More than half of the 32 gaming companies listed on the Chinese mainland predicted slowed year-on-year net profit growth for the first quarter of 2020, as small and medium-sized developers struggle to compete with bigger developers and acquire approval to launch new titles, game media GameGrape reported.
Despite the overall increased player activity and spending during the first quarter, which is primarily attributable to the stay-at-home orders aimed at preventing the spread of the coronavirus, 11 companies forecasted slower year-on-year net profit increases for the period. With the exception of three companies such as Jinke Culture and Durpalm, the other eight companies will report net profits lower than RMB 50 million for the first three months of 2020.
These 11 companies generally attributed the deacceleration in net profit growth to declining revenue from legacy titles, the absence of monetization approval for new games, and office and labor costs.
Six companies reported increased losses compared to the same period last year, citing shrinking revenue from their offline business and delays in the launch of new titles.
Only 12 mainland listed gaming companies will report increased net profits in their Q1 results, including known names such as 37 Interactive Entertainment, Perfect World, and Yoozoo Games. 37 Interactive Entertainment took the lead on the list with a net profit of RMB 700 million to RMB 750 million, with Perfect World coming in third with RMB 585 million to RMB 635 million.
37 Interactive Entertainment, in particular, said in its earnings results that it would launch more than 30 titles in 2020 despite the challenging macro environment.
China’s video game market saw 29.7% year-on-year growth in the first three months of 2020, according to an earlier report from China’s Game Publishing Commission (GPC) and research firm IDC. However, gaming giants reaped most of the growth gains, with eight of the 10 highest-grossing titles for the first quarter of 2020 coming from Tencent and NetEase.