With the acceleration of 5G construction in China, there are always many doubts about the impact of 5G landing.
Zhu Jun, an Internet co-analyst at China Merchants Securities Media, shared the recent research on South Korea, the first country to realize commercial services for 5G consumers, at the Jinmen Financial Roadshow, combing its 5G commercial development path in detail, and sorting out the diversified application content under 5G in South Korea. This is of great value for further exploring the various changes that may occur after the landing of 5G in China.
<h1>First, the global 5G wind, why can South Korea come out on top?</h1>
1. The global 5G process has accelerated, and South Korea has taken the lead in realizing 5G commercialization
The global 5G process is accelerating. According to IHS statistics, as of June 30, 2019, 33 operators in 20 countries around the world launched commercial 5G networks and services, more than double the number of commercial networks in the first quarter of 2019.
Among them, South Korea took the lead in launching consumer-facing 5G commercialization in April 2019, and South Korea's three major operators SK Telecom, KT and LGU+ launched 5G commercial networks and the first enhanced mobile broadband services with government support.
The time for official large-scale adoption in the United States is very close to that of South Korea, with AT&T and Verizon launching their eMBB businesses in the first week of April 2019, and Sprint and T-Mobile also launching 5G services.
According to Lifewire statistics, as of August 2019, there are about ten countries in the world where 5G has been officially commercialized, including South Korea, the United States, the United Kingdom, Germany, Finland, Switzerland, etc.; And China, Japan, Russia, France, Australia and other countries have conducted 5G testing, and it is expected that commercial applications can be achieved by the end of 2019 or 2020 in the short term.
A few countries such as India, Brazil, South Africa and other countries have also begun to develop 5G technology. According to GSMAIntelligence, by 2025, 5G networks will be commercially available in 111 countries and regions around the world, and the global 5G process will accelerate.
China has made rapid progress in 5G commercialization, and Chinese manufacturers are leading in 5G technology. In early June 2019, China issued 5G licenses to three telecom operators and China Radio and Television, and then began to deploy 5G networks on a large scale. Given the sheer size of the Chinese market, it is expected that China will soon become the largest market for 5G commercial use.
At the same time, according to the 5G patent report released by IPAnalytics, the number of 5G patents owned by Huawei and the number of patents actually applied for rank first in the world, nearly 20% ahead of the second nokia, ZTE ranked third, and Huawei and ZTE together have 30% of the total number of global 5G patents. Among them, Huawei's 5G wireless base station shipments are in a leading position.
Huawei, in partnership with Deutsche Telekom, has launched the first network slice based on a shared RAN, core network, and transmission network. As an end-to-end provider of 5G products and solutions, ZTE is also in a leading position in commercial deployment and cooperation, new technology and product research and development.
According to the HIS report, Huawei has signed 50 5G contracts. Huawei has 5G commercial networks in Europe, the Middle East and Asia, and multiple trials have demonstrated its 5G capabilities.
South Korea's 5G commercial implementation has taken the lead. At 11:00 on April 3, 2019, South Korea's three major operators SKT, KT, LGU+ took the lead in opening 5G commercial services for mass consumers, and South Korea became the first country in the world to open 5G commercial use, 2 hours ahead of the United States. Two days later, the world's first 5G mobile phone, the Samsung Galaxy S105G version, was officially launched in South Korea.
2. Decoding the development of 5G in South Korea: user base + policy promotion + operators' rapid efforts
Good user base + strong government dominance + rapid promotion of operators, South Korea took the lead in realizing 5G commercialization. The South Korean government has taken 5G as one of its national strategies to coordinate the three major domestic telecom operators, and the pace of 5G development has been very fast.
On the one hand, South Korea's 5G started earlier, and in 2013, South Korea already had 5G-related strategic deployment plans.
On the other hand, in the early stage of 5G development, the government strongly led and coordinated all parties to try 5G applications and actively promoted 5G development. At the Pyeongchang Winter Olympics in February 2018, KT joined hands with companies such as Ericsson, Cisco, Samsung and Intel to provide 5G application services, while setting up a 5G experience area in the event gathering area.
During the 2018 Winter Olympics, KT and other companies provided 360-degree panoramic VR, synchronous viewing, time slicing and other different viewing experiences, with the help of 5G's super fast rate, in the sledding, cross-country skiing, figure skating and other projects launched a new broadcast form, these attempts have accumulated experience advantages for the commercialization of 5G.
In June 2018, South Korea completed the 5G spectrum auction, becoming the first country in the world to complete both 3.5GHz and 28GHz spectrum auctions, and the three major Operators in South Korea auctioned the above frequency bands for $3.3 billion in this auction.
Since then, South Korea's three major operators have begun to accelerate the deployment of 5G equipment, and in only one year from the official commercialization of 5G, the entire process of 5G pilot - procurement of equipment - spectrum - deployment of networks - enterprise commercialization - consumer commercialization has been completed, and the promotion process is very efficient and rapid.
South Korea can take the lead in opening 5G consumer commercial services, we believe there are the following four factors:
1) The high penetration rate of smart phones and the Internet lays the foundation for 5G users
According to the Pew Research Center in the United States, in 2018, South Korea ranked first in the world in terms of smartphone penetration, with a penetration rate of 94%, eleven percentage points ahead of israel, the second place, and China's smartphone penetration rate was about 68%, at the midstream level.
In terms of Internet penetration, South Korea ranks first in the world with 96%. And on the eve of the launch of 5G this year, there are about 56.3 million 4G users in South Korea, accounting for 84% of the country's mobile users. The extremely high smartphone and Internet penetration rate lays a good user base for the commercialization of 5G in South Korea.
2) South Korea's cities are densely populated, and the network construction has rapidly achieved greater coverage
The residential areas in Urban Areas of South Korea account for about 2.4% of the total land area, and 91.66% of the population is concentrated in urban areas that account for 16% of the total land area. South Korea's population is highly concentrated in major cities such as Seoul and Busan, so telecom operators can concentrate on building base stations in several key cities, which can cover more than half of the country's cities and population.
On April 5, 2019, 85,261 5G base stations were built in South Korea, including Seoul, Busan, Daegu, Gwangju and Ulsan. According to the plan, south Korea's three major operators will build 230,000 5G base stations in 85 cities in South Korea in 2019, covering 93% of the south Korean population. Among them, LGU+ base stations lead the number and have the widest coverage capability.
As of September 2, according to data released by the Ministry of Science, Technology, Information and Communications of the Republic of Korea, LGU+ has the largest number of base stations, reaching 30,282, with 27,537 KT base stations and 21,666 base stations of SK Telecom. At present, the distribution of LGU+ base stations is concentrated in major urban areas, with 44,325 5G base stations located in the Tokyo Metropolitan Area, accounting for 55.8% of the total number of 5G base stations.
Seoul, Chungcheongbuk-do, and Jeollanam-do have the most KT base stations, Daegu and Sejong have the most SK telecommunications base stations, and most other areas have the most LGU+.
3) At this stage, the construction of 5G networks in South Korea mainly uses the 5GNSA (non-independent networking) model, which is conducive to rapid deployment and pushing into the market
The 5G network in this mode still uses the 4G network base station, and only updates the old 4G base station to access the 5G network.
Compared with the 5GSA (standalone networking) model, although the 5GNSA model has shortcomings such as network latency and lack of reliability of services, it can save costs due to its use of existing 4G base stations, which is conducive to rapid deployment into the market and preemptive users. Countries that started 5G commercial services earlier, such as the United States and the United Kingdom, have also adopted the networking mode of 5GNSA.
4) The government strongly leads the promotion and coordinates the operators to advance rapidly
We have vertically sorted out the policies of the South Korean government for 5G construction, and the Korean government has attached great importance to 5G at the beginning and demonstrated its determination to develop the 5G industry. As early as 2013, South Korea established 5GForum, the promotion group of the 5G Forum, to take 5G as a national strategy and incorporate it into the medium- and long-term development plan.
At the end of the same year, the Ministry of Science, Information and Communication Technology (MSIP) of the Republic of Korea released the 5G Mobile Communication Pilot Strategy. And in the process of unifying the three major communication companies to develop 5G, it is emphasized that in the competition of the global industry, it is necessary to gather the strength of the country to face the competition from the outside world.
South Korea's 5G industry is not simply a matter for communication operators or several equipment manufacturers, but an important national strategy of the South Korean government.
In April 2018, under the coordination of the South Korean government, the three major telecom operators in South Korea reached an agreement on 5G, and the three operators will jointly build and share on 5G construction, accelerate 5G deployment, effectively use resources to reduce duplicate investment, start jointly lay out 5G, and officially open 5G commercial services for mass consumers on April 3, 2019.
<h1>Second, South Korea's 5G industry chain is re-sorted, and the development geometry after the commercial implementation of 5G is geometric</h1>
1. Multi-party participation in the construction, the 5G industry chain is back
We believe that there are four main participants in the 5G industry chain. On the one hand, infrastructure equipment manufacturers represented by Samsung, Huawei, Nokia, etc., are responsible for providing and carrying out 5G infrastructure construction.
On the other hand are telecom operators, South Korea currently has three major telecom operators, Korea Telecom SKT (SKTelecom), Korea Telecom KT (Korean Telecom) and LGU+, which have state-issued mobile network operating licenses and directly provide 5G network services to enterprises and consumers. Finally, there are 5G terminal equipment vendors and application content providers.
1) 5G equipment suppliers take the lead in building a 5G basic framework in deep binding with telecom operators
The equipment supplier is responsible for the manufacture of a series of 5G physical network facilities, including 5G chips, 5G base stations, antennas, RF front ends and other components and supporting solutions.
In October 2018, SKT and KT selected Samsung, Nokia and Ericsson as 5G network equipment suppliers, while LGU+ worked with Huawei, Nokia and Samsung to build 5G networks.
According to data released by the Ministry of Science, Technology and Communications of The Republic of Korea, as of September 2, the number of 5G base stations established by the three mobile operators in South Korea is close to 80,000, and the number of base station transceiver transmission and transmission devices is close to 180,000 units, and 78% of the planned construction target for this year has been completed.
2) 5G mobile phones were rapidly launched, and new carriers such as VR/AR equipment entered the industry chain
In April 2019, South Korea's first and world's first 5G mobile phone, the Samsung Galaxy S10, was launched two days after the launch of South Korea. The list price is 1.39 million won (about 8,000 yuan). Subsequently, LG launched the 5G mobile phone LGV50ThinQ5G, priced at about 7600 yuan.
In August, Samsung released its flagship phone, the Galaxy Note10, with a 5G-enabled version. In September, Samsung released two 5G mobile phones: GalaxyA905G, with a list price of about 4500 yuan, as a mid-range mobile phone, further reducing the entry threshold of 5G mobile phones, and GalaxyFold5G, South Korea's first folding screen mobile phone.
At the same time, new carrier equipment such as VR/AR has rapidly entered the industrial chain. The performance of a single mobile phone cannot perfectly experience the rich and diverse media content brought by 5G, and in the 5G era, users need to be equipped with additional audio-visual enhancement equipment, such as VR headsets.
LGU+ launched the "5G Data Package to SEND VR Headset" campaign, users can subscribe to the 5G Data Package to enjoy preferential purchase of VR headset devices, and high-level packages can even get VR headsets for free.
3) Operators bind 5G traffic packages to other value-added services provided by content providers, and differentiated content services become the core of competition
For example, live sports events, exclusive AR/VR games, video membership rights, third-party APP membership rights, etc., operators compete for new customers and accelerate the conversion of 4G users to 5G with differentiated 5G service content.
Most South Korean operators cooperate with their own professional baseball events, golf and e-sports events to launch real-time HD and free-view event broadcast content in the 5G environment, or cooperate with other companies with high-quality IP content to create unique content experiences, such as KT and Disney to launch the AR game "CatchHeroes", SKT and Microsoft to create 5G cloud game projects, and so on.
2. What is the development after the commercial implementation of 5G in South Korea?
1) The number of 5G users and penetration rates have increased rapidly, and a number of operational indicators have exceeded expectations
South Korea is one of the leading countries in 4G technology, with the three major mobile operators KT, LGU+ and SKT deploying 4G services in the second half of 2011. On the eve of the launch of 5G, there were about 56.3 million 4G users in South Korea, with a penetration rate of about 84%.
5G commercial launch in April to the end of June, 5G user penetration rate reached 2.3%. Although the penetration rate cannot be compared with the mature 4G industry, it took only 69 days after 5G was launched to reach the 1 million user mark, and its user growth rate has far exceeded the original 4G.
According to the latest data released by the Ministry of Science and Information of the Republic of Korea on September 3, SK Telecom occupies the first position in terms of 5G market share, with a share of 41.38% and 790,000 users; The number of KT users is 590,000, accounting for 31.2%; LGU+ has a share of 27.4%, 7 percentage points higher than its share of the overall mobile retail market, with 520,000 users.
At the same time, according to the Statistics of the Ministry of Science and Information of the Republic of Korea, the ARPU (average revenue per user) of 5G users is 73,500 won, which is 75% higher than the 42,000 won ARPU of 4G. In Q2 2019, South Korea's 5GDOU (average monthly traffic consumption per person) was 24GB of traffic, while 4G was 9.5GB and 3G was only 0.5GB; 5G users have nearly 3 times the DOU of 4G.
2) The three major operators provide multi-gear packages, and the overall tariff of 5G packages is slightly higher than that of 4G
South Korea's three major telecom operators, SKT, KT and LGU+, offer packages for 5G in different gears, with monthly tariffs ranging from 55,000 won (about 325 yuan) to 130,000 won (about 769 yuan). The cheapest 55,000 won package, which provides at least 8GB of 5G traffic per month, slows down after exceeding it.
All three carriers also offer the highest level of unlimited data plans (LGU+ and SKT's highest tier plans are all entitled to a 2-year unlimited data discount) that enjoy additional benefits such as data sharing, free TV shows, mobile insurance, free smart devices (tablets or watches).
Overall, the price of 5G and 4G packages is relatively close, and the difference between the cheapest packages between the two sides is only 6,000 won; Both have the option of an unlimited data plan, but the 5G unlimited data plan costs slightly more than 4G.
3) 5G traffic growth is obvious, AR/VR content has become a traffic harvester
According to StrategyAnalytics, about 8% of South Korean 5G users use the most basic $55,000 package, while 80% of 5G users use unlimited data plans, and only 34% of 4G users use unlimited data plans.
And, 2019Q2 South Korea uses an average of 24GB of data per month per 5G user, while 4G is 9.5GB and 3G is only 0.5GB; Among them, 5G unlimited traffic users (27GB/month) use 16% more traffic per month than 4G unlimited traffic users (23GB/month).
Meanwhile, data from Q1 2019 shows that 56% of 4G traffic is used to watch videos and 8% to other multimedia projects (music, games, maps, etc.).
After the commercialization of 5G, in September this year, LGU+ said that AR and VR content accounted for almost 20% of 5G data traffic. 3DVR and AR content generates 300-400MB/min of data traffic, which is 10-15 times more than the 40MB/min of ordinary HD movies. AR/VR content becomes a traffic harvester.
<h1>Third, the content side ushered in new opportunities, how will the 5G content side be reshaped from South Korea?</h1>
5G is the latest generation of cellular mobile communication technology. According to the definition of the International Telecommunication Union (ITU), 5G networks have 7 major characteristics such as large bandwidth and ultra-low latency, and will form three major service scenarios: enhanced mobile broadband (eMBB), large-scale machine-like communication (mMTC) and ultra-reliable low-latency communication (uRLLC).
According to the International Telecommunication Union 5G report, 3D video/ultra-high-definition video, AR/VR, and cloud games and other enhanced mobile broadband scenarios will become the first application scenarios in the development of 5G.
Through the detailed collation of the various applications that have been gradually landed after the launch of 5G in South Korea, we have found:
The ultra-high-speed data transmission features of 5G meet the further upgrade of the video industry's picture quality, and ultra-high-definition video develops rapidly and is widely tried;
VR/AR applications are the most distinctive content applications in the 5G era, whether it is VR film and television or VR/AR games or VR live broadcasting, social networking and other pan-entertainment methods, which have become the key factors of traffic and competitiveness; 3) 5G promotes the further generalization of cloud applications, laying the foundation for the development of key application content including film and television, VR games, etc.
1) 5G empowers the transformation of the film and television industry, and ultra-high-definition video + VR film and television innovate the audio-visual experience
5G empowers the transformation of the film and television industry, and double upgrading and innovation of the audience's audiovisual feast. Based on its characteristics of large bandwidth, ultra-reliability and low latency, 5G empowers the video industry to upgrade in the following two directions: information video and video ultra-high definition; An extension of the medium.
From the perspective of information video and video ultra-high-definition, 5G drives the formation of the Internet of Things, stimulates the outbreak of the number of terminal screens, activates the demand for ultra-high-definition video, and at the same time, the ultra-high-speed data transmission characteristics of 5G solve the network bearing problem of ultra-high-definition video and help the development of the ultra-high-definition video industry;
From the perspective of media extension, 5G also solves the network requirements for bandwidth and latency in the development of VR technology, combined with the help of cloud technology to the VR industry, VR film and television will also ride on a new round of VR development to achieve rapid growth.
5G solves the constraints of ultra-high-definition video development, and operators cooperate with multiple parties to create ultra-high-definition TV services
5G solves the bearing problem of ultra-high-definition video content and meets the technical requirements of low latency, high rate, high reliability and high security of ultra-high-definition video transmission.
Because ultra-high-definition video contains a larger amount of data, ultra-high-definition video requires higher data transmission capacity and computing power, and according to the general standards of the industry, 4K video transmission rate is at least 40-60Mbps, 8K video generally requires more than 135Mbps bandwidth to ensure transmission quality.
Although the current 4G network can provide a peak rate of 100Mb/S, the 4G network with an actual usage rate between 8Mb/s and 60Mb/s can no longer fully meet the technical requirements such as ultra-high-definition video bandwidth and latency, and the good bearing attribute of 5G network solves the development resistance of ultra-high-definition video content on the network side.
As far as the C-side is concerned, from the perspective of the application scenarios of ultra-high-definition video content, 5G drives more scenes and devices to become Internet of Things, which also potentially spawns the number of various types of screens, and the demand for ultra-high-definition video content will grow based on the explosion of the number of screens.
C-end screen reform activates ultra-high-definition demand, consumers contact screen choices increase, including AR glasses, VR glasses, etc., ultra-high-definition video content distribution channels increase;
Family large-screen entertainment heating up, compared to small-size mobile phone screens, large-screen and ultra-high-definition video visual effects are better, better adaptability, which will make large-screen become ultra-high-definition better carrier carrier, good for the development of family large-screen economy.
People + screen + content interactive experience upgrade, based on the information accuracy of ultra-high-definition video, consumers' interactive experience and personalization on each terminal screen will be further upgraded, and the audience can watch multi-perspective pictures at the same time and independently choose the picture angle.
At the same time, ultra-high-definition video will revolutionize the audience's audiovisual experience. Ultra HD video content refers to video content with 4K and 8K Ultra HD resolutions.
Compared with the HIGH-definition 2K standard, ultra-high-definition 4K and 8K have achieved breakthroughs in high resolution, high frame rate, high color depth, high color gamut, and high dynamic range: the high resolution of 4K and 8K provides the audience with richer picture levels and more exquisite picture details, presenting a three-dimensional sense of the scene and a sense of space; Advances in high frame rate technology have improved the fineness and smoothness of images.
The progress of high color depth and high color gamut has improved the color display effect of the picture; The improvement of high dynamic range technology protects the motion trajectory and makes the moving picture more clear and stable; The overall improvement of technical standards will revolutionize the audience's audiovisual experience and present a real on-site audiovisual scene.
Korean operators have carried out multi-party content layout and cooperation to create ultra-high-definition video and TV services.
South Korean telecom operator SKT has added a 5GX component to its video service Oksusu, which includes three types of optimized 5G content: VR, UHD and 5GMax.
SKT will provide UHD video services to the 13 million users of its TPhone service. In terms of content layout, SKT and ComcastSpectacor, a subsidiary of US cable operator Comcast, announced a strategic cooperation to establish a joint venture esports company T1Entertainment & Sports, which will help SKT obtain rich e-sports game video and back-office content, including "League of Legends".
South Korean telecom operator KT launched UHD live B2B services for TV station SBS, KT became the world's first ultra-high-resolution "UHD live broadcast service" using 5G networks, and SBS news program MorningWide became the first program to use 5G network live broadcasting.
South Korean telecom operator LG and Netflix launched an ultra-high-definition TV service with a one-year contract price of 35,400 won and a total of 225 channels, including 27 premium channels, 13 international channels and Netflix video content with ultra-high-definition picture quality. In addition to launching the Ultra HD TV service, LGU+ also launched an Ultra HD set-top box rental service with a one-year contract price of 7,700 won.
2) 5G + cloud activation vr film and television, VR content differentiation has become the key point of competition
Virtual reality technology (VR) is characterized by immersion, interactivity, and conceptuality. Allowing users to enter a 3D virtual scene is not possible with the naked eye, and needs to be achieved with the help of the corresponding equipment.
For film and television content, users will get from the flat visual experience provided by the film and television content played on the TV, PC screen, and smartphone screen in the past to the virtual cinema scene to watch the movie, or enter the immersive film and television content and become part of the virtual space experience.
Playing 2D videos on your phone requires a download speed of 5Mbps, and 4G is completely bearable. When the download speed of VR and AR content reaches more than 10 times that of 2D video, the advantages of 5G networks with low latency and high rate can be played in this field.
5G boosts the better realization of cloud VR and drives the innovation of VR terminal device experience. According to the International Telecommunication Union's 5G report, some applications such as augmented reality (AR) and virtual reality (VR) require high bandwidth and extremely low latency that cannot be perfectly implemented in 4G networks.
The large bandwidth and low latency characteristics of 5G networks, AR and VR can be better realized in the 5G network environment, bringing users higher resolution picture quality and smoother pictures, reducing the sense of vertigo and enhancing the user's immersive experience.
According to Huawei's VR report, cloudification of virtual reality (CloudVirtual Reality) is to introduce the concept and technology of cloud computing and cloud rendering into VR service applications, and with the help of high-speed and stable networks, the display output and sound output of the cloud are encoded and compressed and transmitted to the user's terminal equipment, so as to realize the cloud and render VR service content to the cloud.
At present, the three major operators in South Korea are trying a variety of VR video content services, and we briefly combed the layout of the three major Operators in South Korea in VR film and television content and found that the VR film and television content ecology has become an important competitive factor for the three operators to compete for users and occupy the 5G market.
SKT: VR video content is integrated into the OksusuOTT service
In terms of content services, SKT has integrated VR video into its popular OksusuOTT streaming video products, including VR content and 5GMax, two content modes, 5GMax video mode, which allows VR headset users to watch 4K movies, documentaries and extreme sports videos on a virtual IMAX-style big screen.
In terms of cooperation layout, SKT cooperates with various extreme sports players and events to allow athletes to wear 360-degree camera equipment and shoot athlete perspective content.
KT: Focus on VR live film and television content, event cooperation and player cooperation to create content perspective differentiation
In terms of content services, KT has launched a number of 5G application services, including panoramic photography and photography applications Real360°, e-sports live broadcast, professional baseball live broadcast and live performance live broadcast applications, as well as VR-related content. In terms of cooperation layout, KT cooperates with various extreme sports players and events, allowing athletes to wear 360-degree camera equipment and shoot athletes' perspective videos.
KT has partnered with NexonGaming to introduce video content for the Go-Kart Championship.
LGU+: Powerful layout VR+ content, multi-angle + immersive to create a unique content experience.
LGU+ has launched a wealth of 5G-related film and television applications and services, covering AR, VR, idol live broadcasting, baseball, golf, game e-sports and other content resources, compared to SKT and KT, LGU+ has the most abundant 3DVR video content, with 544 videos.
As the center of its 5G service portfolio, LGU+ offers a range of VR and AR content to give users an immersive 5G media experience.
While this content is used in 4G networks, it is only when 5G networks and VR/AR devices are used to get the best results. At the same time, in order to quickly promote the content of 5G applications in the market, LGU+ also launched a series of activities of "buying 5G data packages and sending VR headsets".
All phones that support 5G networks can connect to these VR headsets. After the commercialization of 5G, the two VR headset devices of Pico and Samsung are either bundled with 5G data plans for free or discounted, and the strength of the discount is also related to the level of the data package, and the more advanced the 5G package, the higher the discount on the VR device.
2. 5G will accelerate the development of VR/AR games and jointly create new game experiences
Since the official commercial launch of 5G in South Korea in April, local mobile operators in South Korea have continued to invest in the development of mobile mobile games and immersive content, and create differentiated 5G service content through AR/VR games.
1) SKT exclusively operates Microsoft cloud gaming services, establishing unique content advantages in the new era of 5G
Long before 5G was officially commercialized, SKT began to lay out 5G game content. In early February 2019, SKT announced the signing of a cooperation agreement with NexonGaming, one of the largest game companies in South Korea (representing dungeons and warriors, sports karts, CSOnline, etc.).
In the future, SKT will use the company's three iconic game titles: Kart Rider VR, Crazy Arcade and BubbleFighter as an important part of the differentiation of 5G game services, and release a 5GVR version of the game.
SKT exclusively operates Microsoft Cloud Gaming Services with user advantages. In September, Microsoft announced a partnership with SKT to launch Microsoft's cloud gaming platform xCloud in South Korea, which will be the exclusive operator of Microsoft's cloud gaming services in South Korea. xCloud allows players to connect to a 5G network via their phones and run many critically acclaimed Xbox games.
As the largest mobile operator in Korea, SKT has the largest number of 5G subscribers (more than one million) and perfect 5G infrastructure facilities, and through SKT's ultra-high-speed, ultra-low latency 5G network support, the cloud gaming platform can bring gamers a more immersive and seamless gaming experience.
At present, the xCloud cloud game platform has four exclusive games from Microsoft, Named Halo 5, Gears of War 5, Killer Intuition and Sea of Thieves.
SKT actively lays out AR games to attract 5G users through unique content experiences. SKT plans to open a demonstration platform for THE MAGICLeapOne of AR glasses in the "5GX High-end Experience Zone" in the company's five flagship stores. Consumers can use THE ARC GLASSES Magic LeapOne in-store to play the famous game Angry Birds.
At the same time, SKT also cooperated with the famous AR game company Niantic (the developer of PokemonGo) on the AR mobile game "Harry Potter: Wizarding League". This mobile game is an AR adventure RPG game themed on the theme of Harry Potter stories, and like PokemonGo, players can discover magical creatures and props in the Harry Potter world in various geographical locations in the real world, meet well-known characters, and use magic to fight against other players. Harry Potter: Wizarding League has done well since it hit the shelves.
Over 400,000 first downloads, 6.5 million downloads in the first week of the world, and more than 15 million downloads in the first month; It topped the U.S. Apple Store free app list for 15 hours, and then jumped to the top of the Apple Store download list in 31 countries around the world, and still maintained the top position in 7 countries after its debut week.
On the one hand, SKT's 5G users can play the official version of the content in advance before the official version of the game is launched, and after the game is listed in South Korea, it is only open to SKT's 5G users in the short term.
On the other hand, 5G users can also enjoy additional game content, SKT offline stores play games without traffic, and some stores in important business districts will even have more game content and offers than ordinary stores.
2) KT differentiates its positioning as a VR theme park to create a VR offline ecology
On the one hand, KT cooperates with big IP to develop and launch high-quality AR/VR games. For example, KT and Disney cooperated to develop the "Avengers" theme AR mobile game "CatchHeroes".
The core gameplay of the game is similar to PokemonGo, in which players collect hero cards by discovering icons of the Marvel Infinity Stones on the map, which correspond to various characters in the Avengers movies, including Iron Man, Captain Marvel, Thor, Thanos, and so on.
Users can play the game by downloading apps on Google Play and the Apple App Store, or by scanning QR codes in KT Store event notifications across the country. The game currently has more than 100,000 installs on the Google Play platform.
On the other hand, KT differentiates to create a VR offline theme park. In 2018, KT reached a partnership with GS Retail, a large Korean convenience store chain operator, where KT's technical advantages in 5G networks, AR and VR were combined with GS Retail's expertise in operating offline retail space and sales business to open the VR theme park VRIGHT.
The first park opened in March 2018 at the Annex of Yonsei University in Western Seoul, with more than 30 VR and AR game content provided by leading Korean video game developers Smilegate and Appnori, including the first-person shooter SpecialForceVR: UniversalWar and the multiplayer augmented reality dodgeball game HADO.
3) LGU+ takes the lead in providing 5G cloud VR game services, and cooperates with content parties to enrich the number of cloud VR games
In July 2019, before officially providing 5G cloud gaming services, LGU+ established 50 5G cloud VR experience zones in South Korea and plans to expand to 90 in the next year. At present, there are about 10 games in the experience area, including popular VR games on the Steam platform such as "BeatSaber" and "Arizona Sunshine", and it is expected to expand the number of games to about 20 by the end of August.
Content providers for VR games include Rakuten World and KakaoVX, of which Rakuten World is one of the main VR content providers in South Korea and has developed more than 10 VR games; KakaoVX is a subsidiary of Kakao, and the game PUBG developed by Blue Hole Studios was released in South Korea by KakaoGame.
Cooperate with NVIDIA to develop 5G cloud gaming services, and 5G users enjoy a variety of benefits. At the end of August 2019, LGU+ announced plans to partner with NVIDIA to develop a 5G cloud gaming service.
Nvidia's cloud gaming platform, GeForceNow, used LTE networks in Places like North America and Western Europe for public beta testing prior to 5G and has more than 300,000 users. Nvidia's collaboration with LGU+ is the first attempt to commercialize a 5G cloud gaming platform based on the many advantages of 5G networks.
There are now about 150 PC and console games on the platform, including popular hits such as Monster Hunter: World, Fortnite, and League of Legends.
The official launch date of the GeForceNow platform has not yet been announced, but LGU+'s 5G users with monthly tariffs of more than 95,000 won can try this product for free, and LGU+'s 5G users can also enjoy discounts such as cloud gaming service subscription discounts.
3. 5G reconstructs pan-entertainment methods, live broadcasting and social display alternative play
1) VR+ live broadcast reconstructs the live viewing perspective, and strong interactivity enhances user stickiness
Live broadcasts can be divided into two main types according to the intensity of interactivity. First, sports events, music variety shows, concerts and other scenes live broadcast, the audience pays one-way attention to live video, interaction is a "bullet screen" exchange with other audiences, and the interaction is weak.
The second is the personal live broadcast of celebrities or network anchors, the live broadcast content ranges from personal talents to online education, and the live broadcaster can give feedback to the audience in real time, adjust the follow-up live broadcast content, the live broadcast is highly interactive, and the audience's sense of participation and willingness to pay is also strong.
VR+ live broadcast is a combination of virtual reality and live broadcast, with the characteristics of deep immersion and strong interactivity, which can bring users an immersive look and feel. For example, the NBA has used VR technology to broadcast games live in all competitions of the 2017-2018 season, and users can wear VR glasses to have a view of the side of the playing field, and users can also choose the camera angle.
At present, LGU+ has provided a variety of VR live broadcast methods. On the one hand, there is the live broadcasting of sporting events such as baseball events and golf events. Users can choose to watch the dynamics from various locations on the golf course or baseball field, and support multi-screen playback and real-time graphics overlay "AR stereoscopic broadcast", which can display the flight trajectory of the ball and player statistics.
One of the most innovative features is support for the replay of batting moves of baseball players or golfers, allowing users to freely adjust the perspective around the players and watch the players' batting actions from any angle.
At the same time, LGU+ also provides live video broadcasts and recordings of performances by famous K-pop idol groups. The business offers traditional 2D video, but users can choose multiple perspectives, and can choose their favorite artists to watch close-up videos of their performances, choose to watch different perspectives or different artists at the same time through simple interface operations, and switch between different perspectives and artists in real time.
2) VR+ social reconstructs social communication methods, and scenario-based methods form new experiences
We look at the development of social media, in the 2G era, represented by THE QQ, Tieba and forums of the PC Internet, users can communicate through text, pictures, and emojis.
Subsequently, in the 3G era, the mobile social era represented by WeChat, users can use voice, pictures, etc. for information communication, and on the basis of the current 4G communication technology, short video products such as vibrato, kuaishou, and second beat are representatives, and users can directly communicate with each other for video.
And we judge that in the 5G era, the new form of social media will be represented by VR social networking. VR+ social changes social from flat to three-dimensional, breaking the existing human-computer interaction and achieving true zero-distance real-time communication. According to the content of the virtual scene, VR+ social applications can be divided into three typical types: all-round experience, social tools and user creation and sharing.
We believe that VR+ social will reconstruct the Internet social mode from three aspects: scenario, immersion and multi-way expression:
VR+ social implementation of interactive mode scenario.com. Current social media is based on text, pictures, audio, video, etc. information communication and sharing, unlike real-life social networking through activities and other ways to establish cognitive and social relationships. But VR+ social can build and enter the scene to establish social relationships, and scenario-based will be a new height in the development of social media.
VR+ social enables a high degree of immersion. Represented by the all-round experiential VR social platform FacebookSpace, etc., the use of gesture recognition, expression synchronization, visual recognition and other technologies allows users to participate in activities such as gatherings, remote meetings, virtual conferences, video chats and other activities in virtual scenes to create a common experience.
With the development of technology, the realism of the avatar in VR social networking will gradually improve, from cartoon images to CG model characters, and finally develop into live-action videos, while real-time and accuracy will also be further improved, augmented sense of reality and interactivity, and all-round improvement of user social experience.
VR+ social can achieve multi-way expression. Current social media mainly disseminates information through words and words. In VR social, subtle facial expression changes, body postures and movements can be captured and presented in real time in the virtual social scene, which will achieve more ways of communication and expression.
At present, South Korean communications company SKT has announced the launch of the VR social application OksusuSocialVR, where users can watch sports matches, movies or TV in the same social VR space.
By wearing a VR headset, users can gather in several different VR virtual spaces, such as living rooms, movie theaters, concert halls or sports rooms, and each virtual conference room can support up to eight users to join. The company also plans to allow users to customize their own virtual spaces in the future.
<h1>Fourth, the enlightenment of South Korea's 5G application research</h1>
Revelation 1: 5G commercial landing speed is expected to exceed expectations, telecom operators take the lead and cut into the content side
1. The market should update its understanding of the speed of 5G commercial landing.
In June 2018, South Korea completed the 5G spectrum auction, since then, South Korea's three major operators began to accelerate the deployment of 5G equipment, only one year away from the official commercialization of 5G, completed the 5G pilot - procurement of equipment - spectrum - deployment network - enterprise commercialization - consumer-level commercialization Of this whole process, 5G construction to the official opening of commercial speed may exceed expectations.
At present, the commercialization of 5G in China is close at hand. In June 2019, the Ministry of Industry and Information Technology officially issued 5G commercial licenses to China Telecom, China Mobile, China Unicom, and China Radio and Television. Since August, Huawei, Oppo, ZTE, Xiaomi and other head mobile phone brands have released new 5G mobile phones.
China Unicom announced the opening of 5G package reservations on September 30, and previously, China Mobile and China Telecom also officially opened 5G package reservation activities on September 20 and September 29, respectively, allowing users to participate in 5G package reservations through online links, QR codes, login clients, and offline processors to call the customer service hotline.
At present, the number of users who have booked 5G packages through the platforms of the three major operators has reached 8.534 million. Among them, the number of China Mobile reservation users exceeded 5.2589 million, the number of China Unicom reservation users reached 1.5523 million, and the number of China Telecom reservation users exceeded 1.7228 million.
2. With the rapid landing of 5G in the future, the demand for 5G application content will break out rapidly, and telecom operators will take the lead in making efforts and trying to cut into the content side.
The market should strengthen the awareness of the importance of 5G application content, and the uniqueness of 5G application content will be the key to future competition. The media sector, including film and television, games, education, and pan-entertainment, is expected to benefit from the huge demand for high-quality content brought about by the development of 5G.
At the same time, according to the development experience of the three operators in South Korea, operators will no longer be limited to the channel side, but will be conducive to their terminal advantages and user accumulation, and actively cut into the content side to create a unique competitive advantage, thereby expanding the number of users and enhancing user stickiness.
At present, Korean telecom operators on the one hand purchase high-quality copyright content and monopolize high-quality and unique content resources, on the other hand, they cooperate with well-known IP parties or content parties to participate in the production of high-quality and unique content to enhance their competitiveness in the competition for 5G users.
For example, SKT will operate Microsoft cloud game services exclusively, and the game library first has four exclusive Microsoft games of "Halo 5", "Gears of War 5", "Killer Intuition" and "Sea of Thieves", and cooperates with the famous AR game company Niantic (the developer of "PokemonGo") on the AR mobile game "Harry Potter: Wizarding League". SKT's 5G users can play the official version of this mobile game in advance and enjoy additional game content.
In addition, LG and NVIDIA cooperate to develop 5G cloud game services, there are currently about 150 PC and console games on the platform, covering popular game masterpieces such as Monster Hunter: World, Dark Souls 3, Fortnite and League of Legends, LGU+ 5G users with a monthly tariff of more than 95,000 won can try the GeForceNow platform for free, and can enjoy discounts such as cloud game service subscription discounts.
We have seen that through the binding of high-quality value-added content services, it has become an important strategic means for telecom operators to expand new 5G users and enhance the stickiness of 5G users.
3. Reviewing the layout of China telecom operators, taking China Mobile as an example, the content side has already been laid out.
On June 27, Mango Super Media and Migu signed the Strategic Cooperation Agreement in Shanghai, in order to give full play to the respective advantages of Mango Super Media, China Mobile and Migu Company, the two sides decided to fully cooperate in basic telecommunications services, high-quality copyright content, 5G field, household products, overseas expansion, strategic investment and other incremental businesses.
Previously, on May 21, China Mobile invested 1.2 billion yuan to become the second largest shareholder of Mango Super Media, migu company is the only operating entity in china mobile's music, video, reading, games, animation digital content business sector, before which mango super media and Migu have a 8-year cooperation history.
The copyright cooperation between the two sides has helped build the "big MG" entertainment ecology of Mango and Migu. The high-quality copyright content of the two parties will be given priority to cooperation under the same conditions, including but not limited to content licensing, joint procurement, joint production, joint distribution, etc. based on video resources such as variety entertainment, sports events, film and television dramas, documentaries, children's animations, etc., as well as the interconnection of resources for large and small screen content. In addition, it also plans to innovate and integrate video ringtones, joint membership, derivative sales and other aspects.
As the first practice of the "big MG" layout, China Mobile Migu has previously announced the first national fitness variety show "Oops! Good Body", co-produced by Migu Video and Mango TV, the two sides will work together to open a new model of cross-platform content self-production. At the same time, the two sides will cooperate to explore in-depth cooperation in the field of 5G and move towards the era of "super video" together.
The two sides will carry out joint development and joint distribution of ultra-high-definition video content such as 4K, 8K, VR/AR for the 5G Internet, jointly participate in the ultra-high-definition laboratory, jointly invest, share intellectual property rights, and carry out media integration innovation and cooperation in exploring and building offline intelligent 5G performing arts venues and 5G ultra-high-definition live broadcasting. Migu will also support Mango Super Media to join the 5G Multimedia Innovation Alliance.
Revelation two: The wave of ultra-high-definition video has arrived, and radio and television + video platforms are facing a new round of content ecological opportunities
The market should see the opportunities of 5G+ ultra-high-definition video for domestic radio and television, video platforms and live content ecology. According to the "Ultra-high-definition Video Industry Development Action Plan (2019-2022)", in 2022, the overall scale of China's ultra-high-definition video industry will exceed 4 trillion yuan. According to the China Ultra HD Video Industry Alliance, the 4 trillion yuan of Ultra HD content and application sectors will account for more than half of the overall scale.
As far as the C-side is concerned:
1) Radio and television: compared with small size mobile phones, the rich information and visual enjoyment of large screens, TVs and ultra-high-definition videos are more suitable; At present, South Korean telecom operator KT has provided UHD live broadcast services to TV stations, and LGU+ has joined hands with Netflix to launch an ultra-high-definition TV subscription service.
Ultra-high-definition video contains great opportunities in the field of radio and television, so the market should pay attention to the layout and planning of ultra-high-definition video in the domestic radio and television system.
At the same time, the monetization of ultra-high-definition video on the IPTV/Internet TV side is expected to leverage the current IPTV and Internet TV penetration rate and the rising trend of ARPU on the one hand, and on the other hand, it will benefit from the hardware penetration and reverse drive content demand brought about by the increase in the importance of home large-screen hardware driven by 5G.
2) In terms of video and live broadcast platforms, at present, the high-definition resolution format has been used for differentiated pricing of members on video websites and live broadcast platforms, and ultra-high-definition videos can also be monetized from business models such as members and hierarchical members and on-demand.
Looking back at the development of high-definition video in China, the current policy development plan is clear, many parties have a rich layout, and it is expected to rise rapidly after 5G lands. In May 2013, the release of China's first industry unified standard for ultra-high-definition TV "4K ultra-high-definition TV selection and purchase standard" marked that the domestic ultra-high-definition tv industry officially entered the stage of standardization and development.
On February 28, 2019, the Ministry of Industry and Information Technology of China, the State Administration of Radio, Film and Television, and the Central Radio and Television Station jointly issued the "Ultra-high-definition Video Industry Development Action Plan (2019-2022)", according to the action plan, China will vigorously promote the development of the ultra-high-definition video industry and the application of related fields in accordance with the overall technical route of "4K first, taking into account 8K".
After the release of the action plan, the three major telecom operators, provincial and municipal radio and television systems, provincial and municipal governments, and major TV hardware manufacturers have further planned and laid out the competition in the ultra-high-definition video industry.
Revelation three: The development progress of cloud games in China is expected to exceed expectations, and the console market is expected to usher in development opportunities
The cloud gaming market is expected to climb rapidly and triple over the next four years. Combing the development path of the game industry, we found that from stand-alone hosts to end games to page games to mobile games, each new medium has brought tens of billions of new industry additions.
Console games were born in 1958 and have $47.9 billion by the end of 2018; End-game originated in the 1980s and is currently marketed at $32.2 billion; The size of the page game has been 3.5 billion US dollars since the 1990s; Mobile games (smartphone + tablet) exploded in 2012 and have exceeded $68.5 billion so far.
According to aggregate data from statista, a well-known Internet data center, the size of the cloud gaming market has risen from about $45 million in 2017 to $66 million in 2018. By 2023, that number is expected to skyrocket to $450 million. The overseas cloud gaming layout started earlier.
As early as 2009, OnLive launched the first real cloud gaming platform, but for various reasons, the concept of cloud gaming was not optimistic about capital. It was only in recent years that overseas hosting giant Microsoft announced Xbox's cloud gaming service ProjectxCloud in 2018 and Internet giant Google officially announced the Stadia cloud gaming platform in 2019, and cloud gaming has come into view here.
For overseas players, the foothold of cloud gaming is mainly distributed in the field of console games and the subscription-based payment model spawned by it. According to Microsoft's previous statement, at least more than 5,000 games were included in the early days of Microsoft's ProjectxCloud service, and more than 3,500 are currently directly provided, and users can also convert their XboxOne into personal host servers by using streaming service technology.
Google's Stadia is a game platform based on cloud computing and streaming technology, Google Cloud server undertakes game calculation and rendering work, and the player user only needs to receive the game screen through the network, and at the same time operate the data back to the cloud. In terms of devices, through this technology, players are expected to play AAA works directly through mobile phones, tablets and even Chrome browsers.
The layout of domestic cloud games has accelerated. In 2018, Alibaba Cloud launched a new cloud 3.0 and gameMaster intelligent service covering the game ecological chain; Since then, in 2019, Tencent has launched a cloud gaming platform "Tencent Play" in cooperation with Intel, which will be suitable for PCs and smartphones.
On June 25, 2019, Huawei XLabs and NetEase ThunderFire Game Division signed a Memorandum of Understanding (MOU) to establish a 5G Cloud Game Joint Innovation Lab to explore various possibilities for 5G industry applications, study game experience evaluation models, and promote the ecological development of the cloud game industry.
In July 2019, Qualcomm announced that it signed a non-binding Memorandum of Understanding (MoU) with Tencent Games to focus on cloud games/AR/VR/5G games, etc.; Tencent invested in British game platform Antstream Arcade to enrich its own cloud gaming system and successively released three cloud gaming platforms.
During MWC Shanghai Mobile World Congress, on June 25, 2019, Qualcomm and ZTE joined forces to show the application of 5G technology in the field of cloud games based on the 5G live network environment. Using the cloud gaming solution provided by Tencent Instant Play, the two parties demonstrated the cloud gaming experience available in the 5G live network environment on the 5G smartphones of OnePlus, Vivo, Xiaomi and ZTE.
During ChinaJoy, Qualcomm Snapdragon and Xiaomi and other mobile phone manufacturers, Tencent Cloud, WeGame, Kingsoft Cloud and Intel, HUAWEI CLOUD and Touch Technology all provided cloud gaming experience display. Shunwang Technology, Dalong Cloud Computer provides players with a cloud product experience.
On the whole, we believe that the development progress of cloud games in China may exceed expectations: on the one hand, in 2018-2019, leading manufacturers at home and abroad are working intensively to lay out cloud games; Regulators, on the other hand, place a lot of emphasis on cloud gaming. On August 1, 2019, Guo Yiqiang, director of the Publishing Bureau of the Central Propaganda Department, mentioned in his speech that cloud games will have a significant impact on the game industry format, and hopes that the industry will pay close attention.
<h1>Fifth, focus on the target</h1>
1. 37 Mutual Entertainment: The third pole of the mobile game industry, multi-field investment to create a cultural and entertainment ecosystem
1) The performance of new mobile games is eye-catching, superimposed on the market recovery and boutique trend, driving the revenue of 2019H1 to increase by 83.83%.
In the first half of 2019, the revenue was 6.071 billion yuan, an increase of 83.83% year-on-year, and the rapid growth was on the one hand due to the restart of the approval of the game version number at the end of 2018, superimposed on the stimulation of new categories such as H5 and WeChat mini games, and the industry gradually picked up. On the other hand, the trend of high-quality industry is becoming more and more obvious.
With the gradual disappearance of user dividends and the more prominent content advantages, the company, as the head company in the game industry, benefits from the overall industry boutique trend by virtue of its high-quality research and development and publishing capabilities. From the perspective of the company's new online games, the performance of mobile games is eye-catching, and the two boutique mobile games of "Douluo Continent" H5 and "One Knife Passed down" have a monthly flow of more than 100 million.
After its launch in July, "Elf Festival" performed prominently, ranking third in the AppStore game best-seller list. In terms of page games, the company continues to rank first in the 2019 operating platform service rankings, and the self-developed product "Dark Archangel" has been launched in July. Many self-developed boutique games such as "Eternal Age" and "Sword of the Archangel" that have been online for more than 1 year have maintained a stable flow in the published region.
From the perspective of attributable net profit, 19H1 achieved a net profit attributable to the mother of 1.033 billion yuan, an increase of 28.91% year-on-year, of which Q2 achieved a net profit attributable to the mother of 579 million yuan, an increase of 47.9% year-on-year, to achieve accelerated growth, the new tour is concentrated on Q1 online, the sales cost is higher, the Q2 sales expense has declined, while there is a time difference in the return on the purchase, and the new tour issued in the first quarter has gradually entered the recovery period.
2) Refined operation and diversified product reserves drive the further increase in mobile game revenue and share, and accelerate the development of cloud game technology
The company's mobile game business revenue and R & D investment have shown an upward trend, and the mobile game business continues to maintain a leading position in many places in China and overseas. From the perspective of mobile game release, at 19H1, the market share of the company's domestic mobile game business further increased to 10.02%.
The company's highest monthly turnover in the first half of 2019 exceeded 1.35 billion, with a total of more than 133 million new registered users and a maximum monthly active user of more than 34 million.
19H1 Company launched excellent game products of different genres and themes such as "One Knife Passed Down", "Douluo Continent" H5, "Sword and Reincarnation" and so on. In terms of overseas markets, the company's overseas brand 37GAMES covers more than 200 countries and regions, and has released more than 100 mobile games worldwide.
From the perspective of R & D business, 19H1, the company's mobile game R & D business flow increased significantly, R & D expenditure of 318 million yuan, an increase of 22.74% year-on-year, the growth of R & D investment is mainly concentrated in product quality improvement and new product category exploration two aspects, while accelerating the construction of a better cloud game system.
The company improves product quality by improving the engine and continuously iteratively optimizing the gameplay of the game process, so that the new products continue to attract users and maintain a high flow rate for a long time.
In terms of cloud game technology, the company is working hard to build an internal cloud, build cloud game agency services, and develop related framework systems to achieve a smooth technical transition towards the 5G cloud game era.
In terms of game reserves, according to the company's "diversified" distribution strategy, the company has strengthened the product reserves and product matrix, which includes arPG, MMO, cards, SLG, simulation and other different types, covering different themes such as magic, Western fantasy, Oriental fantasy, adventure, and fantasy.
Next, the company reserves independent research and development products such as "Douluo Continent 3D", "Jiangshan and Beauty (tentative name)" and domestic agent products covering multiple themes, such as the MMO game "Tomorrow's Fantasy (tentative name)", "Song of the Cloud City (tentative name)" and so on.
3) With the main game business as the core, the AR/VR game field is laid out in an investment manner
At present, the layout of 37 Interactive Entertainment in the AR/VR field is mainly in the investment field, mainly in the investment of Canada's Archiact and Shanghai's Tianshe Culture. On March 7, 2016, 37 Interactive Entertainment acquired a 10% stake after the completion of the investment through the control company Zhimei Network to invest in Archiact InteractiveLtd, a Canadian VR game content developer.
Archiact was founded in Vancouver, Canada, focusing on VR game product development, has developed "LamperVR: FirstFlight", "LamperVR: FireflyRescue", "WaddleHome" and other world-class VR game products, and has been recommended by Google Play and Samsung GearVR Oculus store for many times.
At the same time, in July 2016, 37 Interactive Entertainment invested in Shanghai Tianshe Culture, and obtained 15% of the equity after its capital increase with 10 million yuan, providing financial support for Tianshe Culture's VR technology and exporting its content, and the film and television and animation IP resources under 37 Interactive Entertainment will be opened and shared with Tianshe Culture.
Tianshe Culture has rich experience in the creation of VR secret room games, and its own live-action secret room "L's secret room" has been operating in Shanghai for two years, and has established a complete and systematic secret room operation system; In early 2016, the Co-op vr puzzle game "Crying Doll" was launched, which is based on the Unreal Engine 4 and can be applied to virtual reality devices such as OculusRift, HTCVive, and PlayStationVR.
In the future, 37 Interactive Entertainment plans to take the main business of games and traffic operation advantages as the core, combined with the existing layout in the VR/AR field, empower the invested companies and form strategic synergy, and prepare for the upcoming 5G era, provide more high-quality content with new experiences, create a one-stop cultural and entertainment ecosystem, and become the most trusted cultural and creative brand for the young generation of Chinese people in the future.
4) Profit forecast and investment advice
It is expected that the company will achieve a net profit attributable to the mother of 1.96 billion yuan and 2.30 billion yuan in 2019-2020, corresponding to 18.9 times and 16.5 times the price-earnings ratio, respectively, and maintain the "highly recommended -A" rating.
2. Perfect World: Console game field + Steam China forward-looking layout, the 5G era or usher in a good opportunity for development
19H1 income was basically flat, 19H1 attributable net profit increased by 30.5% more than expected, and boutique mobile games gradually cashed in. In 2019, the company achieved revenue of 3.656 billion yuan, a year-on-year decrease of 0.29%, and the low revenue growth rate was mainly affected by the company's transfer of cinema business and the adoption of an authorized operation model for some games.
In 2018, after the company transferred the cinema business, excluding the impact of the cinema business, the revenue of 19H1 game and film and television business actually increased by 12.44% year-on-year. In terms of molecular industries, the company's 19H1 game business revenue increased by 8.06% year-on-year to 2.88 billion yuan; Film and television business fell 22.42% year-on-year to 780 million yuan, mainly due to the transfer of cinema business in 2018, excluding the impact of cinema business, 19H1 film and television business revenue increased by 32.25% year-on-year.
19H1 mobile game revenue increased by 39.4% year-on-year to RMB1,689 million. Classics such as "Jiexian Mobile Game" continue to perform stably, and in 2019, they have successively launched "Perfect World" mobile games, "Cloud Dream Four Times Song", "Eagle Hero 2" and other boutique games, actively contributing to the company's performance; Among them, the "Perfect World" mobile game has the largest volume and the most obvious contribution.
19H1 end-of-game revenue decreased by 15% year-on-year to $985 million, mainly due to the higher base of 18H1 Deep Sea Trek's end-game recognition revenue. The company's classic terminal game products such as "Jie Xian", "Perfect World International Edition", "DOTA2", "CS:GO (Counter-Strike: Global Offensive)" and other revenue contributions are basically stable.
Relying on the company's flagship IP "Jie Xian" to create a second-generation end game masterpiece "New Jie Xian World" is actively under development. In addition, the company reserves several "terminal game + host" dual platform games.
The 5G era will be good for the development of console games, and the domestic host blue ocean that is laid out in advance is expected to benefit the company. As a veteran developer in the field of terminal games, the company has many years of accumulated experience in game development, with the promotion of cloud games to greatly reduce the hardware costs of players, console games are better than mobile games in terms of graphics and playability, and there is great room for development in the future.
Perfect World is the only A-share layout console game game company, has a wealth of R & D experience, operating experience and product reserves, the company's products, the Sino-French team to develop the "Very Hero (UnrulyHeroes)" response is outstanding, TAPTAP score up to 9.7 points, sandbox survival construction game Deep Sea Trek (Subnautica) on Steam received more than 90,000 reviews, the evaluation level is very good rating, It is Steam's TOP20 game in the first half of 2018.
In addition, "Perfect World" console version, terminal game and console dual platform game "Torchlight Frontieriers", "MagicAscension" and other projects are actively under development, once the future console market in China detonated, Perfect World will inevitably become the first batch of companies to benefit.
Profit forecast and investment advice: It is expected that the company will achieve a net profit attributable to the mother of 2.12 billion yuan and 2.46 billion yuan in 2019-20, corresponding to PE of 16.7 times and 14.4 times, respectively, maintaining the "highly recommended -A" rating.
The content of the article is the core viewpoint of Zhu Jun, an Internet co-analyst at China Merchants Securities Media, at the Entrance Finance Roadshow