Shanda game executives interpret third quarter results

Beijing time November 27 Morning News, Shanda Games (Nasdaq:game) today released the third quarter as at September 30, 2013 of the unaudited consolidated financial report. Earnings showed that Shanda's net operating income for the third quarter was 1.125 billion yuan (USD 183 million), up 3.3% per cent year-on-year, to Wall Street analysts ' expectations; net profit for the third quarter was 399 million yuan (64.9 million USD), Last quarter was 486 million yuan, 405 million yuan in the same period last year.

After the earnings release, Shanda Game CEO Zhang and CFO Wei attended an analyst conference call to unscramble the earnings points and answer questions from analysts.

The following analysis is the main part of the question and answer session:

Timothy Chen, analyst at Morgan Stanley, Timothy Chen: Can you tell me about the life cycle of the company's hand tour, such as The Million King Arthur, and can you tell me about the trends in the number of paid users and the number of active users per day (DAU)? In addition, the company G Home Hand tour platform on how much of the user is from the Grand game PC game platform?

Zhang: We are now very difficult to determine how long the life cycle of a game, I observed that "Puzzle & Dragons" This hand tour in the Japanese market has been operating for more than a year, to get a good performance; The key is to use our strength to extend the life cycle of a hand tour, This does not mean that the life cycle of embarking on a tour is short; On the other hand to see the market competition, in our "Million King Arthur" time, the Korean market is not a game like this, but from last year to now, the Korean market has appeared in more than 40 imitation "million Arthur" Hand tour, These also affect the life cycle of a product, so we can not judge the life cycle of the hand tour is 6 months, 1 years or 2 years. On the second question, 80% of the users on the G home came from the end of the tour, 20% from the Million King Arthur.

Andy Yang Andy Yeung, a Oppenheimer analyst: does the company stop the "Space-Time Rift" (RIFT) commercial operation, and will it affect the company's revenue and profitability over the next few quarters?

Wei: "Time and Space Rift" contribution to the company's third-quarter revenue is very small, the reason we stopped the game was because we had to pick up the cost of the game, and after the third quarter, the company didn't have to bear any costs for the game, so the future won't have any impact.

Oppenheimer analyst Andy Yang (Andy Yeung): The second question about the company's revenue composition, the company's PC client game revenue in the past 6 quarters have been declining, while the growth of hand tour revenue is very fast, can you look forward to the future of the company from the end of the tour and hand-travel revenue for the total revenue ratio?

Zhang: The company hopes to have a new end-product launch in 2014, allowing this segment of the business to grow from new revenue, in which "Final Fantasy" has achieved good results in Japan, which is expected to be listed in China in the second quarter of next year, so it expects the game will help the company's revenue next In addition, the company's own research and development of a product will be launched at the end of 2014, I believe that the launch of new products will help the company this part of the revenue. Hand tour is also an important business of the company, Shanda has prepared a lot of products, including independent research and development, introduction and cooperation in the operation of products; we hope that in the next three years, the revenue of mobile games and large games will be flat, each accounting for 50%, while maintaining steady and growing revenue.

William Huang, Barclays Capital analyst, William Huang: What is the profit margin for hand travel? How is the profit margin compared to the end? How does the management forecast the profit margin trend of the future tour? The second question about the G home Platform, the current market has two platform models, one is the vertical game publishers, such as Fei and CMG, the other is the application store, such as 91 wireless and Qihoo, then management how to position G home Platform? What is this platform's long-term strategy for revenue growth?

Wei: At present, the agency cost of hand travel is very small, some games are not even, the company's own promotion of the Android game, profit margins and the end of the tour, and if the cooperation with the Third-party platform, then pay the partners a few percentage points of revenue, but this part of the cooperation is few, such Most of the promotion or the company to promote their own channels to do; in iOS games, Apple has to take 30% of its revenue, so this part of the profit margin will be lower.

Zhang: There are two main users of G home Platform, a game provider, the other is a game player, so at present can say G home a vertical platform, characterized by the provider to provide games to the player; G Home and Fei, 91 wireless, Qihoo platform completely different, the first embodiment in IP, Shanda has a lot of companies can not have exclusive IP, this is a big advantage of G home, these games will be the first in the G home issue, second, Shanda end tour has tens of millions of of the paid users, we will slowly convert them to our hand tour users, which is not the basis of other companies, Third, the G-Home internationalization strategy is a big competitive advantage.

Macquarie analyst Shao (Jiong Shao): The company's competitors have to enter the host game area of the plan, Shanda game How to view the future of host games?

Zhang: Company is a network game company, so our focus has been on different network platform game products, in recent years we will focus on mobile games above, for the host game for the time being not considered.

Macquarie analyst Shao (Jiong Shao): How much does the company use online and offline methods to promote "Million King Arthur"? How does a company make a budget when he or she promotes a particular topic?

Wei: The company distributes 4%-5% of its total revenue per quarter to game promotions, and then, according to a certain percentage, and based on forecasts of the game's prospects, assigns each game to the studios that run the games to distribute the marketing costs according to their circumstances.

Zhang: "Million King Arthur" is the first line of online promotion channels are used in the game, we will continue to optimize the promotion of this way.

Macquarie analyst Shao (Jiong Shao): What is the current user-pay rate and average per-user income for millions of King Arthur?

Wei: Hand Tour Performance calculation method and the end of the tour is not the same, can not make comparisons; in the hand tour performance, we use each active user average daily contribution income (Ardau), That figure was about 2.9 yuan in the last quarter, and it grew in the two quarter, mainly because Chinese players are more accustomed to buying items in the game, so although each user contribution is not small, the third quarter of ardau still have growth, in the user pay rate is not a high end, because the grand end of the user's pay ratio is at a relatively high level.

Macquarie analyst Shao (Jiong Shao): Does the rate of payment reach two digits?

Wei: One of the data I saw showed that the ratio was close to two digits.