Summary of Key Points from the Conference Call Industry Overview - The gaming industry is experiencing continuous innovation in game genres and breakthroughs in evergreen games, with significant growth potential despite a slowdown in user acquisition competition and gameplay innovation [2][9] - The market for female-oriented games in China is projected to reach 8 billion yuan in 2024, reflecting a year-on-year growth of 124%, driven by an increasing female user base [6] Key Companies and Performance - Notable companies in the gaming sector include Giant Network, G-bits, Perfect World, Kain Technology, Shenzhou Taiyue, and 37 Interactive Entertainment, all showing strong performance [3] - Giant Network's "Supernatural Action Group" has achieved significant daily active users (DAU) and is expected to release strong performance in Q3 [21] - G-bits has seen its profit forecasts revised upwards due to the success of its games, including "Wanjian Changsheng" [26] - Perfect World is entering a new game release cycle, with promising results from its recent titles [28] - Kain Technology is leading in AI layout and is expected to see significant profits from its collaboration on legendary games [3] Game Trends and Innovations - The "search and escape" gameplay has gained popularity due to its high-risk, high-reward mechanics, appealing to players' psychological tendencies [5] - "Supernatural Action Group" fills a market gap with its low entry barrier and strong social attributes, attracting a large female user base, with 62% of its players being female [7] - The introduction of innovative gameplay elements in "Supernatural Action Group" has improved user retention and community engagement [10] Market Dynamics - The overseas SLG (strategy) mobile game market is expected to grow, with revenues projected to reach $12.5 billion in 2024 and $7.3 billion in the first half of 2025, reflecting year-on-year growth of 17% and 25% respectively [13][14] - Chinese companies are expected to generate $18.6 billion in overseas revenue in 2024, with strategy games accounting for approximately 41% of this figure [14] Challenges and Opportunities - The SLG mobile game segment faces challenges such as high user acquisition costs and low success rates, but successful titles can yield long lifecycles and stable profit releases [15][20] - The importance of evergreen games for small and medium-sized developers is highlighted, as they offer higher profit margins and more stable revenue streams compared to short-term products [12] Future Outlook - The gaming industry is expected to maintain strong growth momentum, with companies like ST Huadong, G-bits, and 37 Interactive Entertainment showing promising Q2 results [9] - The upcoming third quarter is anticipated to be crucial for performance, with several companies poised for growth based on their product pipelines and strategic positioning [9][23] Conclusion - The gaming industry is evolving with innovative gameplay and a focus on long-term engagement, particularly among female players. Companies that adapt to these trends and leverage their strengths in product development are likely to see continued success and growth in the coming years [2][9][12]

Summary of Evergreen Games Conference Call Industry Overview - The conference focuses on the evergreen games sector, highlighting the potential for significant revenue growth through effective operations, as demonstrated by Tencent's Supercell game "Clash Royale," which achieved $140 million in revenue in Q2 2025, a 90% quarter-over-quarter increase and over 40% year-over-year growth [2][3] - Companies with evergreen game potential typically possess high Daily Active Users (DAU) and social gameplay attributes, or own classic native IPs that can be continuously iterated and updated, particularly in SLG (Simulation and Strategy Games) and MMO (Massively Multiplayer Online) genres, which have high player sunk costs and stronger user retention [2][5] Key Insights and Arguments - Evergreen game companies generally have valuations above the industry average, with companies like Nintendo, Take-Two, and Nexon showing strong forward Price-to-Earnings (PE) ratios, indicating high market expectations for future earnings [2][6] - As of early 2025, Nintendo's forward PE was 36, TikTok's was 27, and Nexon's was 26, averaging 26, which is higher than the average valuation of the A-share and Hong Kong game sectors, which is below 20 [7] - The operational methodology for evergreen games includes simple content updates, seasonal updates, and continuous iteration of core gameplay and monetization strategies, creating a platform that encourages ongoing player engagement and spending [9][10] Company-Specific Strategies - Tencent's strategy for 2025 emphasizes the operation of headlining games while adjusting its organizational structure to enhance producer incentives, focusing on long-term development and middle-tier games like "Crossfire" and "League of Legends" [4][11] - Nintendo aims to maintain user engagement by expanding gameplay on its platforms, creating "infinite" products that encourage continuous player interaction and consumption [12][13] - Tencent's overseas game revenue accounts for approximately 30%, with Supercell, Riot Games, and Miniclip being significant contributors [14] Potential Companies for Evergreen Games - Companies with successful evergreen game potential typically have large DAU advantages and social gameplay attributes, such as Tencent and Giant Network's new title "Supernatural Action Team" [5] - Companies with classic native IPs that can be continuously updated, like Nintendo with its Mario and Pokémon franchises, and Nexon with its Dungeon Fighter Online (DNF) IP, also show strong potential [5][29] - SLG and MMO games are identified as having longer lifecycle potential due to their inherent player engagement characteristics [30] Valuation Insights - Evergreen game companies are generally valued significantly higher than the industry average, with stable and continuous revenue growth being a key factor supporting these high valuations [6] - The report highlights the importance of maintaining a balance between hardware and software revenue, with Nintendo's software revenue becoming a more significant contributor as hardware sales plateaued [18][19] Conclusion - The evergreen games sector is characterized by companies that can maintain player engagement through continuous updates and strong IPs, leading to sustained revenue growth and higher valuations compared to the broader gaming industry. The strategies employed by leading companies like Tencent and Nintendo serve as benchmarks for success in this evolving market.

Core Viewpoint - The gaming sector is experiencing a surge, with Giant Network's stock hitting a new high, driven by strong financial performance and the launch of new games [1][3]. Financial Performance - In the first half of the year, Giant Network achieved revenue of 1.662 billion yuan, a year-on-year increase of 16.47%, and a net profit of 777 million yuan, up 8.27% [3]. - The company plans to distribute a cash dividend of 1.50 yuan per 10 shares to all shareholders [1]. - The flagship game "Original Journey" has added over 20 million new users in the first half of the year, with a stable monthly revenue of 100 million yuan [3]. New Game Launches - Giant Network's new game "Supernatural Action Group" launched on January 23, 2025, has seen significant market acceptance, with a monthly revenue of approximately 49.98 million yuan in June, a 141% increase [6]. - The upcoming game "Moonlight Night CCG" will begin limited testing on September 4, 2023, featuring a 1v1 card battle mode [7]. Strategic Development - The company is focusing on developing mini-games based on existing IPs to leverage user growth and revenue expansion [4][5]. - Analysts suggest that the integration of classic IPs with new game formats can create a sustainable development foundation for the company [8].

Core Viewpoint - Tencent is shifting its focus towards "evergreen games" as a strategic response to the changing dynamics in the gaming industry, particularly in light of recent legal challenges and market conditions [4][6][21]. Group 1: Evergreen Games Strategy - The term "evergreen games" refers to projects that have sustained popularity and revenue over time, with Tencent defining them as games generating annual revenue of at least 4 billion RMB and maintaining a daily active user (DAU) count of over 5 million for mobile games [6][7]. - Tencent currently has 14 games that meet the evergreen standard, including flagship titles like "Honor of Kings" and "Peacekeeper Elite" [7][11]. - The gaming industry has experienced a significant downturn since 2020, leading to a reduction in new project launches and a scarcity of blockbuster games, which has prompted Tencent to focus on maximizing the potential of its existing evergreen titles [7][12]. Group 2: Market Dynamics and Challenges - The gaming industry is facing a cyclical downturn, with a shift in player preferences towards diverse entertainment options such as live streaming and short videos, making the development of evergreen games a necessity for survival [43][44]. - Tencent's investments in content-heavy games and large-scale projects have not yielded the expected returns, leading to a strategic pivot back to platform games that leverage its established social networks and user bases [21][25][44]. - The company has faced significant challenges in developing new content-driven games, as evidenced by the high costs and risks associated with such projects, which have led to a preference for investing in existing successful titles [27][31]. Group 3: Development and Innovation - Tencent's approach to game development emphasizes the importance of industrialized processes and the ability to produce engaging content consistently, which is crucial for maintaining player interest in evergreen games [40][41]. - The company has recognized that the success of its evergreen games relies not only on strong operational strategies but also on the capability of development teams to deliver interesting content regularly [10][12]. - Tencent's historical investments in various game genres, including first-person shooters and MOBA games, have positioned it well to capitalize on the evergreen game strategy, as these genres typically have higher player retention rates [34][40].

Core Insights - The article discusses the historical significance of Shengda Network and its transformation into Shengqu Games, highlighting the emotional connection of the "Sheng Warriors" to the company's legacy and their aspirations for its future [1][4][6]. Group 1: Company History and Transformation - Shengda Network, founded by Chen Tianqiao, acquired the rights to the game "The Legend of Mir 2" in 2001, which significantly changed the company's trajectory and reshaped entertainment for Chinese youth [2][4]. - The success of games like "Bubble Hall" and "Adventure Island" led to Shengda's IPO on NASDAQ in 2004, establishing it as a major player in the gaming industry [4][6]. - The rebranding of Shengda Games to Shengqu Games in 2019 marked a formal separation from Shengda Network, although it retained significant brand value and user base [5][6]. Group 2: Leadership and Vision - Peng Cheng's return as CEO of Shengqu Games in 2024 is seen as a symbolic "Sheng Warrior return," aiming to revive the company's former glory and complete unfinished business [1][6]. - Peng Cheng emphasizes the need for a cultural and strategic shift within the company, focusing on innovation and revitalizing old IPs to drive growth [6][24]. Group 3: Financial Performance - Century Huatong's mid-year performance forecast indicates a revenue increase of approximately 83% to around 17 billion yuan, with a projected net profit growth of 107% to 159% [6][24]. - Shengqu Games has maintained a positive growth trajectory by refining gameplay and content, successfully rejuvenating the popularity and commercial value of its legacy IPs [6][24]. Group 4: Challenges and Strategies - The company faces challenges such as an aging workforce and the need for talent rejuvenation, with plans to lower the average age of employees while retaining experienced staff [18][19]. - Peng Cheng's strategy includes consolidating operations and focusing on core competencies, particularly leveraging existing IPs before exploring new product lines [24][25]. Group 5: Market Trends and Future Outlook - The gaming industry is evolving, with a focus on "evergreen games" and the challenge of reviving classic IPs while appealing to modern players [28][29]. - The company aims to balance nostalgia with contemporary gaming preferences, ensuring that new versions of classic games resonate with both old and new audiences [28][29].

Core Viewpoint - The concept of "evergreen games" has emerged as a strategic focus for major Chinese gaming companies Tencent and NetEase, aiming to maintain long-term revenue and player engagement in a mature market where creating new hits is increasingly challenging [1][2][15]. Group 1: Definition and Importance of Evergreen Games - "Evergreen games" refer to titles that sustain high revenue, popularity, and a stable player base over time, serving as cash cows for gaming companies [2][3]. - The strategy of focusing on evergreen games allows companies to leverage existing successful titles while minimizing the risks associated with new game launches [15][29]. Group 2: Market Share and Competition - Tencent and NetEase dominate the evergreen game market, with 20 out of 30 titles listed in the "2024 China Evergreen Game List," accounting for over 70% of the market share and an estimated revenue of $4.85 billion [3][4]. - The competition between Tencent and NetEase is characterized by their different game genres, with Tencent focusing on MOBA and shooting games, while NetEase emphasizes MMORPGs [6][7]. Group 3: Strategic Differences - Tencent has a larger portfolio of evergreen games, with 13 titles listed compared to NetEase's 7, indicating a significant lead in both current and potential evergreen games [8][10]. - The revenue structure also differs, with Tencent generating income from both domestic and international markets, while NetEase primarily relies on domestic revenue [11][14]. Group 4: Industry Context and Challenges - The rise of evergreen games is seen as a response to the industry's "hit-driven anxiety," where companies seek stability in a market that has matured and where user growth is limited [15][16]. - Both companies are adapting to a changing landscape by focusing on cross-platform games and GaaS (Games as a Service) models, which allow for ongoing content updates and player engagement [17][18]. Group 5: Future Outlook and Strategic Focus - The ongoing competition between Tencent and NetEase in the evergreen game sector is expected to intensify, with both companies aiming to secure dominance in their respective genres while exploring international markets [19][24]. - The strategic emphasis on evergreen games is not just a defensive measure but also a proactive approach to ensure long-term growth and sustainability in a highly competitive environment [27][29].

Core Insights - Tencent's Q2 2025 earnings report highlighted the unexpected success of the game "Delta Action," which has rapidly climbed to the top of the industry in terms of daily active users (DAU) and revenue [1][4][10] Game Performance - "Delta Action" launched in September last year and has shown significant growth, entering the top five in industry DAU and top three in revenue [1][4] - The game achieved over 10 billion yuan in revenue in Q4 last year and currently boasts over 20 million daily active users, marking a 66% quarter-on-quarter increase [4][10] - It has become a rare dual-platform evergreen product, performing exceptionally well on both PC and mobile [4][10] Strategic Importance - Tencent's management has consistently highlighted "Delta Action" as a key contributor in every earnings report since Q3 last year, positioning it alongside major titles like "Honor of Kings" and "Peace Elite" [2][5] - The game aligns with Tencent's strategy for long-term service-oriented games (GAAS), marking it as the most successful self-developed evergreen product since "Peace Elite" in 2019 [5][20] Market Dynamics - "Delta Action" has reached a peak of nearly 200,000 concurrent users on the Steam platform and ranks among the top three in net bar popularity [6] - On mobile, it competes closely with "Peace Elite," ranking in the top three of both the App Store free and revenue charts [8] - The game has the highest average daily active accounts among new releases in the past three years [9] Revenue Structure - The strong performance of "Delta Action" has shifted Tencent's revenue structure towards self-developed products, directly enhancing the gross margin of Tencent's value-added services, which saw a year-on-year increase of 23% [10] Competitive Landscape - Tencent's management has addressed concerns regarding potential cannibalization among its flagship games, emphasizing that the shooting game genre in China remains underexploited compared to Western markets [15] - The company believes that the introduction of new gameplay modes can expand the user base rather than merely competing for existing users [15] - "Delta Action" and "Peace Elite" currently have low overlap in user demographics, reducing immediate competition [15][18] Future Considerations - Tencent aims for "Delta Action" to complement "Peace Elite," potentially attracting players interested in extraction gameplay [18] - The company holds the IP for "Delta Action," allowing for greater revenue control and operational flexibility compared to "Peace Elite," which is based on an IP controlled by a third party [20] - The competition between Tencent's internal studios could lead to significant shifts in its game development strategy, especially if "Delta Action" continues to outperform "Peace Elite" [20]

Financial Performance - Net revenue for the second quarter reached RMB 27.9 billion, representing a year-on-year growth of 9.4% [1] - Revenue from games and related value-added services was RMB 22.8 billion, up 13.7% year-on-year, with online games accounting for 97.1% of this segment, approximately RMB 22.14 billion [1] Game Releases and Updates - Notable game releases include "Out of Bounds" on Xbox and PS5 in April, "All-Star Streetball Party" globally in May, and "Marvel Secret Wars" launched in June [4] - Existing titles like "Nirvana in Fire," "Seven Days World," and "Identity V" achieved strong market performance through version updates in Q2 [4] Product Pipeline - Upcoming products include a sci-fi shooting mobile game set to launch overseas on August 28, an ocean adventure RPG expected in 2026, and several other games in development [8] - "Nirvana in Fire" mobile and "Yanyun Sixteen Sounds" are set for global release, with the former having opened global pre-registration in May [10] Market Strategy and Performance - The CEO emphasized the commitment to developing "evergreen games" and enhancing player experiences through self-developed IPs [10] - "Yanyun Sixteen Sounds" has shown robust performance, exceeding pre-launch expectations in user engagement and monetization [10] Revenue Dynamics - "Seven Days World" experienced a revenue rebound following a significant update in July, with a balanced user and revenue ratio between domestic and overseas markets [11] - The company is focusing on the competitive landscape of shooting games, aiming to meet high user expectations for quality and innovation [12] Marketing and Expansion - The company employs a standard operational process for marketing, leveraging social media and AI tools, with a balanced approach to marketing expenditures [17] - Future expansion in overseas markets is a priority, with successful entries in regions like North America, Japan, and Southeast Asia [18] Game Performance Insights - "Marvel Secret Wars" saw a temporary rise in sales rankings on Steam, indicating effective seasonal update strategies [13] - "Dream of the Red Chamber" and "Egg Party" have shown data recovery, attributed to innovative content and marketing strategies [15]

Group 1 - NetEase's first major single-player game, "Wanmin Changge: Three Kingdoms," was canceled shortly after its demo release, indicating a cautious approach to project viability based on market demand [4][17] - The success of "Black Myth: Wukong" has revitalized the single-player game market in China, showcasing its potential beyond direct sales revenue and changing perceptions about the quality of domestic single-player games [4][5] - The number of new F2P games in China is declining, with a reported drop of over 22% year-on-year in the first half of 2025, indicating a challenging environment for free-to-play titles [4][12] Group 2 - The single-player game market in China saw significant growth, with sales reaching approximately 10.22 billion yuan in 2024, largely driven by "Black Myth: Wukong," which alone generated around 9 billion yuan [7][9] - Despite the growth in single-player games, they still lag behind top F2P games in revenue, with "Honor of Kings" generating approximately 2.419 billion USD (about 17.359 billion yuan) in 2024 [9][10] - The cost of developing AAA games has become a significant challenge, with budgets often exceeding 100 million USD, leading to a focus on fewer, more secure projects by major publishers [18][20] Group 3 - The cancellation of "Wanmin Changge: Three Kingdoms" highlights the high development costs associated with single-player games, where a team of 70 could incur costs of around 150 million yuan over three years, necessitating substantial sales to break even [17][21] - The industry is witnessing a shift towards mid-tier 2A games and independent titles as viable options for developers, allowing for better cost control while still delivering creative content [21] - The current landscape suggests that the single-player game market may be entering a favorable era, where both creative aspirations and financial viability can coexist [21]

Core Insights - The article highlights the impressive DAU achievement of "Metro Escape" mode in "Peace Elite," surpassing 37 million on May 1, indicating a strong market presence and potential for growth in the shooting game sector [1][3][4] - "Metro Escape" has established itself as a leading product in the new "search, fight, and retreat" genre, demonstrating the ability of established titles to adapt and thrive in changing market conditions [4][5][12] - The success of "Metro Escape" reflects a strategic shift towards more engaging gameplay experiences, appealing to both new and existing players, and signifies a potential new standard in the gaming industry [8][19][30] Summary by Sections DAU Performance and Market Position - "Metro Escape" achieved a DAU of over 37 million, leading the "search, fight, and retreat" genre and significantly outpacing other new titles [1][4] - The mode's success indicates a robust growth trajectory for established games that can pivot to new trends effectively [5][12] Gameplay Innovation - The "search, fight, and retreat" gameplay model enhances player experience by integrating strategy, character development, and resource management, making it appealing to younger audiences [8][9] - The mode's design focuses on accessibility and enjoyment, reducing barriers for new players while providing diverse gameplay options [24][27] Strategic Development and Market Trends - The article discusses how "Peace Elite" has leveraged its large user base to identify and capitalize on emerging gameplay trends, leading to sustained growth [11][12][15] - The introduction of "Metro Escape" in 2024 reflects a calculated response to market demands, showcasing the ability of established titles to innovate and adapt [12][19] Economic Impact and Community Engagement - The success of "Metro Escape" has driven significant engagement on social media platforms, with over 36.9 billion views on Douyin, indicating a thriving community around the game [33][35] - The mode has contributed to a resurgence in content creation related to "Peace Elite," enhancing its ecosystem and attracting new creators [35][36] Long-term Viability and Growth Strategy - The article emphasizes the importance of maintaining a dynamic product lifecycle, with "Metro Escape" exemplifying how established games can evolve to meet changing player expectations [17][19] - The success of "Metro Escape" is expected to have long-term positive effects on "Peace Elite," reinforcing its position in the competitive gaming landscape [36][39]