On April 15, Perfect World (002624:SZ) disclosed its annual report. During the reporting period, the company achieved operating income of CNy 7.791 billion, a year-on-year increase of 1.57%; net profit attributable to the parent company was CNY 491 million, a decrease of 64.31% from the same period last year; basic earnings per share were CNY 0.26, a year-on-year decrease of 63.89%.
Perfect World is a global cultural and entertainment industry group that focuses on the research and development, distribution, and operation of online games, while also expanding into the film and television production business. Looking at its different sectors, the gaming sector is the main source of revenue for Perfect World, accounting for 85.61% of total revenue, although it slightly contracted compared to 2022. The film and television business saw rapid growth in 2023, increasing by 222.46%, currently representing 13.27% of total revenue.
As of the mid-year performance report in 2023, the revenue from its global gaming and film/television business accounted for 81.71% and 17.15% of total income, respectively, indicating that the gaming business far outweighs the film/television business in terms of revenue contribution.
Specifically, in the gaming sector, the company achieved operating income of CNY 6.669 billion in 2023, a decrease of 7.91% from the same period last year, with a net profit of CNY 490 million, a decrease of 69.21% from the same period last year. Perfect World explained that due to the impact of the game product development cycle, the company launched fewer new games. Several existing games continued long-term operations through content updates and refined marketing, but due to the natural life cycle, revenue declined compared to 2022, leading to a corresponding decrease in performance contribution. The net profit from its gaming business even broke its own "lowest" record of CNY 720 million set in 2021, marking the lowest value in nearly five years. In the film and television business sector, the company achieved operating income of CNY 1.034 billion, an increase of 222.46% from the same period last year, with a net profit of about CNY 93 million, an increase of approximately 39% from the same period last year.
As early as 2021, when the gaming business saw a significant decline, Perfect World had already made decisions for "optimization and streamlining," such as selling part of its gaming business and optimizing its workforce. It is reported that by early 2022, Perfect World had laid off nearly a thousand employees, and the short-term optimization did have a certain effect—Perfect World's net profit increased by 273% in 2022. However, nearly a third of the net profit still benefited from Perfect World's sale of some research and development studios and teams in Europe and the United States for CNY 400 million.
In 2023, Perfect World's gaming business development showed signs of fatigue once again, seemingly echoing the decisions made in 2021, aiming to streamline its workforce. According to recent leaks from Perfect World's netizens and third-party sources, Perfect World is suspected to undergo significant changes in projects and personnel. For instance, some employees from projects such as "Perfect New World(Chinese:完美新世界)" and "One Punch Man: World(Chinese:一拳超人：世界)" are rumored to be laid off, the much-anticipated "Soul Cage(Chinese:灵笼)" is to be sold, the first project team will undergo significant layoffs, and the third project team will partially go independent, while the seventh project team will be packaged for sale...
Although Perfect World's gaming business development is currently stagnant, a review of its development history reveals the significant contribution of the gaming business to Perfect World. In 2005, Perfect World launched its first 3D MMORPG online game, "Perfect World," which captured a large number of domestic players. The following year, this game successfully expanded overseas to countries and regions such as Japan, South Korea, Vietnam, and Singapore. Seizing the opportunity, Perfect World then launched its second online game, "Wulin Waizhuan(Chinese:武林外传)", which was the company's first attempt to deeply integrate a popular TV series with a game. The ripple effect brought about by this game also propelled Perfect World's foray into the film and television sector.
Throughout the year, Perfect World has marked a pivotal moment in its gaming business expansion into overseas territories. Subsequently, the company has steadfastly pursued a route focused on intellectual property (IP) products, creating multiple IP-based products such as "Zhu Xian(Chinese:诛仙)" and "Chi Bi(Chinese:赤壁)". The following year, Perfect World became listed on the American stock market.
After years of development, Perfect World has solidified its strategic development approach, emphasizing a commitment to a globalized path, expanding its overseas business footprint through acquisitions and investments, integrating gaming and film, and maintaining a dual-focus strategy on gaming and film. However, Perfect World has not yet fully established itself overseas.
On one hand, the film and television business has not become a primary revenue source for Perfect World. A comparison of the financial reports from 2019 and 2022 shows that the revenue from its film and television business was CNY 1.178 billion and CNY 320 million, respectively, indicating a sustained loss in revenue. Furthermore, while the gaming and film integration strategy maximizes IP value and captures a portion of IP users, the time constraints associated with film and television effects limit its impact. Additionally, issues such as unfinished film and television projects or other factors affecting IP have been recurrent, all of which are significant factors influencing the final outcome for IP-based games.
Moreover, Perfect World still faces the challenge of maintaining the momentum of new products. The launch of products such as "Phantom Tower(Chinese:幻塔)" (distributed by Perfect World in the Korean region) and "Perfect World: Battle of the Gods(Chinese:完美世界：诸神之战)" at the end of 2021 and the beginning of 2022 significantly boosted Perfect World's gaming revenue in 2022. However, looking ahead to the 2023 performance forecast, although these products remain core profit generators for Perfect World, their influence has not met expectations.
For a product to succeed in overseas markets, localization is essential to meet the aesthetic and preference requirements of international users. Domestic IPs have limited influence on certain overseas users. In the international market, Perfect World not only competes with well-known IP products such as "Tomb Raider" and "Star Wars," but also faces competition from major companies like Tencent and NetEase, which has influenced its development in overseas markets.
Investment in the field of AI and Games (AIGC) might serve as a significant means for Perfect World to reverse its decline. In its financial reports, Perfect World mentioned the application of AI technology in various stages of its development pipeline, including intelligent NPCs, scene modeling, AI drawing, and AI voice dubbing. Additionally, the company officially announced the integration of "Zhu Xian World(Chinese:诛仙世界)" with NVIDIA's Audio2Face technology at the NVIDIA AI conference, enabling the direct transformation of audio into animation.
Regarding the company's operational plans for 2024, in the gaming business, Perfect World has indicated that it is actively optimizing the recently completed new round of testing for the new traditional Chinese-style MMORPG "Zhu Xian World" based on the company's IP "Zhu Xian." Furthermore, games such as "One Punch Man: World," "Fate/Grand Order: Realm of the Round Table(Chinese:乖离性百万亚瑟王：环)", "Persona: Nightfall(Chinese:女神异闻录：夜幕魅影)", and "Light Ink, Water Cloud Village(Chinese:淡墨水云乡)" are actively undergoing external testing based on their development progress. In the film and television business, the company will adopt an operational strategy of "reducing quantity and enhancing quality," continuously providing high-quality film and television works for its audience.
As of the time of writing, Perfect World's stock is priced at CNY 9.86 per share, with a total market value of CNY 19.228 billion.