In 2017, NetEase launched the "Chicken Eating" mobile game "Wilderness Action". Considering that there were not many similar mobile games in the market at that time, "Wilderness Action" was extremely popular, and the number of players even surpassed the top domestic mobile game "King of Glory" at one point.
However, in 2019, Tencent launched "PlayerUnknown Battlefield" (later renamed "Peace Elite"). Although it was released relatively late, Tencent attracted a large number of NetEase players with its own social advantages, becoming the new king of the "chicken eating" mobile game track.
This Friday (December 15th), Tencent's latest party mobile game "Yuanmeng Star" was officially launched. As one of Tencent's key new products this year, "Yuanmeng Star" is widely regarded by the outside world as a competitor to NetEase's "Egg Boy Party", which has also raised concerns among many market insiders: may the market competition between "Peace Elite" and "Operation Wilderness" be staged again in the party mobile game track a few years ago?
At the launch of "Yuanmeng Star", JPMorgan analysts lowered NetEase's revenue forecast for the next two quarters, expecting it to partially affect NetEase's future revenue for "Egg Party".
However, Wall Street investment bank analysts such as Goldman Sachs and Morgan Stanley also pointed out that with the continuous expansion of the party game market, the number of players for both games can achieve growth in the future.
Tencent's New Game Snipes NetEase Again?
This Friday, Tencent's new game "Yuanmeng Star" was officially launched, which not only drove Tencent's stock price up by over 4% in the morning, but also drove up the concept stocks of Yuanmeng Star in the A-share market. As of Friday's close, Aofei Entertainment, China Travel Service United, and Evergrande High tech have hit the limit up, while Xunyou Technology has surged 7.6%.
"Yuanmeng Star" was created by Tencent's Tianmei Studio and was released in January this year. It is one of Tencent's key new products for gaming this year. Due to the fact that "Yuanmeng Star" and NetEase's popular game "Egg Party" both belong to the party game track, this game is also believed to bring considerable competitive pressure to NetEase.
On Thursday Eastern Time, NetEase's stock price fell 2.33% in the US stock market. In the past three weeks, due to the threat of "Yuanmeng Star", NetEase's stock price has accumulated a decline of over 10% from its high on November 20th. However, since the beginning of this year, NetEase's stock price has still risen by a cumulative 47.36%, far outperforming other internet technology companies such as Tencent.
It is understood that "Egg Party" was officially launched in May last year and is still one of the most downloaded applications in China, popular among leisure users (especially young female players). During the Spring Festival this year, the income of "Egg Boy Party" once exceeded that of "Genshin Impact" of Miha Tour, and became the top three mobile game income in China. In just November, the download volume of "Egg Party" still ranked in the top five on the IOS end.
Morgan Stanley analysts stated in Thursday's report that the launch of "Meta Star" may have a 2% to 3% impact on NetEase's revenue. The bank also lowered NetEase's revenue expectations for the next two quarters by 4% and 5%, respectively.
Goldman Sachs: The party game market is expected to further expand
Goldman Sachs holds different views on the prospects of NetEase's Egg Party.
Goldman Sachs wrote in its report that although there may be some overlap in the user goals of these two games, Goldman Sachs expects the overall potential market for party games to rapidly expand after the entry of Meta Star. These two games will jointly attract more shooting and casual game players, rather than simply competing for player relationships.
Goldman Sachs emphasizes that the competition between "Meta Star" and "Egg Party" in terms of user numbers and user time is worth paying attention to.
They expect that the annual revenue of "Egg Party" is expected to reach 7 to 8 billion yuan this year, and it is expected to drop to 4 to 5 billion yuan next year. Goldman Sachs emphasized that this is mainly due to the normal decline in game lifespan.
Due to its launch approaching the peak season of the Lunar New Year, Goldman Sachs expects that "Yuanmeng Star" will generate revenue of 800 to 1 billion yuan in its first month of launch, and the revenue in its first year of launch will be between 5 billion to 6 billion yuan.
Zeng Xiaofeng, Vice President of Niko Partners China, a gaming consulting company, also said, "Party games are becoming increasingly popular in China as a type of game, and the arrival of 'Yuanmeng Star' should help expand the entire potential market, rather than simply eroding the user base of 'Egg Party'."
The market may be overly concerned about the competitive pressure of Egg Party
It is understood that NetEase will also release more games in the future to make up for the decline in popularity of "Egg Party", including "Shooting Eagle" and "Yan Yun Sixteen Sounds".
It is estimated that the percentage of "Egg Party" in NetEase's total revenue in the third quarter is in the median to high single digits.
Morgan Stanley analysts such as Alex Poon wrote in their report:
"We believe another buying opportunity is emerging, mainly due to excessive market concerns about the competitive pressure of 'Egg Party'... We expect that with NetEase announcing the release dates of several strong games, its stock price will regain momentum."