THIS MATERIAL IS A MARKETING COMMUNICATION.
Video: The Game Industry in China
With decades of development, the online game industry has blossomed into one of the largest and most profitable entertainment verticals globally. Emergence of personal computers (PC) and Internet has helped spur rapid development of online games and its open-up to the mass market.
Personal Computer, website and console games were the key format back in early 2000. Mobile games started to grew into scale amid smartphone transition and development of mobile Internet from 2007. Global online game market size amounted to US$152bn in 2019. China (US$36.5bn) and US (US$36.9bn) combined constituted half of the pie. (Newzoo, 2020)
By segments, mobile games produced US$65.8bn, followed by console and PC gaming. The online market has gained extra momentum going into 2020 when extensive lock-downs globally amid the COVID-19 pandemic forced many people to stay at home and seek entertainment online.
Looking ahead, we expect technology advancement such as 5G and rising consumer spend to be the key drivers for industry growth at 8% CAGR in 2018-23E. (Mirae Asset estimates as of Apr 2021)
There are eight components in the gaming ecosystem. Among these, game developers, publishers, distribution and payment channels are major parts.
For an online game’s gross revenue, app stores usually charge a commission ranging from 30% to 50%, with the rest roughly allocated at 20-40%/20%/10% to distributors/developers/IP license holders. (Source: Hackernoon, July 2020).
Recently Apple announced to cut app store commission rate to 15% for software developers with less than $1mn in annual net sales on its platform, which in our view signals positively amid increasing industry complaints over high channel costs and should alleviate the cost burdens for smaller online game companies.
In recent years, growth in player engagement has elevated eSports and game livestreaming into mainstream culture, which also in turn converts more gaming audience to gamers and become a key part of the vibrant online game ecosystem.
Now let’s take a closer look at the largest component of online game: mobile games, which is the fastest growing segment. In the past few years, China has been leading the way in mobile games development, with mobile games representing ~70% of total online game market, significantly higher than 47% globally, thanks to the rapid transition from PC to mobile internet. (iResearch, Newzoo, 2020)
In our view, shorter game round/more casual nature captures fragmented user time spent during commute. In addition, the increasing prevalence of Free-to-Play (FTP) model, where download is usually free at App stores, but users can purchase heroes, skins and battle passes in game, also helps lower the entry barrier and helps tap to a broader user base, especially female gamers.
In China, mobile gamers now also embrace different mobile genres, with MOBA (multi-player online battle game), MMORPG (Massively Multiplayer Online Role Playing Game), FPS (first-player shooting), card, and casual games being some most popular genres.
Looking ahead, we expect mobile games to account for an increasingly larger part of China's total online games market, mainly driven by average revenue per user (ARPU) growth.
Tencent and NetEase are the two dominant online game companies in China, with an estimated combined market share of more than 60% as of 2019 (Company data, iResearch). HoK (Honour of Kings), Tencent’s flagship MOBA title launched in 2016, has 100mn daily active users (DAUs) (Tencent, Jan-Oct. 2020) and is one of the most successful mobile games as of date.
NetEase is an online game veteran with strong game development, publication and operation capabilities. Fantasy Worldwide Journey (FWJ), NetEase’s flagship MMORPG games, is recognized as one of the most successful PC titles in terms of longevity, as it remains a top 4 PC title in China after 17 years in operation. (Superdata, 2020)
Across the globe, major mobile games develop/publish companies include Activision Blizzard, Electronic Arts, BANDAI NAMCO, Netmarble, etc. (App Annie, 2020)
Staying Ahead with Mirae Asset’s Latest Insights
Disclaimer & Information for Investors
No distribution, solicitation or advice: This document is provided for information and illustrative purposes and is intended for your use only. It is not a solicitation, offer or recommendation to buy or sell any security or other financial instrument. The information contained in this document has been provided as a general market commentary only and does not constitute any form of regulated financial advice, legal, tax or other regulated service.
The views and information discussed or referred in this document are as of the date of publication. Certain of the statements contained in this document are statements of future expectations and other forward-looking statements. Views, opinions and estimates may change without notice and are based on a number of assumptions which may or may not eventuate or prove to be accurate. Actual results, performance or events may differ materially from those in such statements. In addition, the opinions expressed may differ from those of other Mirae Asset Global Investments’ investment professionals.
Investment involves risk: Past performance is not indicative of future performance. It cannot be guaranteed that the performance of the Fund will generate a return and there may be circumstances where no return is generated or the amount invested is lost. It may not be suitable for persons unfamiliar with the underlying securities or who are unwilling or unable to bear the risk of loss and ownership of such investment. Before making any investment decision, investors should read the Prospectus for details and the risk factors. Investors should ensure they fully understand the risks associated with the Fund and should also consider their own investment objective and risk tolerance level. Investors are advised to seek independent professional advice before making any investment.
Sources: Information and opinions presented in this document have been obtained or derived from sources which in the opinion of Mirae Asset Global Investments (“MAGI”) are reliable, but we make no representation as to their accuracy or completeness. We accept no liability for a loss arising from the use of this document.
Products, services and information may not be available in your jurisdiction and may be offered by affiliates, subsidiaries and/or distributors of MAGI as stipulated by local laws and regulations. Please consult with your professional adviser for further information on the availability of products and services within your jurisdiction. This document is issued by Mirae Asset Global Investments (HK) Limited and has not been reviewed by the Securities and Futures Commission.
Information for EU investors pursuant to Regulation (EU) 2019/1156: This document is a marketing communication and is intended for Professional Investors only. A Prospectus is available for the Mirae Asset Global Discovery Fund (the “Company”) a société d'investissement à capital variable (SICAV) domiciled in Luxembourg structured as an umbrella with a number of sub-funds. Key Investor Information Documents (“KIIDs”) are available for each share class of each of the sub-funds of the Company.
The Company’s Prospectus and the KIIDs can be obtained from www.am.miraeasset.eu/fund-literature/ . The Prospectus is available in English, French, German, and Danish, while the KIIDs are available in one of the official languages of each of the EU Member States into which each sub-fund has been notified for marketing under the Directive 2009/65/EC (the “UCITS Directive”). Please refer to the Prospectus and the KIID before making any final investment decisions.
A summary of investor rights is available in English from www.am.miraeasset.eu/investor-rights-summary/.
The sub-funds of the Company are currently notified for marketing into a number of EU Member States under the UCITS Directive. FundRock Management Company can terminate such notifications for any share class and/or sub-fund of the Company at any time using the process contained in Article 93a of the UCITS Directive.
Hong Kong: This document is intended for Hong Kong investors. Before making any investment decision to invest in the Fund, Investors should read the Fund’s Prospectus and the information for Hong Kong investors (of applicable) of the Fund for details and the risk factors. The individual and Mirae Asset Global Investments (Hong Kong) Limited may hold the individual securities mentioned. This document is issued by Mirae Asset Global Investments (HK) Limited and has not been reviewed by the Securities and Futures Commission.
Copyright 2023. All rights reserved. No part of this document may be reproduced in any form, or referred to in any other publication, without express written permission of Mirae Asset Global Investments (Hong Kong) Limited.