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Chapter 335 Shortcomings and Plans

"We must increase our R&D investment! Right now, our R&D investment only accounts for 8% of revenue. To put it bluntly, we're practically living off our past achievements. Our company can't afford to rely on the mountains of gold left by our ancestors; we can't just sit back and do nothing after achieving some success, can we?"

In the first quarter, YueDong Games' total revenue reached $4.6 million, of which the YueDong Games platform, as the company's new business engine, generated more than $1.83 million in revenue, which is a remarkable achievement.

Meanwhile, YueDong's self-developed and operated game business generated over $2.42 million in revenue, accounting for half of the company's total revenue.

The rest are other sources of income, such as game merchandise licensing, IP collaboration revenue sharing, and GG (Game for Gamers) and the like. These scattered sources add up to less than a fraction of the total revenue.

The total investment in game development and technology research and development was only $3600 million, which is less than the required 8% of $3680 million, leaving a shortfall of $80.

This is absolutely unacceptable. Ernst cannot possibly distribute so much profit as dividends and taxes. The platform is important, but good games are the lifeline of the company.

Without strong R&D capabilities, how can you create games that players love and that attract users to stick with your platform?

Without good games, you hand over the initiative to other game content creators, who can hold you hostage at any time.

"And then there's GG revenue; we have to pay attention to that. Our game is so successful, whether it's Counter-Strike or..."

"Whether it's other popular games or games with a large number of players, GG's revenue is less than $700 million, which I think is a huge joke."

This is like opening a popular restaurant with customers every day, but not knowing to put out drinks and alcohol to sell, thus wasting such a good source of customers.

Praise is also due. The collaboration with Nintendo was indeed a major achievement for Rein Ruiz. This collaboration not only greatly increased the popularity of the YueDong gaming platform, but also brought a lot of high-quality game resources, which can be considered a great contribution to the company.

However, while praise is due, internal problems cannot be ignored.

When it comes to tapping into the company's internal potential, especially in the GG business, if things aren't done well, they're not done well, and there's no point in making excuses.

All of YueDong Games' revenue came from just one game: Counter-Strike.

This is so abnormal and abnormal.

Yuedong Games currently has quite a few games under its belt, several of which are quite popular. Any one of them could have great potential for being developed into a game.

Ernst pointed to the detailed game revenue data in the financial report and said, "I think Indian Treasure is very suitable for a game called Game for the Ages."

Although this game was not developed independently by YueDong Games, it was a project produced by a game studio that the company heavily supported.

It's similar to the familiar match-3 game, but it's also different from it.

Candy Crush games eliminate elements by connecting them together, while Indian Treasure eliminates them by following patterns. Only when the falling pieces form a specific pattern similar to Tetris can they be successfully eliminated.

Although it's a bit troublesome, this gameplay still attracts many players in this era.

Moreover, the game's refreshing visuals and relaxed pace make it perfect for incorporating various gadgets, whether they're snacks, drinks, or everyday items, all of which can be seamlessly integrated without causing players any aversion.

The financial report shows that YueDong Games, the studio that developed the game, holds more than 40% of the shares, making it the single largest shareholder.

This means that the company has a lot of say in the operation and decision-making of this game. If the GG business can be expanded to this game, it will definitely bring a significant increase to the company's GG revenue and change the current abnormal situation where GG revenue is the only source of revenue.

"Besides 'Indian Treasure,' there's also 'Texas Hold'em 1998.' Why not discuss collaborations for those reward items? We've provided them with so much traffic; are these companies just trying to get something for nothing?"

Since its launch, this game has received overwhelmingly positive user feedback, with a peak concurrent user count exceeding 8. Such a massive user base is practically a walking GG card, yet it's not being properly utilized, which is a huge waste.

Take one of the prizes in the game, a $100 Walmart shopping voucher, for example. Walmart doesn't pay for GG (Game for Good) fees, but even the shopping voucher is paid for by YueDong Games. Why should I use your voucher?

Faced with Ernst's questioning, Ryan Ruiz was also somewhat helpless. He also knew that Leap Games was not doing well in terms of GG revenue. "You know, our GG revenue business is just starting out. It was only established after the New Year. Not only are there too few people, but Fordman, who is in charge of this business, also has no experience in this area."

Fordman was originally a finance department staff member and had been one of Josh Green's deputies. He did have a good performance in the finance field, but GG business and finance business are completely different things. It's like asking a chef who is good at making Chinese food to make Western food. No matter how hard he tries, it is difficult to make an authentic taste.

With the GG department now independent, Fordman was appointed to the position in a time of crisis and was promoted. This kind of cross-departmental promotion is common in many companies. Originally, it was meant to give employees a chance to demonstrate their abilities, but unexpectedly, it was like being forced into a corner, putting Fordman in an awkward situation.

However, in retrospect, the saying "everyone has their own expertise" is indeed true. Fordman did not do very well in the GG business. Not only did it fail to open up the market, but it also failed to find its direction.

After listening to Ryan Ruiz's explanation, Ernst remained silent. Ryan Ruiz was the CEO of Leap Games, so it was only natural to seek his help when the company had problems. Ernst could not overstep his authority to give orders, much less be the bad guy to blame Fordman.

Seeing that Ernst did not respond, Ryan Ruiz continued, "I spoke with Fordman, and he will return to the finance department to continue his previous work."

"As for the GG department, I've already asked a headhunting firm to help recruit professional talent. And regarding the expansion of the GG department's staff, I plan to entrust the matter to the newly appointed director of the GG department. After all, he will have a better understanding of what kind of talent is needed and will be able to recruit more suitable people."

Ernst nodded slightly, which was a sign that he agreed with his idea.

"As for R&D investment, it may remain at this level for the time being, or even be reduced."

Ernst put down the financial statements in his hand, turned to look at Ryan Ruiz, and asked in a questioning tone, "What are your plans?"

Once this financial report is released, the successful collaboration between Nintendo and the YueDong gaming platform will undoubtedly show other game developers the potential of the PC game market, thereby accelerating their PC game development process.

In this situation, as long as YueDong Games maintains its current user base advantage, no game developer will be able to refuse this high-quality channel and marketing platform.

According to Ernst's assessment, the revenue of YueDong Games platform is likely to continue to grow significantly in the third and fourth quarters of this year, and the company's net profit may even exceed $8 million this year.

Given such a favorable situation, instead of increasing R&D investment, he's actually reducing it. What big move is Ryan Ruiz planning? Otherwise, he should have been replaced as CEO.

Ryan Ruiz chuckled and reminded him, "Have you forgotten about the game console?"

Ernst suddenly realized that Leap Games had been preparing to enter the world of game consoles.

It's hard for Chinese people to imagine how much Europeans and Americans love game consoles. If they had to choose between a game console and a computer, 90% of gamers would choose the game console without hesitation.

This is not because there are fewer computer games now; even two thousand years from now, this situation will not change much.

In Europe and America, most people may not have a computer at home, but they absolutely cannot be without a game console. In fact, many families own multiple game consoles. This is the true state of the local gaming market.

Many Chinese people find this phenomenon difficult to understand because before computer games became widespread, game consoles were perceived by many Chinese as a form of "soft drug" that harmed children.

If Nintendo hadn't used the name of educational devices to open up a small gap in the Chinese market back then, most Chinese people probably wouldn't have heard of the term "game console."

In the European and American markets, the situation is quite the opposite; game consoles are the mainstream of the gaming market, while PC games are only a secondary option.

This is one of the reasons why Microsoft, despite investing billions of dollars in the game console market, remains committed to developing its own game console.

Because this market is so big that it cannot be ignored.

Even back in 1998, the game console market alone was generating tens of billions of dollars in revenue every year.

Sony's PlayStation console sells over 2100 million units annually, with each unit priced at $299, generating over $60 billion in revenue from hardware sales alone.

This doesn't even include the revenue from the accompanying game software; a popular console game can generate more profit than the hardware itself.

The newly released "The Legend of Zelda: Ocarina of Time" is priced at a hefty $49.99 per copy. Market predictions suggest that the game could sell over 200 million copies in a year, generating nearly $1 million or more in revenue annually.

Moreover, this is just the performance of a single game; if you add up the revenue of all popular console games, the numbers would be even more impressive.

According to forecasts, the total output value of game consoles and console games in 1998 will exceed US$300 billion, while the output value driven by PC games will be less than US$58 billion.

With a huge market worth tens of billions on one side and a niche market worth billions on the other, how could YueDong Games not want to get involved in the game console market when faced with such a gap?

Ernst asked with interest, "You have a goal?"

If YueDong Games wants to enter the game console market, there are essentially two ways: either acquire an experienced game console company or develop its own game console.

Judging from Ryan Ruiz's plan to reduce R&D investment and conserve cash, he definitely chose acquisition rather than independent R&D.

If they had chosen to develop their own game console, the project would probably have already been officially launched by now, and the R&D investment would not only not have decreased, but would have increased significantly. How could the R&D investment be so minimal as it is now?

Moreover, developing a game console requires not only a large amount of capital investment, but also long-term technological accumulation and talent reserves, but YueDong Games has not made any moves in these areas.

Acquiring a mature game console company is different. Not only can you directly obtain the other party's technology, team and market channels, but you can also greatly shorten the time to enter the game console market and reduce market risks.

All YueDong Games can do is take money.

Ryan Ruiz is currently saving money.

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