Tencent's "New Game King" rises

Author | Huang Yu

Editor | Zhou Zhiyu

Just one month after its launch, Tencent's "Dungeon & Fighter: Origin" (referred to as DNF mobile game below) dropped a bombshell on the gaming industry.

On June 19, the official announcement of DNF mobile game stated that due to contract expiration, starting from June 20, DNF mobile game will no longer be available on some Android app stores. This is the first mobile game under Tencent to choose to delist from certain Android channels.

Informed sources revealed to Wall Street News that these platforms include Huawei, OPPO, and vivo app stores, but not Xiaomi. From the actual situation, contracts with these companies have indeed expired, so DNF mobile game adjusted its distribution strategy.

Wall Street News search found that as of 8 pm on June 19, DNF mobile game could no longer be found on OPPO and vivo app stores, while it could still be found on Huawei and Xiaomi app stores. In addition, DNF mobile game still ranked first in the game bestseller list on Huawei app store.

Due to the large user base, major Android app stores have always been important distribution channels for game products. The official reason for DNF mobile game not renewing contracts with some Android platforms has not been explained yet, but it is not difficult to associate it with the contradiction between Android channels and game developers due to high revenue sharing ratios.

When game developers distribute games through Android app stores, they need to pay a certain percentage of revenue sharing to the app store as the distribution channel, known as "channel tax." Generally, Apple App Store's revenue sharing ratio is 30%, while most Android app stores have a high revenue sharing ratio of up to 50%.

It is worth mentioning that Huawei, OPPO, and vivo are all part of the "Mobile Hardcore Alliance" (M.H.A), which is a mobile internet value-added service organization composed of leading domestic smartphone manufacturers. When the alliance was established in 2014, members agreed on a 5:5 revenue sharing ratio with game developers.

Therefore, internet industry analyst Zhang Shule also told Wall Street News that the announcement of DNF mobile game to delist from some Android app stores may be due to the excessively high Android channel tax and aggressive behavior of the channels.

Game developers, long suffering from high channel revenue sharing ratios, have long been engaged in a "war" with Android app stores.

In 2020, due to the failure to negotiate a 7:3 revenue sharing ratio (game developers take 70%), miHoYo's "Genshin Impact" did not initially launch on Android app stores, exposing the contradiction between Android channels and game developers to the public on a large scale for the first time. Later, "Genshin Impact" reached a 7:3 revenue sharing ratio agreement with Xiaomi app storeLater, more and more game products refused to cooperate with the Android channel, including last year's "Honkai Impact 3rd: Star Rail" under miHoYo, NetEase's "All-Star Streetball Party," and this year's "Ming Chao" by Kulo Technology.

NetEase CEO William Ding once said, "In China, the revenue share of the Android channel is as high as 50%, even 20% more expensive than Apple, making it the most expensive and unhealthy in the world."

More and more game products choose not to cooperate with the Android channel. The key point is that they have found that even without the Android channel, it seems that it will not have a significant impact on the game's release. Excellent games can still succeed.

As the world's largest game company, why did Tencent launch the first shot against the Android channel with the DNF mobile game?

Zhang Shule said that only mobile games with explosive combat power can do this kind of resistance. Although DNF cannot yet be called a super hit, Tencent has made a heavy investment in it, which is why they took action.

Furthermore, Zhang Shule pointed out that since the promotion of DNF mobile game has just begun, the users of the channel server are just gathering and at low levels, with low stickiness. Tencent is confident in diverting the vast majority of users to its official server. Only after a long time on the channel server will there be a net loss of users and major negative public opinion about the brand itself.

With the sluggish growth of the game business, Tencent has high hopes for the DNF mobile game. As the "Star of Yuanmeng" launched at the end of last year has not become a hit, the DNF mobile game launched on May 21 this year carries the expectation of Tencent Games to create a new hit game, which is expected to bring new growth momentum to Tencent Games.

Morgan Stanley believes that the DNF mobile game is one of Tencent's largest game releases in recent years and should be one of the key catalysts to drive a turning point in the growth of Tencent's domestic game business in the second quarter. It is estimated that the total revenue of the game in the first year could reach 10 billion RMB.

In the month since its launch, the performance of the DNF mobile game has been very impressive. According to Sensor Tower, as of June 17, the DNF mobile game has been stably ranked first on the overall best-selling list for iPhones in China for 28 consecutive days, making it the most popular mobile game in the past few years.

In addition, Sensor Tower's Store Intelligence platform shows that in the last 11 days of May, the game's revenue in the Chinese iOS market has exceeded the total revenue of "King of Glory" and "Peace Elite," achieving a 12% growth in Tencent's mobile game revenue in May.

According to data from Moon Fox, the DNF mobile game has generated over 1 billion RMB in revenue in the first week on both platforms, and it is expected that the total revenue for the first month will approach 3 billion RMB.

Faced with such a strong "cash cow," Tencent clearly hopes that more profits can enter its own pockets. If this exploration of rejecting the Android channel is successful, Tencent may usher in higher profit growth in the future.

This is a significant resistance, not only for Tencent but also for the entire gaming industry