20221229-招银国际-China_Internet_November_online_game_market_recap_2页_483kb

China Internet Market Summary - November 2022

Core Content Overview

This document provides a detailed analysis of the performance of the China online game market in November 2022, alongside insights into the broader China Internet sector and key market participants such as Tencent and NetEase. It also outlines the CMBIGM ratings and important disclosures related to the report.

Main Points and Key Insights

1. Online Game Market Performance

• Revenue Decline: China's online game market revenue fell 19.2% YoY and 3.0% QoQ to RMB19.2bn in November 2022.
• Reasons for Decline: The sector remained weak due to lack of new game titles and high base effect.
• Forecast: The market is expected to return to positive YoY growth by 2Q23E as license approvals resume and the base effect eases.
• Leading Players: Tencent and NetEase are highlighted as key players with strong operation and development capabilities to solidify leadership in both domestic and overseas markets.

2. Mobile Game Market

• Revenue Drop: Mobile game revenue declined 25.7% YoY to RMB13.5bn in November 2022.
• Constraint: Supply constraints and lack of quality new content are the main factors affecting growth.
• New Game Performance: Most new games launched in November had soft monetization, with none generating >RMB200mn in the first month.
• Positive Outlook: The resumption of imported game license approvals in December 2022 and normalization of domestic approvals are seen as key positives for sector recovery.

3. PC Game Market

• Revenue Growth: PC game revenue increased 6.3% YoY to RMB4.8bn in November 2022.
• Drivers: Strong performance from legacy titles, including Tencent's League of Legends and NetEase's Fantasy Westward Journey.

4. Imported Game License Approval

• Resumption: Imported game license approvals resumed on 28 Dec 2022, with 44 games approved after an 18-month delay.
• Domestic Approvals: 84 domestic games were approved in December, up from 70/73/69 in November/September/August 2022.
• Key Titles: Tencent and NetEase each had 6 and 3 games approved, respectively, including Tencent's VALORANT.

5. Overseas Gaming Market

• Revenue Decline: Revenue from China's self-developed games in overseas markets fell 8% YoY but was flat QoQ to US$1.36bn.
• Reasons for Decline:
  • Normalization of user time spend post-COVID.
  • Macro concerns affecting high ARPU games.
  • Slowing new game launches.
• Positive Example: Tencent's GODDESS OF VICTORY: NIKKE achieved global success, generating over US$100mn in one month and ranking in the top 5 mobile games by global grossing.

6. Tencent and NetEase Performance

• Tencent:
  • Domestic game revenue is expected to decline 7% YoY in 4Q22 due to lack of new titles in 2H22.
  • International game revenue is forecast to decline 9% YoY, mainly due to the high base in 4Q21 and soft performance of PUBG Mobile.
• NetEase:
  • Online game revenue growth is expected to slow to +4% YoY in 4Q22E, down from +9% YoY in 3Q22, due to the YoY decline in Harry Potter: Magic Awakened.
  • Both companies are expected to gain market share as user spending becomes more concentrated in quality legacy games.
• 2023E Forecast: Tencent and NetEase are expected to see 8% and 3% revenue growth, respectively.

CMBIGM Ratings

Analyst Certification and Disclosures

• The report is prepared by CMB International Global Markets Limited (CMBIGM), a subsidiary of China Merchants Bank.
• The research analyst certifies that the views expressed are personal and not influenced by compensation.
• There are no direct conflicts of interest in the report, though investment banking relationships may exist.
• The report is not an offer or solicitation to buy or sell securities and is not tailored for individual investors.
• Legal Disclaimer: The report is for internal use and not for public distribution without prior consent.

Related Reports

1. China Internet - Quality growth and further digitization penetration provide growth support - 19 Dec
2. China Internet - The shoe has dropped: PCAOB announced unobstructed inspection access - 16 Dec
3. Bilibili (BILI US) - Focus on more sustainable growth - 30 Nov
4. Pinduoduo (PDD US) - Strong revenue and earnings growth - 29 Nov
5. Meituan (3690 HK) - Long-term development intact despite short-term headwind - 28 Nov
6. Baidu (BIDU US) - Earnings beat on stringent cost control - 23 Nov
7. JD (JD US) - Stronger-than-expected margin expansion - 19 Nov
8. Weibo (WB US) - Ongoing moderate recovery - 18 Nov
9. Alibaba (BABA US) - Earnings back on growth track - 18 Nov
10. NetEase (NTES US) - Preparing for next strong product cycle - 18 Nov
11. Tencent (700 HK) - Return to earnings growth track - 17 Nov