Text/Lin Zhi

Today (November 14), NetEase released its financial report for the third quarter of 2024. During the quarter, the company's net revenue was RMB26.2 billion, up 2.8% sequentially and down 3.9% year-on-year. Net revenue from games and related value-added services was RMB20.9 billion, up 4.0% quarter-on-quarter and down 4.2% year-on-year.

Among them, the net revenue of PC games increased by about 29% year-on-year and 30% quarter-on-quarter. This is probably thanks to the return of Blizzard's products. NetEase said that the number of daily active users of World of Warcraft increased by more than 50% compared to before the service was suspended, while the number of daily active users of Hearthstone increased by 150%.

According to the financial report, a number of NetEase products performed steadily in this quarter. Among them, "Journey to the West 2" achieved a record high in quarterly revenue; "The Fifth Person" grew revenue for the third consecutive quarter, with a record number of daily active users and concurrent players worldwide. Naraka: Bladepoint revenue also reached an all-time high, driving an increase in PC game revenue; Naraka: Bladepoint mobile reached No. 3 on the iOS best-selling chart shortly after its launch.

The mobile game "Against the Cold" cooperated with NetEase Fuxi to launch the world's first UGC-enabled 3D interactive companion system, and has more than 8 million agents, and recently returned to the top three best-selling iOS lists. "Egg Boy Party" has added five new gameplay methods: MOBA, chase and escape, werewolf killing, pet raising, and farm, and the daily active users have reached tens of millions.

In terms of overseas markets, "Peak Speed" was launched in Japan in August, topping the free charts of Apple and Google Play stores. The mobile game will be available in Hong Kong, Macau and Taiwan in November, while All-Star Street Ball Party is also preparing for global release.

In addition, NetEase disclosed the progress of a number of new products under development. A number of products such as "Destiny: Rising" and "Marvel's Secret Spell Mania" have been publicly unveiled; "Marvel Brawl" and "Sixteen Voices of Yanyun" are scheduled to be launched in December; The urban open-world RPG game Codename: Infinity is also about to start offline technical testing, and the game has now exceeded 5 million pre-orders worldwide.

Here's a look at the key takeaways from the Q3 earnings call related to gaming:

Q: Third-party data shows that there is some pressure on the turnover of the mobile game "Against the Cold" and "Egg Boy Party". What is the current situation within the company? Can you share your follow-up operation strategy?

A: In our just-concluded 1st anniversary celebration of the mobile game, the stickiness of players was very good, and the reflow even exceeded our expectations. In terms of operational strategy, we have been trying to balance commercialization with the in-game experience of players. In the long run, we are confident that we will continue to explore commercialization while ensuring that players enjoy the game.

"Egg Boy Party" is still one of NetEase's highest-ranking DAU products, and although it has encountered some challenges in commercialization, we believe that this is a stage in the process of operational development to gain experience. We believe that with the launch of long-term content, this product will continue to play its commercial value and gain long-term growth.

Q: I would like to know about the current situation of overseas studios, and we have seen that "Seven Days World" is performing well on Steam this year, can you share some specific operations? What are the follow-up plans of domestic studios in terms of going overseas?

A: Our strategy in terms of going to sea is mainly "walking on two legs". On the one hand, overseas studios develop products for the European, American and Japanese markets, and on the other hand, domestic studios develop products for overseas markets such as Japan, South Korea, Europe and the United States.

"Marvel Brawl" will be released on December 6, and "Outbounds" is scheduled to launch in the first quarter of next year. Both products are designed with bilateral competition, and we believe that through the synergy between domestic and overseas studios, NetEase can further develop the overseas game market."

In addition, NetEase's "Wilderness Action" and "The Fifth Personality" in Japan have also achieved good results. We believe that there will be more products in the overseas market in the future to make new progress and achievements.

Q: Compared to other AAA competitive shooters, what is the potential of Marvel Brawl? What metrics should we focus on to track its progress?

A: About Brawl, it's a new generation of superhero team competitive shooter with a unique gaming experience, and we hope it can open up a new market track in this popular category. The product has been tested on a large scale on PC and console, and the final test results are excellent, with a positive rating of nearly 95% on Steam, and the game is currently ranked seventh on the Steam Wishlist.

We're confident in the next release and will further refine key features before going live. The game will be released globally on December 6 and is expected to provide a powerful experience for users and provide unique gaming fun for a long time.

Q: Regarding Blizzard's re-launch of "World of Warcraft" and "Hearthstone" in China, the response has exceeded expectations. What are the different efforts the company has made to achieve this outcome? Does this mean that Blizzard's annual revenue contribution in the future will be higher than in previous years? Also, When will Overwatch return to the domestic market?

A: In terms of marketing and products, we have taken a multi-faceted effort to promote product operations, including cross-border cooperation with multiple brands to enhance the social impact of our products and attract a large number of new players. For example, announcing the return of Hearthstone at ChinaJoy became one of the highlights of the event.

Our performance on social media promotion, especially in video content, has exceeded 10 billion views on our social media videos. These results are the result of in-depth planning and meticulous execution. We have established a deep cooperative relationship in product and marketing, and believe that through innovation that meets the local needs of China, we can maintain a high level of user activity and willingness to pay. This gives us confidence in the future performance of Blizzard's products in the Chinese market.

There is no specific launch date to share regarding the return of Overwatch, but we see it as the next big product to reboot in China.

Q: Can you share some more details about Out of Bounds? Can you give us an update on the progress and expected release date of Codename: Infinity?

A: As mentioned earlier, Outsiders will be tested in China at the end of the year, and the specific release date will depend on the testing situation.

With regard to Codename: Infinity, we plan to conduct our first in-person player test at the end of this year, and we have invested a lot of R&D resources and high expectations for this product.

I can assure you that Codename: Infinity not only continues the tradition of the two-dimensional open world, but also incorporates a lot of innovation, which is based on NetEase's understanding of the game market and the observation of players over the past 20 years. We are confident in the game and will disclose further information in due course.

Q: Regarding the terminal game of Fantasy Journey to the West, can the management share the flow and operation trend of the game after the recent changes? What has been the feedback from players on the major changes made in the first half of the year?

A: The current data of the terminal game of "Fantasy Journey to the West" is relatively stable, and the revenue in August is the second highest in the whole year, and it is showing a steady upward trend. From August to October, some tweaks were introduced, and players showed a more welcoming attitude towards these contents.

At the same time, we plan to release new expansions and more optimized content at the end of the year to ensure the fun of the game and the stability of operations.

Q: How does management feel about the operation of Naraka: Bladepoint since its launch in July? Did it meet management's expectations? What content updates or promotions will be available for this game in the coming months? Also, what are the obvious differences between the mobile and PC versions of the gamer?

A: Naraka: Bladepoint mobile has added a total of 50 million users since its launch. In these four months of operation, we observed that although it is also an action competitive game, there is a big difference between the needs of mobile game users and mobile game users.

Overall, mobile game users have a more diverse set of needs, ranging from competitive-minded players to those with strong social needs, as well as those who prefer to collect appearances. Therefore, in future versions, we will not only meet these different needs, but also focus on providing differentiated content and services according to the differences between PC and mobile gamers.

In addition to the adjustments to the hero gameplay, we will also introduce new gameplay that is not available in the PC game in each version to better meet the pursuit of freshness by mobile game players. At present, Naraka: Bladepoint mobile game is in a healthy and stable state of development, and we are confident in its future performance.

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