China's Online Gaming Revenue Hit 59.4 Bn Yuan in Q2 2017

Source:iResearch August 28,20174:58 PM
In Q2 2017, China’s online gaming revenue reached 59.52 billion Yuan with a YoY growth of 38.8% and a QoQ growth of 2%. Due to the seasonal reasons, the QoQ growth was relatively slow. After its development in 2016, the market share of China PC games and mobile games stabilizes at 40% and 60%, and mobile gaming still shows a slightly growing trend. 
Meanwhile, Tencent and NetEase occupied a market share of 64.5% in total in Q2 2017, up a little compared with their market share of 62.9% in Q2 2016. 
Given such a market situation with two giants and several large companies, two giants had different strategies and performances in online gaming. Tencent kept a steady growth thanks to the outstanding performances of League of Legend, DNF and Wangzhe Rongyao, and its revenue from online gaming attained 28.4 billion Yuan with a QoQ growth of 5.2% and a market share of 47.7% in Q2 2017. What’s more, Tencent’s mobile gaming revenue for the first time surpassed that of PC gaming. Its mobile gaming revenue achieved 14.8 billion Yuan in Q2 2017, while its PC gaming revenue was only 13.6 billion Yuan. This marked the start of mobbing gaming era for China online gaming industry.

In contrast, NetEase for the first time in the recent two years encountered a QoQ decline. In Q2 2017 its revenue decreased 12.2% and its market share dropped to 16.8%, showing a significant shrink compared with its market share of 19.5% in Q1 2017. After the mobilization of NetEase’s four client IP games, these adapted games that used to offer NetEase steady cash flow in the past two years failed to stand out in mobile gaming market. At the end of 2016, Yinyangshi, the game developed by NetEase itself, had awesome performance in online gaming, but the game receives less and less attention among mobile game players due to its frequent bugs, slow system updating and lack of new contents and stories. Thus, it can be inferred that the booming season for mobile gaming has passed by. Currently, China’s online gaming market needs products of high creativity, high sincerity and high quality to maintain the growth of the market. Even traditional gaming giants also need to invest more in updating game rules and improving game operation so as to provide players with better products. Only in this way can the gaming companies gain a long-run prosperity. 

Apart from the two giants, other companies showed little difference in their performances. 37 Interactive Entertainment ranked the third in online gaming with a market share of 2.13% thanks to its consistent exploration in web games and the outstanding performance of mobile game, Yongheng Jiyuan adapted from web game. Although the webpage market is not as prosperous in 2017 as in 2013, the web game market size is after all larger than 10 billion Yuan. Therefore, its dominant position in webpage market will bring a large income. Meanwhile, the Perfect World and Youzu Network took the fourth and the fifth place thanks to their accumulation in pan entertainment field.
As for listed mobile gaming companies, Tencent widened the gap with other companies and maintained its leading role in mobile gaming market thanks to the awesome performance of Wangzhe Rongyao and Tianlong Babu, a game co-developed by Tencent and Changyou. NetEase, however, was less satisfying. Its self-developed game, Guangming Dalu, and its proxy game, My World, didn’t receive much attention, and its revenue declined slightly accordingly. Apart from Tencent and NetEase, other companies had fierce competition while showed little differences in their business. They are assumed to rise possibly in turn in the future.

Reasonable merging and purchasing may bring “overtaking in curve”, as purchasing and merging of main-business-related companies helps the company to develop fast and accelerates the maturity of the market. Kunlun purchased Xianlai Game to open up the entertaining chess & cards gaming market; 37 Interactive Entertainment purchased two game developing and publishing companies, Zhiming Network and Mokun Technology, so as to strengthen its game developing and publishing ability. Currently, the “two giants + several large companies” market structure will last for a relatively long time, and the merger and acquisitions in capital market will become more frequent. What’s more, Tencent’s purchasing domestic and oversea small- and medium -size companies for expanding its market share and other companies’ resource integration and cooperation will both accelerate the development of the whole online gaming market.

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