Editor's note: In 2020, a century of changes and the COVID-19 epidemic are intertwined, with unprecedented risk challenges. However, China's economy has bucked the trend and forged ahead, becoming the only major economy with positive growth in the world, and has made extraordinary achievements in an extraordinary year. As the micro foundation of the economy, and as the "vanguard" of the industry, what kind of answer has the listed company given in the past year? The People's Daily Online Economy and Technology Channel launched a series of reports focusing on the annual reports of listed companies in an extraordinary year.

Recently, game listed companies have successively released their annual reports for 2020. Under the influence of COVID-19, the "housing economy" has developed rapidly in the first half of 2020, and the game industry, as an important part of it, has gradually increased its prosperity. The Report on China's Game Industry in 2020 shows that in 2020, the number of game users in China will exceed 660 million, and the actual sales revenue of China's game market will be 278.687 billion yuan, up 20.71% year on year and 13.05% year on year. The scale of "Game Sailing" was further expanded. The actual sales revenue of self-developed games in overseas markets was 15.45 billion US dollars, up 33.25% year on year, and the growth rate was 12.3% year on year. The internationalization level was further improved.

At the same time of rapid development, the game industry is still moving towards normalization. In October 2020, the Law on the Protection of Minors was revised to put forward requirements for the identification of minors and game time. Some enterprises responded positively and launched regular testing and other measures to monitor minors based on big data. Relevant regulatory authorities gradually attach importance to the healthy development of the industry, focusing on games The R&D, publishing and operation are subject to strict qualification management, content review and other regulatory measures.

Data source: Public financial report Data mapping: Yang Yubo

Head effect highlights the strong overall profitability of game companies

The previously released Report on China's Game Industry in 2020 showed that the revenue of China's game market in 2020 was 278.687 billion yuan, up 20.71% year on year. Compared with 2019 (up 7.66% year on year), the growth rate was significantly accelerated.

As reflected in the annual report, there are six game companies with revenue exceeding 10 billion yuan. Tencent and NetEase continue to occupy more than 50% of the market share of China's game market.

Tencent's "Glory of the King" and "Peace Elite" contribute products to its main revenue. At the same time, the success of Xinyou's "Tianya Mingyue Knife", "Call of Duty" and other products also promoted its revenue growth. In 2020, Tencent Holdings' revenue totaled 482.064 billion yuan, including 156.1 billion yuan from game business, up 36% year on year.

NetEase's classic IP games combined with the huge game product architecture provide a guarantee for the steady growth of its revenue. Dream Journey to the West and Dahua Journey to the West contribute to its main revenue. Wilderness Action still maintains strong profitability in Japan. In 2020, NetEase's revenue totaled 73.667 billion yuan, including 54.68 billion yuan from game business, up 17.6% year on year.

In 2020, the year-on-year growth rate of operating revenue of most game companies will be positive. Among them, the rapid increase in the year-on-year growth rate of revenue of Shenzhou Taiyue is mainly due to the Shell Wood game. Shell Wood will achieve a revenue of 2.408 billion yuan in 2020, with a year-on-year growth of 180%. Its Age of Z has been among the top 30 mobile game revenue in China for a long time; The revenue of Bilibili increased by 77.03% year on year. The steady growth was mainly due to the exclusive agency rights held by Bilibili. Bilibili mobile game business was dominated by distribution, of which exclusive distribution accounted for about 75%. The tendency of the quadratic games makes Bilibili grasp a large number of high-quality resources, providing necessary conditions for the growth of its revenue.

The scale of business income of head game companies can indirectly reflect the overall development trend of the game industry. The growing size of the company has steadily increased the overall market size of the game industry, and has gradually become an important part of China's cultural and entertainment industry.

"Going to sea" became the key word, and the scale of overseas market revenue increased

With the increasingly fierce competition in China's game market, domestic users pay more attention to the content quality, and the public's demand for high-quality games is stronger. In this changing environment, compared with the domestic market, the overseas market has a broader space. For Chinese game companies, going to sea has become a key word.

Zhang Yijun, Chairman of the Game Working Committee of the Voice and Data Association of China, said that "going global" is still an important strategic choice for leading enterprises and an important means for SMEs to seek breakthroughs.

The Report on China's Game Industry in 2020 shows that the actual sales revenue of China's self-developed game overseas market in 2020 will reach 15.45 billion US dollars, an increase of 3.855 billion US dollars over 2019, or 33.25% year-on-year.

Except Tencent and NetEase, which did not disclose overseas revenue, Century Huatong ranked first in overseas revenue scale with 5.66 billion yuan. Century Huatong has the following two major competitive advantages. First, Diandian Interactive, a subsidiary of Century Huatong, is one of the earliest game companies in China that integrates R&D, distribution and operation in the overseas market. The King of Avalon and The Age of the Gun occupy a certain market share in the SLG field all the year round. Second, it has the ability to continuously launch high-quality and targeted new products. In 2020, Century Huatong launched simulation games Dragonscapes Adventure and Idle Mafia, which have excellent performance in the American market.

In 2020, the overseas revenue of Shenzhou Taiyue, Sanqi Mutual Entertainment, Gilbert and Yaoji Technology had a high year-on-year growth rate. Among them, Shenzhou Taiyue is mainly due to the substantial growth of its subsidiary's product flow of Shell and Wood Games; Puzzles&Survival, which was promoted to European and American markets by Sanqi Mutual, has made outstanding achievements, raising the overseas revenue of Sanqi Mutual in 2020; The year-on-year growth of Gilbert's overseas revenue mainly comes from its "The Strongest Snail".

R&D investment continues to improve the concentration of R&D talents

In recent years, innovative, high-quality and playable products have been favored by players. Head game companies pay more attention to the investment in game research and development. By investing funds and recruiting talents, the company has also launched competition in the field of game research and development.

"According to our observation, in the marketing mix of 2020, the largest contribution rate is still the self-developed games," said Zhang Yijun. In 2020, the actual sales revenue of China's self-developed games in the domestic market will be 240.192 billion yuan, an increase of 50.678 billion yuan or 26.74% over the previous year.

In 2020, Tencent Holdings' overall group research and development expenditure totaled 38.972 billion yuan, with a year-on-year growth of 28.3%. The total amount of research and development expenses of NetEase is 10.369 billion yuan. Tencent and NetEase have rich business lines, large companies and relatively high R&D investment.

In addition to Tencent and NetEase, a total of 15 game companies' R&D expenses showed positive growth. Among them, the growth rates of Bilibili, Sanqi Mutual Entertainment, Cardio, Zhejiang Digital Culture, Youzu Network, Gibit, Chuanmengtiandi, China Mobile Games, and Baotong Technology were higher than the average, indicating that the top companies continued to pay more attention to R&D. The company's year-on-year growth rate was the highest, reaching 106.9%. To some extent, the company made up for its own shortcomings by increasing investment, which was mainly implemented in two leisure sports games under development; The R&D expenses of DreamWorld ranked second in year-on-year growth, mainly to improve mobile game development ability Capital investment in SaaS product incubation.

Tencent and NetEase have not disclosed the specific number of R&D staff. A share and some Hong Kong listed companies disclosed the specific number. In 2020, the number of R&D employees in Perfect World will increase significantly, slightly exceeding that of Century Huatong. Perfect World independently develops game engine, and The number of R&D staff has increased due to the layout of AR and VR; In terms of Century Huatong, its R&D expenses have increased for three consecutive years, and the number of R&D staff has increased simultaneously. Next to Perfect World and Century Huatong is Sanqi Mutual Entertainment. Its R&D brand Sanqi Game has expanded for many years in a row. It is planned to increase to more than 4000 people by 2023, focusing on the recruitment and training of game R&D talents. The R&D expenses of 37 Mutual Entertainment are mainly salary and welfare, design and equity payment.

R&D investment is one of the important drivers for the long-term development of game companies. In the future of diversified channels, picky players and rich products, whether the game companies can independently develop excellent and long-term running products will be an important factor determining the fate of the game companies. At the same time, the game industry is still facing large variables and strong development potential. In this context, excellent talents will become the core competitiveness of game companies.

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