In the past few days, the industry giants have released financial reports one after another, which can be described as a few joys and sorrows. On the whole, Tencent and NetEase, Inc are the big winners in this performance competition.

But where there is light, there is shadow, and the gratifying results under light must be accompanied by a crisis lurking in the dark.

Under the blessing of excellent performance, the overall growth of the two proud performance pillars-- the game sector, apart from the steady growth figures, the words such as "negative growth", "decline" and "no more than in the past" around mobile games PC have become more eye-catching and make people quite concerned.

For a long time, the competition in the game market can not be underestimated, the two leading bosses also fought for many times secretly and openly, it is surprising that under the blessing of the two companies' excellent performance, the mobile game PC game has shown a trend of extreme and extreme development. After a careful exploration, the two sides actually have signs of differentiation in the deployment of game business.

01

Tencent's contribution to the PC game "cannot be ignored" contributed to negative growth.

Tencent released its results for the third quarter of 2018 on November 14. According to the financial report, the revenue of the company's Q3 was 80.595 billion yuan, up 24% from the same period last year, higher than the market expectation of 80.41 billion yuan; the profit during the period was 23.405 billion yuan, up 30% from the same period last year; the net profit margin rose to 29% from 28% in the same period last year; the profit attributable to equity holders of the company was 23.333 billion yuan, up 30% from the same period last year, higher than the market expectation of 18.39 billion yuan. A few days ago, Tencent's share price fell by more than 10% in the past 10 days, coupled with the dismal end of Q2, so that people did not expect Q3 financial results. The result that exceeded market expectations really gave people who were not optimistic a solid slap.

As far as this financial report is concerned, the value-added service business, which is composed of online game revenue and online advertising business, still contributes most of the revenue. The company's Q3 value-added services revenue increased by 5% to 44.049 billion yuan compared with the same period last year. Among them, online games fell 4 per cent year-on-year to 25.813 billion yuan, which is the first negative growth in Tencent games recently, which is really worth paying attention to. Mainly due to the decrease in Tencent's PC game revenue, PC game revenue was 12.4 billion yuan, down 15% from the same period last year and 4% month-on-month.

Tencent believes that the glory of PC games is a thing of the past, and Tencent has always relied on mobile games to dominate the world. This quarter, mobile games have made a comeback, with revenue rebounding from a 19% decline in Q2, a year-on-year increase of 7% and an 11% month-on-month increase to 19.5 billion yuan. This is mainly due to the release of new games in that quarter ("Free Fantasy Mobile", "my name is MT4" and "Saint Seiya", etc.). In addition, the income of the popular mobile game "Arena of Valor" is not as good as its peak, but its profitability is still not to be underestimated.

In terms of negative growth, PC games were partly offset by increased revenue from smartphone games, but PC games fell a bit this quarter, and mobile games can no longer make up for the decline in revenue caused by PC games. And then look at the old opponent NetEase, Inc PC game data "rejuvenation" is really not a taste.

02

NetEase, Inc's PC game "sudden rise of a New Force" earns considerable income.

NetEase, Inc released its results for the third quarter of 2018 on November 15. According to the financial report, the net income of Q3 NetEase, Inc was 16.855 billion yuan ($2.454 billion), up 35.1% from the same period in 2017. Deferred income performed well, growing by as much as 16% month-on-month. Of this total, net income from online games was 10.348 billion yuan ($1.507 billion), up 27.6% from a year earlier.

According to the data, the net income from mobile games accounts for 68.0% of the net income of online game services, compared with 74.7% in the previous quarter and 68.3% in the same period last year. The gross profit margin of online gaming services in the third quarter of 2018 was 65.1%, compared with 64.3% in the previous quarter and 62.5% in the same period last year. The month-on-month increase is mainly due to the increase in revenue contribution from PC games where the gross profit margin is higher than that of mobile games, such as "against the cold", which is partly offset by the decline in the contribution of revenue from self-developed mobile games.

The share of mobile games has been firmly grasped by Tencent, NetEase, Inc in addition to continue to strengthen research and development, can only return to the PC end of the game to fight again, fortunately, it worked.

03

2018 the game is not as expected as the financial report to determine the morale of the army.

When talking about the games of the two families, there are always endless slots or bug, but they are in the hearts of domestic game lovers, just like the red and white roses in the game world, they can not easily stand in line, each has its own good.

Tencent games advocate fast food, fragmented entertainment concept, the degree of krypton is not high, through the game and social connection to achieve linkage, strong popularity.

In contrast, NetEase, Inc games are good at fine classification of minority games, with a clear audience, simple entry, Krypton gold tendency is more serious.

In the face-off with each other, the arrival of 2018 made them even more upset. Just like the hit US TV series Game of Thrones saying "The winter is coming", on March 29th, the former State Administration of Press, publication, Radio, Film and Television issued a notice on important matters of game application and approval, saying that due to institutional reform, the release of all game version numbers was completely suspended, and no suspension period was notified. Although the word "limited version number" is not as secretive as "Voldemort" in the Harry Potter series, it is not easy for the makers of the game industry to let it go.

This directly led to the high expectations of Tencent's popular mobile game "PUBG" could not be realized seriously affecting the overall payment rate, and then Tencent Q2 reported a month-on-month decline in mobile game business. NetEase, Inc's share price also fell all the way, closing down 45 per cent as of October 31.

The release of Q3 financial report undoubtedly gave Tencent and NetEase, Inc a shot in the arm, but each other had their own plans for the game plate.

04

Tencent expands his territory and NetEase, Inc is still game first.

2018 is also known as the "three years of famine" in China's game industry-product shortage, traffic shortage and user shortage. Although Tencent's main strong plate is still in the game, but it seems to want to rush out of this "success is also a game, failure is also a game," the old game.

Tencent, who has just reached the age of 20, is determined to make a comfort zone and is not willing to be labeled as a game boss. In September, he officially launched a new round of overall strategic upgrade to strengthen Tencent Cloud's service innovation capability, strengthen the layout of AI, actively embrace the industrial Internet, take root in the consumer Internet, and announce the optimization and adjustment of the existing organizational structure based on the two major businesses of social networking and mobile games. At the same time, Q3 reported that game revenue accounted for 32.03% of total revenue, the lowest since 2015. This also confirmed Tencent's eagerness to change the business direction dominated by the game business, and the income structure also began to tend to equilibrium.

Even if the market is still the same, NetEase, Inc, who has a game history of nearly 20 years, is still marching on the road of the game, striving to recover the lost territory occupied by Tencent in those years-market share and national reputation. In fact, NetEase, Inc's game research and development ability, original ability has always been very resistant, but how to never get on the "national game" train. "thanks to the support of an increasingly rich product line, NetEase, Inc's game revenue has exceeded 10 billion for two consecutive quarters," Ding Lei said. " He still maintains confidence in NetEase, Inc, in addition to increasing investment in games, and even NetEase has become the world's largest game research and development company. Obviously, NetEase, Inc's ambition to win back the number one giant in the game is evident.

A few days ago, at the 2018 Guangdong Internet Conference, Tencent and NetEase, Inc, old rivals who "love each other", were awarded the "Top Ten Internet leading Enterprises Award in 2018" to encourage Guangdong Internet enterprises to continue to explore and innovate. to promote the positive development of the Internet industry in Guangdong. Financial report is not only the realization of phased goals, but also the premise of further specific deployment of the blueprint. in the future, what kind of substantive progress will be made by Tencent's resolute "turn around" in the future? can NetEase, Inc's struggle in the game stand the test of the market? We'll just have to wait and see.