The NetEase Games booth at the China Joy conference in Shanghai on July 30, 2021.
Arjun Kharpal | CNBC
GUANGZHOU / HANGZHOU, China – NetEase is preparing to release a major game that it hopes will bolster its international expansion efforts as competition intensifies with incumbent Tencent and newcomer ByteDance.
In a rare interview with international media, Hu Zhipeng, vice president of NetEase and one of the top bosses of the tech giant’s video game business, laid out the company’s plans to increase revenue at the company. ‘foreigner. He also spoke of NetEase dipping its toes into new areas including console and cloud gaming.
The overseas push comes at a time when Chinese regulators are scrutinizing the country’s tech giants and concerns about a further crackdown on the gaming industry rise.
On Thursday, NetEase will release “Naraka: Bladepoint” to the world, a 60-player battle royale style game in which players compete to be the last player standing. Other popular games in the genre include “Fortnite”, for example.
“Naraka: Bladepoint” targets international players. NetEase hopes that 50% of its gaming revenue will come from overseas in the future, up from around 10% currently, Hu said.
To achieve this, NetEase plans to use famous brands or intellectual property (IP) to exploit foreign players. The Hangzhou-based company is developing games based on the epic “Lord of the Rings” by JRR Tolkien as well as the “Harry Potter” series by JK Rowling.
The second part of the strategy is to release games from popular genres outside of China. This is where “Naraka: Bladepoint” comes in.
It combines Chinese culture with the battle royale gameplay known to gamers around the world, according to Hu.
“We are also trying to combine traditional Chinese culture with game genres that most Western gamers are familiar with, to create new games,” Hu told CNBC, according to a Mandarin translation of his comments.
He said Western players “will not find it difficult to play the game, while they may be interested in Eastern cultures. It can create a whole new experience for Western players.”
A screenshot of the battle royale game “Naraka: Bladepoint” from NetEase which will be released worldwide on August 12th. “Naraka: Bladepoint” is part of NetEase’s desire to expand internationally.
NetEase has not been as aggressive in its international expansion as Tencent has. The latter focused on a strategy of acquiring large game companies such as the maker of “League of Legends” Riot Games, as well as taking stakes in many other studios.
NetEase, meanwhile, has focused on minority stakes in companies around the world such as Niantic, which makes “Pokemon Go”.
Hu said the company continues to seek investments and partnerships internationally.
“We are looking for overseas partners in terms of games R&D (research and development) and output (games) through direct investment or cooperation,” said Hu.
Push for console and cloud gaming
Chinese game developers like NetEase and Tencent have generally been strong in PC and mobile games. This is because video game consoles like Sony’s PlayStation or Microsoft’s Xbox were banned in China for 14 years until 2014. As a result, Chinese developers have focused their efforts on other market segments. .
This is starting to change.
NetEase has confirmed that it is working on a console version of “Naraka: Bladepoint” but has not given a timeline for its release.
The call is clear. Consoles, including hardware and software, accounted for just over 4% of the total games market in China in 2020, according to market intelligence firm Niko Partners. But in 2021, consoles are expected to account for 28% of the global $ 175.8 billion game market, according to Newzoo, another games research company.
This is why making console games is a way for Chinese developers to appeal to international gamers.
In 2019, NetEase opened a games studio in Montreal, Canada, to help with international expansion. Last year, the company opened another studio in Japan dedicated to the production of console games.
“Our Sakura studio in Japan and (the studio) in Montreal are dedicated to the development of console games, as a third of the overseas market share is occupied by console games,” Hu said, adding that the market was “quite attractive”.
NetEase also has an eye on cloud gaming, which allows gamers to play titles without the need for dedicated hardware like a console. Gamers can effectively stream games to a device just like they would a movie on Netflix.
US tech giants Google, Facebook, Amazon and Microsoft have all launched cloud-gaming services.
NetEase started testing its own cloud-gaming services in 2019 and “Naraka: Bladepoint” is on the service. But Hu also said the company is ready to work with other cloud gaming platforms in China and offer the game on platforms that are managed internationally by other companies.
“Naraka Bladepoint is actually an opportunity for other cloud gaming platforms… There are many cloud gaming features in this game. I welcome cloud gaming platforms to work with us” Hu said.
Growing competition and regulatory challenges
China’s gaming industry has grown rapidly in recent years with a changing regulatory landscape and emerging competition.
Tencent and NetEase dominate the industry, but more recently TikTok owner ByteDance has also entered the foray.
“We are confident that we are sufficiently prepared to meet the challenges based on our development capabilities,” Hu said in response to a question about increasing competition.
Meanwhile, game companies continue to face a difficult regulatory landscape.
In 2018, Chinese regulators froze the approval of new versions of video games over concerns about eye problems in children. Regulators are also still concerned about video game addiction among children under the age of 18.
Last week, a publication affiliated with the Chinese official newspaper Xinhua, published an article calling the game “opium”. The article called for further restrictions on the gaming industry to prevent addiction and other negative effects on children.
But the article was later withdrawn and republished with a new title and references to “opium” were removed, hinting that it may not reflect Beijing’s official point of view.
CNBC’s interview with NetEase’s Hu took place before the publication of the article criticizing the games. But in response to a question about the regulations, Hu said such gaming industry rules are “necessary.”
“Large companies such as Netease and Tencent welcome such regulatory operations. The regulations in turn push us to promote the quality of our products,” said Hu.
“(Regulation) is an issue we all face, but I’m not worried that it has a real influence on us. Rather, it drives us to create better products.”
– Additional reporting by Iris Wang of CNBC.