The “Mini games Empire” that attracted 1.7 billion players went to Hong Kong for an IPO. Why is it still losing money for a single game with a turnover of more than 2 billion yuan?

(Photo source: Visual China)

Blue Whale News March 7 (Reporter Shao Yuting)2months27On the 20th, the official website of the Hong Kong Stock Exchange showed that Xingbang Mutual Entertainment, the king of Mini games, submitted a listing application, with CICC serving as the exclusive sponsor.

Xingbang Mutual Entertainment has distinctive family characteristics. As the leading company in China’s Mini games track, it quickly started to grow with authorized games such as “The Legend of Jiuzhou Fairy Sword” in the early days. After the second generation took over, faced with the squeeze from giants such as Tencent and Netease on the Mini games market, they were eager to“The transition from traffic-driven to technology-driven is wavering in ensuring flow and investing in innovation, resulting in poor reputation for new works and lack of quality products.

Over-reliance on large items makes the empire aura of Mini games no longer exist

The prospectus shows that Xingbang Mutual Entertainment was established in2014In 2009, it was a mobile game company in China that integrated development, distribution and operation capabilities.2017In 2008, the company’s first game,”Dragon City Dominance”, was officially released. Currently, the company owns iconic products such as “The Legend of the Sword of Jiuzhou” and “The Fate of the Sky Sword”. As of2024years9months30Day, cumulative number of registered players17Hundreds of millions.

According to reports, Xingbang Mutual Entertainment is the largest mobile game company in China based on the flow rate of Mini games;RPGIn terms of game history, Xingbang Mutual Entertainment is the third largest mobile game company in China; in terms of game history, Xingbang Mutual Entertainment is the sixth largest mobile game company in China with integrated development, distribution and operation capabilities.

The rise of Xingbang Mutual Entertainment and“Mini games bonus”In 2008, the company launched “The Legend of the Sword of Jiuzhou”, relying ononclassicAdaptations and lightweight gameplay quickly opened up the marketas of2024years9In June, the cumulative sales volume of the game exceeded 10 billion yuan,Another self-developed “Sky Sword” also performed well, with the two products accounting for more than 90% of the company’s sales.

But2024In 2008, this dual-core drive model suffered heavy losses, and the revenue of “The Legend of the Sword of Jiuzhou” in the first three quarters plummeted year-on-year73.2%to5.3billion yuan,”Sky Sword” also fell into growth stagnation due to intensified competition in the industry, causing the company’s overall revenue to be halved and losses occurred.

According to the prospectus,20222024In the first three quarters of the year (hereinafter referred to as the reporting period), Xingbang Mutual Entertainment recorded revenue as follows56.75100 million yuan,53.27100 million yuan,20.95100 million yuan; the net profits recorded were3.28100 million yuan,1.97100 million yuan,-0.47100 million yuan; gross profit margins are30.6%、26.3%、33.5%。

During the reporting period, these two games together contributed % of total revenue respectively.88.9%、90.5%、91.7%and70.2%。Among them, the income from “The Legend of the Sword of the Nine States” is approximately28.47100 million yuan,23.03billion Yuan and5.27100 million yuan, accounting for:50.1%、43.3%and25.2%; The income from “Sky Sword” is approximately22.01100 million yuan,25.14billion Yuan and9.44100 million yuan, accounting for:38.8%、47.2%and45.0%。

Regarding the decline in performance, Xingbang Mutual Entertainment said that the main reasons were the decline in revenue from the core games “Tianjian” and “Jiuzhou Immortal Sword” and the adjustment of distribution strategies, which led to pressure on gross profit, the uncertainty of the continued release and operation of mobile games, China Mobile’s fierce competition in the gaming industry, as well as changes in Chinese laws, regulations and policies that may affect its business.

Since the games developed by the company are mainly downloaded and played for free, the vast majority of revenue comes from the sales of virtual items in the games. As the core products enter a recession, the company’s monthly paying users also show a downward trend. During the reporting period, the average monthly paying users were107Thousands of people,90.80Wanrenji54.60Ten thousand people; the average turnover per paying user is490Yuan,524Yuan and456Yuan.

The flow of water continues to decline, but the company’s sales costs remain high. During the reporting period, Xingbang Mutual Entertainment’s sales costs were39.38billion,39.28billion Yuan and13.93100 million yuan, accounting for % of total revenue69%、74%and66%。The company’s cost of sales is mainly used to pay third-party developers, third-party game publishers, advertising and marketing agencies and third-party distribution channels. During the reporting period, the commissions charged by third-party publishers were34.63100 million yuan,35.81100 million yuan,11.99100 million yuan, accounting for the proportion of sales costs87.9%、91.2%、86.1%。

Highly concentrated equity, products are out of reach

2014In 2008, when the domestic mobile game market was in the ascendant, Chengdu businessman Guo Zhongjian established the company with his keen sense of smell, and initially entered the game track with agency distribution and lightweight operations.

2017In 1999, Guo Zhongjian’s daughter Guo Xiaolan joined the company and became a member of Chengdu Xingbang.CEOThe company’s identity-led strategy has shifted to independent research and development, promoting the birth of hit games such as “The Legend of the Sword of the Nine States” and “The Legend of the Sky Sword”, and changing the company’s brand name from“9130

from“From the beginning to the second generation,Guo Xiaolanhelmafter, started in the companyimplementation“AI+globalization”transformationTrying to break dependence on a single product.In 1999, the company was establishedAIThe laboratory, which plans to apply machine learning to user portraits and advertising, has also launchedAIThe system Sun Great Sage Zhuge Liang improved development efficiency and launched18Development of reserve games.

But2024In the first three quarters of the year, Xingbang Mutual Entertainment’s R & D expenses were1.66100 million yuan, accounting for only the proportion of revenue for the same period7.92%, and sales expenses are always at a relatively high level,2024Accumulated in the first three quarters of the year6.12100 million yuan, accounting for % of revenue for the same period29.2%, among which, promotion and advertising expenditures are as high as5.74100 million yuan.

heavysaleslightresearch and developmentAs a result, the company’s products fell into a hopeless situation,as of2024Year, company17Only among the R & D teams3New tours generate large-scale revenue, New works such as “The Abyss in the Other World: The Great Spirit King” suffered a decline in reputation due to technical flaws when they were launched.TapTapThe scores in3.7。

In addition, faced with the squeeze of giants such as Tencent and Netease on the Mini games market, untilXingbang Mutual Entertainment, which established an overseas distribution team only a year ago, has long missed the early window of sailing. Its main focus is on the Southeast Asian market,2024Insufficient annual revenue contribution5%。

IPOIn the past, Guo’s father and daughter entertained each other for Xingbangthecontrolling shareholder, two people hold90.7%Voting rights. Among them,Guo Zhongjianshareholding57.54%, Guo Xiaolan holds shares33.16%, Chengdu High-tech Venture Capital is the only external shareholder, holding shares9.30%。

2022years4month,2022years11months andIn 2000, Chengdu Xingbang, a subsidiary of Xingbang Mutual Entertainment, declared dividends to equity shareholders respectively4000Ten thousand yuan,1.12100 million yuan,1.50Billion yuan, of which,2022Total dividends per year accounted for2022Annual net profit46.3%;Annual dividends accounted for % of annual net profit76.1%, and almost all of the dividends fell into the pockets of Guo’s father and daughter.

as of2024years9months30On the 20th, Xingbang Mutual Entertainment’s net operating cash flow-5.85100 million yuan, a year-on-year decrease162.57%;heldcash and cash equivalents5.94billion Yuan。