The new year promises to be an exciting one in the video game industry. New consoles are due to come out ahead of the 2020 holiday season from Sony and Microsoft, and new monetization models for games will start to emerge as more cloud gaming services launch.
The technologies and services emerging this year will set the tone for the next decade in the video game industry. But there are two things investors can bet on with confidence: Mobile game sales will continue to grow faster than console and PC games, and the companies with the most engaging content will prosper.
NetEase: A leader in China’s growing mobile games market
NetEase is a leading internet and online game services provider in China. The stock has tripled over the last five years on the back of strong growth across its business lines, including online games, online education, e-commerce, and advertising. The company’s bread-and-butter is gaming, which produces most of its revenue and gross profit. Over the last five years, total revenue and earnings are up 415% and 275%, respectively, but with China’s gaming market expected to grow to more than three times its estimated $60 billion value in 2017 over the next decade, NetEase’s rise is far from over.
China has the most-engaged and largest base of online gamers in the world. NetEase develops in-house and licenses over 100 mobile games, with notable hits including Fantasy Westward Journey and Westward Journey Online. Also, it’s a go-to partner for foreign companies that want to connect with China’s burgeoning mobile game market. Since 2008, NetEase has been the distributing partner of Activision Blizzard‘s top titles in the Middle Kingdom, including World of Warcraft, Diablo, Heroes of the Storm, and Overwatch.
It also has seen tremendous growth from its e-commerce businesses, including the cross-border retail platform Kaola and the Yanxuan marketplace. But these businesses have not generated much profit for the company. In the third quarter, management sold Kaola to Alibaba for $2 billion to focus on better growth opportunities like online games, online education, and its cloud music service Yunfeng, which just received a $700 million investment from Alibaba.
The… Continue reading at The Motley Fool