In April, Niko Partners forecast $33 billion of digital games revenue in mainland China for 2019. H1 2019 financial reports from Tencent and NetEase, which together account for over 70% of domestic market revenue, indicate that the April forecast remains on track for the year. After the regulatory process induced market slowdown of 2018, 2019 has shown a rebound. More than 1,240 titles have been licensed since the process restarted in December 2018, including several hits that are contributing to the growth.
Niko’s forecast calls for 7.3% growth in PC + mobile games revenue in 2019 over 2018.
The combined online games revenue from Tencent and NetEase was RMB 79,103 million in H1 2019, up 8.6%. Niko forecast mobile games revenue to grow 18.3% YoY whilst PC revenue will decline 4.0%. This is ln line with combined growth figures from Tencent and NetEase where mobile games revenue grew 13.4% YoY in H1 2019 whilst PC games revenue decline 0.1% YoY. The market is rebounding after the 2018 dip, thanks to avid demand.
Tencent reported H1 2019 online games revenue of RMB 55,820 million, up 3.4% YoY, led by mobile games. PC games revenue declined slightly, due to a lack of new releases. Whilst legacy titles continued to perform strongly, demonstrating continued demand from gamers, it was new mobile titles such as Peacekeeper Elite, Perfect World Mobile, JX Online 3 Mobile and Let’s Hunt Monsters that were the big contributors. In Q1 2019 Tencent launched only one game, because of the licensing backlog, but has been awarded 14 more licenses in Q2 (with 10 games launching that quarter).
Peacekeeper Elite is the “replacement” title for PUBG Mobile, which seemed to be doomed to never being licensed for commercial operations. Peacekeeper Elite offers similar gameplay and visuals to PUBG Mobile but has a number of changes to comply with regulations. Tencent swiftly migrated the PUBG Mobile player base over to Peacekeeper Elite, which now has over 50 million DAU and has grossed more than $600 million in China alone. Tencent has also introduced season passes, starting with Honor of Kings and Peackeeper Elite, to drive gamer engagement and spending.
NetEase reported H1 2019 online games revenue of RMB 23,283 million, up 23.7% YoY. Continued success of legacy titles, new title launches, and strong overseas performance helped drive PC and mobile games revenue growth in H1. 10 NetEase titles have been licensed since December 2018, but most growth is coming from updates and features for legacy titles, such as Fantasy Westward Journey, which has received 30 major expansions on PC and nearly 40 major expansions on mobile since franchise inception nearly 15 years ago. Several FWJ esports events have helped boost gamer engagement and spending.
NetEase’s “newer” titles, such as Invincible, Onmyoji and Identity V, are big contributors to the company’s continued success. Invincible, which launched in 2015, experienced growth in both revenue and users in H1 2019, and Onmyoji, which launched in 2016, was #1 on the iOS grossing chart this year with the introduction of a new expansion pack. More new titles have been launched, such as Buildtopia, Sky and Love is Justice, as well as new games overseas. We forecast NetEase to have a strong year in 2019.
Niko’s China Games Market Database tracks Tencent and NetEase, as well as other public and private game companies operating in China. We have also recently released updates on both companies available here for free download (Tencent) (NetEase). You can view all our latest reports on China’s games market here.