HONG KONG, Sept 5, 2024 - (ACN Newswire) - The success of Black Myth: Wukong, a game steeped in the Chinese cultural aesthetics, is underscoring the vast potential for top-tier IP games from China and igniting confidence for developing high-quality products with global appeal.

At a recent interim results briefing, CMGE (0302.HK) management noted that “The success of games like Black Myth: Wukong, Wuthering Waves, and Zenless Zone Zero has reinforced our commitment to producing cross-platform blockbusters under the strategy of self-development,  proprietary IP operation, and self-publishing.”

As the Chinese game tycoon with the largest IP portfolio, CMGE is doubling down on leveraging major IPs like Legend of Sword and Fairy and One Piece. With a strong focus on technological innovation, CMGE aims to deliver high-quality, long-lifecycle games that redefine the revenue patterns and outlive industry cycle.

Traveling Light: Lean Operations Drive Steady Profits

On August 28, CMGE unveiled its financial results for the first half of 2024, reporting a total revenue of RMB 1.23 billion, including 14.3% from overseas operations, and an adjusted net loss of RMB 208 million.

The first half of 2024 saw severe challenges and volatility across the game industry. In response, CMGE adopted a more prudent financial approach by accounting for impairments on certain investments, write-downs on prepayments for unlaunched games, and adjustments to non-operating financial assets.

Through this adjustment, CMGE expects to “travel light and pave the way for future profitability. It also shows CMGE’s ongoing commitment to developing premium games anchored by strong IPs.

Despite industry turbulence, CMGE’s core operations have remained profitable throughout the first half of 2024, thanks to its sharp focus on an IP-driven strategy that continuously strengthens  player viscosity. Impressive key operational metrics include 14.392 million MAUs, 47.297 million new registrations, and 1.027 million monthly paying users contributing an ARPPU of 200.2 yuan.

By business segment, publishing was a big revenue driver, generating 1 billion yuan in the first half of 2024. Soul Land: Shrek Academy topped the Apple Store’s free games chart within a month of its debut in January, pulling in a monthly revenue of over 100 million yuan. Fights Break Firmament: Peak Confrontation secured the second spot on the chart within a month of its debut in June, setting the stage for further growth in the second half of the year.

CMGE has made remarkable strides in global expansion, raking in 176 million yuan from overseas publishing, a year-on-year increase of 41.5%. A major contributor to this growth was the release of Legend of Sword and Fairy: Wen Qing an RPG card game based on the popular Legend of Sword and Fairy IP. Launched in December 2023 across Hong Kong, Macau, and Taiwan, the game soared to the top of the Apple App Store’s free charts in all three regions, showcasing the lasting popularity of the Legend of Sword and Fairy series among Chinese-speaking players.

On the R&D front, CMGE reported an R&D revenue of 126 million yuan and an R&D investment of 110 million yuan in the first half of the year. Notably, R&D expenses dropped by 58.71% compared to the same period last year, thanks to the integration of AIGC into game development, which raised efficiency and reduced costs. Meanwhile, CMGE’s highly anticipated Sword and Fairy World is already under final test. Reductions in design and development costs inspire a more optimistic outlook on future profitability.

CMGE is intensifying its focus on the Legend of Sword and Fairy IP, strategically extending its influence into film, animation, and merchandise. This multi-faceted approach has consistently unlocked new revenue streams, enhancing the brand’s value and market presence. In the first half of this year, CMGE’s IP licensing revenue surged to 107 million yuan, marking a substantial 79% year-over-year growth. This impressive performance stems from a series of high-profile adaptations of the Legend of Sword and Fairy series, including Sword and Fairy 4, a TV series produced in collaboration with iQiyi; Sword and Fairy, a TV drama based on Sword and Fairy 6 and developed alongside Shandong Film and TV; and The Return of Xiaoyao, a reinterpretation of Legend of Sword and Fairy coproduced with Tencent Video. These adaptations have not only captivated audiences but also garnered critical acclaim, further solidifying the franchise’s stronghold in the market.

Leveraging its premier IP assets, CMGE has maintained steady growth while strategically streamlining its balance sheet through accounting impairments. This positions the company for renewed momentum in the competitive game industry.

All About the Game: Chinese-Inspired Sword and Fairy World Gears Up for Launch

For CMGE, thriving in shifting market cycles isn’t about short-term wins but about building long-term capabilities. The company’s “product-first” philosophy centers on delivering high-quality games based on top-tier IPs, helping it stand out in a crowded market and avoid the pitfalls of low-quality saturation. As CMGE Chairman Xiao Jian recently stated, “IP is more than just a cultural symbol—it’s a value system and almost a belief. In fact, it has become the cornerstone for creating competitive barriers in the game industry.”

A key example of this strategy is Sword and Fairy World, an open-world RPG rooted in the iconic Legend of Sword and Fairy IP. After more than three years of dedicated endeavor, the game has successfully secured licenses for both PC and mobile platforms, showcasing CMGE’s commitment to excellence.

Sword and Fairy World, a game derived from one of China’s most cherished IPs, features a vast and immersive open-world experience. Spanning 384 square kilometers, the game is rich in traditional Chinese cultural elements, allowing players to explore breathtaking landscapes—from the picturesque scenery of Jiangnan to the majestic peaks of Mount Shu and the mysterious miao regions. As Chinese cultural themes gain traction in gaming, insiders suggest that Sword and Fairy World has a chance of becoming a major hit, potentially rivaling titles like Black Myth: Wukong.

CMGE also employs immense efforts in elevating gameplay, doing all out to create a top-tier open-world RPG. On the one hand, it gives the best play to the cultural connotation of its IPs and keeps adding contents. On the other hand, it also invents new ways of gameplay, having introduced a unique pet collection system inspired by Chinese mythology and fantasy to innovate core gameplay. CMGE continues to upgrade visual fidelity and environmental realism to deliver a more immersive interaction and create a comprehensive, next-level player experience that resonates with both domestic and global audiences.

CMGE is setting a new standard for player immersion by integrating AI-driven NPCs into its upcoming games. These NPCs will react to the environment and engage in conversations that mirror real-world interactions, creating a vibrant, lifelike social ecosystem within the game. Players will also have access to advanced AI-powered customization tools, including facial recognition and voice modulation, allowing for more personalized expressions and interactions and sparking players’ creativity in the virtual world.

Building on the success of the renowned Legend of Sword and Fairy IP, Sword and Fairy World has repeatedly ranked among the “Most Anticipated Games” of 2024. Having successfully passed the first three tests, the game is nearing its final test before a full release later this year. The number of pre-registrations is already approaching 5 million and could surpass 10 million by the time of debut.

CMGE’s focus on IP-driven, premium games is paying off handsomely. By capitalizing on the popular Legend of Sword and Fairy IP and potential video and animated adaptations, CMGE is successfully broadening its audience base, enhancing user viscosity and lowering customer acquisition costs. This strategy positions the company for sustained profitability. A cornerstone of CMGE’s approach is its emphasis on open-world games, a growing industry trend that greatly increases user capacity and game lifecycle. Openness and creativity are set to drive higher player engagement and LTV. The eagerly awaited Sword and Fairy World, CMGE’s upcoming open-world title, will be available across multiple platforms, with the PC version projected to achieve a gross margin near 70%.

Industry analysts forecast that the launch of Sword and Fairy World will notably increase the share of long-cycle products in CMGE’s lineup. This not only highlights the lasting value of the Legend of Sword and Fairy IP， but also redefines the traditional profitability trajectory for games, paving the way for sustained, high-revenue growth. With this forward-thinking strategy, CMGE is primed for enhanced profitability and long-term financial success.

Growth on the Horizon: CMGE’s Strong Pipeline Set to Fuel Expansion

CMGE is ramping up its global expansion and refining its product lineup to bolster the stability and predictability of its long-term growth. With an impressive slate of titles set for the second half of 2024, CMGE is gearing up to enhance its performance reliability.

In the second half of 2024, CMGE’s publishing division will make a significant impact with a series of high-profile IP-based game launches. Key upcoming titles include Soul Land: Space and Time Reversal , Daily Life of Chat Group, Naruto: Konoha Masters, New Romance of the Three Kingdoms: The Legend of Cao Cao, Country Love: Business Life , Chunqiu Mystery, and the casual mini-game Sanqian Huanshi. The recent launch of Soul Land: Shrek Academy in Hong Kong, Macau, and Taiwan on August 22, 2024, soared to the top of the Apple App Store’s free charts in all three regions during its debut week. Looking ahead, CMGE is planning to release Smash and Code: FA in Hong Kong, Macau, and Taiwan and bring Dynasty Warriors: Hegemony to the Japanese market in the second half of the year. With these strategic moves, CMGE aims to solidify its position and drive continued growth across key global regions.

CMGE is betting big on its internal development to fuel growth in the second half of the year. Leading the charge are key titles including Sword and Fairy World and World of Castellan , which will benefit from expanded promotional efforts, alongside a new installment in the iconic franchise, Code: Dark Night Legend. These self-developed games are expected to make a substantial impact on the company’s overall performance.

“Strategy is not predicting the future. Instead, it’s about making decisions today to be ready for an uncertain tomorrow,” analysts emphasize, channeling Peter F. Drucker’s wisdom. CMGE exemplifies this with a robust IP-driven, product-first strategy. By honing in on high-quality game development, the company is building a unique competitive moat to secure long-term stability and eventually outlive industry cycle.

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