Faced with the clamor of public opinion soliciting comments on new game regulations, I often think of the speech made by the president of General Motors at a U.S. Senate hearing 70 years ago. In 1953, U.S. President Eisenhower asked General Motors President Charlie Wilson to serve as Secretary of Defense. During the Senate hearing, a senator asked: "What should he do if a decision is good for the United States but not good for General Motors?"
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Wilson said: I put the interests of the United States first. However, he then added: "I have believed for many years that whatever is good for the United States is also good for General Motors, and vice versa."
Wilson's answer instantly became famous. Subsequent CEOs in American industry were more or less willing to use this sentence to defend their companies.
Wilson has the absolute confidence to defend himself in this way. At that time, General Motors was at the forefront of product innovation in the world.
In the first half of the 20th century, General Motors' famous designer Harley J. Earl (General Motors' vice president in charge of automobile design) established the majestic and dreamy style of American cars. The sleek and streamlined Buick Y-Job designed in 1939 became the world's first concept car.
From an economic perspective, General Motors also had a profound impact on the American industry.
General Motors has been the world's automobile sales champion for 77 consecutive years, and has also become the company with the most employees in the United States and even the world at that time. At its peak, GM sold 15% of the world's total cars and trucks. On December 31, 1955, General Motors became the first company in U.S. history to pay more than $1 billion in taxes.
However, after entering the 1980s, as innovation in the automobile industry in the Great Lakes region stagnated and industrial growth ceased, the automobile industry, including Detroit, became an extremely heavy rust belt in the United States. In this region once known as the industrial heartland of the United States, the proportion of industry has been declining. The situation in some towns has not improved.
Fast forward to 2008, with the full outbreak of the subprime mortgage crisis, the three major automobile giants became an extremely serious financial burden on the United States. In 2013, after the U.S. government sold out the last batch of General Motors holdings, it finally left the market with a loss of US$10.5 billion, bringing an end to the historic rescue of General Motors.
The public is also increasingly angry about the public financial bailout of the three major auto giants represented by General Motors:
Today, what is good for General Motors is no longer good for the United States. Today, General Motors' best-selling model is still the Cadillac, a design that existed 77 years ago. A full 77 years have passed, and no new ideas have been born in this company.
To rescue a rusty machine with nothing new in mind, the cost will be shared by everyone, the public will be angry, and the regulatory hammer will inevitably fall.
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Earlier this year, the U.S. Justice Department and eight states sued Google on Tuesday, accusing the company's dominance of the online advertising market of harming competition and demanding it be broken up.
In a statement responding to the lawsuit, Google said the DOJ "is trying to pick winners and losers in the fiercely competitive ad tech space. The DOJ is doubling down on a flawed argument that will slow innovation, raise ad costs, and make it harder for thousands of small businesses and publishers to thrive."
It is not difficult to see between the lines that Google today does not even dare to quote the famous saying of the President of General Motors. No one dares to say that what is good for Google is good for the United States.
Peter Thiel, a VC guru who invested in SpaceX, said that today’s Google is facing increasing pressure from public opinion and has even been targeted by antitrust. One important reason is that today’s Google has almost no innovation, and the shadow of monopoly and involution can no longer be covered up.
For example, Thiel pointed out that over the past decade, Google's self-driving progress has been less and less exposed in public relations and public opinion, because today Google is further away from full self-driving. Google Glass, which had high hopes, also bid farewell to the historical stage at the beginning of this year.
In the field of generative AI, Google, which acquired Deepmind early, was late and was choked by the rising star OpenAI: Bard, its rushed AGI product, made continuous mistakes in demonstrations, causing Google's stock price to fall by more than 8%, and its market value to evaporate by billions of dollars.
At a summit, Thiel said in front of Google founder Schmidt that the lack of technological innovation today is obviously not due to lack of money. For example, Google has 50 billion US dollars on its books, and they don’t know how to invest in innovative projects. Google would rather let the money sit at home and enjoy a 0.1% rate of return.
Thiel pointed out that what Google lacks more than money is ideas, or the courage to take risks.
Why can risky ideas no longer enter the decision-making systems of these large companies?
Thiel pointedly pointed out that when the existing business risks are extremely low, such as Apple's mobile phones and Google's advertising, in order to keep bonuses, it is difficult for these large companies to make any risky decisions through the board of directors.
When everyone's bonuses, performance evaluations, and option prices are at stake because of risk-taking and innovation, the resistance against innovation will increase until it completely stagnates.
But at the same time, due to the lack of innovation, the social costs borne by the existing cash cow business will become higher and higher. Google will try its best to exploit small businesses that advertise, and Apple will do everything possible to prevent those game manufacturers from bypassing the Apple Store.
From this perspective, the monopoly of technology has become another curse: technology companies have brought more obstacles to development to American society than motivation. Negative public perceptions and persistent pursuit by legislators have become inevitable, and the public appearance of the giants has become increasingly hateful.
In California, where technology companies gather, the rust of anti-innovation is infecting the land:
California's former Sun Belt glory is over. The high cost of living caused by technology companies has begun to truly affect the lives of Californians.
High-level middle-class communities began to gradually disintegrate. A large number of homeless people were attracted to California by the social assistance programs of technology companies. Educational standards, which cost more money, plummeted. Housing prices remained high. Water and gas prices soared. Politicians came and went, but each received large sums of support from technology companies and spoke the same nonsense.
California has become completely different from the prosperous moment of 1980. Local residents are furious with tech giants. More and more people are fleeing California.
It was not until the beginning of this year that Google finally swallowed the bitter fruit it had sown. Public anger drove lawmakers to take action against Google:
The exploitation and manipulation of small advertisers, anti-innovation actions, and manipulation of public opinion cannot continue any longer.
Google, which has no innovation, must correct itself now, otherwise it will face the fate of being split up.
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In today's Chinese game industry, we dare not claim that what is good for leaders like Tencent is good for Chinese games.
On the day the new game rules solicitation draft was exposed, Tencent fell 16%, and 46 billion US dollars disappeared in one trading day. In addition to the emotional catharsis, the voices of defense began to gather and became louder and louder.
In these arguments, the rise of NVIDIA, Microsoft's cloud services, and Chinese mobile games' support for hardware and traditional cultural industries all prove the great economic, industrial and social value of the game industry.
This is indeed the case. In the past five years of this small economic cycle, China's game market has been the strongest industrial and economic track. By 2021, China's total domestic game revenue has reached 296.513 billion yuan, and overseas revenue in the same year has reached 18.013 billion US dollars. When combined, the contribution of game output value to GDP has officially surpassed that of the United States, ranking first in the world.
In the context of the global game content market, which is stagnant and stuck in a growth bottleneck, the sudden global rise of the Genshin Impact series in China’s two-dimensional circuit, as well as the large-scale Eggman Party that created a party game circuit and set fire to the prairie fire, all reflect the super innovative ability of the Chinese game industry.
These are all facts, and we must recognize the huge value of the game industry to the Chinese economy. However, we must also be prepared for danger in times of peace and face up to the undercurrents related to the healthy development of the industry in the future, such as:
Our industry leader in the past 20 years, the iconic symbol of Chinese games, as the largest weight in the industry, the increasingly slow pace of Tencent Games makes people uneasy about the present and future of the industry - a kind of uneasiness close to the "Rust Belt" style of General Motors and Google.
We have seen that in the six quarters since 2022, Tencent's domestic game revenue has experienced negative or zero growth in five quarters. The entire game industry is rapidly in line with the rhythm of the economic cycle, becoming a weak cyclical business and no longer has the ability to grow explosively that year.
Generally speaking, after the penetration rate peaks, new content supply is the starting point for the game industry to regain growth, and can thus form the so-called healthy growth.
But to be honest, Tencent did not capture the spark of content innovation. Instead, we saw involution that suppressed innovation.
First, it is an all-out acquisition of game content providers.
We might as well use a set of data to show this strategy within the past period:
According to Gamma data, Tencent invested in a total of 129 game companies from 2020 to 2021, accounting for nearly 40% of the total investment in the entire industry.
In the gaming industry, Tencent Games’ investment amount is very eye-catching:
Statistics on the disclosed investment amount among the top 10 companies with the largest number of investments in the two years from 2020 to 2021 show that Tencent has invested more than 40 billion yuan in the game investment market, which is approximately equivalent to nearly 80% of the investment amount in the entire industry.
In addition to the large number of investments and large amounts, Tencent Games is also a "quick shooter":
Looking at the time span, the investment accelerator accelerated in 2019, exploded in 2020, and reached a higher level in 2021. Data agency Nikopartners analyst Daniel Ahmad pointed out on December 18 that nearly 100 game companies were acquired and invested in 2021, equivalent to one every three days.
What’s even more interesting is that as MiHoYo’s Genshin Impact began to kill everyone in October 2020, Tencent has invested in more than 16 companies since October.
In other words, 80% of Tencent’s investments in domestic game companies in 2020 started after October.
It is not difficult to see that a threat that was originally out of sight suddenly became a hot item and became a dark cloud in Tencent's heart.
In fact, with the exception of platinum players like MiHoYo and Lilith, most early game studios cannot support long-term investment in game development and highly volatile rates of return, so accepting investment from Tencent often becomes a logical choice.
With Tencent’s round-the-clock investment from Series A to Series Z, all the heroes in the world have entered Tencent’s network.
Tencent’s index fund strategy has even made competitors like Byte lose their patience. In the absence of any high-quality content supply, short video platforms like Douyin have high-quality traffic, but they are useless.
As the stage of investment in game content providers becomes increasingly early, Tencent's influence in the game market will become more and more stable. If it wants to repeat the "Genshin Miracle", it has given up the possibility of taking the lead.
On November 27, Bytedance officially announced that it would conduct a large-scale business contraction of its gaming business. Tencent Games’ index fund strategy has achieved a great victory.
But what we must be aware of is that this invincible index fund strategy is dragging down the entire gaming industry.
As the content supply gradually dries up, innovative content no longer seems to be one of the dimensions of competition in the Chinese game industry. Focusing on routines and inducing consumption has become the only way to survive for many game manufacturers, which is also the core of the rectification of this draft of new regulations.
A world where "index fund strategies" win is also a world about to face adjustments.
Second, is Tencent’s imitation of any popular new game product.
A full year after competing party game products became popular, Tencent Games quickly responded with the same party game Yuanmeng Star, and invested heavily in the early stage to compete for users.
It is not difficult to infer that taking huge risks to invest in new content will lead to huge risks of failure; for a period of time, Tencent has often waited for popular gameplay to appear, and after it has withstood the market test, it will quickly follow up and copy.
Since Tencent owns core traffic portals such as WeChat, its copied products can often be quickly promoted among acquaintances in social networks, achieving a late strike.
The popular game "Peace Elite" is a typical successful case of this style of play. At that time, the domestic competition for chicken-fighting mobile games was in full swing, but Tencent finally won this track by relying on its huge traffic entrance.
But this time, Tencent invested heavily in Yuanmeng Star, making it clear that it wanted to copy the routine of Peace Elite and ambush any possible dark horse and content innovation through a highly involved business strategy.
In fact, any game studio that is still concentrating on producing content will clearly see that under the power of the giant’s strong involution model, the content produced will be imitated. After becoming a preemptive routine, any new game with truly innovative effects will face the ultimate torture from Tencent.
This kind of torture is a source of uneasiness for the entire industry:
If the content you work so hard to create will be imitated and plagiarized, then why not just join the ranks of "index funds" and use daily logins and induced recharges to quickly attract money from consumers?
The calculation is very good, but it is not difficult to see that this new regulation draft has dealt a big blow to the business model of the "index fund" game - but it has almost reaped the consequences, and by the way, it has dragged the entire industry down.
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In fact, after the draft of the new regulations was exposed, a more important point was raised. Why do e-commerce platforms and short video platforms that go overseas face far less regulatory pressure than games?
In other words, what the defenders want to ask is why no one holds the same moral magnifying glass to torture those e-commerce platforms or short video platforms? What's the difference?
The logic is actually very simple.
Whether it is an overseas e-commerce platform or an overseas short video platform, it can avoid the burning gaze of the public and the strict scrutiny of supervision. There are two levels of logic:
First of all, through full-scale globalization, whether it is a short video platform or an e-commerce platform, the social load generated remains overseas. Tencent, which has been involved in long-term involution and rigidly adhere to routines, has lost the ability to go overseas.
While the core remains unchanged, performance pressure forces major online game companies represented by Tencent to use more routines, directly rushing towards the gunpoint of inducing consumption, and rushing towards the track of minors.
It is not difficult to imagine that this will not only be itself, but the entire industry, and the pressure from public opinion will only increase in the future.
Take Yuanmeng Star as an example. Through this game, Tencent has been fully involved in the decision-making of the minors track. It is difficult to say that this is not an inevitable conflict caused by the trade-off between performance pressure and social pressure.
From this perspective, the debut of Yuanmeng Star and the implementation of new regulatory regulations at the same time are both coincidental and mysterious.
Secondly, as in the case of General Motors and Google in the previous article, China's e-commerce platforms and short video platforms are all going overseas to conquer cities and territories. The people as a whole are benefiting from this trend, and the overall contribution of these platforms is incremental.
The problem faced by game manufacturers who have been criticized for their tricks and inducing consumption is that all the profits are at the cost of the public and supervision, and the cake has not become bigger. So the more fiercely Tencent Games rolls around, the stronger the backlash from public opinion will be.
There is no new content, because new content will be copied; there is no new game hardware, because no one can make money to develop hardware; once the rust belt spreads, there is no room for innovation, and it is almost inevitable that the game industry will be harshly scrutinized.
Sitting on channels and becoming the natural enemy of innovation is a necessity of capital logic. But it is precisely this anti-innovation logic that will lead to huge pressure from the public and regulation.
From this perspective, it is not that Tencent Games cannot see this trend, but the game team that is used to reaping the bonuses of routines is not willing to face this fact. They are more willing to sit on the high pile of gold coins and use familiar routines to ambush all potential innovations.
However, no matter how afraid a company is of innovation and taking risks, in the absence of innovation for a long time, the backlash from public opinion will always arrive only late.
This exposure draft is clear evidence that by creating a rust belt, the entire industry is leading to a fate that is almost the same as General Motors and Google.