On March 27th, the Hong Kong-listed company CMGE (HKG: 0302) released its 2023 annual performance report. According to the report, CMGE achieved total operating income of 2.6 billion yuan in 2023. After adjustments, the net profit reached 5.379 million yuan, marking an overall turnaround from loss to profit with a year-on-year increase of 103% due to the low base in 2022. After deducting the impact of non-operating income and expenses on profit, the operating profit stood at 107 million yuan.
It is worth noting that on March 28th, CMGE disclosed a share repurchase plan. The board of directors believes that the current trading price does not reflect the intrinsic value and business prospects of the company. They plan to use up to HK$100 million for the repurchase of shares on the open market. The board of directors may also decide to further utilize share repurchase authorization based on market conditions. The repurchase of shares will not exceed 10% of the total number of shares issued as of June 2, 2023, which is 275,267,200 shares, and the shares will be cancelled after repurchase. This move also reflects the confidence of the company’s board of directors and management team in its long-term strategy and development.
According to the financial report, in 2023, CMGE attracted over 92.87 million new registered users, marking a 9.8% increase compared to the same period. Among other key performance indicators, the average monthly active users rose to 17.05 million, a 9.9% year-on-year increase, while the average monthly paying users reached 1.19 million, up by 5.8% year-on-year. The mini-game business generated 600 million yuan in revenue, becoming a new growth point for the company.
In 2023, CMGE successfully obtained licenses for multiple games planned for release, such as “Sword and Fairy: Wen Qing”, “Ultraman: The Gathering”, “Swallowed Star: Dawn” and “Cultivation Fantasy” all of which officially launched in 2023. Concurrently, with the rapid development of AIGC technology, CMGE applied AIGC to its independent research and development as well as publishing processes, achieving cost reduction, efficiency improvement, and game innovation. According to the financial report, players under the age of 18 accounted for less than 0.01% of CMGE’s gaming revenue in 2023.
The Publishing Business Performed Steadily, With Mini-Games Emerging as A New Growth Point
In 2023, CMGE’s publishing business generated revenue of 2.133 billion yuan, with overseas revenue accounting for 10.6%. In teams of games, the role-playing card game “Sword and Fairy: Wen Qing,” co-published by CMGE and Qingci based on CMGE’s proprietary IP, officially launched in June 2023. In its first month of its launch, it ranked first in the Apple App Store’s free games list and 14th in the best-selling games list, earning a recommendation from the Hardcore Alliance Superstar. In December 2023, “Sword and Fairy: Wen Qing” launched in the Hong Kong, Macao, and Taiwan regions, ranking the first in the Apple App Store’s free games list and the best-selling games list in these three areas, with third place in Taiwan’s best-selling games list.
Additionally, the card mobile game “Cultivation Fantasy” developed by Love Games with investment from CMGE, was launched in May 2023. In its first month of its launch, it ranked first on TapTap’s hot list and achieved third place in the Apple App Store’s free games list and 21st place in the best-selling games list.
The jointly distributed game “Soul Land: Shrek Academy” by CMGE and TanWan Games obtained its game license in July 2023. In August 2023, it began pre-registration activities, attracting over 6 million pre-registered players. It was officially launched on January 31, 2024, and in its first month of its launch, it ranked the first in the Apple App Store’s free games list and topped TapTap’s hot list.
While the performance of new games has been outstanding, previously launched games have also provided stable revenue streams for CMGE. CMGE’s self-published games like ” The New Legend of The Condor Heroes: Iron Blood and Loyal Heart”, ” Rakshasa Street: Chosen One” and ” Soul Land: God of Battle Arise”, as well as co-produced games with third parties like ” One Piece: The Voyage ” and ” Dynasty Warriors: Hegemony” along with other games already in operation, continued to contribute revenue and profits to CMGE in 2023.
At the same time, CMGE has been actively expanding its mini-game segment. As of 2023, CMGE has launched multiple mini-games such as “Sword and Fairy: Jiuzhou” and “Fire at Will” bringing in revenue exceeding 600 million yuan. The newly authorized mini-game “Country Love Story” by Ben Shan Media started monetization tests at the end of 2023 to validate its commercial model, with plans for an official launch in the first half of 2024. Mini-games have become an incremental segment in the game industry, with the market showing rapid growth. According to data from Qutoutiao Engine, the overall market size of Chinese mini-games exceeded 40 billion yuan in 2023 and is expected to surpass 60 billion yuan by 2024. With such rapid market growth, the mini-game segment is poised to become a new growth curve for CMGE.
Looking ahead to 2024, CMGE’s publishing business still holds many highlights. Multiple heavyweight IP games like “Soul Land: Reversed Spacetime”, “Fight Break Spheres”, “Naruto: Konoha Master”, “New Romance of the Three Kingdoms – The Legend of Cao Cao ” and “Daily Life of Chat Group” are planned for market launch in 2024, with many of them already completing testing and opening pre-registration.
Additionally, CMGE will continue to aggressively promote the mobile game “Sword and Fairy: Wen Qing” in the Hong Kong, Macao, and Taiwan regions, and plans to sequentially launch games like “Soul Land: Shrek Academy”, “Fight Break Spheres”, “Soul Land: Reversed Spacetime” and “Code: FA” in these regions. Furthermore, CMGE will introduce the mobile game “New Romance of the Three Kingdoms – The Legend of Cao Cao” in the Japanese market to boost gaming revenue in overseas regions.
Moreover, CMGE anticipates launching over 10 mini-game products in 2024, including “Country Love Story”, “Sword and Fairy: Wen Qing” and “Naruto: Konoha Master” These games have all obtained licenses and are expected to generate substantial publishing revenue for CMGE.
Self-Developed Business Steadily Progresses; Open-World Game “Sword and Fairy World” Has Achieved 4 million Pre-Registrations and Will Commence Commercial Testing.
In 2023, CMGE’s R&D revenue reached 215 million yuan, with R&D investment totaling 370 million yuan. During the reporting period, CMGE applied AIGC technology to aspects like artistic production and copywriting in games, reducing game development costs and improving development efficiency.
In terms of self-developed games, CMGE’s wholly-owned subsidiary Wenmai Interactive independently developed the Three Kingdoms-themed strategy mobile game “World of Castellan” exclusively distributed in the domestic market by 37 Interactive. It officially launched in November 2023 and received a recommendation from the Hardcore Alliance Superstar in its first month of its launch.
It is understood that “World of Castellan” is the first Three Kingdoms-themed strategy game launched by CMGE. With CMGE’s and 37 Interactive’s experience in promotion and publishing, CMGE is expected to enter the Three Kingdoms-themed strategy game arena and secure a position through “World of Castellan” In 2024, CMGE will continue to develop and launch its second Three Kingdoms-themed strategy game, “Code: Lord” with the aim of gaining more market share in the Three Kingdoms-themed strategy game category.
In terms of esports games, CMGE’s holding subsidiary Shanghai Zhoujing has developed the sports competitive PC game “Hoop City：3V3”, which obtained its license in May 2023 and commenced monetization tests on December 29, 2023. It is scheduled to be launched officially in the summer of 2024.
Before 2023, CMGE’s self-developed games such as “The World of Legend – Thunder Empire”, “Legend of Dragon City”, chess and card games, PC games, and cloud games have been continuously updated and iterated, contributing steady revenue to the company.
In terms of heavyweight self-developed games, the open-world game “Sword and Fairy World” based on the Sword and Fairy IP obtained mobile and PC dual-platform licenses in June 2023. “Sword and Fairy World” has started pre-registration activities, with pre-registration numbers exceeding 4 million, and underwent two rounds of testing in 2023. Monetization Tests to verify the commercial viability of the product before launch are also set to begin soon, with plans for the game to officially launch within 2024.
According to the information, “Sword and Fairy World” incorporates a substantial amount of storyline content such as mainline plots, character-specific storylines, and side quests to explore humanistic themes with players. Additionally, players can explore multiple spaces freely, experiencing the joy of surprise and exploration.
In addition to the rich storyline, “Sword and Fairy World” integrates deeply with AI. Non-player characters (NPCs) in “Sword and Fairy World” will behave and converse according to the natural environment, enhancing the realism of the virtual world. Players can also utilize AI features such as AI character customization, AI voice, AI motion generation, and AI+UGC (User-Generated Content) to enrich personalized expression, improve player interaction experience, and stimulate creativity within the virtual world.
The IP licensing business is experiencing further growth, with the value ecosystem of the Legend of Sword and Fairy IP continuing to expand.
In 2023, CMGE’s IP licensing business achieved revenue of 257 million yuan, representing a 75% growth compared to 2022.
CMGE has deeply expanded its collaboration along the entire industry chain of the “Legend of Sword and Fairy” IP, covering areas such as games, film and television, animation, content literature, music, derivatives, and location-based entertainment. CMGE has partnered with top-tier collaborators in related fields to jointly create the Legend of Sword and Fairy IP universe.
Regarding IP industry chain collaborations, CMGE successfully launched the story card mobile game “Sword and Fairy: Wen Qing” in 2023, achieving excellent results. The idle RPG game “Legend of Sword and Fairy: new start” developed in collaboration with Kaiying Network, was launched in 2023 and ranked fifth on the WeChat mini-games chart. The first fan community based on the “Legend of Sword and Fairy” IP, called ” Sword and Fairy Alliance” was opened for user registration in 2023.
In the film and television sector, CMGE has collaborated with iQiyi and others to produce “Legend of Sword and Fairy 4”, which was officially released on the iQiyi platform in January 2024. Additionally, “Legend of Sword and Fairy 6” produced by Shandong Film and Television, was also released on Tencent Video in January 2024. The television series “Legend of Sword and Fairy 1” produced in collaboration with Penguin Pictures, was completed filming in 2022 and is expected to be released in 2024.
In the animation field, CMGE has entered into a strategic partnership with Penguin Pictures to co-produce animated series for “Legend of Sword and Fairy 1” and “Legend of Sword and Fairy 3”. The trailer for “Legend of Sword and Fairy 3” was released in 2023, with plans for the full animated series to be released in 2024.
In addition to film and animation, CMGE continues to develop merchandise based on the Legend of Sword and Fairy IP. For instance, in the trendy collectibles field, CMGE collaborated with Pop Mart. Following the release of the first blind box series “Legend of Sword and Fairy Chinese Traditional Festival Series Figures” in 2022, CMGE launched the second blind box series “Legend of Sword and Fairy Chinese Traditional Musical Instrument Series Figures” for global sale in 2023.
Furthermore, CMGE collaborated with renowned partners such as LiangXiaoSuMei, Kaitian Studio under Shanghai Qikun Network Technology Co., Ltd., and Bandai Namco Entertainment (Shanghai) Co., Ltd., to release merchandise such as Han Lingsha figures, Yue Qingshu statues, and Jiu Jianxian figures in 2023. Additionally, in November 2023, CMGE partnered with Qishu Youyu, HippoJoy, and INTINY to officially launch the production of interactive image works based on the “Legend of Sword and Fairy” IP.
Additionally, CMGE has planned and is preparing to launch the Legend of Sword and Fairy Location-Based Entertainment project, which is currently in the final stages of pre-operation. It is expected to commence trial operations in four provinces and municipalities, including Shanghai, Hangzhou, Anhui, and Chongqing, within 2024. By bringing the Legend of Sword and Fairy game into real-life settings, the project aims to combine online marketing activities of the “Legend of Sword and Fairy” IP with offline activities, providing fans with a more immersive and interactive offline experience.
Looking towards the future, in line with the trend of cross-industry collaboration between game IPs and film, animation, and other industries, the Legend of Sword and Fairy IP will continue to release a wealth of high-quality content. CMGE’s establishment of an IP game ecosystem and the layout of the Legend of Sword and Fairy IP universe based on the “Legend of Sword and Fairy” IP will continue to expand the ecological value of the IP, potentially driving further growth in CMGE’s own value and ensuring sustained development.
For further information, please contact:
PEANUT MEDIA LIMITED
Direct Line: +86-755-61619798 x8210
Email: hswh.project@czgmcn.com
