After two consecutive days of decline, the share price of A-share gaming giant Perfect World (002624) has fallen by about 10%, reaching a new low in nearly a decade: 7.24 yuan per share. As of the close on June 25, Perfect World's stock fell by more than 5%, closing at 7.32 yuan per share, with a total market value of 14.2 billion yuan. Compared to its peak market value of over 50 billion yuan, it has now evaporated by more than 35 billion yuan.
On June 24, news about "Perfect World's largest-scale layoff" fermented online. The report claimed that the number of layoffs at Perfect World had exceeded a thousand, and key projects that were once highly anticipated, "Perfect New World" and "One Punch Man: World," were both discontinued.
In response, Perfect World stated to reporters that the adjustment was a normal optimization of talent echelons and structure. It is a rational dynamic adjustment of resource allocation for different projects based on the company's business development needs and project progress, ensuring the efficient advancement of projects.
As the leader in A-share gaming stocks, in July 2020, Perfect World's share price once reached a peak of 40.99 yuan per share, but it began to decline thereafter. In the past year, the stock price has been fluctuating around 10 yuan per share. It started to fall below 10 yuan in April this year and reached a new low today, with the stock price having dropped by eighty percent.
"The decline of Perfect World was expected," game industry analyst Zhang Shule said to First Financial, noting that it has little to do with the current overall gaming market environment. Instead, it is due to Perfect World's lack of innovation in the gaming field. "Perfect World's gaming business lacks overall momentum, and this situation has occurred multiple times in recent years with several of Perfect World's new games, often falling from their peak after three months."
Previously, Perfect World launched a second-element game "Tower of Fantasy" to compete with "Genshin Impact," but now its momentum has waned, and it has dropped out of the best-selling list.
Looking at the financial reports from recent years, Perfect World's problems are not a recent revelation. On April 26, Perfect World released its Q1 2024 report, achieving a revenue of 1.329 billion yuan, a year-on-year decrease of 30.19%; it achieved a net profit attributable to the parent company of -29.76 million yuan, turning from profit to loss year-on-year. Perfect World explained that the main reason was the fewer new games launched.
At its peak in 2020, Perfect World's total revenue once broke through ten billion yuan, but it dropped out of the ten billion club in 2021, with annual revenue declining by 16.69% to 8.52 billion yuan. In 2022, Perfect World's revenue continued to decline by 9.95% to 7.67 billion yuan. The 2023 annual report released in April showed that Perfect World's annual revenue was 7.791 billion yuan, a year-on-year increase of 1.57%; the net profit attributable to shareholders of the listed company was about 491 million yuan, a year-on-year decrease of 64.31%.
Perfect World's main business includes gaming and film and television drama business, with the gaming business accounting for more than eighty percent of the revenue. In 2023, Perfect World's gaming business achieved a revenue of 6.669 billion yuan, a decrease of 7.91% compared to the same period of the previous year, and achieved a net profit attributable to shareholders of the listed company of 490 million yuan, a decrease of 69.21% compared to the same period of the previous year. Perfect World explained that due to the development cycle of game products, the company launched fewer new games, and several operating games continued to achieve long-term operation through content updates and precise marketing, but due to the natural life cycle, the revenue has declined compared to 2022, and the corresponding performance contribution has decreased year-on-year.
Layoffs at Perfect World are not the first time; at the beginning of 2021, Perfect World disclosed an investor relations activity record showing that the company optimized several hundred people in the fourth quarter of 2021, and the subsequent round of optimization was expected to reduce several hundred to a thousand people.
In 2021, the total number of Perfect World employees reached 6,272. In 2022 and 2023, the total number of Perfect World employees was 6,061 and 5,754, respectively. In the first quarter of this year, Perfect World mentioned in its financial report that the management expenses increased by 38.48% year-on-year, which was due to "the related costs generated by the continuous optimization of talent echelons according to strategic planning and project conditions."In the May investor relations activity record, Perfect World stated that the company has a rich product reserve and is actively optimizing its new Chinese-style fantasy Xianxia MMORPG game "Zhuxian World," which is based on the flagship IP "Zhuxian." The Chinese-style fantasy Xianxia MMORPG game "Zhuxian 2" has recently completed its first domestic test. The new Chinese-style simulation management farming game "Danmo Shuiyun Township" is currently undergoing a paid test.
Zhang Shule believes that Perfect World has a strong mindset, including the fact that most of its products are MMORPGs (Massively Multiplayer Online Role-Playing Games) and the introduction of IP adaptations into games. "Perfect World is a company that likes to create concepts, especially in cross-industry endeavors, such as film-game linkage and game export. It proposed these ideas more than a decade ago, but the problem lies in having too many ideas and insufficient practical ability.
"The story of film-game linkage has been talked about for more than a decade, but it has not been the first to create a real interactive film-game like 'I'm Surrounded by Beautiful Women!'; in terms of game export, it is content with the less developed game regions in Southeast Asia, which is completely different from the current situation of game export to the global competition among major game companies in Europe, America, and Japan," said Zhang Shule.
In the investor relations activity record, Perfect World was asked by investors about any changes in the company's management and business strategy. At that time, the management replied that, in terms of organizational structure, the company has implemented a more flat management model. Taking the game business as an example, the company has split the original project center into independent studios, which directly report to the person in charge of the game business. This shortens the decision-making chain, reduces communication nodes, and improves the efficiency of resource allocation and project output capabilities. Secondly, in terms of management mechanisms, the company has optimized the entire process management system for game development, including project initiation standards, testing assessments, and process control, to improve output efficiency and success rates.
Some investors have indicated that Perfect World is facing a significant period of transformation and change. Zhang Shule believes that for Perfect World to make a new breakthrough, it must rely on new games and not rest on its laurels. Increasing technical investment in game development and creating high-quality games is the correct approach.
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