NetEase: Fiscal year 2023

NetEase, Inc. (NASDAQ: NTES, HKEX: 9999), a leading internet and game services provider, continues to shape the digital landscape with its comprehensive range of offerings centered around premium content. Established in 1997, NetEase has developed a formidable presence in the gaming industry, both in China and globally, through its extensive portfolio of mobile and PC games. 

Gaming Excellence

With one of the largest in-house game research and development teams, NetEase excels in creating superior gaming experiences across various platforms, including mobile, PC, and console. The company is renowned for its ability to deliver immersive and culturally enriched gaming content that resonates with players worldwide. By integrating play with culture and infusing education with technology, NetEase has transformed gaming into a meaningful conduit for entertainment and enlightenment.

NetEase’s gaming ecosystem is diverse, encompassing a wide array of genres:

• Sandbox
• Real-time strategy (RTS)
• Shooter: FPS, TPS
• Multiplayer online battle arena (MOBA)
• Role-playing: RPG, ARPG, CRPG, MMORPG, TRPG
• Roguelike and Roguelite
• Simulation and sports
• Puzzler and party games
• Action-adventure
• Survival and horror
• Platformer

Financial Highlights

NetEase’s American Depositary Shares (ADS) trade on the NASDAQ under the ticker symbol NTES, while its ordinary shares trade on the Hong Kong Stock Exchange under the symbol 9999. As of December 31, 2023, the company had 3,210,783,141 shares outstanding. NetEase initiated a dividend program in 2012, and for fiscal year 2023, it declared a dividend of 0.51297 USD per common share, amounting to 1,700 million USD.

Financially, NetEase reported a net revenue of 103,468.159 million RMB for FY23, marking a 7.23% increase from FY22. The revenue structure for 2022 included 78.83% from games and related value-added services, 8.36% from innovative businesses and others, 7.60% from Cloud Music, and 5.21% from Youdao. Total equity as of December 31, 2023, was 127,968.322 million RMB, a significant 17.69% increase from the previous year.

Strategic Acquisitions and Global Expansion

In January 2023, NetEase acquired SkyBox Labs, a full-service game studio based in Burnaby and Victoria, Canada, founded in 2011. This acquisition aligns with NetEase’s strategic vision to expand its global footprint and enhance its development capabilities.

NetEase also launched two new game studios in Canada in 2023: Bad Brain Game Studios, led by Sean Crooks, and Worlds Untold, led by Mac Walters. Additionally, the company established two new studios in the United States: Fantastic Pixel Castle, led by Greg Street, and T-Minus Zero Entertainment, led by Rich Vogel. In Tokyo, NetEase set up PinCool, Inc., focusing on developing console game titles.

Challenges and Controversies

Despite its successes, NetEase has faced challenges and controversies. In a notable public dispute, NetEase rejected a proposal from Activision Blizzard to extend their 14-year partnership while Blizzard sought a new partner in China. The terms were deemed “unequal and unfair” by NetEase, leading to the withdrawal of popular games like World of Warcraft, the Starcraft series, and Overwatch from the Chinese market as of January 23, 2023.

Moreover, NetEase encountered backlash in 2023 over the use of AI-generated assets, with fans criticizing the improper rendering of faces, missing limbs, and odd expressions. This incident highlighted the limitations of current AI generative art platforms, particularly in accurately depicting human features.

Conclusion

NetEase, Inc. remains a formidable player in the internet and gaming industry, driving innovation and delivering high-quality content to a global audience. With a robust financial performance, strategic acquisitions, and a diverse portfolio, NetEase is well-positioned for continued growth and success. However, the company must navigate challenges and controversies carefully to maintain its reputation and market position. As NetEase continues to evolve, its commitment to enhancing the gaming experience and expanding its digital services will undoubtedly shape the future of entertainment and technology.