A few days ago, "AI glasses" and "AI + robots" set off another heat wave, and the AI heat is still high, and this scientific and technological revolution is changing the world with an unstoppable trend.

Since the advent of ChatGPT at the end of 2022, generative AI (AIGC) has quickly kicked off a big development. In this wave of technology that has swept the world, the game industry has been hailed as "the best training ground for artificial intelligence" because of its unique attributes, and some people have predicted that "this will be the first industry to be liberated by AI".

So, to what extent has AI "liberated" the game industry? Sanqi Mutual Entertainment (002555.SZ) As a leader in the industry, how many rings has its AI application scored? With these questions, we went deep into Sanqi Mutual Entertainment to find answers from the very front.

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Unlike many game companies that rush to follow up after making significant breakthroughs in AI, Sanqi Mutual Entertainment was keenly aware of the importance of AI early on and took the lead in embarking on a journey of exploration.

In 2017, mobile games entered a golden period of development, but with the increasing business volume, the back-and-forth communication and real-time adjustment of requirements in daily delivery decisions occupied a lot of resources, and the chaotic and inefficient process of complex demand processing became more and more obvious. After half a year of unremitting efforts, this system was successfully implemented in the field of web games, and its feasibility and effectiveness were verified.

In 2018, the automated delivery system "Quantum" came into being. This year, mobile games surpassed web games and terminal games to become the world's largest game market. With the rise of short videos, the traffic ecology has been reshaped. The external changes have strengthened Sanqi Mutual Entertainment's determination to "change", and the "quantum" has fired the first shot of Sanqi Mutual Entertainment's intelligent production process.

Sanqi Mutual Entertainment is not satisfied with simply "trying AI", but is committed to "finding better and smarter AI solutions for business scenarios".

In the context of AI+ games are still in their infancy, there is no predecessor to copy homework, so we can only continue to trial and error and verify. Starting from automated delivery, intelligent customer service, LTV data estimation, intelligent quality inspection, and game balance AI testing ...... Various projects blossomed within Sanqi Mutual Entertainment. However, these projects are either limited by the level of AI capabilities at the time, or limited by the volume of data precipitated, and not every project has a smooth result. For example, in the early years, I tried the traditional NLP solution to solve customer service problems, but the effect was not ideal.

However, it is precisely under the continuous tempering that Sanqi Mutual Entertainment's AI road has been revised, and finally gradually created a digital and intelligent product matrix that can run through the whole process of research and operation, including "Zeus", "Athena", "Poseidon", "Ares" and "Cupid" on the R&D side, and nine mid-platform products such as "Turing", "Quantum", "Tianji" and "Yilan" on the distribution side.

Looking at the industry, many game companies have adopted tiled binding AI tools to build production pipelines in AI applications. Sanqi Mutual Entertainment is a comprehensive self-developed system that has been gradually built, and with the development of its own business, it has shown a gradual spiral of iterative process, and at the same time has precipitated a large amount of its own data and digital assets. These have finally formed an important foundation and competitive advantage for the development of Sanqi Mutual Entertainment in the field of AI+ games.

AI for globalization

For a long time, Sanqi Mutual Entertainment has taken "globalization" as an important development strategy.

From the naming of its intelligent products, we can also get a glimpse of the vigorous "ambition" of Sanqi Mutual Entertainment. The R&D AI products are taken from ancient Greece mythology, expressing the original intention of keeping up with the world's top game technology; On the other hand, the distribution side is more derived from traditional Chinese stories, conveying the cultural confidence of "what is Chinese is the world".

Enabled by AI technology, Sanqi Mutual Entertainment has stepped forward to the global market step by step, and finally achieved a stable layout in core game markets such as Europe, America, Japan, and Korea, and has given birth to a number of phenomenal products such as "Puzzles & Survival", "Song of Cloud City", "데블 M" (English: Devil M), ranking at the top of the list in many places. Among them, "Puzzles & Survival" has accumulated more than 10 billion yuan since its launch in 2020, ranking in the top 10 of the best-selling list in Japan and the top 30 in the best-selling list in Europe and the United States all year round. According to Sensor Tower, "Puzzles & Survival" ranks fifth in the top 30 mobile games in China in terms of revenue in 2023.

The total revenue continues to reach new highs, and overseas has remained stable since its rapid breakthrough in 2022. In 2023, Sanqi Mutual Entertainment will achieve an operating income of 16.5 billion yuan, of which 5.8 billion yuan will be overseas income, ranking first in the A-share game industry; Ranked among the top three in the 2023 Top 30 list of Chinese game overseas revenue released by data.ai. In the first half of 2024, Sanqi Mutual Entertainment's business will accelerate again, achieving operating income of 9.232 billion yuan, a year-on-year increase of 18.96%; the non-net profit attributable to the parent was 1.275 billion yuan, a year-on-year increase of 14.27%; Among them, overseas income was 2.898 billion yuan.

Sanqi Mutual Entertainment mentioned two keys to going overseas, one is product innovation that adapts to the local market, and the other is effective material delivery. In both cases, the AI middle office plays an important role. For example, "Puzzles & Survival" grasps the key point of the potential strategic game behavior of match-3 users in data analysis, and innovatively uses the fusion gameplay of match-3 to break the circle of SLG tracks. "Quantum" shortens the time spent on product launch advertising from 6 hours to 30 minutes, improves efficiency by more than 10 times, and automates more than 65% of the delivery. And make a more accurate portrait of users to improve the accuracy and conversion rate. With "Turing", the production efficiency of distribution materials is far beyond the level of the same industry.

Sanqi Mutual Entertainment can always keenly seize opportunities when the industry changes, and it is inseparable from the contribution of AI. When the scale of domestic game users is difficult to grow, Sanqi Mutual Entertainment quickly aims overseas and makes great progress; At the rise of mini program games, Sanqi Mutual Entertainment quickly grasped the market opportunity.

Entering 2022, the overall global mobile game market has shrunk due to macro factors such as the decline in mobile consumption and the rising inflation rate after the epidemic. However, domestic mini games have benefited from the entrance exchange between Douyin and WeChat, ushering in a period of development dividends. In 2024, Tencent said that as of July, the number of WeChat mini game users has reached 1 billion, the monthly active users have reached 500 million, and there are more than 240 games with a quarterly turnover of more than 10 million yuan; According to the data of the Game Working Committee, in the first half of 2024, the revenue of mini games will be 16.6 billion yuan, a year-on-year increase of more than 60%;

Sanqi Mutual Entertainment relies on its advantages in the distribution field, responds quickly, and shows its skills in the small game track. In the first half of 2024, the company has always held 6-8 seats in the monthly top 100 list released by GameLook, and 2-3 works have ranked in the top 10 every month, and launched a series of phenomenal mini-game products, which are in the leading position in the industry in terms of quantity and quality.

While domestic mini games are in full swing, the behavior habits and interests of overseas users are also showing more fragmented characteristics, and lightweight has gradually become one of the major trends in the global game industry. After massive data analysis, Sanqi Mutual Entertainment seized the commonality of "preference for mildness", quickly launched APP ported versions of some mini games overseas, and made heavy games light through strategies such as integrated gameplay. "Puzzles & Chaos: Frozen Castle", "Mecha Domination", "Little Demon Asks" and several other products have achieved excellent performance in many overseas markets.

It can be seen that with the blessing of AI, Sanqi Mutual Entertainment's integrated strategy of research and operation has been rapidly deepened, which has enabled the company to have a stronger performance in terms of sensitivity to market trends and action.

AI+ solves the "lower limit" and breaks the "upper limit"

Sanqi Mutual Entertainment has a deep insight that the empowerment of AI technology is not only a simple improvement of business load, but more importantly, it fundamentally solves the "lower limit" problem in game production. In the traditional game development process, concept art design, art asset generation, marketing strategy and other links are highly dependent on manpower, facing efficiency bottlenecks and quality fluctuations.

Sanqi Mutual Entertainment mentioned in its 2023 annual report that 2D art-related work has been greatly improved after the use of AI empowerment, and the total monthly output of AI-2D drawings in R&D and distribution of various business lines has exceeded 280,000. In the original character painting process, the company can save 60%-80% of man-hours on average by implementing the new process of AI to produce 2D art. The employees who are "robbed" will do higher-quality content control and "guide" AI to optimize and iterate. On the premise of guaranteed productivity, quality will also be continuously improved with the joint efforts of people and AI.

One of the great significance of AI development is to liberate people from tedious assembly line work, help human imagination and generate ideas, and promote human beings to focus on more creative tasks. The core of the creative industry lies in the ability to keenly grasp market changes and user preferences, and iterate on content that is favored by players, which is an area that AI is difficult to replace.

Sanqi Mutual Entertainment believes that the main role of AI is the customized assistant of employees. Now, this assistant has also changed from a special configuration of the game production pipeline to a standard configuration for employees at all levels. In 2023, Sanqi Mutual Entertainment will build an internal AI Agent platform and launch the internal AI office tool "Xiaoqi", with the current employee usage coverage rate reaching more than 90%, truly realizing "workstation-level" AI services, and further improving the independent decision-making ability and collaborative office efficiency of digital and intelligent products.

In terms of AI exploration, Sanqi Mutual Entertainment has written down three development steps, which also correspond to the three important stages of AI development in the industry. The first step is to release the AI application first, and gradually integrate it into various business links. The second step is to realize tooling and modularization based on the accumulation in the early stage, and build a more automated and intelligent game industrialization pipeline. The third step is to explore more possibilities for AI to enrich gameplay.

It can be seen from the 2024 semi-annual report that Sanqi Mutual Entertainment has gradually taken the "third step". The financial report mentions two explorations, exploring the possibility of building a platform for generating game community content (game battle reports, game music, game videos, etc.), and exploring the possibility of AI total factor production of games. In the second aspect of exploration, Sanqi Mutual Entertainment has developed a casual elimination game in which AI completes the game's plot, materials, dubbing, music and other elements.

On the road of exploring the resonance of games and technology, Sanqi Mutual Entertainment not only actively endogenous but also through investment. On the one hand, we will deepen AI and open up the industrial chain layout of "computing infrastructure, large model algorithms, and AI applications". On the other hand, we will focus on entertainment technology, and intervene in optical displays, XR machines, entertainment content, semiconductors and materials, spatial computing engines, new sensors and other tracks, in order to realize the linkage of internal and external resources and build new advantages in industrial competition.

In the future, it may no longer be limited to tools to improve efficiency, but to improve the experience and immersion of games from all aspects, such as new game categories, game NPCs connected to AI, and even AI-native games. AI+ games have more possibilities, and this may also mean greater challenges. After all, constantly raising the "lower limit" of the industry corresponds to the fact that enterprises must continue to break through the "upper limit" of business.

From the perspective of the entire industry, the application scope of AI technology in the game field continues to expand, the industry transformation continues to deepen, and the production efficiency is expected to be further improved. The expansion of AI to the boundaries of game innovation will also create new game modes and needs, opening the ceiling for the growth of the game industry. The various game companies represented by Sanqi Mutual Entertainment are taking practical actions to jointly promote this scientific and technological revolution to a deeper level.

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