big data began to highlight, the tourists also began to sign large-scale commercial contracts with partners. Lynch thinks big data business may have better opportunities in the next two or three years.
Gamma data released by the "2008 listed game business competitiveness report" shows that the network in the overseas game market has developed rapidly, the three-year revenue compound growth rate reached 82%. Over the past four years, the overseas market has increased by more than 50%. In 2017, the annual income of the network in overseas areas exceeded 1.968 billion yuan, accounting for 60.83% of the total revenue, an increase of 55.23% over the previous year. Over the same period, the actual sales growth rate of domestic independently developed games in overseas markets was only 14.5%, declining for two consecutive years. In the first half of 2018, the revenue of the network dropped by 6.08% in overseas areas, and the revenue share dropped to 53.05%. "I think after four years of rapid growth, the share of revenue has changed a lot." Lynch believes that the distribution of game companies'income, unlike liquor companies, has a strong stability, game products have a life cycle, income fluctuation is a normal phenomenon. "The company will be able to move up its performance with more new high-quality products over a period of time. The revenue of these products will enter a steady or declining period, and the company's revenue may be flat or drop a little." Lynch said that although in the domestic game companies, the Youzu network in the overseas market experience is more abundant, but still need to continue to accumulate. Over the next few quarters, the company will introduce several new games to overseas markets, including "The Winter of Power" and other new games, overall revenue and overseas market revenue will be significantly improved. At present, the data of the raging wings are very bright in various countries and regions. We've come up with a couple of success stories, one of which is the artistic style, and the other is the fancy 3DY engine for gaming applications, which runs smoothly on both low-end and mid-end phones. These experiences have been retained by us, which will have a strong inspiration for the future development of overseas markets. In the second half of the year, even next year, our overseas revenue will continue to grow at a high speed, and the overseas market revenue will account for a higher proportion of the company's operating income. Lynch said.
Among the three established strategies of Youzu Network, "Big IP" strategy has attracted more attention after the company signed the rights to adapting the game of "Game of Power" last year. At the same time, the company in the newspaper, "the purchase of IP in this period increased", "companies purchase large IP payment of prepaid copyright fees and other increases" included in the cash flow changes and prepayments increased reasons.
Lynch says the company's team has measured the risk of acquiring a well-known IP, a risk it must take to implement its strategy. The gaming industry needs to be in sync with the mainstream culture and entertainment market. A well-known IP is a bridge to the mainstream culture and entertainment market. It will stimulate the enthusiasm of the production team and attract more. The entry of talents. "The team assessed the decision to buy IP from a variety of perspectives, including"Trinity"as a permanent copyright,"Tomb Theft Notes"and"Game of Power"with a long term of interest. So this must be a medium and long-term strategy, and the tour clan will continue to carry out the strategy in the future. Lynch feels that the game industry is a very important part of the whole cultural and entertainment industry, it needs to be close to the mainstream cultural and entertainment market, can not be completely divorced from the mainstream market.
In Lynch's view, the successful acquisition of well-known IP is also a test of the company, "IP owners in the sale of not only look at the price, but also consider the quality of the acquisition company. We can successfully acquire some well-known IP, and also show that the R & D capability of the company has been recognized. "
Although this year's game industry to a certain extent by the impact of the relevant policies, but Lynch on the performance of the year-round network of tourists optimistic, "the company has a certain number of reserves,"the game of power"related to the online game will not be affected. Acquisition of heavyweight IP, increased R&D investment and repurchase of the company's stock may have a certain impact on the company's cash flow, which is the risk must be borne. But in the long run, spending money on IP investment will have a positive impact on the company. "
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