XY2 players number statistics update, part 5

One can find my last NTES related post here:

Part 4 here

In part 4, I provided the short term impact of 50% gaming fee increase on NTES's number 1 game, XYQ (Fantasy Westward Journey). In this blog post, I will provide the same data for NTES's number 3 game, XY2 (Westward Journey 2).

The following is the player statistics for XY2:

Date	Date	Number of Players (in thousands)	Comments
1/12/2013	Saturday	708
1/19/2013	Saturday	710
1/26/2013	Saturday	705
2/2/2013	Saturday	696
2/9/2013	Saturday	587	New Year Eve
2/10/2013	Sunday	605	50% fee increase, New Year Holiday
2/11/2013	Monday	604	Chinese New Year Holiday
2/12/2013	Tuesday	597	Chinese New Year Holiday
2/16/2013	Saturday		Work date, server count not recorded

Again, we make 2/9/2013 as the date of seperation, and average the first four row and compare to the average the last four row, we will have the following numbers:

Average number of XY2 players BEFORE the 50% fee increase = 705

Average number of XY2 players AFTER the 50% fee increase = 598

Thus, the decrease = -(705-598)/705 = -15.2%

Comparing to the -20.1% decrease for XYQ, the impact to XY2 is even less. If one went to the gaming forum in China, one will find all kinds of planned strikes, etc. against NTES over the higher gaming fee, frankly, I am a little surprised that the impact is so mild.

So far, there is no crashing of players numbers. It is still too early to tell. The player statistics for the next two weeks shall tell us which way this goes. But so far so good.

A quick players statistics update, part 4

One can find part 3 here:

Part 3 here

With the 50% players fee increase for NTES's number 1 game (XYQ) and number 3 game (XY2), as well as XY3, one would think it would have impact on the number of players playing the games.

At this important point for NTES, this policy will either push NTES into two extremes, either super growth or devastation. It all depends on how the players react to the new policy.

Of course, the player hate the 50% increase in cost. The players also don't like the presence of in-game items. If the players want to play item-based game, there are hundreds of free games for them to choose. XYQ, XY2, and XY3 are time-based paying games. Players are getting double hit, they have to pay to play the game as time-based games, they also have to pay for the in-game items as item-based games.

NTES is banking on that as these games start to become social games, player will have a hard time leaving these games because all their friends are playing in these games. Also, it is the first time in 10 years NTES raised the gaming fee. Average Chinese had been getting richer by a lot more than 50% in the past 10 years, the impact to their disposable income is actually quite small.

To find out if the players abandon the games or not, I will track the game server counts ( I had documented the methodology of the game server counts in many of my previous blogs). The following is the player statistics for XYQ:

Date	Date	Number of Players (in thousands)	Comments
1/12/2013	Saturday	1420
1/19/2013	Saturday	1377
1/26/2013	Saturday	1395
2/2/2013	Saturday	1299
2/9/2013	Saturday	1153	New Year Eve
2/10/2013	Sunday	1170	50% fee increase, New Year Holiday
2/11/2013	Monday	1047	Chinese New Year Holiday
2/12/2013	Tuesday	1046	Chinese New Year Holiday
2/13/2013	Wednesday	1068	Chinese New Year Holiday
2/16/2013	Saturday		Work date, server count not recorded

As one can see, there is a distinct decrease in the number of players playing XYQ. If we make 2/9/2013 as the break point, and average the first four row and compare to the average the last five row, we will have the following numbers:

Average number of XYQ players BEFORE the 50% fee increase = 1373

Average number of XYQ players AFTER the 50% fee increase = 1097

Thus, the decrease = (1097-1373)/1373 = -20.1%

So, what does this mean? It is hard to tell. First, it is pretty clear that there are players lost. Also, Chinese New Year is slow season for gaming.

But what is clear is there are no crashing of player base.

But it is still too early to tell which way this goes. It could still go either way.

2/16/2013 was a working date for China (to compensate for the one week Chinese New Year holiday), so its game server data is not useful. But this weekend and next weekend would start to give us the trend line. I will keep updated as I have new game server statistics. 

Detailed description of NTES's Gaming Fee Increase, part 3

One can find my last NTES related post here:

part 2 here

It took me two blog posts to finally get here. In this post, I will describes the new policy change in detail. One can find the official policy change here:

XYQ announcement

The policy became applicable on 2/10/2013. As of today (2/21/2013), I didn't find any news about this in English. It amazes me how inefficient Wall Street can be some time.

These policy changes apply to XYQ, XY2, and XY3.

Before the policy change, players spend 0.4 RMB to play one hour of games. For example, if a player spend 4 RMB to buy a game card for XYQ, he could play XYQ for 10 hours.

The new policy change has two major components. The first component is it increases the gaming fee by 50%. Now, to play 10 hours, a player has to spend 6 RMB (or 50% greater than 4 RMB).

The second component is it introduced monthly playing card and yearly playing card for these games.

Let me go through the monthly playing card. This monthly playing card is the most restrictive card I have ever heard. It is nothing like that in the west. Typically, a monthly card of other companies works like this: one pays a set monthly fee, then the player can play as much as he wants within that month.

But that is not that way at all for NTES. In this case, a player spend 60 RMB to buy a monthly card. For that, he can play "exactly" 100 hours. What happens if he only play 60 hours within that month? Tough luck, time runs out and he loses 40 hours of play time. What happens if he plays 110 hours within that month? The monthly card would only cover the first 100 hours. That player would have to spend an extra 6 RMB to buy the last 10 hours.

Why would anyone want to buy the monthly card? Because for 60 RMB, one not just get 100 hours of play time, one also get 200 "Jade".

For NTES investors, those "Jade" represents another exciting form of future revenues. It represents a new direction for NTES to uncover future revenues.

In China, there are two form of games. One is item-based free-to-play games. In this type of games, player plays for free. Game company makes money by players buy in-game items.

Another form of games is the time-based paying game. For games like XYQ, XY2 and XY3, players spend money to play the game. Those kind of games are not supposed to have in-game items. But now, with the "Jade" as a new form of game currency, player can buy many in-game items.

So far, NTES are starting to form the in-game store. NTES is taking its time to slowly introduce more in-game items. Most of these in-game items don't affect the player balance.

For the next few quarters, XYQ and XY2 shall get a big revenue boost of 50% due to the fee increase alone. After that, the revenue increase from the in-game items sales shall start to kick in.

Finally, both policy changes will not be popular with the players. Both changes are big risk big reward moves by NTES. There are real chances that those moves can back fire. But it is easy to monitor the player game server statistics to see if there are major player defection. I will monitor them in the next few weeks/months to see which way it goes.

But one would think it would be feast or famine. Either most player tolerate it and NTES get super high growth rate or player defection starts to catch on and NTES loses two of its most important franchises.

State of NTES's game stable, part 2

One can find my last NTES related post here:

My last NTES post

In part 1, I laid out the bi-polar scenario that NTES could either re-accelerate and start to grow like a new start-up ( with a growth > 50%) or could become devastated (cut the company in half). All of that depends on how the players react to this new policy.

Now, I will provide a detailed description of the new policy.  For the detailed analysis of this policy, I will leave for a future blog post.

Again, this policy is used for all of NTES's in-house developed time-based paying games. One can break up all NTES's games into three categories.

The first category is its in-house developed time-based paying games. There are three games in this category and they are XYQ, XY2, and XY3. XYQ is the number 1 game for NTES. XY2 is the number 3 game for NTES. XY3 is a relatively unimportant game for NTES.

The second category is licensed time-based paying games. This includes WOW (World of Warcraft) and SC2 (Starcraft 2). In terms of revenue, WOW is the number 2 game for NTES. But it had been losing players in the last couple of years. SC2 is not really time-based. But it is not very popular and is not very important for NTES.

The third category is its in-house developed item-based free-to-play games. There are about ten games in this category. But four games are important. TX3 is the most technical advanced in-house game for NTES and is most likely the number 4 game for NTES. QN is also a very popular game is most likely the number 5 game for NTES. DTWS2 and WH are new games developed in 2012 and are the games chiefly responsible for the increase in revenue in the last quarter. They are the number 6 and 7 game for NTES.

By the way, to get to the web site for these games. Just type the initial for these games. Then follows with .163.com. For example, to get to DTWS2, just use the web address: dtws2.163.com

The games in the first category probably represents 45% of NTES gaming revenue. The games in the second category probably represents 25% of NTES gaming revenue. The games in the third category probably represents 40% of NTES gaming revenue.

The games in the 1st category are very old games (8 to 10 years old) and is not growing very much. They are very stable because they became social games in that most players go there to hang with their friends. The gaming fee policy change applies to games in this category. Before the policy change, it was assumed that there will be minimal revenue increase from this category (if any). But the new policy changes everything. Now, we could potential get up to 50% increase in revenue from this category.

The games in the second category is basically Blizzard/Activision's WOW. It had been losing players badly in the last year. It is still a little too early to tell, but it seems to have stabilized. WOW is starting to becoming old. It is not going to increase player base. But it is not going to lose much player base either. It is starting to becoming games in the 1st category. The current gaming fee increase doesn't apply to WOW. But I have no doubt that if NTES is able to pass the fee increase to the players for the games in the 1st category, WOW will be next.

The games in the 3rd category are the jewels in NTES's eyes. These are new games (from a few months old to a couple of years old). They are still in the accelerated growth phase. In addition, NTES have four major new games in development. After 2 to 3 years of fruitless trial and error, NTES seems to had figured out how to generate major new games. But games in this category will not be affected by the new gaming fee increase. Because games in this category are item-based games, while the gaming fee applies to time-based games.

OK, I guess I got carry away with the general description of NTES games. I guess I will provide the detailed description of the gaming fee increase in the next blog post.

Rumor: Sina got a new President in charge of Weibo

One can find my last post on SINA here:

My last SINA post

At this point, a lot of articles in China are talking about this news.

Jack Xu had been appointed as the co-President in charge of Weibo. Jack Xu is currently the Vice President in charge of World business for Cisco. Before that, he had been the Vice President in Ebay as well as the Chief Technology Officer for NTES.

Clearly, he had excellent resume.

But for the short term, more interruption and direction changes for Weibo.

If I have time, I will talk about Weibo in the future.

If I ask you, how much will China's equivalent of twitter, CNN, Fox News, New York Time, Washington Post, LA Times, .... combined and add a pinch of Facebook cost? That shall be how much Weibo cost. In a future post, I will tell why Weibo is so popular and why it is filling a function for China that Twitter and Facebook can only dream off.

It is going to be a long write-up, so I will do it when I have some free time.

Netease at a cross road, part 1

One can find my last NTES related post here:

My last NTES post

Sorry for not keep this blog up to date. Frankly, NTES, SINA, SOHU, BIDU, etc. had become very stable companies. They had become big and any change will only have minimal impact to these companies. Besides, I had becoming very busy in my real job.

I am still busy in my real job, so I will not be able to make many blog post in the future.

But something incredibly significant happened to NTES, it would either accelerate NTES from a stable big company to a company that is growing like a new start-up. Or it could also cut NTES in half and will probably cut NTES's stock prices from $50s to the teens (or even less than $10/ADS).

At this point, I had no idea which way it will go.

But first, what happened?

On 2/10/2013: NTES announced 50% price increase for three games. It applies to its number 1 most popular game, XYQ (or Fantasy Westward Journey), its 2nd most popular game, XY2 (or Westward Journey 2), and a less popular game, XY3 (or Westward Journey 3). It applies to all its self-developed time card paying games.

The official announcement for XYQ:

XYQ's new gaming fee policy

The official announcement for XY2:

XY2's new gaming fee policy

The official announcement for XY3:

XY3's new gaming fee policy

XYQ and XY2 are NTES's foundation games. They probably contribute to 40% to 50% of all of NTES's gaming revenues. They are very old games (XY2 is about 10 years old and XYQ is about 8 years old). They don't grow much but they provided reliable revenue quarter over quarter.

Those games are turn based MMORPG games. The gaming pace is designed to be so slow that players are spending most of their time gossiping with their friends. They are probably closer to Facebook than other games.

The cost to play these games was 0.4 RMB/hour (RMB is Chinese currency name). That cost was established 10 years ago when XY2 started operation.

The new gaming fee is 0.6 RMB/hour. For the last 10 years, inflation in China is definitely more than 50%. Chinese can definitely support this new cost structure. Actually, NTES could probably increase gaming cost every few years. NTES will probably increase the gaming fee for World of Warcraft by 50% to 0.6 RMB/hour also. But all of that depends on if this gaming fee increase can be passed on to players without significant player revolt.

Also, we are only talking about gaming fee increase. The upside is up to 50% increase in revenue in the affected game. Since there is no affect on the spending, all these new revenue will add directly to the earning. We might be able to see 100% 200% (I am just guessing now) increase in earning.

But on the other hand, the down side could be there are player revolts and the revolts gain traction and completely destroyed these games. Since XYQ and XY2 are top two games for NTES (much more important than World of Warcraft is to NTES), destruction of XY2 and XYQ will be devastating to NTES.

In the second part of this series, I will provide detailed description of this new cost policy.