Channels are no longer king: Tencent Games will be forced to open its arms

At the just concluded Tencent 2014TGC, the author asked Tencent Vice President Lu Peng a question: After the user base of the two major channels, WeChat and QQ, has gradually reached its ceiling and the growth has begun to slow down, in contrast, there are more and more games on these two channels, and more and more other projects are being connected. While the numerator remains unchanged, the denominator is getting larger and larger, and the benefits of a single product are getting smaller and smaller. How does Tencent solve this problem?

Lu Peng answered this way: the role of channels can be infinitely magnified in the early stage, but what can ultimately make you successful in the industry is the quality of the game, not how strong your promotion ability is or how good your channel coverage is. This is also why we will not launch more products on WeChat and QQ, but will limit the number of products to a certain level. The main reason is also to set a threshold in terms of quality.

Some time ago, Ding Lei, CEO of NetEase, also said, "Whether it is a PC game or a mobile game, the product is still king. Of course, second- and third-rate products will rely more on channels. Good products ultimately rely on product quality to attract users to use them for a long time and improve their experience."

It is interesting that Tencent and NetEase said this at the same time. Two well-known points are:

1. Although Tencent has strong R&D capabilities, we can see that Tencent is still strongest in platforms and channels, such as QQ in the PC game era, WeChat and QQ in the mobile game era, and App Store, which is being developed. In terms of products, Tencent’s internal statement earlier said that the four most profitable games are “CF, DNF, QQ Speed, and QQ Dance”, but we know that Tencent’s most famous products are CF, DNF, and LOL, and these three products are all agents. Of course, the developer of LOL was fully acquired by Tencent. So, it is obvious that Tencent is strong in channels.

2. What about NetEase? Last year, it launched Yixin with great fanfare, saying that it was preparing for the mobile game channel, but the actual situation is clear. Of course, NetEase's R&D capabilities may be worse than Tencent's, but in relativity, compared with its infinite weakness in channels, NetEase is at least not much worse than Tencent in R&D, and is definitely better than many CPs. Therefore, NetEase is strong in R&D.

When the first and second largest game manufacturers in China, one as a representative of the channel and the other as a representative of R&D, both say such things, we should face up to the current channel problem. Has the trend of channel being king in 2013 officially passed?

How did channel becoming king come about?

Speaking of the representative of channel being king in 2013, I have to mention a case here, a scene at CJ in 2013.

At that time, the CEO of a mobile game company enthusiastically traveled from Wuhan to Shanghai to look for opportunities, but the originally scheduled 4-day trip was shortened to 2 days. In his summary, the arrogant attitude of the mobile game channel and the 80% share ratio made him discouraged and impressed.

This is just a small microcosm. In 2013, mobile games exploded, and a large number of entrepreneurs and products entered the market, but the entire market was limited in size, and there were only a few good channels.

As for the products on the market in 2013, it can be said that they were basically all cut from the same mold: parkour, cards, chess, etc., they were nothing more than just a different tune.

Therefore, the function of the channel has been infinitely magnified, and few entrepreneurial teams can calm down and focus on product innovation itself under the external conditions of the mobile game boom and gold mines everywhere.

How did content gradually become king?

Before talking about this topic, we must first be clear that the game itself is a content-centric thing, but the explosion of mobile games led to the initial deformation.

By 2014, this abnormal situation was slowly changing. As Ding Lei said, perhaps channels can support second- and third-rate products, but truly first-rate products are no longer so dependent on channels.

First, mobile games began to lean towards heavy-duty games, eliminating a number of entrepreneurs because their funds and capabilities were not enough to support a heavy-duty game.

Secondly, capital is receding, and cases of getting rich overnight are becoming less and less common. When capital retreats, a new batch of entrepreneurs are eliminated.

Due to these two reasons, only some pretty good CPs will be able to stay, and everyone can really focus on making products.

Finally, the channel has reached its ceiling and user growth has begun to slow down. At this time, high-quality products are needed to support the channel, rather than the channel feeding back to the product.

Channel theory is gradually dying out, and content is king in this era

Let’s talk about something more concrete, taking Tencent as an example.

According to Tencent’s latest Q3 financial report, the monthly active users of WeChat and WeChat were 468 million, a month-on-month increase of 6.8%, a decrease from the 10.7% month-on-month increase in Q2.

It is obvious that the volume of WeChat users has reached a level that includes almost all smartphone users in the country. What we need to know is that the time users use their mobile phones and access WeChat is basically a fixed time. A problem this brings is what I said at the beginning, the numerator has basically been determined.

Let's look at the denominator again. Apart from the games launched one after another by Tencent, WeChat and Mobile QQ are also endowed with many other functions, such as e-commerce.

The denominator starts to get bigger.

The direct result is that every time Tencent released a game, it would top the App Store charts. Even if it didn’t get No. 1, it would be replaced by a game released at the same time and take the No. 2 position. But now there are products that have broken this myth. The situation where a game will top the charts once it lands on Tencent’s trump card channel is gone forever.

Tencent's mobile game revenue in Q3 this year was 2.6 billion yuan, and the month-on-month decline is the best proof of this.

Of course, this is just one reason. The function of the channel has reached its ceiling. Another reason is that when the channel reached its ceiling, Tencent began to increase its efforts to introduce third-party games.

When introducing third-party games, it is inevitable that a portion of the revenue will have to be distributed.

According to Tencent, this is to segment the market and better satisfy users.

This statement is correct, because there is indeed market demand and the era of segmentation is coming, but more importantly, Tencent’s R&D capabilities cannot guarantee that every product is a high-quality one.

Chen Tianqiao, former chairman of Shanda, once said, "We can make an excellent product and an excellent company, but the characteristic of the cultural industry is creativity, and creativity can never exist in the same person, it is constantly discovered among all the people."

Therefore, Tencent is increasing its openness. Among the 19 products that have been or will be released in Q4 this year, 11 categories are covered, and 11 of them, or more than half, are from third parties.

If the proportion of third parties is not increased, the performance of each of Tencent's finished products may not be bad. Perhaps in Q3, the revenue will even be higher, but the reputation among users is bound to be affected, so Tencent will continue to increase its pace of embracing third parties.

Although revenue will be affected to a certain extent in the short term, this is not the main contradiction at all. The main contradiction is that the era when game channels are king is over. In order to ensure its own sustainable development and to satisfy increasingly sophisticated users, Tencent has to give up short-term revenue in order to ensure its reputation in the channels.

According to Lu Peng's explanation, Tencent's channels are an advantage, but not an advantage that will ensure the success of Tencent Games, because channels are no longer king and it will eventually come down to content. Tencent's core competitiveness in the next stage will be "understanding of the game itself, refined operations, and accurate grasp of user needs."

The spring of channels has passed, and it will enter a long tug-of-war period, while the spring of high-quality CPs is about to come.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.