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Operator
Good day and welcome to the NETEAST 2021 Fourth Quarter and Full Year Earnings Conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Margaret Shi, IR Director of NETEAST. Please go ahead, ma'am.
Margaret Shi
Thank you, Operator. Please note the discussion today will contain forward-looking statements relating to the future performance of the company and are intended to qualify for a safe harbour from liabilities. as established by the U.S. Privacy Education Reform Act. Such statements are not guaranteed of future performance and are subject to certain risks and uncertainties, assumptions, and other factors. Some of these risks are beyond the company's control and could cause actual results to differ materially from those mentioned in today's press release and this discussion. A general discussion of the risk factors that could affect NetEase's business and financial results is included in certain filings of the company with the Securities and Exchange Commission, including its annual report on Form 20F, and the announcement and the filings on the website of Hong Kong Stock Exchange. The company does not undertake any obligation to update this forward-looking information except as required by law. During today's call, management will also discuss certain non-GAAP financial measures for comparison purposes only. For a definition of non-GAAP financial merits and a reconciliation of GAAP to non-GAAP financial results, please see the 2021 fourth quarter and the four-year earnings news release issued earlier today. As a reminder, this conference has been recorded. In addition, an investor presentation and a webcast replay of this conference call will be available on the NetEase website at ir.netease.com. Joining us today on the call from NetEase Senior Management, is Mr. William Ding, Chief Executive Officer, and Mr. Charles Yang, Chief Financial Officer. I will now turn the call over to Charles, who will read the prepared remarks of Mr. William.
William Ding
Thank you, Margaret, and thank you, everyone, for participating in today's call. Before we begin, I would like to remind everyone that all percentages are based on RMB. 2021 was an eventful year for NetEase. For online games, we introduced a number of prolific games, breaking new records in various categories. For Yodao, we quickly and successfully restructured our business in light of the new regulations in the online education industry, and Yodao is now ready for its next phase of growth. And for our cloud music business, We are extremely pleased to have completed its initial public offering on Hong Kong's 16th in December. We look forward to growing this business further with augmented content and features to create and bring more quality music to our users. For online games, we finished the year with a strong quarter. Revenues came in at RMB 17.4 billion, representing 30% year-over-year growth. Our flagship titles continue to demonstrate strong year-over-year growth after two decades of operation. We continue to supply our loyal and sustainable base of users with continual content updates. Revenues from our Fantasy Westward journey and Westward Journey Online Saga continued to grow remarkably at double-digit rates year over year, further strengthening their position as China's biggest MMO titles. In terms of our new game launched during the year, Naraka Blade Point was a clear standout with international success. The game quickly broke the sales record for buy-to-play games made by Chinese developers and gained acclaim as a top seller on Steam's Best of 2021 games list. Some of the Naraka Blade Point excitement in the fourth quarter followed our rollout of content updates. For example, in our crossover with Bruce Lee, we brought a series of themed items based on the legendary martial arts figure into the Naraka world, letting players unleash the fury of the dragon against their opponents and invigorating the global player community. Keeping our games fresh with frequent updates, Naraka BladePoint's user base continuously hits new records. The strong engagement and retention we are seeing today brings us great confidence that Naraka BladePoint will continue to attract users from all over the world. We are now working diligently to bring players console version, and mobile version of the game, which we look forward to bringing to our players in the very near future. The highly anticipated release of Harry Potter Magic Awakened also took the market by storm as one of the most successful games in China last year, enchanting millions of players and dominating both top downloads and grossing charts in China, following its launch in September. Harry Potter Magic Awakened uses the best-in-class development capabilities of NetEase Games to bring players a captivating gameplay experience with compelling features, an in-depth collectible card system, and beautifully crafted art style. After a strong debut in September, we continued to extend the game's popularity by frequently rolling out captivating updates that bring users fresh gameplay, cosmetic items, and cards every month, rising to the top three position multiple times on China's iOS top grossing game chart during the fourth quarter. We share an equal excitement for the overseas versions of Harry Potter Magic Awakens, and our localization for other geographies are progressing smoothly. Two weeks ago, we kicked off a closed beta testing for overseas players. Leveraging the talent of two gaming and online entertainment powerhouses, we will work very closely with Warner Brothers Games to co-publish this amazing game globally, including in the US, Europe, and Japan later this year. We believe worldwide audiences will be delighted to embark on immersive adventures, taking a fantastical journey into the wizarding world of magic and infinite possibilities. In addition to these two blockbuster games, we are proud to have also launched a number of other titles in various brand new genres, growing our reach with new players and opening up new possibilities. We launched Ace Racer in July, our very first self-developed racing game. Ace Racer's realistic art style and real-life racing tracks create an exciting and differentiated racing experience. Players can travel to Hangzhou, Chongqing, and other places to enjoy the unique and beautiful scenery. The strong debut of Ace Racer marks another leap in our genre expansion. giving us more confidence in our ability to create more successful titles outside of our comfort zone. Infinite Lagrange, our space themed SLG game launched in the third quarter, is a great example showcasing how we expand SLG genres with its strong debut in China. As one of our next generation SLG titles, Infinite Lagrange features an iconic space simulation experience, captivating hardcore sci-fi players with its intense and exciting travel through time and space. After six months of operation, Infinite Lagrange continues to show a healthy upward trend with gradually ramping revenue. With our strong R&D capabilities and relentless pursuit of innovation, We are constantly looking to break into new territories, capturing new users that reach beyond our traditional genres. Moving into 2022, we have an abundance of new pipeline projects planned for Naraka Bladepoint and Harry Potter Magic Awakened, as well as a number of other strong titles ready for launch in China and globally. Diablo Immortal has been long anticipated by players' community worldwide. In our pursuit of top quality, the game has taken us great effort to create and refine. We strive to bring our players the most authentic Diablo experience, restore the popular combat style and immersive exploration features, and create a new story and gameplay for the mobile platform. Luckily for players, the wait is almost over. We have concluded the latest round of testing in January with highly positive feedback from players in both China and overseas markets. We are on track for its global launch this year, and in China alone, we have already over 10 million players pre-registered for this exciting title. Additionally, Ghost World Chronicle Our self-developed Chinese-style sci-fi RPG is also in the making. We creatively integrated sci-fi style with elements from modern cities and traditional Chinese culture, creating an engaging Chinese-style sci-fi world with a distinct artistic style. We are working diligently on development and hoping to bring a fresh and differentiated RPG experience to players In the overseas market, we will be launching Dead by Daylight Mobile in Asia, which is the mobile version of the famous asymmetrical battle arena PC game. We have worked jointly with Behavior Interactive to build this mobile version, and we are confident that players will find unrivaled asymmetrical competitive experiences following the game's release in the coming months. As we create a larger presence on the international stage with our top quality games, we are also attracting global top talent into NetEase. In January, we announced that we have teamed up with master producer Toshihiro Nagoshi, former producer of Yakuza, one of the most famous and best-selling game franchises in Japan. Together, we are building Nagoshi Studio in Tokyo for the development of high quality games for global audiences. We share a commitment to unleash the potential of creators in an open and inclusive environment. The new studio will have full authority to manage and create the kinds of games that they are passionate about, and we will be there to provide support throughout. Over the past few years, we have also attracted top producers including Katsuya Akasuka and Goichi Suda. With these top talents joining us, we will gain new inspiration and global vision to reach passionate gamers around the globe with high quality and engaging content. Now turning to Youdao, We have completed a smooth business transition in compliance with requirements from regulators and achieved steady growth throughout 2021. Total net revenues for Youdao were RMB 1.3 billion in the fourth quarter, representing 21% year-over-year growth. In addition, we achieved positive non-GAAP net income for the first time since our IPO and continuing operating cash flow inflow of RMB 142 million. In the fourth quarter, we continued to upgrade our Steam course offerings. Growth fillings from Youdao Go, Youdao Weiqi, increased by around 130% year-over-year. Recently, we launched Youdao Zhongheng Qiyuan, the Youdao Game Academy app, which enables Go and chess learning through AI or person-to-person matches. Complementary to our online offerings, we opened our first offline STEAM center in Beijing last November, offering courses such as Youdao Go, Youdao iCode programming, and Youdao Drosophila Science to help improve children's skills in logical thinking and explore the scientific world. We expect to expand the learning center with more diversified content in the coming period. Growth momentum from our leading smart devices also remains strong with new and improved content and features. Net revenues from the segment grew 34% year-over-year to RMB $317.7 million in the fourth quarter. Through a partnership with the commercial press, the oldest and most influential publishing agency in China, exclusive content, including those from Xinhua Dictionary, were added to our dictionary pen. Additionally, in our new upgraded pro version of the dictionary pen, personalized writing assessment and improvement suggestions are available for students at various stages of learning based on vocabulary, grammar, and composition. These features are again powered by our strong AI technology such as optical character recognition and natural language processing capability. As for education digitization solution, we have secured strategic partnerships with a number of local municipals including Hefei, Xiamen, and recently Suzhou, to provide schools and teachers with our Youdao Smart Learning Terminal and solutions, empowering them to effectively track students' learning progress and optimize teaching guidelines. Turning to our cloud music business, throughout the year, we continue to make progress on our financial, operational, and corporate goals. The various product and content enhancement we made strengthened our overall position amidst a healthier industry environment. And the view of online music services is stable in 2021. In the fourth quarter, net revenues increased 24% year-over-year to RMB 1.9 billion, with continued increase in membership paying ratio. we have managed to improve profitability along with enhancements to our content library attributable to copyright cost optimization. In the fourth quarter, we enhanced our margins both year over year and quarter over quarter and achieved positive gross margin for the full year of 2021. To foster our growing music community, We continued our product innovation initiatives in the fourth quarter. Some of our upgrades included more individual personalization capabilities on the homepage. Users can now better showcase their personalities and music preferences. We also added a musical notation function in November, providing music enthusiasts with professional and accurate scores and services across our music offerings. In addition, we launched our brand new beat trading platform in mid-December, accommodating transactions between beat makers and musicians, as well as music fans. The beat platform has the potential to not only allow beat makers to realize commercial value, but also liberate individual musicians' creative content, enriching our content ecosystem and bonding our users together even more. On the content side, we secured more high-quality music from large IP owners and continues to nurture independent artists. By the end of the fourth quarter, we were servicing more than 400,000 independent musicians. Meanwhile, we have been making progress on our initiatives to produce music in-house which further diversifies and differentiates our content offering. Going forward, we hope to bring more quality content to our platform to complement our music library while working together with other industry players to benefit all music lovers. On to Yanshan. As one of the most loved lifestyle brands catering to the new middle class in China, NetEase Yanshan is redefining the lifestyles of China's younger generation, intensifying our focus on certain categories. We continue to launch a variety of popular products across core categories, including food, electrical appliances, household cleaning, pets, and beauty and skincare. Our useful design-led approach has enabled the products on our platform to gain increasing appeal with younger consumers. As we grow each of our businesses, we are also very conscious of the effect on society and our emphasis on ESG initiatives has greatly increased over the past years. We are honored to have our efforts acknowledged by MSCI who upgraded our ESG rating to an A. In addition, we scored 39 points in the Dow Jones Sustainability Indices, DJSI, more than doubling our score in the prior year. On Sustainalytics ESG Risk Assessment Scale, Netties received a score of 14.9 points, indicating a low level of ESG risk. We are recognized by Systemlytics as an ESG industry top-rated company and also an ESG regional top-rated company. Along with our leading privacy and data security policies, the human capital development practices, we've made concerted efforts to reduce our carbon emissions, improve our corporate governance, and make increased contributions to charitable causes The global pandemic and environmental catastrophes have prompted many to find ways to do more for the society, and we are no exception. Adding to our recent disaster relief donations following the flood in Shanxi and Henan, we also donated an additional RMB 10 million to help local residents in Xi'an in the wake of COVID-19. With our solid financial reserves and continued strong performance, improving shareholder return is always on our agenda. During 2021, we repurchased around US dollar 2 billion worth of shares and paid US dollar 551 million in dividends. All in all, we are pleased with our growth in 2021. We gained steady ground across each of our verticals Positioning NetEase for continued growth in 2022, our focus on content creation and elevating users' experience with NetEase products and services remains at our core. Moving ahead, we will continue to innovate, diversify, and expand our reach to generate further value for our users and investor communities as a whole. This concludes William's comments. I will now provide a very brief review of our 2021 fourth quarter and full year financial results. Given the limited time on today's call, I will be presenting some abbreviated financial highlights. We encourage you to read through our press release issued earlier today for more details. Total net revenues for the year were RMB $87.6 billion or US dollar $13.7 billion. representing a 19% increase year-over-year. We closed the year with fourth quarter revenue of RMB 24.4 billion, or US dollar 3.8 billion, representing 23% increase year-over-year. For 2021, our net revenues from online games services were RMB 62.8 billion, up 15% from 2020, revenues accelerated even faster in Q4 to RMB $17.4 billion, up 30% year-over-year. The additional growth was primarily due to increased revenue contribution from the launch of new games, such as America's Bladepoint and Harry Potter's Magic Awakens. Net revenues from our mobile games accounted for approximately 68.3%, for the fourth quarter and 70.4% for the full year. The adult net revenues for 2021 reached RMB 5.4 billion, up 69% year over year. On a quarterly basis, net revenue increased by 21% to RMB 1.3 billion in Q4. Both increases were driven by fast growth of both your adult learning services as well as increased sales of smart devices. Net revenues from NetEase Cloud Music were RMB 7 billion for the full year, up 43% year-over-year. Q4 net revenue of Cloud Music increased 24% year-over-year to RMB 1.9 billion. Both increases were primarily due to increased revenues from social entertainment services particularly audio-based live streaming and paid user expansion. Total revenues for innovative businesses and others were RMB 12.4 billion for the first year, up 13% year-over-year. For the fourth quarter, total revenues were flat year-over-year at RMB 3.8 billion. Our total gross profit was 53% in the fourth quarter compared with 50.2% in Q4 of last year. Looking at our fourth quarter margin in more details, gross profit margin for our online game services remains stable at 64.1%. As a reminder, this number is generally stable with some narrow fluctuations based on the revenue mix of mobile and PC titles, as well as revenue mix of self-developed and licensed games. Growth margin for Youdao in the fourth quarter was 50.7% compared with 47.5% in the same period of prior year. The growth was primarily attributable to our improved learning services growth margin due to improved economies of scale and continuous optimization of our faculty compensation structure. The substantial sales growth of smart learning hardware such as Yodal Dictionary 10 3.0, also contributed to these gains, as this line carries a higher gross margin than other product lines. GP margin for NetEase Cloud Music was positive at 4.1% versus a negative margin of 7.1% in the year-ago period. This is our third consecutive quarter of positive gross margins. The significant increase was primarily due to the strong top line growth as well as improved cost control measures. Gross profit margin for innovative businesses and others was 26.8% compared with 28.2% in Q4 of 2020. The decrease was mainly due to the decreased GP margin from advertising services. For the full year, Total operating expenses were RMB 30.6 billion, or 35% of our total net revenues. For the fourth quarter, total operating expenses were RMB 8.3 billion, or 34% of net revenues. Looking at the fourth quarter, selling marketing expenses as a percentage of net revenues was 13.5%, compared with 14.1% in the prior quarter. The quarter-over-quarter decrease was mainly due to decreased marketing spending related to Youdao. R&D expenses were remaining $3.8 billion, largely stable from the previous quarter. We remain committed to investing in content creation and product development, which is core to our revenue growth into the sustainable future. The effective tax rate was 19.6% for the full year, and 14.2% for the fourth quarter. As a reminder, the effective tax rate is presented on an accrual basis, and the tax credits differ from each of our entities at different time periods, depending on applicable policy and our operation results. Our non-GAAP net income attributable to our shareholders for the fourth quarter of 2021 totaled RMB 6.6 billion, or U.S. dollars 1.04 billion. Non-GAF basic earnings per ADS for the quarter was U.S. dollar 1.58 or U.S. dollar 0.32 per share. Our cash position remains strong. As of the year end, our total cash and cash equivalent, current and non-current time deposits, and short-term investment balance totaled RMB 103.4 billion, compared with RMB 100.1 billion as of December 31, 2020. In accordance with our dividend policy, we are pleased to report that our Board of Directors has approved a dividend of U.S. dollar 0.081 per share, or U.S. dollar 0.405 per ADS. Lastly, under our share repurchase program, approximately 18.5 million ADS had been repurchased as of December 31st, 2021, for a total cost of approximately US dollar 1.8 billion. Meanwhile, under NetEase Yodal's share purchase program, approximately 0.6 million ADS has been purchased for a total cost of $8.2 million as of the year end. Thank you for your attention. We would like now to open the call to your questions.
Margaret
Operator, please go to Q&A.
Harry Potter
Thank you. If you would like to ask a question, you may signal by pressing star 1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Once again, star one for questions. If you ask your question in, if you wish to ask your question in Chinese, please immediately repeat your question in English. We'll take our first question from Jaylong Shi with Nomura.
Jaylong Shi
Good evening, management. Thanks for taking my question. Congratulations on a solid quarter. My question is about the new games. Charles just mentioned that we have a lot of new games. So, I would like to ask the management, how many of these new games have been released this year? We know that Diablo Immortal has been released this year. Can you tell us about the time when Diablo Immortal was released in China? My question is about game pipeline. Just wondering if management can provide an update on the latest game pipeline for this year and how many of the new games have already received license and will be released this year. For one of the new games, Diablo Immortal, which has already received the license in China, can management provide an update on its launch timeline? Thank you.
Charles
Our dark and dark will be online before the first half of this year. The rest of the day will come to make up for it. We are going to have all the products online this year. We have some very good products. So within this year, there will be some launches all over the world. In addition to dark and dark, there will be many more launches this year.
Margaret Shi
Sure. We're aiming to launch Diablo in the first half of this year. And obviously for Diablo, we already have the license approval. We're going to launch it in China as well as globally. Additionally, we're also going to introduce the overseas version of Harry Potter.
Margaret
Thank you, Dalo. Thank you. We'll take our next question from Kenneth Fong with Credit Suisse.
Charles
Hi, Ding Zhong, Charles, Margaret, 你们好。谢谢接受我的提问, 也恭喜你们在一起有一个非常长进的业绩。 我想问一下就是, Harry Potter, 我们在国内取得空前的成功, 第一呢,其实我们应该怎么去想这个游戏的生命周期? Thank you management for taking my questions and congrats for another solid set of results. After the huge success of Harry Potter Magic American in China, what's our view on the longevity of the game? and the timeline, strategy, and region for the overseas launches. Thank you very much. Regarding this question, our company has a lot of experience in long-term operation of games. For example, we have a dream game, a large-scale game, including Eagle Lion. The product of Harry Potter is a kind of content consumption form. As you know, NetEase, we have a lot of experience in running our games for a long period of time. And some of the examples are FWJ, WJ, and Omioji.
Margaret Shi
For Harry Potter, this is a type of game that's about consuming content. So the longevity is very much linked to how much content is available to the game players. So we'll continue to deliver those exciting content to keep our users engaged. In terms of overseas version, we are aiming to issue it in the middle of this year. Thank you. Thank you.
Harry Potter
Thank you. We'll take our next question from Alicia Yap with Citi.
Alicia Yap
Hi, thank you. will develop a new version of the game, and then add elements from the original game. Another quick question is about music. I don't know if the management team can comment on the future trend of membership rates and the growth of subscription, or the profit and loss of the music industry in general. Thank you. So I have two questions. One is regarding the metaverse. So can management share with us what you think about metaverse? Would you consider adding some metaverse elements into existing games or launching another version of some of the existing games in the metaverse settings? The second question is related to cloud music. Can you comment on the pricing trend for the subscription and also overall subscription growth target and the margin trend for the business? Thank you.
William Ding
between virtual networks and reality. From this point of view, NetEase has always been a large-scale MMORPG, multi-person role-playing software with many years of experience. It itself is very much in line with the original universe of community, social travel, and economic model. So we will make full use of the advantages accumulated in this area. We will explore from both directions, as mentioned earlier. One direction is to add some offline combinations in the game. In addition, we will consider the development of the original development of our control technology based on existing games. The reason for this is the world. This is what we are exploring.
Margaret Shi
For Metaverse, our understanding is that Metaverse is that integration between the virtual world and reality. And for NetEase, as you know, we have many, many years of operating MMORPG games. And for MMORPG games, there's very heavy social elements and there's a very sophisticated economic system. And in certain ways, you can regard it as a model or prototype for Metaverse. And so we'll continue in that way. And secondly, based on our existing technology, we'll also be exploring possible new games for Metaverse. Thank you.
Charles
Okay. Firstly, that cloud music will continue to grow through
Margaret Shi
comprehensive content offering. And one of that is for us to continue to produce high quality and exclusive content. And much of it will be self-produced by ourselves in-house. And we believe that very soon we will be able to deliver to the Chinese consumers a lot of the high quality Chinese pop music. for them. So content strategy is one of the main focus for our growth and expansion. Thank you.
Harry Potter
We'll take our next question from Natalie Wu with Haitong International.
Natalie Wu
Good evening. Thank you for accepting my question. Congratulations on such a strong performance. I feel that this year will be a year worth looking forward to. 我主要想问问招人的计划以及在今年哪些项目上面咱们计划人才储备的一个增量比较多 以及这个海外具体哪些市场或哪些区域咱们会最重视这下最多的一个功夫 I will translate myself briefly. So thanks for taking my question and congratulations on a very solid quarter. It feels like the upcoming 2022 will be a fruitful year considering all those quality names in your pipeline. So my question is regarding the headcount plan for this year. Just wondering which business line has the most talent incremental plan. And regarding the global expansion, which southern regions are the major target markets that you're going to put the most effort on. Thank you.
Margaret
Tianyu, you can answer this question.
Charles
This year, in terms of talent preparation and recruitment, the focus will be on the global part, the foreign part. As you can see from the report, last year, we recruited some of the best producers and teams from around the world to join our company. In the future, in the direction of globalization, we will strengthen this industry. I believe that in the near future, including this year, we will have more global top-notch production teams join us. On the other hand, our newcomers and the domestic market are almost the same as the online market. Yes, there is not much change in this regard.
Margaret Shi
In terms of headcount plan, I think our focus this year will be on global talent. As we mentioned in our prepared remarks, last year we managed to attract many of the top talent globally, and we'll continue to invest in this area. So very soon you'll probably see more of the global talent joining NetEase. In terms of the hiring plans in China, there should be no change from previous years. Thank you.
Harry Potter
We'll go next to Thomas Chong with Jefferies.
Thomas Chong
Because we are now facing global gaming players in different regions, I would like to ask about our future development in PC, console, and mobile games. The second question I would like to ask is our core competence. Thanks management for taking my questions. Can we discuss about the upcoming new games to be developed in multiple devices like console, PC, and mobile in order to target the global audience in different regions? And my second question is about our core competence in developing high-quality titles on a consistent basis like Harry Potter and Awaka. Thank you.
Margaret
I'll answer that.
Charles
In the development of new games, in the future, in addition to mobile games, PC and consoles are our focus. In addition to China, overseas is also our focus. So my answer to you is, from a market perspective, both domestic and overseas are very important. Overseas is our focus. As for equipment, as long as we can play games, we will go in. uh, uh, Thank you.
Margaret Shi
Thomas, the first question in terms of new types of games. In addition to mobile games, PC and console will also be an important area for us. Any media you can imagine play games on is an area that we want to explore, is where we want to create game content for. In terms of regional focus, both China and the international market are very important to us. Overseas is going to be the next new focus. And in terms of your second question on our core competence, I think over the last two decades, you can see that NetEase is a company that's very focused and very dedicated in content creation. And secondly, is that we value our talents. And thirdly is that we are very much high-quality driven. So now when we think about creating games, we're not thinking about just in China, but also lifting that. We're also taking a global vision. We want to be able to serve the global market as well. And all in all, we think that talent is perhaps the most important thing for our sustainable growth. We want to continue to attract and retain talents that share our passion in game creation. Thank you.
Harry Potter
Thank you. We'll take our next question from Alex Poon with Morgan Stanley.
Alex Poon
Thank you. Thank you, Manager, for introducing my question. Congratulations on your good performance. My first question is about the trend of old games. Recently, the market has been weak. Advertising and e-commerce have seen a downward trend. I'd like to ask if our old games have been affected by the market, especially by the high-paying users. In the fourth quarter of last year, more games were launched. We added a limit to the collection of treasures. Does this limit affect our old games? This is the first question. The second question is about the Ring King and the Roblox gaming platform mentioned earlier. What is the current situation? Thanks for the management for taking my question. I have two questions. First question is related to our legacy titles. Recently, macro environment has not been very good and consumption advertising has not been doing well. And does this weaker macro environment affect our legacy titles, especially those high-paying users? And also, there have been some daily limits on the loot box of some games. Does this change affect our growth of our legacy titles? The second question is related to the status of Lord of the Rings and the Roblox-like platform that we discussed before in December. Is there any chance that these two games will come out in Asia in first half? Thank you very much.
Margaret
Tianyu, please answer the question.
Charles
Regarding the old games, we have seen that some of our current old products have developed very well. They performed very well last year, including this year's Spring Festival. We didn't experience any major environmental impact. Including what you mentioned about some of the opening restrictions, our old games' design in terms of consumption is very restrained. So this limitation doesn't have much impact on our income. Especially, as you all know, our Dreamcast is mainly a time-saving game. So in this respect, the performance of the old game is very normal. In the second question, regarding the Ring King, we will add a new version of the Ring King in the second quarter of this year. There is also a version of the Hong Kong-Australia version. So Alex, for your first question, is that from what we are seeing, our legacy titles are actually growing very well throughout last year.
Margaret Shi
And I think you would mention about the the price joy actually has very little impact on us because we've been very conservative in terms of how we monetize And and for games like swj if you remember is actually a time-based Type of game as your second question Lord of Rings. We are going to release that game in Hong Kong Macau and Taiwan and And for your third question, we are going to have, we are actually developing some of the UGC-oriented games, and then some of them will be introduced to the players.
Margaret
We'll go next to Xu Ji. Thank you very much.
Xu Ji
Thank you for accepting my question. Congratulations on your very strong performance. My question is, how should we expect the impact of Activision acquired by Microsoft on their cooperation with NetEase, especially for the past arrangement of license gains and your cooperation on Tableau and for the more the potential IP license. Thank you. 微软和动视报区在过去很长一段时间里面都是网易非常亲密的合作伙伴。
Charles
我们跟微软有Minecraft,我的世界,在中国的运营, 我们关系也非常不错,相互信任, 也取得了很多好的运营的成绩。 那么我们也恭喜这一次微软和这个冻子暴雪, 这个并购的这个交易, 这个微软众所周知是世界上最大的, It is also one of the largest game platforms. And Dongzhi Box has a lot of excellent IP content. I believe they are strongly connected to the future development of this game. It's a very good mutual aid. Also in China, Wang Yi is also the only one of these two companies. This is our understanding. At the same time, Wang Yi is also willing to cooperate with Microsoft and Dongshi Baoxue
Margaret Shi
Yeah, so both Microsoft and ActiveBullets have been very close partnership with NetEase over the past years. And we've been operating Minecraft in conjunction with Microsoft, and we've delivered very good, strong results. and we congratulate Microsoft and Activision Blizzard for coming together. Microsoft is one of the largest gaming platforms in the world with WoW Activision. Blizzard is one of the best game creators in the world, and we believe that their partnership will create great synergy and it will create positive impact on the gaming industry. And in China, NetEase, We have a close relationship with both of them, and we believe that the partnership between Microsoft Activision Blizzard will also yield a strong positive impact for us in China too. And from our perspective, we'd also love to explore more possibilities of working with Microsoft. Thank you.
Margaret
Thank you.
Harry Potter
Thank you.
Margaret
We'll take our next question from Garrett Wong with Citic. Hello. Hello, can you hear? Yeah, okay.
Charles
Hello. Hello. Okay. Okay. Many game companies are also adjusting their products and game development. They are also continuously optimizing their development resources. I would also like to ask about the company's current market environment in China and overseas, especially after the change in the number of game users, the development system of NetEase in the future, and the cultivation of the core game, and a strategy on resource configuration. As mentioned earlier, there will be some products under the current situation of the domestic game industry, we have observed that many game companies have also cut their pipelines or optimized the resource allocation. I would like to ask under the current domestic and overseas market environment, how nowadays the developers are the structure of key game categories strategy of resource allocation and the future pipeline.
Margaret
Thank you. Yes, I will answer this question.
Charles
Indeed, it has been a long time in China that we have not seen a game model. For Wang Yi, we are a research and development company. We hope that after two or three years, the opening up of the overseas market can achieve We have 20 years of game development experience. Thank you.
Margaret Shi
So it has been a while since we saw new license approval. For NetEase, we are a game content creator, and we've been preparing for the overseas market for a long time. For the past couple of years, you've seen some highly successful games in Japan, and you've seen us being able to attract some of the biggest global talents to NetEase. We are committed in investing in the global markets. Hopefully, in the next two to three years, you will see some huge blockbuster titles being produced by NetEase on the global stage, whether it's self-developed by us or it's in a partnership with some of our partner friends. Over the last 20 years, we have accumulated tons of experience in game development in terms of marketing operations, in terms of R&D, engines, and all of those years that will give us that strong edge in creating globally successful gains. Thank you.
Harry Potter
That will conclude our question and answer session. At this time, I'd like to turn the call back over to management for any additional or closing remarks.
Margaret Shi
Thank you again for joining us today. If you have any further questions, please feel free to contact us directly or TPG Investor Relations. Thank you. Have a great day.
William Ding
Thank you, everyone.
Harry Potter
That will conclude today's call. We appreciate your participation.
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