Market Overview - On January 21, the gaming sector declined by 0.71% compared to the previous trading day, with Dianhun Network leading the decline [1] - The Shanghai Composite Index closed at 4116.94, up 0.08%, while the Shenzhen Component Index closed at 14255.12, up 0.7% [1] Individual Stock Performance - Notable gainers included: - Sanqi Interactive Entertainment (002555) with a closing price of 28.31, up 3.97%, and a trading volume of 965,700 shares, totaling 2.707 billion yuan [1] - Xinghui Entertainment (300043) closed at 6.63, up 3.11%, with a trading volume of 989,000 shares, totaling 653 million yuan [1] - Notable decliners included: - Elevator Network (603258) closed at 18.95, down 3.76%, with a trading volume of 56,700 shares, totaling 108 million yuan [2] - Youzu Interactive (002174) closed at 12.00, down 2.52%, with a trading volume of 346,100 shares, totaling 419 million yuan [2] Capital Flow Analysis - The gaming sector experienced a net outflow of 159 million yuan from institutional investors, while retail investors saw a net outflow of 190 million yuan [2] - Retail investors contributed a net inflow of 349 million yuan [2] ETF Performance - Gaming ETF (product code: 159869) tracked the China Animation and Gaming Index, with a five-day decline of 4.17% and a price-to-earnings ratio of 42.07 [5] - The latest share count for the gaming ETF was 8.8 billion, with a decrease of 17 million shares and a net redemption of 27.706 million yuan [5]

Group 1 - The media sector outperformed the index in 2025, with a 24.75% increase, ranking 8th among 31 sub-industries, driven primarily by a 60.67% rise in the gaming sector [1][14][21] - The overall revenue growth for the media industry in the first three quarters of 2025 was 5.92%, while net profit increased by 37.12%, indicating strong earnings per share (EPS) performance [1][21][24] - The current valuation of the media industry is at the 47th percentile of the past three years, with attractive valuations in the gaming and film sectors [1][24][25] Group 2 - The mobile gaming market in 2025 achieved sales revenue of 257.08 billion yuan, a year-on-year increase of 7.92%, indicating a recovery in market sentiment [2][26] - New game releases such as "Supernatural Action Group" and "Staff Sword Legend" exceeded expectations, while established titles like "Honor of Kings" and "Peace Elite" continued to perform well [2][26] - The approval process for new game licenses remained stable in 2025, benefiting the supply side of the gaming industry [2][34] Group 3 - The short drama market in China reached a scale of 67.79 billion yuan in 2025, growing by 34.4% year-on-year, with a significant portion attributed to IAA [3][22] - The overseas short drama market is expected to grow by 145.7% in 2025, reaching a scale of 21.07 billion yuan, indicating strong international demand [3][22] - AI-driven animated dramas are emerging rapidly, with the market size expected to exceed 20 billion yuan, benefiting from lower production costs and enhanced efficiency [3][29] Group 4 - AI model capabilities continued to iterate in 2025, with significant advancements in models like Gemini 3 and ChatGPT 5.2, leading to accelerated commercialization [4][38] - The annual recurring revenue (ARR) for OpenAI reached 12 billion USD in 2025, with various AI applications generating over 100 million USD in annual revenue [4][38] - Investment opportunities in AI applications are expected to grow, particularly in AI video, advertising, animated dramas, and gaming [4][38] Group 5 - Recommended companies for investment include Giant Network, Perfect World, Century Huatong, and others, indicating a focus on firms with strong product pipelines and market positions [5][10]

Market Overview - The market size of legendary games is projected to reach 33.3 billion yuan in 2025, with a year-on-year growth of 18.93%. The estimated market size for 2026 is expected to exceed 40 billion yuan [1][3] - The core user base for legendary games is expected to rise to 55 million by 2025, driven by the compliance of copyright and the emergence of mini-games [2][13] - The number of legendary mini-games in operation is estimated to be around 480 in 2025, reflecting an increase of approximately 18.67% compared to 2024 [1][54] Industry Dynamics - The legendary game market has experienced fluctuations due to the compliance of legendary games, leading to a decline in private servers. The market size for 2024 is estimated at 28 billion yuan, with a modest growth of 3.32% [2] - The end of the private server era is marked by the resolution of copyright disputes, with the legitimate copyright holder, Shengqu Games, required to pay significant licensing fees, thus driving the market towards compliance and regulation [5][9] - The integration of mini-games into the legendary game ecosystem is expected to provide new growth momentum, with mini-games projected to account for about 8% of the overall market consumption [2][3] User Demographics - The user base for legendary games is predominantly male, accounting for over 71%, while female users represent less than 30% [23] - The age distribution shows a strong presence of users aged 31-40, making up 30.92% of the user base, while younger users under 30 account for nearly 40% [26] - The overall user ecosystem is characterized by a "mobile-first" approach, with mobile users expected to dominate at 62% of the total user base by 2025 [16] Revenue and Value - The cumulative revenue for legendary games is projected to reach 410.68 billion yuan by 2025, with legitimate games accounting for approximately 38.7% of this revenue [5] - The total value of the legendary IP is estimated to be around 3.6478 trillion yuan from 2001 to 2023, with an expected annual average value generation of 28.53 billion yuan starting in 2024 [35][41] - The gaming segment remains the primary revenue source, contributing approximately 93% of the total IP value, highlighting the strong market demand for gameplay-driven content [37] Marketing and Advertising - The marketing strategy for legendary games heavily relies on user acquisition through paid advertising, with a significant decline in the number of materials for mobile games, dropping by 56% in 2025 [42][46] - In contrast, the advertising material for legendary mini-games is expected to surge by approximately 116%, indicating a shift in focus towards this segment [46][49] - The average usage duration of advertising materials has improved, reflecting a transition towards quality-driven marketing strategies [72] Competitive Landscape - The legendary game market is characterized by a concentration of top-tier companies, with major players like Shengqu Games, Ke Ying Network, and Tanwan Games dominating the market [81][84] - The competitive dynamics are shifting towards a model where head companies leverage their strong relationships with IP holders and extensive operational experience to maintain market leadership [81][86] - The emergence of mini-games as a core battlefield for user acquisition is reshaping the competitive landscape, with traditional mobile games facing challenges in user retention and acquisition costs [68][69]

Core Insights - Century Huatong's mobile game "Whiteout Survival" has topped China's overseas mobile game revenue rankings for 2025, marking 24 consecutive months at the top and becoming a phenomenon in China's game export history [1] - The company is focusing on balancing resources between existing strong products and new product incubation to maintain growth momentum [1] Group 1: Financial Performance - Century Huatong's overseas business brand, Century Games, achieved a remarkable 87% year-on-year revenue growth in 2025, becoming the second in the overseas revenue rankings [2] - "Whiteout Survival" generated $2.1 billion in revenue for the year, a 45% increase, surpassing $4 billion in total revenue [2] - The game saw a 32% increase in overseas revenue, contributing over $1.65 billion, with the U.S., South Korea, and Japan accounting for 64% of this revenue [2] Group 2: Product Development and Strategy - The company is leveraging a "racehorse mechanism" for parallel development and rapid validation of new products, ensuring efficient resource allocation between mature and new products [3][4] - Century Huatong is actively developing both SLG (strategy) and casual game segments, with a focus on expanding into subcategories like match-3 and merging games [4] - The company maintains a strong resource allocation strategy, ensuring that rapid growth products like "Kingshot" receive adequate support [3] Group 3: Operational Efficiency and Challenges - Century Huatong is balancing expansion with operational efficiency, emphasizing prudent growth and effective management of resources [5][6] - The company has expanded its workforce in key areas like R&D and marketing while maintaining a cautious approach to business expansion [6] - Financial management has been optimized, with efforts to reduce past debts and lower financial costs [6] Group 4: Industry Outlook - The gaming industry is driven by supply-side dynamics, with favorable policies, dedicated professionals, and AI technology enhancing development efficiency [7] - Century Huatong is confident in the industry's future, focusing on innovation and experience upgrades to withstand competition [6][7]

Group 1 - The core viewpoint of the article is that Century Huatong is focusing on sustainable high-quality development and has taken measures to reduce financial expenses by repaying part of its past debts [1] - The company plans to continue optimizing its financial structure and strengthening financial management by 2026 [1]

Core Viewpoint - Century Huatong emphasizes that the core competitiveness of Didi Interactive lies in the integration of research and development with publishing [1] Group 1 - Didi Interactive possesses extensive experience in user acquisition and has a rich product line in SLG (Simulation Game) and casual games [1] - The organic combination of user acquisition expertise and diverse product offerings has enabled Didi Interactive to break revenue records in the SLG and casual gaming sectors [1]

Core Viewpoint - Century Huatong is experiencing rapid business growth and is expanding its game offerings while maintaining a cautious approach to business expansion [1] Group 1: Business Development - The company is expanding its personnel in both research and development as well as user acquisition areas to support its diverse game types [1] - Despite the expansion, the company emphasizes a balance between restraint and efficiency in its team growth [1]

Core Viewpoint - The impact of plagiarized products on Dd Interactive is objectively acknowledged by Century Huatong, but significant product barriers and user differences exist between Dd Interactive's works and the plagiarized products [1] Group 1 - Dd Interactive has experienced rapid development over the years, establishing a strong market presence [1] - There are substantial product barriers and deep user differences between Dd Interactive's offerings and those of the plagiarized products [1] - Dd Interactive's user acquisition and operational capabilities are unique in the industry, emphasizing the importance of focusing on its own products [1]

Core Viewpoint - The company, Century Huatong, expresses confidence in the gaming industry's future, highlighting multiple favorable developments and opportunities in the sector [4][7]. Group 1: Product Operations and New Product Incubation - The company's main SLG products, "Whiteout Survival" and "Endless Winter," are performing steadily, while another product, "Kingshot," is in a rapid growth phase. The company has sufficient resource reserves and does not face concerns regarding resource allocation [3][6]. - The subsidiary, Diandian Interactive, employs a "horse racing" mechanism for new product incubation, leveraging mature R&D capabilities and extensive user acquisition experience to enhance its new product development capacity [3][6]. - The company aims to create a second growth track beyond SLG by diversifying into casual subcategories, utilizing differentiated designs to avoid direct competition with market hits [3][6]. Group 2: Business Layout and Competitive Barriers - The core competitiveness of Diandian Interactive lies in its integrated R&D and publishing model, which helps the company break revenue records in the SLG category [3][6]. - The company has established a strong risk resistance framework against the impacts of product imitation, focusing on refining its own products [3][6]. Group 3: Financial Management - The company plans to continue optimizing its financial structure and strengthening financial management in 2026 [3][6]. Group 4: Industry Outlook - The gaming industry is experiencing a convergence of favorable factors, including increased governmental support for the dual promotion of technology and culture, heightened focus among industry players, and the efficiency improvements brought by AI technology [4][7]. - The gaming sector is characterized as a supply-driven demand market, where high-quality products remain the core growth engine [4][7].

Core Viewpoint - The company has integrated AI tools across its entire gaming business operations, enhancing efficiency and quality in various key areas [1] Group 1: AI Integration in Business Operations - AI tools have penetrated critical aspects of business operations including digital asset creation, product quality testing, customer service, marketing, and operations [1] - The internal AI tool platform developed by the subsidiary Shengqu Games includes seven core functions, such as intelligent translation, AI voice synthesis, AI character generation, AI sound effect generation, AICG dubbing, data analysis agents, and AI image enhancement [1] Group 2: Impact on Production Efficiency - The AI tool platform significantly compresses traditional production cycles, allowing for rapid project iteration and saving valuable time [1]