One can find my last NTES related post here:
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.