A game tycoon with a net worth of tens of billions began to lead the company to a hard life

Chinese entrepreneur

2024-06-28 09:28The official account of China Entrepreneur magazine

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01Perfect World, a well-known game company, recently announced that it has once again started the largest layoff, with more than 1,000 people, and two buildings have been vacated.

02Due to changes in the market environment, Perfect World continued to carry out innovation, exploration, transformation and upgrading, but the performance of some products fell short of expectations.

03In order to meet the challenges, the company has adopted a series of solutions, including optimizing resource allocation, focusing on core projects, and optimizing necessary personnel.

04 However, Perfect World's performance in the past three years has been sluggish, with an operating income of about 7.791 billion yuan in 2023, a year-on-year increase of 1.57%, and a net profit of about 491 million yuan, a year-on-year decrease of 64.31%.

05Perfect World used to be the leading game company in China, but now it is also facing the challenge of living a hard life.

Technical support is provided by Tencent Hybrid Model

A game tycoon with a net worth of tens of billions began to lead the company to a hard life

Text: "Chinese Entrepreneur" reporter Zhao Dongshan

Editor|Li Wei

Image source: Perfect World official website

Seeing the news of Perfect World's layoffs, Wu Xiaoke was not shocked at all: "This is nothing new, Perfect World has been laying off employees one after another since 2022. In March this year, Wu Xiaoke just resigned from Perfect World and has been taking a break since then.

On June 24, 2024, the media reported that Perfect World once again started the largest layoffs, with more than 1,000 employees, and two buildings have been vacated. Affected by this, Perfect World's stock price has fallen by 10% recently, hitting a new low of 7.24 yuan per share in the past ten years. As of the close of trading on June 26, the total market value of Perfect World was 15 billion yuan, compared with more than 50 billion yuan at the peak, which evaporated 35 billion yuan.

Source: China Attempt Library

Founded in 2004 by Chi Yufeng, a native of Xiangfan, Hubei Province, Perfect World started with games and has since gradually expanded its business to film and television, games, e-sports, cinemas, animation, education, all-knowledge, and Wanziwang. In the past 20 years, Perfect World has been the leading game company in China, ranking among the top A-share game companies in terms of annual revenue, and is known as the third pole in the game field after Tencent and NetEase.

Chi Yufeng was born in 1971 and was successfully admitted to the Department of Chemistry of Tsinghua University in 1989. In 1996, Chi Yufeng founded Beijing Hongen Education. In 2004, Chi Yufeng entered the game industry, catching up with the rapid growth of terminal games and Internet games, and his wealth also grew rapidly. On May 12, 2020, Chi Yufeng ranked 99th on the "2020 New Fortune 500 Rich List" with 25.86 billion yuan. For several years in a row, Chi Yufeng entered the Hurun Global Rich List.

However, the past three years have not seemed to have an easy time for Perfect World. According to the financial report, in 2023, Perfect World will achieve operating income of about 7.791 billion yuan, a year-on-year increase of 1.57%; The net profit attributable to shareholders of listed companies was about 491 million yuan, a year-on-year decrease of 64.31%. In 2023, Perfect World's game business will achieve an operating income of 6.669 billion yuan, a decrease of 7.91% over the same period of the previous year, and a net profit attributable to shareholders of listed companies of 490 million yuan, a decrease of 69.21% over the same period of the previous year, the lowest value in the past five years.

On June 26, 2024, Perfect World responded to the media in response to the recent layoff rumors, saying: "In order to actively adapt to the rapid changes in the external market environment, the company continues to carry out innovation, exploration, transformation and upgrading, but it is true that some products have performed less than expected. In order to cope with the challenges, the company took the initiative to sort out and adjust, and adopted a series of solutions, including optimizing resource allocation, focusing on core projects, optimizing necessary personnel, and intensifying office space, so that resources can be more concentrated on core advantageous businesses. ”

According to incomplete statistics, since the resumption of the distribution of game versions in April 2022, Perfect World's games such as "Persona: Phantom of the Night", "One Punch Man: World", "Zhuxian 2" and "Light Ink Cloud Town" have all obtained version numbers last year, and the project has crossed the most important threshold for launch. But now, it seems that this still failed to save Perfect World from its sluggish performance.

I have to admit that the former game giants have also begun to have a hard time.

Continued shrinking

In fact, Perfect World is one of the leading game developers in China, owning a number of self-developed game products such as "Perfect World", "Zhu Xian" and "Tower of Fantasy", and has introduced and operated a number of overseas popular games such as "DOTA 2" and "CS:GO". However, due to operational pressure, Perfect World had to make personnel adjustments and strategic focus for the third time in half a year.

On December 18, 2023, Perfect World announced that "in order to implement flatter management of game projects, improve the efficiency of resource use and improve project output", the company has adjusted its organizational structure and personnel.

At that time, Tong Qing, the former head of Peach Blossom Garden Studio and a well-known game producer, was appointed as the president of Perfect World Holding Group, reporting directly to Chairman Chi Yufeng. The first project center is divided into two studios, hardcore and Qingyun, with the heads of Zhang Wei and Zong Zite respectively; The seventh project center was also renamed Nebula Studio, and the person in charge was Chen Jun; The head of the Peach Blossom Garden Studio Group was taken over by Bai Xue; The heads of the four aforementioned studios report directly to Lu Xiaoyin, CEO of the game business.

Previously, Perfect World adopted the team structure of "project center + studio", but after this adjustment, Perfect World intends to make faster decisions for the team through the organization of the studio, and focus on promoting well-known game producers within the company. Tong Qing, who was promoted to the president of Perfect World Holding Group, has the title of "Tong Shopkeeper" in the industry, and he used to work in Changyou, but served as the producer of the "Dragon Babu 3D" mobile game project.

Tong Qing Source: Perfect World's official WeChat

In 2015, Tong Qing led the R&D team of "Dragon Babu 3D" to join Perfect World and took over the development of the mobile game "Zhu Xian", which caused a sensation in the domestic game industry at that time. Subsequently, he served as Senior Vice President, Member of the R&D Decision-making Committee, and Head of the Incubation Center at Perfect World, leading the team to produce a variety of mobile game products such as "Perfect World", "Wulin Gaiden" and "Song of the Four Seasons of Cloud Dreams".

However, after only 3 months, Perfect World has made another layoff adjustment, this time directly to each studio project. In March this year, there was news on the pulse that the T3 project team of Perfect World's "One Punch Man" was laid off, and hundreds of people were affected.

On March 21, Perfect World responded: "This adjustment is due to the optimization of the normal talent echelon and talent structure, and the company will make reasonable and dynamic adjustments to the matching resources of different projects according to the needs of business development and the progress of the project, so as to ensure the efficient progress of the project and the healthy development of the overall business." ”

In order to promote the efficient operation of the game business, Perfect World has implemented a flatter management model for the game development team to improve the efficiency of resource use and project output. While the original project center was spun off into an independent studio and reported directly to the head of the game business, the three middle platforms of technology, art and data continued to empower the game project, and the distribution center provided project support.

However, just three months later, Perfect World reported the news of layoffs for the third time.

It starts with expansion

The source of everything seems to have started with Perfect World's rapid expansion in 2019.

In 2019, Perfect World put forward the strategy of rejuvenation transformation, and began to set up many projects such as "Tower of Fantasy", "One Punch Man World" and "Million King Arthur". According to media reports, even one-third of the 24 projects released by Perfect World at that time have not yet been officially named.

At that time, as a global game developer, publisher and operator, Perfect World developed vigorously, and its games were deployed in various fields such as terminal games, mobile games, console games, VR games and cloud games, and its products were exported to more than 100 countries and regions, and there were branches in Beijing, Hong Kong, Shanghai, Chongqing, Chengdu, Hainan, Wuhan, Hangzhou and other places.

However, Perfect World's aggressive expansion has coincided with a downturn in the global economy, especially in the gaming industry, which has repeatedly pressed the pause button due to regulatory and license issues.

Subsequently, in 2021, Perfect World's revenue and net profit both declined, of which the net profit attributable to the parent company fell from 1.548 billion yuan to 369 million yuan, a year-on-year decrease of 76.16%. At the end of 2021, Perfect World launched a plan to reduce costs and increase efficiency, laying off hundreds of employees.

Perfect World executives also admitted the mistake they made at that time in a media interview: "The speed at which game users demand higher product quality is increasing rapidly, which is faster than the company expected. The company did not take into account the time required for product development. In addition, the company's internal management decisions are not precise enough and do not anticipate market changes enough. The superposition of internal and external factors has led to the company's product curve not being well connected in 2021. ”

In 2021, Perfect World even sold its subsidiaries Shenzhen Perfect World Interactive Entertainment and Shenzhen Perfect World Technology, the former to Garena and the latter to Lilith. In 2022, Perfect World once again sold its teams in Europe and the United States and its R&D studio in the United States for 400 million yuan. However, Perfect World has established many new game projects in the past, and the R&D expenses have remained high, so the R&D expenditure has been greatly increased.

However, in the view of game producer Li Lewei, another important reason why Perfect World has come to this point is its idea of making games.

"Although they are all games, the idea of many domestic companies is not to treat games as a work of art, but as pure commodities. Therefore, a large number of numerical growth + first charge will be designed to retain players in a psychological way. It can be said that the goal from the beginning was not for fun, but for addiction. Li Lewei told "Chinese Entrepreneur".

"One Punch Man: World" created by Perfect World did gain a certain amount of attention and user payment when it was first launched. The game is a 3D action game licensed from the popular Japanese manga "OnePunch-Man", which was established in 2019 and released in April 2021. According to SensorTower's prediction, the game has only been launched for a month and a half, and the total global turnover on the App Store and Google Play is about 23 million yuan, which is quite impressive. However, Perfect World lacked continuity in overseas markets, taking the Thai market as an example, the game remained in the top 10 best-selling games on the App Store for five days after its launch, but then began to decline rapidly, and user payments gradually decreased.

When announcing its 2023 annual report, Perfect World explained that during the reporting period, due to the impact of the game product development cycle, the company launched fewer new games, and several games in operation continued to achieve long-term operation through content updates and fine marketing, but due to the impact of the natural life cycle, the turnover decreased compared with 2022, and the corresponding performance contribution decreased year-on-year.

The glory of the past

Chi Yufeng and Perfect World have had their own golden years.

In 1996, Chi Yufeng founded Beijing Hongen Education. During this entrepreneurial period, Chi Yufeng launched well-known products such as reading pens, audiobooks, and Hongen story machines. The computer learning software and English series software developed by Hongen Company have become the essential software for the first batch of computer learners and English learners at all stages.

In 2004, Chi Yufeng founded Perfect World Games. With leading R&D technology and rich experience, many of Perfect World's products have been recognized by the market. Perfect World Games is the first game company in China to independently develop 3D game engines, and through long-term R&D investment, Perfect World has accumulated a lot of core technologies such as commercial engine applications, 3D modeling and rendering.

At that time, the three online games "Perfect World", "Wulin Gaiden" and "Zhu Xian" launched by Chi Yufeng and his team all became hits. Since 2006, Perfect World has started its global development. In 2007, Perfect World, which had only been established for three years, was listed on the NASDAQ in the United States.

Source: China Attempt Library

After the success of the three games, Chi Yufeng appreciated the power of game + film and television IP. In 2008, Chi Yufeng founded Perfect World Film and Television and entered the film and television industry, successively launching film and television works such as "The Piano of Steel", "Very Perfect", "33 Days of Broken Love" and "Beijing Youth".

In December 2014, Perfect Film and Television landed on the A-share market through backdoor Jinlei shares, and later changed the stock name to Perfect Global. In 2015, Perfect World completed its privatization and delisting on NASDAQ and was listed on the Shenzhen Stock Exchange in 2016. In the same year, Chi Yufeng injected the game business into a listed company and changed its name to Perfect World again.

The integrated development of film and television + games was sought after by the capital market at that time, and when the restructuring plan was announced to resume trading, Perfect World gained 6 daily limits.

Over the past decade, Perfect World has maintained the coordinated development of "game + film and television", but the game business has always played the role of a hematopoietic bank. However, with the misalignment of R&D investment and return on the game business, in 2021, Perfect World's net profit was 369 million yuan, only 30% of the expected target. In 2022, Perfect World achieved a 273% increase in net profit to RMB1.377 billion, mainly due to the sale of overseas projects, and in 2023, Perfect World's net profit increased by RMB491 million, a year-on-year decrease of 64.31%.

When the glamorous company stepped on the accelerator pedal in 2019, it probably didn't realize that danger was coming.

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