When evaluating the gaming sector in 2024, it becomes clear that the first half of the year focused on rebuilding confidence amidst a turbulent decline, while the latter half signaled a vigorous recovery of the industry.

The reasons for this can be traced back to the reliance of the gaming industry on the supply side of new contentBenefiting from stable approvals for game licenses throughout the previous year, the improvement in the supply side of the gaming industry has provided a robust foundation supporting a positive outlook for 2024.

On December 24, China's National Press and Publication Administration released the approval information for domestic and imported online games, with a total of 122 domestic games and 13 imported games receiving approval

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By the end of 2024, the total number of approved domestic games reached 1,306, a significant increase of 329 from the previous year, with approvals exceeding one hundred per month for the last seven monthsIn terms of imported games, 110 were approved, an increase of 12 from 2023, reinforcing the solid foundation for a thriving game market.

Reviewing the growth trajectory of the gaming industry in 2024, it’s evident that the sector’s performance closely aligns with advancements in AI technology. New content, such as mini-games, micro-dramas, and mixed reality (MR), has opened up fresh growth avenues for the gaming industryCompared to previous years, 2023 marked the most significant influence of new technologies and content in catalyzing industry growth, making 2024 a turning point for the gaming sector.

The launch of "Black Myth: Wukong," the first AAA game produced in China, has showcased the capacity of the domestic gaming industry to create world-class titles

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This game has not only revitalized the cultural and tourism economy but has also won core awards at the TGA, "Best Action Game," and "Player’s Voice." Such success leads to expectations that by 2025, the innovations in technology and entertainment will usher in even more investment opportunities, further expanding the gaming industry's growth potential.

Overall, the performance of China's gaming market in 2024 has been impressiveReports indicate that the domestic gaming market has generated actual sales revenue of approximately 325.78 billion yuan, a year-on-year increase of 7.53%, reaching a record highAdditionally, the user base has grown to 674 million, reflecting a growth rate of 0.94%, marking a historic peakExport revenues for domestically developed games have also reached 18.557 billion dollars, representing a year-on-year increase of 13.39%.

Delving deeper into the gaming market's overall performance in 2024, one can identify several key factors: firstly, an increase in the number of new game releases and the emergence of blockbuster titles; secondly, stability in the operation of several evergreen products; thirdly, an impressive performance in mini-games with strong growth momentum; and lastly, the mainstream adoption of multi-platform releases and cloud gaming has made consumption easier for users.

Looking towards 2025, between September and the end of December, the gaming sector’s performance lagged behind several others, ranking second to last, just above publishing, and falling below film, marketing, and broadcasting sectors

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Considering the low institutional holdings, with a mere 0.5% of institutions holding shares as of Q3 2024, the gaming sector possesses significant potential for future price adjustmentsParticularly in Q4, the gaming sector’s growth lagged behind its counterparts in the more visibly impactful AI application sectorsAs the foundational technologies of AI continue to advance, gaming is set to become a crucial application, broadening valuation potential considerably.

1) Mini and PC games are witnessing growth on both ends, while game apps are increasingly casual.

On December 24, an update on the gaming approval process revealed that 98 games reported changes this yearOf these, 23 mobile games have announced client version adaptations, and 7 client games are seeking mobile versions

The trend of game developers simultaneously targeting both mobile and PC platforms has become more pronounced.

“The trend of expanding the gaming industry across both the mobile and PC ends reflects shifting market demand,” said Yuan Shuai, deputy secretary of the Zhongguancun IoT Industry Alliance"On one hand, the mobile gaming market is becoming saturated, leading to heightened competition and developers seeking new growth avenues; while on the other hand, improvements in PC hardware and players’ desire for high-quality gaming experiences highlight the immense potential of the PC gaming market.” Thus, a dual-platform strategy has become crucial for game developers to adapt to market changes and expand their reach.

In 2024, the scale of PC-based games reached 67.981 billion yuan, with consoles and other gaming platforms accounting for 14.947 billion yuan, resulting in a combined figure of 82.93 billion yuan—a growth rate unmatched in nearly a decade

Popular three-platform games, including "Endless Warm," "Delta Operation," as well as PC titles like "Zhu Xian World" and "Black Myth: Wukong," excelled in 2024. Notably, "Black Myth: Wukong" has sold 22.7 million copies on Steam, generating $1.1 billion in revenue, which is unprecedented.

As we move into 2025, the trend of expansion on both ends is expected to continueTraditional mid-tier mobile companies are gradually losing their edge in MMO genres under the casualization trendMini games, characterized by shorter development cycles and higher frequency, have become a favored solution for many small to mid-sized companiesAt the same time, as users' overall tastes improve and hardware upgrades occur, the demand for higher-quality, immersive console games will steadily increase.

2) AI applications in gaming are projected to have significant breakthroughs.

Since December 13, several A-share gaming companies have begun implementing their AI gaming strategies, showcasing genuine progress

For example, on December 13, Giant Network unveiled its “QianYing” voice game generation model at the annual China Gaming Industry Conference, emphasizing “gaming + AI” avenuesKaiying Network also presented significant advancements with their new "Xingyi" model in game developmentFurthermore, on December 21, the AI companion robot from Talking Tom was launched across various sales channelsThis product features a custom emotional interaction model developed collaboratively with a big model tech company, incorporating accurate emotional recognition capabilities.

The integration of AI into gaming can be summed up in two main areas: firstly, utilizing AI for voice generation, artwork creation, and game testing, as seen in the recent hit "Shawarma Legend"; and secondly, enhancing game experiences with AI non-player characters (NPCs), enabling user-generated content creation in UGC games, like the recently launched "Yanyun Sixteen Sounds," where AI NPCs can interact vocally with players.

Moreover, as we move further into 2024, ongoing improvements and competition in AI technology are expected to decrease the unit costs of tokens, creating a solid foundation for widespread AI applications by 2025. As AI evolves into a critical component within gaming, with the potential for breakthroughs across various sub-elements such as audio-visual interfaces and interactive formats, the pace of fusion between gaming and AI will likely accelerate even more.