ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronEye IconIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailPositive ArrowIcon PrintSite TitleTitle ChevronIcon Twitter
Nikkei Markets

NetEase sees some impact from virus even as gamers rise

Company hopes for 'reasonable' cost of sub-licensing music from competitor

NetEase CEO William Ding

HONG KONG (Nikkei Markets) -- Chinese gaming major NetEase on Thursday cautioned it expects some impact on its business from the coronavirus epidemic, even as it witnessed an increase in the number of gamers as people stayed indoors amid the outbreak.

William Ding, its billionaire chief executive, said on a conference call that while the epidemic has also forced many employees to stay indoors, the effect on research & development activities was "not big" and that it was not likely to change the expected timelines for new games.

"Many people stay home and play games during the Chinese New Year, even without the epidemic. This year, we got slightly more gamers," said Ding, who currently has a net worth of $21.4 billion, according to Forbes.

NetEase's pipeline of new games includes a Harry Potter themed game, Magic Awakened as well as Pokemon Quest.

NetEase and rival Tencent Holdings together hold nearly a 70% share of the Chinese gaming market by gross revenue, brokerage house Daiwa said last month, although competition has been increasing.

NetEase has been pressing the pedal to expand its presence in overseas markets, which accounts for just around 10% of its overall revenue at present. Last year, it set up a research unit in Canada to develop games for overseas players. Well known for its hit martial arts online game Fantasy Westward Journey, NetEase has also been looking to diversify its business beyond video games to e-commerce, music and online education.

The launch of a 3D version of Fantasy Westward Journey in December has given the company a head-start in the first quarter of this year, Ding said.

"We will continue to bring more masterpieces to both domestic and global players in 2020," he said.

The remarks came at a time when China is grappling with the outbreak of the coronavirus that has virtually brought life to a halt in parts of China. Large Chinese companies such as Alibaba Group Holding have already forecast downbeat revenue growth in this quarter due to the outbreak.

Ding was speaking after the company reported its fourth-quarter results that beat market estimates. Net profit jumped 20% to 3.05 billion yuan ($434 billion), while revenue grew 9.2% to 15.73 billion yuan, the Nasdaq-listed company said in an exchange filing.

Its online games business raked in 11.60 billion yuan, bringing in nearly three-fourths of its net revenue, and a 5.3% increase from the same quarter the previous year.

Referring to its music-streaming business, meanwhile, Ding said the company hopes that the high content acquisition costs it's been grappling with will drop. NetEase and some other music streaming companies in China currently sub-license music from Tencent Music Entertainment, which has exclusive global rights with multiple top music labels.

The exclusivity model has forced Chinese music platform owners to pay twice or even thrice what would be a "normal" price, said Ding.

"We hope that in the future, the royalty will go back to a reasonable and rational level," he said, adding that greater regulatory compliance by the big label companies will help the industry's cost structure return to healthier and normalized levels.

The music streaming service had last year secured investments worth $700 million from China's largest ecommerce company Alibaba Group Holding and Yunfeng Capital, a buyout firm backed by its billionaire co-founder Jack Ma.

NetEase is aiming for a separate listing of the music streaming service, company officials told Bloomberg last year.

Late last year, NetEase successfully listed its online education platform Youdao in the U.S.

"We believe that NetEase's orientation as a forerunner in these evolving markets positions us well for growth and the ability to create additional value for our stakeholders," Ding said.

The company's board approved a share repurchase program of up to $1 billion of its American Depositary Shares within 12 months from Mar. 2.

The board also approved a dividend of $1.02 per ADS for the fourth quarter of 2019.

-- Benny Kung & Dhanya Ann Thoppil

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Try 1 month for $0.99

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends July 31st

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to the Nikkei Asian Review has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media