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NetEase Finds Success In Japan's Lucrative Mobile Games Industry

Mar. 06, 2018 4:05 PM ETNetEase, Inc. (NTES)TCEHY6 Comments
Motek Moyen profile picture
Motek Moyen


  • NetEase’s Battle Royale mobile game, Knives Out, only made $2.5 million in global net sales last January.
  • As per Sensor Tower’s latest estimates, Knives Out had global net sales of $10 million in February. The big surprise is that more than 80% of sales came from Japan.
  • Knives Out is currently the no. 1 most-downloaded and the no. 8 top-grossing iPhone app in Japan.
  • Japan is a much-coveted market for mobile games. It produces the highest ARPU for mobile games, $89.88.
  • Japan's lucrative mobile gaming industry is long dominated by local companies. NetEase breached this moat.

NetEase (NASDAQ:NTES) rush-launched its Battle Royale mobile game, Knives Out, without in-app purchases and advertisements last November. Fortunately, Knives Out went viral. Knives Out garnered more than 100 million downloads after just over a month. NetEase introduced in-app purchases earlier this year, and Knives Out is turning out to be a winner.

(Source: NetEase)

Last January, Knives Out’s global net revenue was approximately $2.5 million ($2 million from iTunes and $500k from the Google (GOOG) (GOOGL) Play app store). The latest data from Sensor Tower reported that Knives Out’s February 2018 net sales (30% cut of app store owners was already deducted) from the iTunes App Store was $8 million. It also earned $2 million from the Google Play Store. This quadruple month-over-month sales growth is mostly due to Knives Out’s unexpected success in Japan.

Japanese players of Knives Out accounted for 83% of the $2 million made through Google Play Store and 89% of the $8 million made via iTunes.

(Source: Sensor Tower)

The $10 million it made last month is almost equal to the $12 million that the Chinese iOS version of Knives Out earned in February. There’s no Google Play in China so I cannot get a Sensor Data for it. We can only presume that the Android Chinese version is also generating net sales of at least $2 million.

Knives Out’s combined global/China monthly net revenue is therefore around $24 million. Making $24 million a month from copying Player Unknown’s Undergrounds Battlegrounds PC game is an easy-money triumph for NetEase. It proved that there's money in free-to-play Battle Royale games.

I am confident that six months from now, Japanese players can boost Knives Out’s non-China monthly net sales to $15-20 million. Japan has the most generous mobile gamers in the world. The average monthly spending of Japanese players on

This article was written by

Motek Moyen profile picture
Motek Moyen is a financial analyst, technician, and Adobe multimedia content creator. He studied Mathematics, Commercial Advertising, and Computer Science in the 1990s. He does not trade stocks.

Analyst’s Disclosure: I am/we are long NTES, TCEHY, GOOG. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (6)

In my opinion, given recent track, it is highly unlikely to fall back to 210-220 range. If you are lucky, you may grab some shares at 250s but current entry point does not seem bad at all.
ArtfulDodger profile picture
Fellow Investors:

NTES is tough, smart, innovative, and the company's management makes few mistakes. Something else to think of regarding NTES is that, it's still a relatively small company. Thus, it has miles to expand, and it will do so.

As far as an investment, at this point, NTES's ratios are slightly stretched, but I look for them to contract as the company brings in new funds from new sources, games, and other parts of its business.

Toward that end, I would look for an entry point, for NTES is one of the best companies in the world, if not the best. That is my opinion after owning this company two different times over many years.

Long NTES from the twenties.

markalan92 profile picture
ArtfulDodger, you mentioned NTES's ratios are a bit stretched at this point. What price do you think would be a good price to enter this stock?
markalan92 profile picture
My calculations show that NTES's PE is still a bit high, and that the 270-280 range would be a nice buy.
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