NetEase GamesStrategy2019

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ChinaGamesMarketIntelligence:NetEaseGamesStrategy2019

NetEaseGamesStrategy2019 NetEaseisaChineseinternettechnologycompanythatprovidesonlineservicesacrosscontent,community,communicationandcommerce.Itisthe2ndlargestgamingcompanyinChina,byrevenue,andthe5thlargestgamepublisherintheworld.NetEaseisknownforitshighqualityself-developedIPandforlocalizinghitforeigngamesfromBlizzard(NetEaseandBlizzardhaveaJVinChina),Mojang,andothersfortheChinamarket.In2019thecompanyisfocusedoncreatingadiversegameportfolioforboththedomesticandoverseasmarkets.NetEaserecentlyannounceditsQ12019financialsandhelditsannual5.20gamingconferencewhereitshowcasedmorethan50titles.ThisreportwillexploreNetEase’scurrentgamesstrategyandhowitplanstogrowin2019andbeyond. NetEasehadasolidQ1aslegacygamesandnewgamesperformedstronglyNetEasereportedQ12019revenueof$2.74billion,up29.5%YoY,withtheincreaseprimarilybeingdrivenbygrowthfromgamingande-commerce.Non-GAPPnetincomewas$449.5million,up126%YoY.Totalgamesrevenueswere$1.77billion,up35.3%YoY.Mobilegamesaccountforapproximately72.1%ofrevenuecomparedto71.8%inQ12018.Theincreaseingamesrevenuewasprimarilydrivenbysustainedsteadyperformancefromexisting(legacy)titles,strongperformancefromrecentlylaunchedtitlesandhigheroverseasrevenue.TheresultsreflectNetEase’scontinuedtransitionfromadomesticgamesdeveloperandpublishertoaglobalentertainmentcompany. NetEasehascreatedadiverseportfolioofself-developedgames NetEaseisprimarilyknownforitshighquality,self-developed,MMORPGgameswhichhaveremainedstrongperformerssinceNetEasefirstenteredthegamesindustryin2001.LegacytitlessuchasFantasyWestwardJourney,NewWestwardJourneyandTianxiaIIIdemonstratedgrowthduringQ12019withquarterlyrevenueforFantasyWestwardJourneyOnlineandNewWestwardJourneyOnlineIIachievingarecordhigh.Since2014,NetEasehasbeenadaptingtheseoriginalPCgamesformobiledevicesandextendingthelifecycleofthegames,plusoverallengagementandspending,byreachingthemuchlargermobilegamingaudience. Overthelastfewyears,NetEasehasleverageditsstrongself-developmentcapabilitiestocreatenewIPacrossadiversenumberofgenrestotapintotheoverseasmarketwhereitpreviouslyhad

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ChinaGamesMarketIntelligence:NetEaseGamesStrategy2019

nopresence.NetEasehasnowreportedits4thconsecutivequarterwheregamingrevenuehasexceeded$1.5billion,whichisimpressiveparticularlybecausethecompanydidnotlaunchanynewgamesduringthemostrecentquarter. Invincible,awarstrategymobilegamethatlaunchedin2015,achievedrecordhighrevenueduringQ12019andactiveusersincreasedquarteroverquarter.Onmyoji,aturn-basedfantasystrategygamethatlaunchedin2016,hasreturnedtothetopoftheiOSgrossingchartinChinaaftermultiplenewupdatesandevents.KnivesOut,abattleroyalegamethatlaunchedin2017,hassucceededgloballywithmorethan250milliondownloads.NightFalls:Survivalisanopenworldzombiesurvivalgamewithsandboxandshooterelementsthatlaunchedin2018andhasremainedaconsistentperformeratthetopofthegrossingchartsinChina.ThesegamesrepresentadiverseportfolioofgamesdevelopedbyNetEaseinmultiplegenres,movingbeyonditsreputationasasuccessfulMMORPGdeveloper. NetEasecontinuestoimportforeigngamestoChina Inadditiontocreatingastrongline-upofself-developedtitlesforthedomesticmarket,NetEasehasalsobeensuccessfullylicensingandpublishingforeigntitlesinChinasinceitsjointventurewithBlizzardin2008(JVwillremainatleastuntil2023).NetEasecurrentlyoperatesBlizzard’sWorldofWarcraft,Starcraft,Diablo,HearthstoneandOverwatchinChina.WhilstWorldofWarcrafthasbeenastablerevenuegenerator,Overwatchhassoldmorethan10millioncopiesinChinaat$32.InadditiontopublishingBlizzardgamesinChina,NetEasealsorunsesportstournamentsforthegamesandcurrentlyoperatesanesportsteamintheOverwatchLeague. NetEasepartneredwithMojangtobringanofficialreleaseofMinecrafttoChina,whichlaunchedinOctober2017.TheChineseversionofMinecraftisfreetoplayandismonetisedviaskinsandserversingame.Thegamehasamassedmorethan200millionregistereduserstodateacrossPCandmobile,whichmakesitoneofChina’sfastestgrowinggames.Mostrecently,NetEaseconfirmedthatitwasworkingwithThePokémonCompanytolocaliseandreleasePokemonQuestinChina,anactionadventuregameforsmartphones.NetEasehasalreadyaddedaPvPmodetotheChineseversiontoincreasetheappealforChinesegamers.NetEasepartneredwithKabamtobringMarvelContestofChampionstoChinawiththeAndroidversionlaunchingshortlyafterEndgamereleased. NetEaseworkswithfewerpartnersanddistributionchannelsthanTencent,butisstillaformidableforceinChina.WeexpectNetEasetocontinuebeingatoppartnerofchoiceforoverseasdevelopersexportingtoChina,especiallyasthecompanycarriesoutitsinternationalexpansionstrategy.

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ChinaGamesMarketIntelligence:NetEaseGamesStrategy2019

NetEaseisfocusingonaninternationalexpansionstrategyNetEasehastakenanumberofstepstoreachaglobalaudiencewithitsself-developedgames,particularlyasthedomesticmarketgrowthratessoften.ThisinternationalexpansionstrategyhasbeenkeytoNetEase’sgrowthduringthetemporarygamelicenseapprovalfreezeinChina,asNetEasewaitedoutChina’sgamingregulatoryreformduringthelastninemonthsof2018.Today,NetEaseiscreatinggamesthathaveaglobalsimultaneouslaunch,orinsomecases,launchoutsideChinafirst. JapanandtheUShavebecomekeymarketsforNetEasewithtitlessuchasKnivesOutandIdentityVperformingwellinbothcountries.KnivesOut,thecompany’sself-developedbattleroyalegame,recentlyaddedabattlepassandhadanin-gamecollaborationwiththeStreetofFightersIPwhichallowedittobecomeatopgrossinggameinJapanduringMarchandMay.IdentityV,anasymmetricalbattlearenagame,hasalsoperformedwellinJapanandtherecentadditionofanewcharacterhelpedthegameenterthetop5iOSgrossingchartinApril.CyberHunter,asci-fibattleroyalegame,isanexampleofatitlethatlaunchedoutsideChinafirst,withthegametoppingtheJapandownloadchartinApril. WhilstNetEaseisprimarilyfocusingonmobilegames,duetothestrengthofthissegmentinChina,thecompanyhastakenstepstoportitstitlestoPCfortheoverseasmarket.OnmyojiwasreleasedonSteamintheWestandFacebookGamesroominAsiatotryandtapintothelargePCgamingaudiencearoundtheworld.NetEasehasalsostartedtoexploretheconsolemarketoverseas,creatingaPlayStation4versionofKnivesOutthatissettolaunchinJapanthisyear. NetEasewantstobecomeaglobalgamingcompanyNetEaseplanstoinvestinoracquireoverseasgamesstudiosthatcancreatenewtitlesforaglobalaudienceaswellasfindpartnerswhowilllicenseIPtoNetEasesotheycandevelopnewgamesthatcanbereleasedworldwide.ItisthroughthisapproachthatNetEaseaspirestobecomeaglobalgamingcompanythathasastrongportfolioofself-developedtitlesthatarepublisheddomesticallyandglobally,astrongportfoliooflicensedoverseasgamesthatarepublishedinChina,andpartnershipswithmultiplegamepublisherstocreatenewgamesbasedonlicensedIPfortheglobalmarket.

- In2018NetEaseandMattelenteredintoajointventuregamedevelopmentstudiocalledMattel163.ThestudioisdevelopingmobilegamesandothercontentbasedonMattel’sbrandsforreleaseinboththeChinaandglobalmarkets.

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ChinaGamesMarketIntelligence:NetEaseGamesStrategy2019

- In2018,NetEaseannouncedapartnershipwithBlizzardtocreateDiabloImmortal,amobileactionRPGfortheglobalmarket.ThegameisbasedonBlizzard’spopularDiabloIP.

- In2018,NetEaseannouncedapartnershipwithCCPGamestocreateanewEVEOnlinemobilegamecalledEVE:InfiniteGalaxy.

- NetEaseinvestedmorethan$200millioninmultipleoverseasgamedeveloperssuchasBungie,QuanticDreamJumpshipandSecondDinnertocreategamesfortheglobalmarkettobepublishedbyNetEase.

- MarvelandNetEasearecollaboratingtocreateneworiginalentertainmentwhichincludesgames,tvshowsandcomicbooksbasedontheMarveluniverse.ThedealwillseeNetEasedevelopandpublishapproximately5or6MarvelgamesinChinaandoverseas.

WebelievethattheseinitiativeswillallowNetEasetohaveamuchstrongerpresenceontheglobalgamingstageandincreaseitsoverseasgamingrevenuefrom10%ofgamingrevenuestoapproximately20%bytheendoftheyear. NetEaseannounced28newgamesatitsannual520conferenceNetEasehelditsannual520conferenceonMay20,2019whereitshowcased50titlesincluding28newgames.Thethemeoftheconferencewas‘PromotingCreativityforLove’andtheeventwaspromotedasaninteractiveentertainmentproductlaunchconferenceasopposedtoagamingconference.WilliamDing,CEOofNetEase,saidduringtheopeningkeynotethatthecompanywillaimtopromoteChinesecultureinitsself-developedgames,spreadChinesecultureandtraditionsoverseasthroughitsglobalgamesanddeeplyinvestinesportstopromotehighlevelgaming.Finally,Dinggaveaspeechontheresponsibilityofgamecompaniesinsociety,somethingthathasbeenahottopicinthemediagivengamingaddictionamongminorsinChina.Thecommentswerelikelymade,atleastinpart,toappeasethegovernment.PanEntertainmentcontentisakeyfocustobuildthevalueofself-developedIPWithabroadportfolioofself-developedtitles,NetEasehasstartedtobuildthevalueofitsIPbytryingoutvariouspanentertainmentformatssuchasgames,movies,TV,music,comicsandmore.OnmyojiisakeyIPforNetEasethathasuniquegameplay,animeartstyleandJapanesemythology.Afteramassingmorethan200millionplayers,NetEaselaunchedaspinoffgameintheMOBAcategorycalledOnmyojiArena,whichhelpedNetEasegaintractioninthiscategoryandturnedOnmyojiintoafranchise. NetEaseiscurrentlyworkingon4newOnmyojigames,includingOnmyoji:TheCardGameandOnmyoji:YokaiKoyawhichareinthecollectiblecardandsimulationgenres,respectively.The

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ChinaGamesMarketIntelligence:NetEaseGamesStrategy2019

othertwospinoffgameswillhavedetailsreleasedatalaterpoint.Onmyojihasalsoexpandedthroughmerchandise,fanart,amusicalstageproduction,afilmandacartoonseries.AnOnmyoji-themedCafe&ShopisalsosettoopenthisJuly.OnmyojihasbecomeatruepanentertainmentIPforthecompanyandweexpecttoseeNetEasereplicatethismodelacrossallofitstopIP. Collaborations,crossoversandpromotionswillhelpNetEasereachalargeraudience NetEasehasstartedtointroducemorecollaborations,crossoversandpromotionsintoitsgamessothatitcangrowitsoverallplayerbase.InJuly2018,OnmyojiintroducedacollaborationwiththeInuyashamangaseries,apopularIPinJapan.Thegamejumpedfrom#50intheiOSgamerevenuechartto#2overnight,demonstratingthepowerofknownIP. Duringthe520conference,NetEaseannouncedanumberofcollaborationeventsforalreadypublishedtitlestoincreasetheappealofthesegamesanddriveengagement.InJune,KnivesOutwillcollaboratewithEle.meandMcDonaldstoallowplayerstoreceivespecialcouponsforfood.KnivesOutwillalsocollaboratewithpopularJapanesemediafranchiseEvangeliontobringcharactersandothercontentfromtheanimeintothegame.Onmyojiwilllaunchanin-gamecollaborationwithJapaneseTVanimationBleach,withfulldetailssettoberevealedatalaterdate. OthercollaborationsincludeMeteorButterflySwordandDynastyWarriors9whereLuBuwillappearasanenemyofficerinthegame.SandboxbattleroyalegameBuildtopiawillhaveacrossoverwiththecharacterBumblebeefromtheTransformersfranchisewhereplayerscanfightasBumblebeeinanewgamemode.Non-HumanAcademy,ananimestyle5v5MOBAhasacrossoverwithTVanimationKillerSeven.DawnofIsles,anMMORPGthatincludescraftingelementswillcollaboratewithJapanesemascotKumamon. Newself-developedtitlesforPCandMobiledemonstrateastronganddiverseportfolioNetEasehasfoundsuccessdevelopingmobileversionsofitspopularPCgames,startingwithamobileversionofFantasyWestwardJourneyOnlinethatreleasedin2015.RevelationOnlineMobilewillbethenextmobileadaptationofthePCgamebythesamename.RevelationOnlineisafreetoplayMMORPGgamelaunchedin2015. SuperMechaChampionsisanactionshootinggamewitharmoredmechs.Thegamecombinesfuturisticenvironmentswithfastpacedcompetitivegameplaytocreateaninnovativegameexperience.Thegameplayshownattheeventlookedpromisingandwebelievethetitlecouldbecomeapopularesportsgame.

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ChinaGamesMarketIntelligence:NetEaseGamesStrategy2019

MasterworkApocolypseisafantasymultiworldRPGmobilegamewith3Danimestylegraphics.Thegameisbasedontheideaofrealitybeingmodifiedwhereonlytheplayercantravelacrossmultipleworldstocollectanddeveloppowerfulmagicbooks.ThegamessoundtrackwillbecomposedbyfamousJapanesecomposerMasaruYokoyamaandthegamewillbevoicedinbothChineseandJapanese.WeexpectthegametoappealtofansoffantasyandJapanesecultureandart. RoverRageisthefirstrovercraftingandbattlegameonmobilewhereplayerswillcreatetheirownroverandthenuseittodefeatenemiesonthemap.Thegamehasarumblemodeandbattleroyalemodewhereplayerswilldefeatotherrovers,lootfromthemandupgradetheirownroverinrealtime.NetEasecollaboratedwithBritishgamedeveloperPayloadStudios,whohaveasimilarPCandconsolegame,tocreatethemobilegame.ThegamewillbegintestingonJuly26th.NetEasehasutilisedthisstrategybeforewithIdentityVwheretheyworkedwiththedevelopersofDeadbyDaylighttocreateauniquemobileversionfortheglobalmarket. LoveisJusticeisamobilegamesetintheNorthernSongDynastywhereplayerswillgettoknowcharactersinthegame,traveltheworldwiththemandbuilduparelationship.Othernewself-developedgamesannouncedduringtheeventincludeUnknownFuture(collectablecardgame),TheBloodyTales2(MMO),GhostWorldChronicles(RPG),Nostos(openworldVRgame)andStaySilent(VRshooter). EsportsisagrowingfocusforNetEaseChinaisthelargestesportscountryintheworldwithmorethan300millionfansandanevergrowingesportsscene.EsportsisakeydriverbehindthegrowthofthedigitalgamesmarketinChinaasesportsfanhavehigher,longerengagementandhigherspendlevelsingame.NetEaseconfirmedin2018thatitwouldspend$160milliononesportsinitiativesinChinatocreateesportstournamentsforitsgames.Anadditional$47millionwasspenttotrainstreamers,shoutcastersandesportsplayers. NetEasenowoperatesitsownesportstournamentsundertheNeXTbrand.Thetournaments,whichwereintroducedinmid2018,areNetEase’sfirstentryintotheprofessionalesportsspace.Thespringseasonwillhave16gamesincludingtitlesfrombothNetEaseandBlizzardwithtotalprizemoneyover$1million.NetEaseheldasummerandwinterseasonlastyearthatfetchedmorethan700millionvideoviews,andtheliveaudienceexceeded32,000. NetEasehasbeenabletosuccessfullypromoteitsNeXTbrandthankstopartnershipswithmorethan20livestreamingplatformsandwithmajorbrandssuchasChinaUnionPay,Nvidia,

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ChinaGamesMarketIntelligence:NetEaseGamesStrategy2019

Alienware,Zotacandothers.NetEaseiscertainlyalateentrantintoesportsbuthashadexperienceinthisspacewithFantasyWestwardJourneyPKbattlesinthepastandhasworkedcloselywithBlizzardforOverwatchesports.Thecompanyislookingtotakeitsesportstournamentsoverseasinthefuture. NetEasewantstocreateagamingecosystemNetEaseisplanningagamingecosystemaround4keyareas:Developers,Users,LiveStreamingandDerivativeContent. Developers:NetEaseGameAcademyandMinecraftdevelopersupportprogram. Users:DaShenappisasocialplatformforplayerswithmorethan50millionregisteredusersandmanykeyopinionleaders.ThegoalistobeakintoagamingversionofFacebook. Livestreaming:Esports,gamebroadcastsonCCLive,anda$90millioninvestmentintolivestreamers.Alsoworkingonupgradingesportstoprovideuniquecontent. Derivativecontent:Creationofnewgames,TVshows,movies,comicsandothermediaformatsthatutiliseexistingIP.NetEasehasaninteractivereadingplatformwhichhostsanimation,comicsandinteractivenovels. SummaryNetEaseistransitioningfromacompanyfocusedonhighqualityMMORPGsgamesforChina,toacompanyfocusedonnewtitlesinmultiplegenres,globalexpansion,investinginesportsandcreatingnewlong-lastingpartnershipswithoverseasdevelopers.NetEasehasbeenabletobuildupastrongandstableportfolioofgamesthatallowedittosurvivethetemporarygamelicenseapprovalfreezewithease,andhasamorethan28titlesinthepipelineplusitsexistinghits.NetEaseisimpressiveastheyhavebeenabletosucceedanddifferentiatefromTencent.