The new hope of Tencent Games

Author | Huang Yu

Editor | Zhou Zhiyu

Tencent Games always have big projects in their pockets. On the evening of May 28th, the SPARK 2024 Tencent Games conference arrived as scheduled, bringing the latest updates on 34 products, including 13 heavyweight new games, showcasing their future strategies to the outside world.

Among the series of projects showcased by Tencent Games, there is the recently launched "Dungeon & Fighter: Origin" (referred to as DNF Mobile), which has become the absolute focus of the gaming industry in the first half of this year and even in 2024.

For Tencent Games, with the previous launch of "The Star of Yuanmeng" at the end of last year failing to become a hit, DNF Mobile carries the expectation of becoming a new hit.

As one of the early "Four Heavenly Kings" of Tencent Games, DNF is the only IP that has not released a mobile version for a long time. After a delay of nearly 4 years, DNF Mobile finally officially launched on May 21st, with a good start as expected - the server was full immediately upon opening, unprecedented queues.

From the market performance in the past week since its launch, this "nostalgic" DNF Mobile game is expected to become another national mobile game under Tencent.

According to data from Qimai, after its launch, DNF Mobile has consecutively topped the iOS overall and game bestseller charts for 8 days, with an estimated download volume of about 792,000 in the past week and an estimated weekly revenue of about $13.237 million.

As the world's largest gaming + social company, nearly a third of Tencent's revenue comes from games, and Tencent must defend its moat.

However, the gaming business criticized by Ma Huateng for "seeming to lie on its laurels" has indeed shown weak performance in the past two years. Not only has it failed to create new hits after "King of Glory" and "Peace Elite," but its performance has basically remained flat.

In the fourth quarter of last year, Tencent's gaming business revenue was 40.9 billion yuan, a year-on-year decrease of 2%, with declines in both domestic and international gaming businesses. By the first quarter of this year, gaming revenue was still not ideal, with an overall year-on-year decline of 0.4% to 48.1 billion yuan, with overseas games growing by 3% and domestic games declining by 2%.

To change this situation, Tencent Games is making efforts to reorganize and optimize. Tencent's management has revealed that the soft revenue situation of Tencent Games is expected to improve from the second quarter of 2024.

Against this backdrop, the launch of DNF Mobile naturally carries high expectations.

Morgan Stanley pointed out that DNF Mobile is one of Tencent's largest game releases in recent years and should be a key catalyst for driving a turning point in domestic gaming business growth in the second quarter, with total revenue expected to reach 10 billion yuan in the first year.

Guotai Junan Securities also believes that there is further potential for Tencent Games' growth expectations to improve. On the one hand, the recent launch of DNF Mobile has performed well in the iOS rankings, and its annual revenue performance may exceed expectations. On the other hand, the excellent performance of "Brawl Stars" has driven a 34% year-on-year increase in overseas game revenue in the first quarter of 2024, and its iOS ranking in major markets has further improved since April As predicted by TF Securities, the growth of Tencent's gaming business is on the rise, with growth expected both domestically and internationally. This is partly due to the improvement in mature game operations and the upcoming launch of heavyweight new games.

The optimization of Tencent's gaming business has already shown results, with more new and old games besides DNF mobile game showing vitality.

Pony Ma, Chairman and CEO of Tencent's Board of Directors, stated after the first-quarter financial report that team adjustments in several top games in the domestic and international markets have begun to take effect, leading to an increase in total game revenue and laying the foundation for future growth in game revenue over the next few quarters.

Data shows that Tencent's total game revenue in the domestic market in the first quarter increased by 3% year-on-year, while total game revenue in the international market increased by 34% year-on-year.

It is reported that two top games, "Honor of Kings" and "Peacekeeper Elite," benefited from new commercial rhythms and improved game content design, achieving year-on-year revenue growth in March. Several domestic market games such as "Clash of Clans Battle," "CrossFire Mobile," and "Area F2" set historical revenue highs this quarter.

Several key games in the overseas market also performed well in the first quarter. Among them, Supercell's games saw growth in user numbers and revenue; "Brawl Stars" in the international market had twice the daily active accounts compared to the same period last year, with revenue four times higher.

Tencent's management also pointed out at the first-quarter performance meeting that the company has been working to revitalize flagship games, a process that is now progressing smoothly and yielding some experience. One of them is that games classified as evergreen can indeed sprout new growth, such as "Brawl Stars."

Furthermore, the management also stated that if a game considered to be evergreen stagnates, the problem usually lies not in the game itself, but in the team operating the game. Tencent needs to change the team, sometimes changing the mindset, sometimes changing the people. When the company makes these changes, positive results can be seen quickly.

Facing an increasingly fierce industry competitive landscape, Tencent has become more cautious in developing new games.

Tencent's management believes that the gaming industry poses challenges for new games, as with evergreen games improving, each new game not only competes with other new games released at the same time but also with all existing games or the top performers among them that have survived and developed into evergreen games.

In this context, Tencent's strategy is to continuously raise the standards of new games brought to the market, focusing on fewer but larger and better new games.

"For games that we hope will become evergreen, the metrics we focus on are not the most obvious external indicators, such as download volume or first-day revenue, but metrics like player engagement, retention rate, etc.," the management mentioned.

Tencent Games is in a critical period of returning to its best state, emphasizing high production value new games while also focusing more on evergreen games.

From the SPARK2024 Tencent Games conference, it can also be seen that unlike before, Tencent is now placing more emphasis on presenting gameplay iterations and operational optimizations for evergreen games Focusing on the core business, this is still the key to Tencent Games maintaining its dominant position in the future