Interpreting the underlying logic of CMGE’s adjusted net profit increase of 32.1%
HONG KONG, Mar 30, 2021 – (ACN Newswire via SEAPRWire.com) – In the mobile Internet era, games have become another online entertainment with reading, music, and video. Especially in the post-epidemic era, games are defined by social attributes. The era of national games has come, in which the growth of the mobile game market is particularly outstanding.
On the one hand, the mobile game market is constantly embracing good news:
According to the data of the “2020 China Game Industry Report” released by the Game Working Committee of the China Audio Digital Association in December 2020, the number of mobile game users in China reaches 654 million in 2020, with a year-on-year growth of 4.84%. Meanwhile, in 2020, the actual sales revenue of China’s mobile game market is CNY 209.676 billion, accounting for 75.24% of the total game market.
On the other hand, the booming growth of leading mobile game enterprises:
On March 24, CMGE Technology Group Co., Ltd. (HKG: 0302), a leading IP mobile game company, issued an earnings report for 2020, with operating revenue of CNY 3.820 billion, a year-on-year increase of 25.8%; and an adjusted profit of CNY 807 million, a year-on-year increase of 32.1%.
In the era of national mobile games, why can CMGE stand out and continue to win the favour of users and capital?
Publishing, licensing, and R&D: short-term and long-term capital depression
In this financial report, CMGE’s publishing, R&D, and licensing business grew steadily, and its self-development business performed well. These three businesses are the epitome of the three stages of the development of mobile games.
Mobile game 1.0 period: The market is barren, and the entire market is in a new stage, and all companies want to occupy a place in the market.
Almost every industry has a huge user demand in the market, but there are not enough products and services to meet these needs, because the urgent task is to solve the demand, so is the mobile game industry. This is also why CMGE can quickly occupy a place in the mobile game market with publishing business, which is the foundation of CMGE’s continuous evolution.
In 2020, the CMGE publishing business revenue of mobile games was CNY 2.978 billion, a year-on-year increase of 16.6%. “Reborn!” mobile game released in that year ranked second on the Top Free Game List of Apple stores in the first month of its launch in mainland China; the mobile game “Xuan Yuan Sword- the Origin” ranked second on the Top Free Game list of Apple stores in the first month of its launch in mainland China; “New Legend of the Condor Heroes: Iron Blood and Loyal Heart” ranked first on the Top Free Game list of Apple stores in the first month of its launch in mainland China and the fifth on Best Selling List on Apple Store (according to App Annie’s statistics).
Mobile game 2.0 period: The market aesthetics were initially formed, expand the demand for game content, pan ACG content began to break the circle, focusing on IP.
When the game players have gone through the primary stage of the market, they begin to have higher pursuit and expectation for the quality and content of the game, just like consumption upgrading. Moreover, ACG circle is very fragile, and various kinds of free game and novel game are constantly emerging, and CMGE is the epitome of IP mobile game.
In 2020, CMGE’s profit on IP games was 2.639 billion yuan, a year-on-year increase of 63.4%. New products, including “Swallowed Star: Dawn”, “Rakshasa Street”, “Soul Land”, “Three works of The New Legend of The Condor Heroes”, “Drawing Swords” etc., are in urgent need of development.
Mobile game 3.0 period: in the era of high-quality products market, more demanding pictures, modeling, playing methods, etc., focus on research and development.
With the gradual enrichment of content IP, users have higher requirements for game playability, modeling, screen, etc. The emergence of various game media has also enabled many players to gradually improve their understanding of game appreciation and game technology. With the advent of the times, technology and research and development have become the core of market competition.
In 2020, the revenue of CMGE reached CNY 730 million, a year-on-year increase of 73.4%. Many of its self-developed games performed strongly. For example, “Millionaire 10” launched by its holding subsidiary Beijing Softstar has reached 700,000 sets of sales on the Steam platform; “Legend of Dragon City” became popular after it was launched; the independently developed “Joy of Mahjong” game has won the second best-selling list of mahjong game products in Huawei, OPPO, VIVO and other channels, with a monthly turnover of nearly 20 million yuan.
CMGE has been advancing all the way, because it has been firmly holding the pulse of the market, accurately insight into the dynamic demand of the mobile game market, and with the efforts of publishing, research and development, and licensing, it can have a foothold in the present and look forward to the future.
From IP “Great Wall” to R&D “Long March”: From mode innovation to technology innovation
The reason why CMGE can maintain its competitiveness in the mobile game market for a long time lies in: on the one hand, it benefits from the enterprise moat established by CMGE’s IP game ecosystem, on the other hand, CMGE is also constantly deepening the research and development of mobile game technology and pursuing technological innovation.
According to the “2020-2021 China Game Enterprise R&D Competitiveness Report” released by Gamma Data, the R&D investment in the mobile game market has been continuously increased in the past two years, and the R&D cost of top 10 enterprises with market value has increased by about 36%. At the same time, among the Top250 domestic mobile game products, the proportion of self-developed new games has increased from 56% in 2018 to 76.7% in 2020.
The rise of self-developed games also means that the game market is also undergoing a transformation from model innovation to technological innovation.
In fact, in the middle of the development and evolution of the whole mobile Internet era, it is mainly mode innovation and technological innovation. Just as Meituan, food delivery platform, is based on innovation, allocating transportation capacity and intelligent order distribution is the core technology for Meituan to become a unicorn in the takeout Market.
CMGE is increasingly mature in its IP ecosystem. At the same time, it takes the initiative to go out of the development “comfort zone” and continuously deepen the R&D investment in game technology, which is a kind of development evolution from mode innovation to technological innovation, opening up a new development mode. CMGE can continue to rise to the forefront of the industry, which also relies on its continuous cultivation in mode innovation and technological innovation.
On the one hand, CMGE has a solid moat of IP innovation
CMGE, which takes IP game ecosystem as its core, has always put IP copyright investment at the center of corporate development. Since CMGE went public on October 31, 2019, as of December 31, 2020, 50% of the net proceeds have been used to expand and improve the company’s IP game publishing and development business.
Thanks to this, CMGE’s IP moat is vast and covers various fields, such as “Reborn!”, “One Piece: The Voyage”, “Soul Land: God of Battle Arise”, “Rakshasa Street: Chosen One”, “Xuan Yuan Sword: The Origin”, “Legend of Sword and Fairy series”,etc.
On the other hand, CMGE is competitive in R & D and innovation
CMGE has continuously increased R&D investment in the past two years. According to the financial report, in 2020, CMGE invested 209 million yuan in R&D, with a year-on-year growth of 29.7%. The release of “Xuan Yuan Sword: The Origin”, “The New Legend of The Condor Heroes: Iron Blood and Loyal Heart” and “Thunder Empire” all have better performance.
Moreover, by expanding investment to carry out new resource integration, CMGE continuously improves its R&D strength. By 2020, CMGE has more than 500 R&D personnel, reaching the top of the industry, and plans to double the number in 2021.
CMGE, on the one hand, firmly defends the enterprise moat of IP games, on the other hand, it constantly ploughs deep into the field and explores higher research and technology step by step. Only in this way can CMGE maintain its vitality and constantly bring forth new ideas in the ever-changing game market.
Ecological evolution of game publishing, R&D and licensing: breaking the “information closure” of mobile game market in the future
In addition, the unique IP game ecosystem formed by CMGE’s game publishing, R&D and licensing also has sustainable advantages in the future game market competition.
Since the post epidemic era, with the rapid rise of “home economy”, the national game has become the general trend of the game market. Nowadays, people generally accept and choose games.
But when choosing a game, people are often at a loss because they are not familiar with the content and playing method of the game. They don’t know which game is suitable for them. Moreover, due to the explosion of public opinion information in the era of we media, players are easy to fall into the “information closure” and can not achieve the perfect game experience.
For example, according to Gamma data, in the Research Report on “whether players watch the story completely”, only 32.5% of the players will watch the story completely, and at the same time, nearly 60% of the players say they don’t watch the plot because they want to play the game as soon as possible. This also means that in the future game market, how to effectively express the plot and not occupy the players’ game time has become an important breakthrough point in the future game industry.
The game based on IP is more familiar to the players in terms of content and plot, which means that even if the players don’t watch the plot, it doesn’t affect how to play the game. With the deepening of research and development, people can form a better game experience through gameplay, playing methods and pictures.
Therefore, with the R&D capability of CMGE, the same IP content is gradually expanded in different IP content of the same game form, reaching the essential needs of game users in multiple segmentation scenarios.
CMGE’s R&D integrated ecosystem around IP closed-loop enables users who like different IP and different game types to find the most suitable one. With IP as the cornerstone and R&D as the core, CMGE creates a competitive IP game ecosystem, so as to continuously deepen its market value and break the “information closure” of the future game market.
Centering on IP, CMGE has both short-term value and long-term value, which is conducive to reaching the interests of users and increasing investment value. For the capital market, both equity investment and property investment have certain value, so as to create a new game ecosystem in the future.
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