China’s PC & mobile games:IP again the buzzword at China Joy this year

We attended the B2C and B2B sessions and World Mobile Game Conference(WMGC) of China Joy. IP was again the buzzword this year. But instead ofindiscriminately buying a bunch of IPs, game companies this time seemfocussed on matching the right IPs with their own specialty, in addition todeveloping innovative and unique game play. Top players aspire to develop topgames for specific game genres catering to particular user segments—adeparture from the previous approach of one-game-fits-all—also throughincubation and M&A to complement their own pipelines. Also, publishers aremore eager to bring Chinese titles overseas—the new ‘blue ocean’. Tencent andNetease are our top picks in China’s game space given their market leadership,strong line-ups of IPs and games, and distribution channels.

    Digging into the value of an IP

    China’s game market is swamped by ‘me too’ products with similar gamedesigns and IPs. Leading players Longtu and OurPalm have often stressed thatimportance of innovation in addition to popular IP in game play is critical to userretention. At a panel meeting on pan-entertainment with OurPalm, Youzu, ZeusInteractive and Mokylin, speakers said purchase of an IP has to be aligned withthe specialty of a game company. For example, IPs of variety shows or certaintypes of movies may not fit a hard-core MMO game developer. Additionally,launch windows have to carefully match between movies, shows and games soas to engage the most users at the proper time. Netease believed good IP needsto touch audience’s emotional and cultural chords. The movie IP Kungfu Pandawas well received among gamers because of its rich blend of East and West. Todig the most out of this IP, Netease is launching a series of three games on thisIP leading to debut of the movie Kung Fu Panda 3 in spring 2016.

    Top players expanding through M&A and incubation

    Tencent’s M&A Head Yu Haiyang highlighted deepening penetration in individualgame genres. Tencent is already the leader in certain game genres such asrunning, flying/shooting and round-based RPG but needs to explore further othergenres such as action, sports, chess, and military. Tencent’s M&A criteria forinvestee game studios: 1) focus on quality and leadership in a particular gamegenre, and 2) development cost of RMB10mn-25mn in coming 8-16 months.

    OurPalm is a successful example that grows through M&A. OurPalm reachedno. 3 only after Tencent and Netease by gross billings in June, driven by thesuccess of The King of Fighters 98 Ultimate Match (KoF 98; 拳皇98 终极之战OL) and MU (全民奇迹MU). MU is developed by the acquired company Tianma;and KoF 98 is co-developed with the acquired company PlayCrab.

    App stores working to attract top games

    Tencent’s app store Yingyongbao generated most revenue among Android appstores in June for several top games such as One Piece, 100k Bad Jokes, andBuliangren, according to Tencent’s Chief for Open Platform Hou Xiaonan.Yingyongbao is working to enhance its social networking features. More than50% Yingyongbao users logged on via QQ or Weixin links. With a friend’srecommendation, the download ratio is 30% higher than without. Besides,Yingyongbao launched features that display ranking of friends and game trendsof friends. This enables more targeted game promotion.