Academic Traces | Games Industry Analysis Report (Part 2)
Ⅱ In-depth analysis of gaming company
On 26 August, Perfect World released its 2024 Semi-annual Report. The report shows that in the first half of 2024, Perfect World's game business revenue was CNY 2.650 billion, a year-on-year decline of 27.28%. Among them, the revenue of the mobile online game business was CNY 1.446 billion, down 38.3% from CNY 2.344 billion in the first half of 2023. the revenue of the PC online game business was CNY 1.086 billion, a year-on-year decline of 4.83%. Although the console game business achieved revenue of CNY 46.94 million, a year-on-year increase of more than 300 times, the soaring figures were just a drop in the bucket for the overall game business.
With the successive declines in performance in the game business, Perfect World has entered a critical period of transformation. According to the Half-Year Report, Perfect World has implemented a number of change measures over the past period of time, including focusing on the core strength projects in its R&D strategy and stopping the R&D of some projects; carrying out wide-ranging personnel changes at the grass-roots level and management level to optimise the effectiveness of its employees; comprehensively implementing cost reduction and efficiency enhancement, and reintegrating the office space in the headquarter building, and so on.
1. History of development
Looking back at the history of Perfect World, we have to start with Archosaur Studio (now Archosaur Games), which was founded in 1997, and Perfect Time (now Perfect World), which was founded in 2004. In the beginning, Archosaur Studio was merely a team of students working on single-player games. When the online game boom took the Chinese market by storm, Perfect World founder Chi Yufeng threw his hat in the ring to Archosaur Studio, and together they formed Perfect Time in order to develop MMORPGs. The following year, Perfect Time launched its first game, Perfect World, which was also its first game to use a self-developed 3D engine. The game was well received by the market and put Perfect World among the top Chinese game companies.
In order to accelerate the pace of listing, Perfect Time chose the strategy of ‘skin change game’ in the subsequent game development, i.e., using the existing products to make modifications, and reusing as many art materials and codes as possible. The game Jade Dynasty, which was produced using this method, was launched in 2007 and became the most popular game of Perfect Time at that time, which also successfully contributed to the completion of Perfect World's IPO. After the IPO, Perfect Time began to grow at a high rate, releasing a number of highly acclaimed games in 2008. However, from 2009 onwards, Perfect Time's new product releases became less frequent and the operating costs of its old products increased, which directly led to a slowdown in revenue growth and a decline in profits. In 2010, Perfect Time changed its name to Perfect World (the same name as its first game).
In 2014, with declining performance and personnel turmoil, Archosaur Studio, the strongest R&D capability in Perfect World, chose to become independent. After Archosaur Studio's independence, many of Perfect World's projects had to be interrupted due to technical problems, and many of the accumulated problems could not be solved. Until 2017, Perfect World was in the doldrums, with only one project in R&D each year. Such a slump directly led to Perfect World missing an important windfall.
In 2016, a year when Chinese mainland's mobile game market exploded, Tencent and NetEase established themselves as the top two players in Chinese mainland's game market with Honor of Kings and Onmyoji. And Perfect World, which once had unlimited style, fell out of the first tier. It is good that since 2017, Perfect World has begun to transform to mobile games. Until 2020, Perfect World has released a number of MMO mobile games and achieved good results, and the mobile game has gradually surpassed the PC game to become the main source of revenue for Perfect World. According to iResearch's China Mobile Game Industry Research Report 2020, among the listed game companies in 2019, Perfect World's mobile game revenue ranked fourth, with a share of 1.86%.
In 2020, Mihoyo's Genshin Impact was released, and the Chinese mobile game market saw a trend of anime games (also generally regarded as the Gacha Game trend). The following year, Perfect World released 24 projects at once (most of which were in the pipeline), half of which were anime mobile games, and even included IP co-operation projects like PERSONA and ONE PUNCH-MAN. This may be a sign that Perfect World has caught the wave, but for traditional manufacturers, the transition to anime games is still difficult. Anime games have high investment, long development cycles, and face huge uncertainty in revenue, and Perfect World is falling into this uncertainty.
At the end of 2021, Perfect World's highly anticipated first anime game, Tower of Fantasy, was released. The game was dubbed a challenger to Genshin Impact since it was exposed. It did live up to the hype, raking in CNY 50 million in revenue on launch day, with first-month revenue projected to reach CNY 460 million. According to QuestMobile's research data, the average daily active users of Tower of Fantasy reached 1.75 million in the first month of its launch, while the peak number of users was as high as 10.62 million.
However, at the same time, Perfect World once again fell into the predicament of the game business performance decline year by year. The reason for this is, firstly, the national policy tightening caused by the game market depression; secondly, the perfect world once again into the state of new product release frequency is reduced, the old product operating costs rise. Even the launch of Tower of Fantasy could not save the decline.
And Tower of Fantasy itself saw a massive loss of players and a significant drop in revenue after a period of time at launch. By 2023, its average number of daily active players in Chinese mainland was speculated to have dropped to 100,000 per day. Cumulatively, it contributed only CNY 4.2 billion in revenue by year-end 2023, which is not impressive compared to other games. It can be said that Perfect World in this period simultaneously bore multiple pressures such as decreasing revenue from old products, new products failing to fill the gap, and the high cost of a large number of products in development.
2. Market analysis
According to the industry data released by China Audio-video and Digital Publishing Association, the actual sales revenue of Chinese mainland's game market in the first half of the year was CNY 147.267 billion, a year-on-year growth of 2.08 per cent, and the number of game users reached a new high of nearly 674 million, a year-on-year growth of 0.88 per cent. It can be said that the Chinese game market in the past two years has gradually warmed up, and opportunities are gradually increasing. However, while the industry as a whole is showing a growth trend, the head aggregation effect is also accelerating, and the industry is facing fierce competition.
So far in 2024, Perfect World has launched two games, PERSONA 5 X and One Punch Man: World, which are the third and fourth anime games released by Perfect World since it began its transition to anime games in 2021. Among them, PERSONA 5 X performed well but not outstandingly enough, while One Punch Man: World fell short of expectations altogether.
Such an outcome is actually predictable. From 2020 to the present, Chinese mainland's anime mobile game market has entered the stock market, and the demand for such games is close to saturation. Although the overall game market is expanding, it will be difficult to gain good profits if it cannot be made differentiated. For example, although PERSONA 5 X performed better, its gameplay was not outstanding, resulting in its revenue relying mainly on the fans and audience of the original PERSONA IP, which could not effectively convert new users. One Punch Man: World, also an IP co-operation project, has the same problem. It can be said that although Perfect World is doing well on the path of anime games, it is moving too slowly.
In July this year, Perfect World released the first trailer for its new open-world RPG, Neverness to Everness, which showed players the seamless integration of maps, supernatural art style and vehicle modification and driving in one shot. The trailer has gained widespread attention and recognition from players, with the game's first-week bookings exceeding 2.8 million. Although the game stands out from the market with its unique mechanics and gameplay, it is still unknown when it will be launched. The game was not on the 2021 new projects list, and some of the games on the list that were originally scheduled to be released in 2024 have been delayed for various reasons, with the launch date nowhere in sight. If Perfect World can't speed up the development of Neverness to Everness, it's hard to say if such a product will get the same kind of attention in the years to come. For Perfect World, in the current market environment, rational planning of the project's development cycle and time point is crucial to ensure a balanced input-output ratio. In particular, it is necessary to focus on highly innovative and high-value projects such as Neverness to Everness to avoid over-diversifying resources. At the same time, it is necessary to manage R&D, production and operating costs in a fine manner to ensure the effective use of resources. On the one hand, it is important to do so in order to improve R&D efficiency and product power, and on the other hand, it is also important to be ready to respond to changes and risks in the market.
3. 招聘匹配度分析
According to the recruitment information on Perfect World's official website, its recruitment positions for graduates are mainly divided into four categories: programming, design, art and operation. The design category offers six types of positions, namely: gameplay design, numerical design, level combat design, system design, UI/UE design and plot design. We will take the design positions as a typical fit analysis this time.
Because they are aimed at graduating students, the requirements for each position in the design category are relatively simple, and there are no restrictions on work experience or major. In a nutshell, the first requirement for design positions is to have enough game experience and love games; the second is to have a deep understanding of games and the game industry, and have deeply analysed at least one game; the third is to have strong logical thinking ability; and the last is to have good communication and expression skills.
The first point is the easiest one and I can do it easily. The second point is somewhat difficult, but I have also analysed some of the games and have some understanding of the different aspects of game production. On the third point, I think I have some logical thinking skills and am able to do some complex reasoning. However, on the fourth point, I still have weak points, especially in expressing myself fluently with some difficulty.
4. Conclusion
This report focuses on an in-depth analysis of Perfect World's game business from the perspective of the macro market, in order to clearly point out the problems and strengths of Perfect World's development strategy for the entire game business. Perfect World's R&D heritage has been recognised by the outsiders. Although it is not sensitive enough to changes in the market and does not make quick enough reflections, its actions to persist in innovation and capture new user groups are worthy of recognition. At a time when competition in the industry focuses on gameplay and quality innovation, Perfect World's R&D capability and product layout preserve its long-term competitiveness. After deep reflection and efforts to adjust, Perfect World is expected to be more flexible in dealing with market risks in the future.
Source:
China Audiovisual and Digital Publishing Association
China Mobile Game Industry Research Report, 2020, iResearch
Perfect World 2024 Semi-annual Report
Perfect World Analysis Report on Online Game Industry, 2021, Huaan Research
Perfect World Analysis Report on Online Game Industry, 2023, Huaan Research
Perfect World Official Website
QuestMobile
Assignment score：68/100
Instructor feedback：
Handed well
Deep financial background on 3 studios
Some good insights into company R&D strategy
Room for improvement
More detail on how to build an effective portfolio to serve your career goals would be helpful
More detail on the types of roles on offer & how they could be a fit for you would be helpful