Interview Synopsis

China’s cloud gaming market landscape & development trends in 2021

  • Public Equity
  • TMT
  • Greater China

Cloud gaming in China is growing rapidly, boosted by advances in areas such as 5G and edge computing. Graphics processing unit virtualisation, and audio and video compression technologies, are also maturing. Third Bridge Forum interviewed a former general manager at Youzu Interactive Co Ltd to discuss the industry’s characteristics, competitive dynamics and business development trends.

Cloud gaming in China: who’s winning and who’s losing?

With strong user volumes and content, we heard that leading companies such as Tencent Games, NetEase Games and Migu “may further carve up this market in 2021”. Plagued by sluggish user growth and high operating costs, medium-sized platforms for individual users are “facing difficulties and even the risk of exit”, while some business-oriented companies, such as Welink and Yunlu, are “doing great”. 

One of 2021’s standout games mentioned in the Interview was Genshin Impact, which launched at the end of 2020 and has also gripped international players. However, Genshin “is a relatively high-end game, so it’s not going to look perfect on a regular phone”. Becoming a pure cloud game would yield more commercial gains, we heard. “Of course, it already has a very good cloud version. This is a successful step.”

Although creating cloud versions of traditional games is “easy and [a] mature [process] now”, native-cloud games are still a relatively new concept. The specialist anticipates that the leaders will “dabble in cloud-native games in the future”, starting small before going larger — but this will be a 3-5 year process. 

Taking a closer look at customer-oriented cloud gaming platforms, we heard that China Mobile’s Migu, Tencent Games’ Xianyou and Start, and NetEase-based cloud gaming platforms including NetEase Cloud Games and NetEase Cloud Music are tier 1 in terms of games volume, number of players and market size. The expert added that “many customer-oriented cloud game companies will be invested or acquired by them in the future.”

We also heard that major business-oriented companies have raised funds in 2021, with Welink netting RMB 150m from Xiaomi, and Haima Cloud receiving over RMB 200m. Other names mentioned were Kuaipan, Lon Microsystems and Yunlu. “Yunlu’s game engine and its plan to promote cloud game live-streaming is one of the highlights in 2021.”

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The information used in compiling this document has been obtained by Third Bridge from experts participating in Forum Interviews. Third Bridge does not warrant the accuracy of the information and has not independently verified it. It should not be regarded as a trade recommendation or form the basis of any investment decision.

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