1.     Tencent posts slowest quarterly revenue growth since 2004

Q1 2022 REVENUE AT US$20B

• Revenue Q1 22
• Reasons behind of the split:

1. Total Revenue: US$20.1 B
2. Domestic Game Revenue: US$4.9B, YoY – 1%, QoQ+ 11%; YoY Decrease is due to minor protection measures had a direct     impact on the number of active and paying users
3. International Game Revenue: US$1.6B, YoY+ 4%, QoQ – 20%; QoQ; Due to the lack of growth attributed to the normalization of spending post-Covidand the revenuce decrease of PUBG M

• Games

1. Return to Empire: In-house title launched on Mar 29 with high quality graphics and content; #2 in genre by grossing receipts** in April
2. VALORANT: #6 PC game internationally across all genres by MAU* in March, highest-ranked title released in last four years
3. Dune : Spice Wars: 4X real-time strategy PC game based on iconic sci-fi IP Dune, published by subsidiary Funcom; Initial success on Steam since Early Access on Apr 26; Funcom is developing an openworld survival game based on Dune, under its exclusive game IP partnership
4. Please see below performances snapshots of some other Chinese gaming companies
5. NetEase: FY: Total Rev: US$1.3 B; Game Rev: US$1.1B / Q1’ 22: Game Revenue: US$295 M, YoY+ 23%
6. CMGE:  FY: Total Rev: US$599M, Oversea: US$69M, increased by 72 times compare with last year

2.      Sea posts 10.3% quarterly revenue decline in Q1

GAME BUSINESS FACED HUGE QOQ DECLINE OF 27%

•  GAAP Revenue

1. Total GAAP Revenue: US$2.9B 65%+ YoY, 10%- QoQ which were especially hit by the sluggish performance of its digital entertainment unit Garena and ecommerce arm Shopee
2. Garena GAAP Revenue: US$1.1B, 45%+ YoY, but 27%- QoQ, partly due to the post covid effect
3. QAU: also shrank by 6% from Q4 2021 to 615.9 million.
4. QPU: -23% QoQ to 61.4M

• Sea also reported a decline in cash and cash equivalents by over 20% from the previous quarter, whereas it also succeeded in cutting expenses by 5% on a quarter-on-quarter basis

3.     South Korean Game Companies Q1' 22 perfromances 

NCSOFT AND KRAFTON BREAK THE QUARTERLY SALES REVENUE RECORD

• Nexon:

1. Nexon Group revenue reached US$710M, up from US$689M in Q1 2021
2. Mobile accounted for US$179 Mof external revenue in Q1 2022, with by far the vast majority coming from Korea (¥21.1 billion) – a YoY increase from its 2021 performance (¥22.5 billion, with ¥19.4 billion from Korea)
3. Nexon predicts doubling of mobile revenue following Q1 2022 financials Record year for FIFA ONLINE 4 M and launch of Dungeon&Fighter Mobile bolster Nexon's mobile confidence

• Krafton:

1. Krafton reported $405.7 million revenue in this period – a 13.5% YoY increase and record high in quarterly revenue – with an operating and net profit of $241.9 million and $190.2 million respectively
2. PUBG Mobile accounted for $307.1 million, up only 5% YoY but up 30% QoQ, responsible for 75 per cent of Krafton’s record-high revenue in Q1 2022
3. Krafton attributed this success to “a number of in-game IP collaborations and robust live service systems”

 4.     China’s video game market is projected to grow despite government restrictions

HUGE IMPACT FROM CHINA REGULATION

• A five-year forecast from Niko Partners is predicting China’s video game market will grow through 2026 to US$55 Billion
• The number of gamers in China in 2021 was 706 million, which is actually a decrease year over year. But the total is projected to climb to 730 million in 2026
• The limits on legal playtime ended up pushing a lot of youth gamers out of the market entirely
• The Niko Partners reports also predict an increase in average revenue generated per user. In 2021 the ARPU was $64.44. It’s projected to climb to US$75.60 per user over the next few years
• China’s metaverse to develop differently when compared to the rest of the world due to the unique regulatory environment in China. Game companies have started to invest in internal projects and partner with local governments with more than 16,000 metaverse related trademarks filed by Chinese companies
• The greatest short-term opportunity for metaverse in China will come from interoperability across gaming ecosystems and collaborative events with brands and IP holders
• Insight:

1. Domestic: Chinese mobile games revenue surpassed US$9 billion during Q1 2022, 2.7% YoY, 9% QoQ
2. Oversea market: Games developed in China made revenues of around US$4.55 billion, which was a decrease of 0.54% from the Q4 21
3. Total China Game market revenue: US$11.7B
   

5.     5% Of Nintendo Is Now Owned By Saudi Arabia 

CONTINUOUSLY INVESTMENTS INTO GAMING COMPANIES

•  The country of Saudi Arabia now owns 5.01% of Nintendo as its Public Investment Fund (PIF) continues its chain of investments into video game companies
• Saudi Arabia is now Nintendo's fifth largest shareholder
• The move is unlikely to have wider effects within Nintendo or its games but will instead be used by Saudi Arabia to learn from Nintendo's gaming pedigree
• Saudi Arabia's Crown Prince Mohammed bin Salman last year invested in Grand Theft Auto V publisher Take-Two, Battlefield publisher EA, and Call of Duty's Activision Blizzard
• These investments weren't the first made by Prince Salman, as in 2020 he also purchased a third of Japanese fighting game company SNK, becoming the majority owner
• Insight:

1. Nintendo is the third Japanese game companies that Public Investment Fund (PIF) invested
2. In February, PIF spent US$1.2 billion to acquire 5% of each of Capcom and Japan’s Nexon
3. In March, PIF acquired Nexon’s additional shares on the Tokyo Stock Exchange several times. As of March 18 Today, PIF's total shareholding in Nexon reached 8.14%, become the second largest shareholder of Nexon listed in Japan
4. At the same time, in March of this year, PIF once again acquired 563,566 shares of NCsoft at a price of about 290 billion
5. In this additional acquisition, PIF acquired a 9.26% stake in NCsoft, and also became the second largest shareholder after the company's CEO Taek Jin Kim
6. Neom, a technology center city construction project owned by PIF, has partnered with local media companies to start creating the first 3A-level game development studio in Saudi Arabia

6.     Google’s Russian unit to file for bankruptcy after seizure of bank account 

THE IMPACT OF THE RUSSIAN-UKRAINIAN WAR SITUATION CONTINUES

• Google’s Russian subsidiary plans to file for bankruptcy after the authorities seized its bank account following a series of clashes between Moscow and the US tech giant over content on its site
• Google told the Financial Times the seizure of its account had “made it untenable for our Russia office to function, including employing and paying Russian-based employees, paying suppliers and vendors and meeting other financial obligations
• Despite the impending filing for bankruptcy, Google said it would continue to provide free services to users in Russia, including search, YouTube, Gmail, Maps, Android and Play
• In Russian’s place, it has sought to promote local alternatives, such as Facebook lookalike VKontakte and RuTube, a video hosting platform, both owned by the media holding company of Russian state-controlled gas giant Gazprom

7.     EXCLUSIVE TikTok plans big push into gaming, conducting tests in Vietnam -sources

MARCHING INTO THE GAME BUSINESS

• TikTok has been conducting tests so users can play games on its video-sharing app in Vietnam, part of plans for a major push into gaming
• Featuring games on its platform would boost advertising revenue as well as the amount of time users spend on the app
• TikTok's games are likely to carry advertisements from the start, with revenue split between ByteDance and game developers
• TikTok, which is owned by China's ByteDance, also plans to roll out gaming more widely in Southeast Asia, could come as early as the third quarter, said two of them
• Users of ByteDance's Douyin, the Chinese version of TikTok, have been able to play games on the platform since 2019

8.     EA Looking To Sell Or Merge

HELD POTENTIAL ACQUISITION TALKS WITH DISNEY, APPLE

•  The Battlefield and FIFA maker recently pursued a merger with NBCUniversal, and also held potential acquisition talks with Disney, Apple, and other companies
• EA has been persistent in pursuing a sale, and has only grown more emboldened in the wake of the Microsoft-Activision deal
• Others say that EA is primarily interested in a merger arrangement that would allow Wilson to remain as chief executive of the combined company
• In an earnings call in February, EA implied the company was focused on making acquisitions rather than being acquired

1. Apex Legends becomes the most downloaded game on iPhone in 60 countries
2. In India, Apex Legends Mobile has currently dethroned Battlegrounds Mobile India, becoming the top free game on the App Store
3. The Macau and HK version was published by Tencent’s Level Infinite

9.     Quest Mobile Report: More than half of mobile game players are over 31 years old; IP and innovative elements are the key to attracting users

COMPARISON BETWEEN BEFORE LICENSING RELEASED AND AFTER

• Players:

1. As of March this year, mobile game players over the age of 31 accounted for 50.8% in China, slightly higher than the players under 30
2. Mobile game market no longer maintains the public perception that users are younger, but the proportion of users over the age of 36 is gradually increasing, and the overall number of users is more than that of users under the age of 24
3. After releasing the game license in April 2022, 2094 new games came out pushed the growth rate of active mobile game users

• Game Genre:

1. Taking March 2022 as an example, in the comparison of newly launched mobile games with the entire industry, the market proportion of puzzle and simulation games has increased significantly.
2. Among the newly launched mobile games, puzzle casual games accounted for 31.5%, and simulation games accounted for 19.4%; While in the entire industry, this category only accounts for 28.7% and 12.6%
3. Users spend more time on MOBA games & Airplane Shooting games, accounted for 36% and 16%

• IP

1. 6 games reached the peak of user size at 20M, 4 of them are IP games, IP elements play the big part of the mobile games

10. S. Korea's blockchain gaming industry rattled by TerraUSD, Luna debacle

THE STOCK PRICES OF KOREAN GAME COMPANIES HAVE PLUMMETED COLLECTIVELY

• South Korean gaming firms that feature virtual coins and other blockchain functionalities remain on alert over the adverse effects of the recent collapse of the TerraUSD and Luna cryptocurrencies
• Cryptocurrencies operated by South Korean gaming companies for in-game purchases and trading have undergone volatile trading since May 10, when TerraUSD and Luna started showing signs of trouble
• C2X, a blockchain platform cryptocurrency that previously used TerraUSD as its main platform., once plunged to the 500 won range between May 11 and May 12, compared with its price range between 2,100 won and 2,300 won on May 10
• C2X was created by game company Com2uS Corp
• Wemix, a cryptocurrency run by Wemade Co., the maker of the play-to-earn game "MIR4 Global," dropped by 28 percent during the TerraUSD fiasco

11. A16z debuts US$600 Million Gaming Fund to Add to Web3 Bets

THE FUND’S BACKERS INCLUDE A NUMBER OF EXECUTIVES IN THE GAMES WORLD, INCLUDING CO-FOUNDERS OF KING, DISCORD, ROBLOX, ZYNGA, BLIZZARD AND RIOT GAMES

•  Silicon Valley venture-capital firm Andreessen Horowitz debuted a $600 million fund dedicated to gaming startups, stepping up its bets on so-called Web3 technology just as a broader market decline underscores the volatility of the cryptocurrency-based sector
• Web3 refers to a new iteration of the internet, with products and apps that are built on the blockchain, include the exchange of cryptocurrencies or tokens, and at times are housed in a virtual world, dubbed the metaverse
• Andreessen Horowitz has been an investor in games since well before the Web3 craze, including with a 2009 bet on Zynga Inc., one of Silicon Valley’s gaming pioneers