ByteDance’s product launches are highly data dependent, with test results determining which features go live and algorithms determining which videos users see. When it comes to games, however, there are many more than just these factors. ByteDance’s game division Nuverse, which is responsible for the development and publishing of major games, has shrunk rapidly over the past three months due to a lack of top-tier titles and limited return on investments, according to a report by LatePost.
Since its launch in 2018, Nuverse has received unprecedented patience from ByteDance, as its employees are not required to achieve a return on investment during the first two years. The firm doesn’t require clear progress within two months, and has even looser deadlines than its peers.
During its four years, Nuverse once had more than 3,000 employees across teams in five cities: Beijing, Shanghai, Hangzhou, Guangzhou and Shenzhen. When ByteDance announced its entry into the game business, some in the industry thought that Nuverse would bring change to the existing Chinese game market, but four years on, it is miHoYo that has had the strongest impact.
In a 2016 interview with Caijing.com.cn, ByteDance’s founder Zhang Yiming posited that people love games because they are “seeking a sense of control.” The tech firm’s exploration of this field started at the end of 2017, and in 2018, the company officially decided to set up a game division.
In the first half of 2018, nearly 40% of games launched ads on ByteDance’s search platform Toutiao, according to mobile advertisement analytics platform App Growing. ByteDance has overtaken Baidu to become the second-most-popular game advertising channel behind Tencent. By May of that year, Douyin’s game advertising revenue had reached twice that of Toutiao.
After March 2018, regulatory approval “numbers” authorizing the release of new online games were suspended, and the total revenue of the Chinese game market in the first half of the year increased by 5% year-on-year. An individual familiar with the matter said ByteDance was relatively optimistic and believed that it was only a temporary transitional period. At the end of the year, the approval of new game numbers resumed.
In 2018, ByteDance established a team responsible for the agency and for the R&D of large and medium-sized games. Nuverse was originally an efficiency app startup that was acquired by ByteDance in 2017. Nuverse’s top management team is from external recruitment. One game industry veteran said many planners and technologists with more than five years of experience had received offers from ByteDance.
The high salary has led to the establishment of five R&D and publishing studios in four cities in half a year. By the end of 2020, the number of Nuverse’s employees had reached 2,000.
At a meeting in December 2020, Zhang Yiming commented on the firm’s game business, saying, “Although there is no big breakthrough, there is some progress… A game made over a million dollars a day… A few other games were released, and their performances are not so good. Be patient.”
The game earning over a million dollars every day is “RO Ragnarok: The Birth of a New Generation,” which generated over 2 billion yuan in 2021. The game was developed by The Dream Network with authorization by Korean game developer Gravity and licensed by Nuverse.
A few “not so good titles” include “Art of War: Infinity Evolution” and “Rules of Survival.” The latter was launched by NetEase in 2017 and once had 200 million users worldwide in 2018. However, it gradually declined after the launch of PUBG, a mobile game co-produced and licensed by Tencent, and then was shut down in December 2021.
In terms of its game agency business, the main competitors of Nuverse are Tencent, NetEase, Perfect World, 37 Interactive Entertainment, Bilibili, and others. Game agencies are highly dependent on the prior accumulation of companies in the industry, and the competitive advantage of Nuverse is weak.
Apart from its rocky game agency business experience, Nuverse is facing strong pressure from the self-developed game industry. In September 2020, Genshin Impact, which miHoYo has been working on for four years, was released. Many game companies based in Shanghai, such as Lilith Games, HyperGryph and Papergames, have also made achievements comparable to those of large companies in segments once considered too small by Tencent and NetEase. In 2021, the popularity of these companies led to an overall increase in the salary of game talent based in Shanghai and Hangzhou.
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It has been difficult for Nuverse to find the best talent without profits. In 2021, it acquired Moonton Games for more than $4 billion to increase its internal talent, although it was not a cost-effective deal according to several industry insiders. One veteran in the field said the fair price was $3 billion at most.
From June to early September, Nuverse carried out the largest organizational adjustments and project cuts since the establishment of the department. Among the four self-developed studios, Shanghai 101 Studio was disbanded, while the team of Flowers Ariel only retained around 40 people, and was then merged into the distribution department. The remaining two teams, DC Worlds Collide and All Star, have been wholly handed over to other partners. Oasis Studio in Beijing and Jiangnan Studio in Hangzhou both had projects cut, and some staff have been transferred to Pico, Moonton and a self-developed game project in Shenzhen.