On March 27, CMGE, a Hong Kong-listed company (0302. HK) announced its 2023 financial results. According to the report, in 2023, CMGE achieved a total operating income of 2.6 billion yuan (RMB, the same below) and an adjusted net profit of 5.379 million yuan, turning losses into profits overall, with a year-on-year increase of 103% due to the low base in 2022. After deducting the impact of non-operating income and expenditure on profit, operating profit was 107 million yuan.
According to the financial report, the company will add more than 92.87 million new registered users in 2023, an increase of 9.8% over the same period. Among other key performance indicators, the average monthly active users rose to 17.05 million, up 9.9% year-on-year, and the average monthly paying users increased by 5.8% year-on-year to 1.19 million. Among them, the mini game business achieved a revenue of 600 million yuan, becoming a new business growth point.
In 2023, a number of games planned to be released by CMGE have successfully obtained version numbers, such as "The Legend of Sword and Fairy: Sword Swinging Love", "Ultraman: Gathering", "Devouring the Starry Sky: Dawn", and "My Edgeworth Diary" will be officially launched in 2023. At the same time, with the rapid development of AIGC technology, CMGE has also applied AIGC to its independent R&D and publishing business to reduce costs and increase efficiency, as well as game innovation. According to the financial report, in 2023, underage players under the age of 18 will account for less than 0.01% of the revenue of middle-handed games.
The performance of the publishing business was stable, and mini games became a new business growth point
In 2023, CMGE's game publishing business will generate revenue of RMB2.133 billion, with overseas revenue accounting for 10.6%. In terms of games, the role-playing card game "The Legend of Sword and Fairy: The Legend of Sword and Fairy: Swinging the Sword and Asking for Love" jointly published by CMGE and Celadon based on CMGE's own IP will be officially launched in June 2023, and it will be ranked first on the free list of the Apple Store and 14th on the best-selling list in the first month of its launch, and it has been recommended by the superstars of the hardcore league. In December 2023, "The Legend of Sword and Fairy: Sword Swinging Love" will be launched in Hong Kong, Macao and Taiwan, and in the first month of its launch, it won the first place in the free list of Apple App Store in the above three regions, the first place in the best-selling list in Hong Kong and Macao, and the third best-selling place in Taiwan.
In addition, the card mobile game "My Edgeworth Diary", developed by Lefu Interactive Entertainment, invested by CMGE, will be launched in May 2023, ranking first on the TapTap popular list in the first month of its launch, and winning the third place on the free list and the second place on the best-selling list of the Apple Store.
"Douluo Continent: Shrek Academy", jointly published by CMGE and Gluttony, obtained the version number in July 2023, and opened the online pre-registration activity in August 2023, with more than 6 million pre-registered players, and was successfully officially launched on January 31, 2024, winning the first place on the free list of the Apple Store and the first place on the TapTap popular list in the first month of its launch.
While the new games performed well, the previously launched games also brought stability to CMGE. CMGE's self-published "The Legend of the New Condor Heroes: Iron Blood Heart", "Soul Street is Born to Be King" and "Douluo Continent - The Return of the God of Fighting", as well as "One Piece Bloody Route" and "Dynasty Warriors" co-produced with third parties, as well as other games that have already been launched and operated, will continue to contribute revenue and profits to CMGE in 2023.
At the same time, CMGE actively laid out the mini game section. As of 2023, CMGE has launched a number of mini-games such as "The Legend of the Sword of Kyushu Fairy" and "Gun God of the People: Border King", bringing more than 600 million yuan in revenue. The new mini-game "Country Love: Business Life", which has been authorized by Benshan Media, has started billing testing at the end of 2023 to verify the commercial model, and is scheduled to be officially launched in the first half of 2024. It is understood that mini games have become a new increment in the game industry, and the market has maintained rapid growth. According to the data released by Giant Engine, the overall market size of China's mini games will reach more than 40 billion yuan in 2023, and will further grow in 2024, with the overall expectation to exceed 60 billion yuan. With the rapid growth of the market, the mini game sector is expected to become a new growth curve for CMGE.
Looking ahead to 2024, CMGE's publishing business still has a lot to look forward to. A number of blockbuster IP games such as "Douluo Continent: Reversal of Time and Space", "Breaking the Firmament: Subversive Showdown", "Naruto: Konoha Master", "The Legend of Cao Cao in the New Three Kingdoms", "Daily Life of the Chat Group" and other blockbuster IP games are planned to be launched on the market in 2024, and many of them have completed testing and opened pre-orders.
At the same time, CMGE will continue to vigorously promote the mobile game "The Legend of Sword and Fairy: Sword Swinging Love" in Hong Kong, Macao and Taiwan, and plans to launch games such as "Douluo Continent: Shrek Academy", "Breaking the Sky: Subverting the Duel", "Douluo Continent: Reversal of Time and Space" and "Codename: FA" in Hong Kong, Macao and Taiwan. Warriors of the Three Kingdoms" mobile game, increasing the scale of game revenue in overseas regions.
In addition, CMGE expects to launch more than 10 mini-game products in 2024, including "Country Love: Business Life", "The Legend of Sword and Fairy: Sword Swinging Love" and "Naruto: Konoha Master". Many of the above-mentioned games have obtained version numbers, which is expected to bring considerable distribution revenue to CMGE.
The self-developed business is making steady progress, and the open-world game "Sword and Fairy World" has reached 4 million pre-orders, and commercial testing will be started
In 2023, CMGE's R&D business revenue will reach 215 million yuan, and R&D investment will reach 370 million yuan. During the reporting period, CMGE applied AIGC technology to in-game art production and copywriting, reducing game R&D costs and improving R&D efficiency.
In terms of self-developed games, CMGE's wholly-owned subsidiary, Wenmai Interactive, independently developed and exclusively distributed by Sanqi Mutual Entertainment in the domestic market, the Three Kingdoms-themed strategy mobile game "City Lord" was officially launched in November 2023 and was recommended by hardcore league stars in the first month of its launch.
It is understood that "City Lord World" is the first Three Kingdoms-themed strategy game launched by CMGE, and with the promotion and distribution experience of CMGE and Sanqi Mutual Entertainment, CMGE is expected to enter the Three Kingdoms-themed strategy game track through "City Lord World" and occupy a place. In 2024, CMGE will continue to develop and launch the second Three Kingdoms-themed strategy game "Codename: Lord", which is expected to further gain more market share in the Three Kingdoms-themed strategy game category.
In terms of e-sports games, the sports competitive PC game "Street Basket for All" developed by Shanghai Zhoujing, a subsidiary of CMGE, has obtained the version number in May 2023, and the billing test will start on December 29, 2023, and will be officially launched in the summer of 2024.
CMGE's self-developed games "Legend of the World: Thunder Hegemony", "Legend of Dragon City", board and card games, PC games and cloud games, which were operated online before 2023, have also maintained continuous iteration and upgrade, and continue to contribute stable revenue to the company.
In terms of blockbuster self-developed games, the open-world game "Sword and Fairy World" based on Sword and Fairy IP has obtained a dual-ended version number for mobile phones and PCs in June 2023. The game "Sword and Fairy World" has started to launch pre-order activities, with the number of pre-orders exceeding 4 million, and two tests have been conducted in 2023
"Sword and Fairy World" takes the 33 years of the Sword and Fairy Calendar as the starting point of the timeline, where players will meet 32-year-old Li Xiaoyao, Lin Yueru after resurrection, Wang Xiaohu and Li Yiru who have just defeated Chiba Zen Master and solved the crisis, and many other classic characters, and experience a new story that has not been mentioned in the Sword and Fairy IP. On the premise of maintaining the orthodox fairy sword flavor, the game also adds many original new characters and corresponding new plot content. For example, during the second test, the mirror spirit "dust" that caused widespread discussion among players, and in the next test "Sword and Fairy World", another original character "Yi Shu" will be added. Through the design concept of "three-dimensional integration" of plot, interaction and vision, "Sword and Fairy World" improves the integrity of game design, allowing players to immerse themselves in this world of oriental romantic fantasy.
At the same time, "Sword and Fairy World" also restores the most classic "Three Emperors and Five Spirits" setting in the IP world view to the game, and the scenes, monsters, NPCs, etc. in the game all have the special imprint of the Three Emperors system. For example, the novice area "Guiyun Village", where the player is located at the beginning, has been iteratively optimized according to the experience feedback of the players in the second test. According to the setting that Guiyun Village is full of spirits, more elements of the Shennong system with a spirit atmosphere have been added to the environment and buildings, making the entire Guiyun Village more recognizable and fairy sword characteristics.
"Sword and Fairy World" will also add more innovative gameplay in the next test to bring players a differentiated open world experience. As a animistic world, the game gives all items a "spirit" aura, everything can be moved, everything can be grasped, and everything can be flirted. In three of them, you can experience the new "Imperial Spirit" system, which allows players to subdue different spirits and become spirit pets. And the subdued spirit pets can also be cultivated and grown together, turning them into stronger partners. With the help of the Spirit Pet's abilities, players can complete various challenges in the open world, and they can also let the Spirit Pet assist in the battle, providing a richer choice of combat strategies. Spirit pets can also participate in the construction of homes, moving mountains and stones, refining elixirs, cultivating herbs and plants according to different characteristics, or playing a role in guarding homes. Some of the featured spirit pets also support riding, which greatly enriches the player's game experience in "Sword and Fairy World".
"Sword and Fairy World" also pioneered the introduction of multiplayer home building gameplay, allowing different open world players to build their own homes in the same space for the first time. What's more, you can call friends to create an exclusive "immortal" community. Thousands of personalized building mods make players' UGC content full of possibilities, triggering players' desire to create and share.
"Sword and Fairy World" also uses more cutting-edge technology in research and development and player experience, and the depth is the use of AI and AIGC capabilities. For example, the NPCs in "Sword and Fairy World", everyone is a living existence, and will show corresponding behaviors according to the changes in the natural environment, improving the authenticity of the virtual world and bringing a more vivid open world experience of Sword and Fairy. For example, when the weather is bad, NPCs will go home early, and when it rains, NPCs will hold up umbrellas even when they have to go out. In addition, with the help of AI face pinching, intelligent voice and other technical applications, the game also greatly enriches the player's personalized expression and improves the interactive experience.
According to the official reveal, in the next test, "Sword and Fairy World" will enhance the user experience through the optimization of the four major plot directions, add five innovative gameplay, including the addition of two core system gameplay to ensure the freshness and playability of the product, and seven basic quality improvements, optimize the user's sensory experience, and bring players a new iteration of the oriental romantic fantasy world.
The game is also scheduled to start its first paid beta test in May 2024, and is scheduled to be officially launched within the year.
The IP licensing business is growing again, and the value ecology of Xianjian IP continues to expand
In 2023, CMGE's IP licensing business revenue will reach RMB257 million, an increase of 75% compared with 2022.
Among them, CMGE has deeply laid out the whole industry chain cooperation of the IP of "The Legend of Sword and Fairy", covering games, film and television, animation, content literature, music, derivatives and live entertainment, and joined hands with top partners in related fields to jointly create the IP universe of Sword and Fairy.
In terms of IP industry chain cooperation, CMGE successfully launched the story card mobile game "The Legend of Sword and Fairy: Sword Swinging Love" in 2023 and achieved excellent results. CMGE's idle mobile game "The Legend of Sword and Fairy: A New Beginning", a collaboration between CMGE and Kaiying Network, has been launched in 2023 and has achieved the fifth best-selling result in the WeChat Mini Game Rankings. The first fan community based on the IP of "The Legend of Sword and Fairy", "Sword and Fairy Alliance", has been opened for registration to users in 2023.
In terms of film and television, the film and television drama "The Legend of Sword and Fairy IV" filmed by CMGE and iQIYI has been officially broadcast on the iQIYI platform in January 2024. At the same time, "The Legend of Sword and Fairy VI" launched by Shandong Film and Television will also be officially broadcast on Tencent Video in January 2024. The film and television drama "The Legend of Sword and Fairy" cooperated by CMGE and Penguin Films has been filmed in 2022 and is expected to be released in 2024.
In the field of animation, CMGE has reached a strategic cooperation with Penguin Films to jointly produce animated dramas such as "The Legend of Sword and Fairy I" and "The Legend of Sword and Fairy III". The trailer of the animated drama "The Legend of Sword and Fairy III" will be launched in 2023, and the animated feature film is scheduled to be released in 2024.
In addition to film and television and animation, CMGE continues to develop fairy sword IP derivatives. For example, in the field of trendy toys, CMGE cooperated with Bubble Mart, and after cooperating to launch the first blind box series "The Legend of Sword and Fairy Chinese Traditional Festival Series Figures" in 2022, the second blind box series "The Legend of Sword and Fairy Chinese Traditional Musical Instrument Series Figures" will be launched again in 2023 for global sale.
At the same time, CMGE has cooperated with well-known partners such as Liangxiao Plastic Beauty, Kaitian Studio under Shanghai Qiku Network Technology Co., Ltd., and Bandai Namco (Shanghai) Entertainment Co., Ltd. to continue to launch model games such as Han Ling yarn figures, moon clear sparse statues, and wine sword fairy figures in 2023. In addition, in November 2023, the production of an interactive graphic work based on the IP of "The Legend of Sword and Fairy" jointly created by CMGE and HippoJoy, HippoJoy and INTINY was officially launched.
In addition, CMGE's Xianjian live entertainment project is in the final stage of preparation before operation, and is expected to start trial operation in Shanghai, Hangzhou, Anhui and Chongqing provinces and municipalities directly under the central government in 2024. By turning the Legend of Sword and Fairy game into a real scene, the online event marketing activities of the "Legend of Sword and Fairy" IP will be closely integrated with offline activities, presenting a more immersive, interactive and interesting offline experience for Sword and Fairy fans.
Focusing on the future, with the trend of cross-border cooperation between game IP and film and television, animation and other industries, many high-quality content of Xianjian IP will continue to be released. Based on the IP of "The Legend of Sword and Fairy", CMGE has established an IP game ecology with first-mover advantage and the layout of the Fairy Sword IP universe, which will continue to expand the ecological value of the Sword and Fairy IP, and is expected to further amplify the value of CMGE itself and achieve sustainable development.