1In mid-month, the Game Working Committee of the Chinese Audio-Visual Games Industry Association (hereinafter referred to as 'Game Working Committee') announced2022China's Game Industry Data Summary for8Among market indicators, only the client game market has seen growth. Both the market scale and user scale, two important indicators, have shown a2014The first decline since the beginning of the year.
2022In [year], the gaming industry has been focusing on going global. Why is the actual revenue from overseas markets for self-developed games also declining year-on-year? From an industry perspective, what changes and trends are there in China's game exports at present? What challenges still face it? Frost & SullivanFrost & SullivanYang Lizhu, consulting director of Frost & Sullivan's Greater China region (hereinafter referred to as 'Frost & Sullivan'), was interviewed by Cailian Finance's 'Sci-tech Innovation Board Daily'. Interview, jointly discussing the development of the Chinese gaming market.
Cailian Finance & Economics News Agency
Q
2022In [year], the gaming industry has been emphasizing going global. Why is the actual revenue from overseas markets for self-developed games also declining year-on-year?
The overseas expansion of the gaming industry is indeed a major development trend in China's gaming industry at present. The actual sales revenue from overseas markets for self-developed games has declined year-on-year. The main reasons can be attributed to three points: First, the decline in consumer spending due to the global macroeconomic environment; second, intensified competition in overseas game markets leading to higher purchase costs; third, some Chinese game manufacturers lack experience in overseas expansion and have poor localization efforts, making it difficult to attract local players.
First, the decline in player spending due to the macro environment.
The overseas expansion of Chinese games inevitably faces the impact of the overall economic environment of overseas markets. In the post-pandemic era, not only in China but also globally, macroeconomics are facing downward trends, especially in Europe and America, which are currently facing40The highest inflation level in years. Over the past three years, in order to cope with the impact of the pandemic, both the Federal Reserve and the European Central Bank have adoptedQE(QQE) policies, which have pumped a large amount of liquidity into the market, driving up inflation. Coupled with the recent persistent global energy price increases due to the Russia-Ukraine conflict, this has further elevated global inflation levels. Against the backdrop of high inflation, consumer spending in the gaming industry has declined to a certain extent, ultimately reflected in a reduction in the overall revenue level of the gaming industry.
Second, competition in the overseas game market has intensified, driving up purchase costs.
The overseas game market is transforming from a blue ocean market into a red ocean market. As Chinese games concentrate on going global, game companies are not only facing competition from local enterprises in overseas markets but also from other Chinese game companies.
Buying volume is a unique marketing and promotional method in the Chinese gaming industry, referring to the precise targeting of game advertisements to target users through pop-up ads on social platforms, video platforms, and other media. On one hand, Chinese gaming companies are concentrating on going global for gold mining. In the same overseas market, if there is a competitor that focuses on buying volume, it can easily lead to a sharp increase in bidding costs in the short term. On the other hand, as Apple Store, Google Store, and others have modified their user privacy policies, allowing users to limit ad tracking and information collection to protect their privacy, it greatly restricts the accuracy of 'buying volume' for gaming companies that mainly rely on buying volume to achieve user payments. This ultimately leads to higher costs of 'buying volume', reduced ad accuracy, poor advertising effectiveness, and ultimately limits revenue from overseas markets.
Thirdly, some game developers lack experience in going global, and their localization efforts are not strong. Coupled with unfamiliarity with marketing channels, they find it difficult to adapt to overseas markets.
During the process of games going global, they will inevitably encounter differences in policies, cultural customs, and other aspects, which pose high requirements for game companies' localization operational strategies. Some game manufacturers lack experience in going global and find it difficult to effectively improve localization in areas such as game content, distribution, and operations. As a result, their market share is taken by local game companies, leading to a decline in revenue.
At present, the overseas expansion footprint of Chinese games has covered regions including Europe and America, Japan and South Korea, Southeast Asia, the Middle East, etc. Taking the Japanese market as an example, Yahoo is the main traffic channel in Japan. However, the promotion price of Yahoo is relatively high and difficult to compete with. At the same time, due to high living pressure and work pace, the profile of mobile game players in Japan tends to be middle-aged, with an average player age of40The industry is facing high demands for game quality, and user retention obtained through sheer volume purchases is poor. It is difficult for games to make a profit solely by relying on volume sales.
Q
Looking at the industry, what changes and trends are there in China's game exports going forward? What challenges are still faced?
1Changes in Chinese Games Going Global: The 'volume sales' myth has been shattered, and game developers are turning towards the development of high-quality products.
China Mobile's overseas game development has gone through three major stages: overseas exploration, rapid development, and model maturity.2009 - 2011The year is in the overseas exploration phase. With the development of the overseas game market, some game companies have established branches overseas, but the games launched are mainly web-based.2012year-2017The year is a stage of rapid development, with mobile games beginning to expand into overseas markets.2018 - 2022The year is at the stage of model maturity, with China's game approval process suspended, and game companies are flocking overseas in search of growth opportunities.
In the past few years, Chinese game companies have rapidly occupied overseas markets by 'buying impressions'. However, with rising costs of impression buying, decreased accuracy due to privacy policy changes, and fierce competition from Chinese peers, the myth of achieving profitability through impression buying in overseas markets is gradually collapsing. It is undeniable that impression buying can indeed help games quickly increase exposure and acquire users in a short period, but current game companies are beginning to realize that the effect of impression buying on overseas game distribution and operations is quite limited.
On one hand, the rapid growth in the cost of acquiring user base has had a significant impact on the profitability of game companies. On the other hand, the emergence of high-quality games such as Genshin Impact reflects players' recognition of high-quality gaming. Currently, most leading game companies have also realized the market demand for high-quality games and have increased their R&D investment. It is expected that there will be more original content in the future.IP addressAnd the launch of high-quality games.
2The trend of Chinese games going global mainly includes two points: first, the quality of games will further improve; second, emerging markets in Southeast Asia, the Middle East, and Latin America are on the rise.
Firstly, the quality of games released overseas will be further improved, shifting from solely relying on marketing traffic to a focus on robust product quality.
On the one hand, from the supply side, more and more Chinese game developers are entering overseas markets. Similar marketing strategies are difficult to provide a core competitive advantage for game companies. Only by focusing on the game product itself and creating high-quality products can a company establish a moat of quality and reputation in the fierce global competition, thereby occupying more market share.
On the other hand, from the demand side, as the number of overseas game products increases, players' expectations for game quality are also constantly rising. In addition, whether overseas games can provide localized content will become one of the core competitiveness factors for successful game exports.
Second, emerging markets in Southeast Asia, the Middle East, and Latin America are on the rise.
Currently, the main regions for Chinese games going global are concentrated in developed economies with high per capita income and mature industrial chains, such as the United States, Japan, and South Korea. These regions have rapidly growing mobile game market sizes and generally adopt an open attitude towards overseas game products, with lower entry barriers. Therefore, they have become the primary target markets for Chinese game companies going global. However, in recent years, with the economic development of Southeast Asia, the Middle East, and Latin America, as well as the increasing penetration of mobile internet, the growth potential of these regions' mobile game markets cannot be underestimated, and they are expected to become emerging markets for Chinese games going global.
3Challenges for Chinese games going global: Localized game development and operation will remain the main challenges for Chinese game developers for a long time.
For most small and medium-sized game developers in China, localized game development and operation will remain a significant challenge. Localization involves not only the development of game content but also subsequent distribution and operation, which are interlinked. For large game developers such as Tencent and NetEase, they already have relatively mature overseas teams and operational experience with related game products. However, for most small game developers, they have never touched the overseas market, do not understand the needs of overseas players, are unaware of relevant overseas policies, and lack experience in the distribution and operation of overseas games. This will be the main challenge faced by most small game developers.
Overall, China's game overseas market is currently facing an important turning point. It is moving from the era of extensive volume purchasing to one of building a high-quality game moat. Localization will remain a significant challenge for Chinese game developers for a long time to come. Although the overseas game market has great potential, Chinese game developers still need to be fully prepared.
*This interview was published in the Sci-tech Innovation Board Daily of Cailian Finance & Economics News Group, with reporter Zhang Yangyang. The original title was 'The Game You're Playing Is “Changing”'.|focus 》(Click "Read the Original Article" at the end of the text to view the full report).
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