NetEase Inc (NTES) 2013 Q1 法說會逐字稿

Thank you. Ladies and gentlemen we will now begin the question and answer session. (Operator instructions) Our first question comes from the line of Timothy Chan from Morgan Stanley. Please go ahead.

謝謝。女士們、先生們，我們現在開始問答環節。（操作員指示）我們的第一個問題來自摩根士丹利的 Timothy Chan。請繼續。

Hi William, Onward and Brandi. Good morning and thanks for taking my questions. I have two questions. The first question is could you maybe comment a little bit more of your new game pipeline especially the titles like Dragon Sword, League of Legends and also the student games. What do you think the potential of these titles are and how are they different from the existing titles that you are operating?

嗨，威廉、昂沃德和布蘭迪。早上好，感謝您回答我的問題。我有兩個問題。第一個問題是，您能否對您的新遊戲系列發表更多評論，特別是《龍劍》、《英雄聯盟》以及學生遊戲等遊戲。您認為這些遊戲的潛力是什麼？它們與您正在經營的現有遊戲有何不同？

(interpreted) Okay so basically to recap on the new game pipelines of the Company I think going forward we will be rolling out quite a number of new game titles to the market which will be in the form of game types will be quite different from what we are currently or existing operating. First of all we will be focusing more game types on the competition type of games and the ones that we are going to launch will be the Hero of Three Kingdoms which we believe would also fill up this space.

(翻譯) 好的，基本上回顧一下公司的新遊戲管道，我認為未來我們將會向市場推出相當多的新遊戲，這些遊戲的類型將與我們目前或現有運營的遊戲類型截然不同。首先，我們會把更多的遊戲類型集中在競技遊戲上，我們即將推出的遊戲是《三國志英雄》，我們相信它也會填補這個空白。

We will also try to develop some other types of games that will be designed to take me to the different [lift] and the features in the game market in general. Going forward we will also roll out some new mobile games in the market and some of those will be an extension of our existing PC games and some of those would be some specially defined games that will be played on the mobile platforms.

我們也將嘗試開發一些其他類型的遊戲，這些遊戲旨在帶我了解不同的[提升]和遊戲市場中的整體特徵。展望未來，我們也將在市場上推出一些新的手機遊戲，其中一些將是我們現有電腦遊戲的延伸，還有一些是專門在手機平台上玩的遊戲。

Thank you. My second question is on your mobile games development. Obviously NetEase has a lot of mobile users on surfaces like News App and also (inaudible). May I ask would you also consider launching some of maybe the mobile game platform leveraging the success of your mobile apps?

謝謝。我的第二個問題是關於你們的手機遊戲開發。顯然，網易在新聞應用程式等平台上擁有大量行動用戶，而且（聽不清楚）。請問您是否考慮利用行動應用程式的成功來推出一些行動遊戲平台？

(interpreted) Yes so basically with regard to the Company's strategies on the mobile games development basically we will focus both on the platform developments and also the product developments.

(翻譯)是的，所以基本上就公司在手機遊戲開發方面的策略而言，我們將重點放在平台開發和產品開發上。

Thank you. (Spoken in a foreign language)

謝謝。（用外語說）

(Interpreted) In the upcoming next months hopefully you will see something about our mobile game platforms and also some mobile games in the market.

（翻譯）在接下來的幾個月裡，希望您能看到一些有關我們的手機遊戲平台以及市場上的一些手機遊戲的資訊。

(Spoken in a foreign language)

（用外語說）

Operator next question please.

接線員，請問下一個問題。

Thank you. Your next question comes from the line of Eddie Leung from Merrill Lynch. Please go ahead.

謝謝。您的下一個問題來自美林證券的 Eddie Leung。請繼續。

Okay good morning guys. Thank you for taking my questions. I have two questions. The first one is about licensing games. So just wondering how you would look at the prospect of World of Warcraft given a pretty big sequential decline in the first quarter supposedly. Then secondly you mentioned about some new trends that you will focus on. What could be some of those new trends? We have seen quite some M&As in the internet space recently. NetEase has been growing organically in the past decade or so. So will the Company consider using acquisitions as part of the strategic tools to get into some of these new trends? Thanks.

好的，大家早安。感謝您回答我的問題。我有兩個問題。第一個是關於授權遊戲。所以我只是想知道，考慮到第一季《魔獸世界》的環比大幅下滑，您如何看待它的前景。其次，您提到了一些您將關注的新趨勢。這些新趨勢可能有哪些？我們最近看到網路領域發生了不少併購事件。網易在過去十多年一直在有機成長。那麼公司是否會考慮將收購作為策略工具的一部分來適應這些新趨勢？謝謝。

(Interpreted) So first of all with regard to Eddie's questions on the licensing games and our commitment to it, basically we are licensing not only the World of Warcraft but we are also licensing the Starcraft II and we believe that those two game titles are of very good quality. We feel happy that we have got very good business partners as such, like Blizzard Entertainments

（口譯）首先，關於 Eddie 關於授權遊戲和我們對此的承諾的問題，基本上我們不僅有《魔獸世界》的授權，而且還有《星海爭霸 II》的授權，我們相信這兩款遊戲的質量非常好。我們很高興能有像暴雪娛樂這樣的優秀商業夥伴

With regard to our will on the new trends or the potentials, acquisitions and investments of mergers and things like that basically NetEase would uphold a very open attitude to (inaudible). We would be very open to entertain to potential acquisitions, investments or mergers and things like that as we see fit especially when those targets can fit into the Company's business developments or can create some strategic values to the whole Group.

關於我們對新趨勢或潛力的意願，收購和投資合併等，網易基本上會持非常開放的態度（聽不清楚）。我們非常樂意接受潛在的收購、投資或合併等我們認為合適的事項，特別是當這些目標能夠適應公司的業務發展或能夠為整個集團創造一些策略價值時。

Understood. Thank you.

明白了。謝謝。

Thank you and your next question comes from the line of Jialong Shi from CLSA. Please go ahead.

謝謝，您的下一個問題來自里昂證券的史嘉龍。請繼續。

Hi good morning William, Onward and Brandi. Thanks for taking my call. I have one question. I remember William mentioned over the last conference call that joint mobile games is relatively easy compared to (inaudible) games and that maybe it had found a good way to do mobile games. Now that three months have passed just wondering if you are still the same confident or even more confident about the prospect of your mobile games? Also can you give us an update on your mobile game initiatives so far into the year?

大家好，William、Onward 和 Brandi。謝謝您接聽我的電話。我有一個問題。我記得威廉在上次電話會議中提到，與（聽不清楚）遊戲相比，聯合製作手機遊戲相對容易，也許它已經找到了製作手機遊戲的好方法。如今三個月過去了，您是否對手機遊戲的前景依然充滿信心，甚至更有信心？另外，您能否向我們介紹今年迄今為止的手機遊戲計劃的最新進展？

(Interpreted) Basically to add to our progress in terms of the mobile games development side of the things the Company is feeling quite positive to it and the progress so far has been smooth. We also have got the confidence that in the long term we would create some positive results in terms of these new business developments. We also hold a positive (inaudible) towards the long term developments in these patterns.

（翻譯）基本上，就我們在手機遊戲開發方面的進展而言，公司對此感覺非常積極，而且迄今為止的進展也很順利。我們也相信，從長遠來看，我們將在這些新業務發展方面創造一些積極的成果。我們也對這些模式的長期發展持正面態度（聽不清楚）。

Our next question comes from the line of Tian Hou from TH Capital. Please go ahead.

我們的下一個問題來自泰合資本的天后。請繼續。

Hi this is Gina calling in for Tian. Thanks for taking my questions. My first question is you know for NetEase as a game developer developing mobile games shouldn't be an issue but the success of a game is dependent on the mobile distribution. Can you give us your thoughts on your mobile distribution channel strategy?

你好，我是吉娜，我找田。感謝您回答我的問題。我的第一個問題是，您知道對於網易作為遊戲開發商來說，開發手機遊戲應該不是問題，但遊戲的成功取決於手機發行。您能談談對行動分銷通路策略的看法嗎？

(Interpreted) So basically with regard to the Company's strategies in terms of the mobile games distribution, in a word, we would take a very diversified approach in achieving this aim. First of all we believe that we have got very good product settings because you would see that in terms of our mobile news applications we have very high numbers of installations and we also have got some other types of new mobile applications like the News Read and also some other dictionaries and cloud notes and things like that. Which means that we have a very wide area of mobile applications in place already which we also believe will set out a very ground for cross sale and capabilities of our upcoming mobile games or other stuff like that.

(翻譯) 因此，基本上，就公司在手機遊戲發行方面的策略而言，總之，我們將採取非常多樣化的方式來實現這一目標。首先，我們相信我們已經擁有非常好的產品設置，因為您會看到，就我們的行動新聞應用程式而言，我們的安裝數量非常高，而且我們還有一些其他類型的新行動應用程序，例如News Read以及其他一些字典和雲端筆記等。這意味著我們已經擁有非常廣泛的行動應用程式領域，我們也相信這將為交叉銷售和即將推出的行動遊戲或其他類似產品的功能奠定基礎。

Secondly, we also have got a very strong [game] of platforms and also a news platform which we believe would be able to get reach to our targeted consumers or the users of the potential mobile games applications.

其次，我們也擁有非常強大的遊戲平台和新聞平台，我們相信這些平台能夠觸及我們的目標消費者或潛在手機遊戲應用程式的用戶。

Thirdly, we would also make good use of doing some pre-installations of those applications on certain handsets in order to enable a much wider and extensive distribution of our mobile games. Having said that, we believe that we have already got very solid foundations in distributing the products and services alike for NetEase. Say for example we are very -- we have got a very good performance or the stand in the PC games development and we also foresee and believe that the people could make good use of the [dramatic] times by experiencing mobile games as well.

第三，我們也會充分利用在某些手機上預先安裝這些應用程式的優勢，以便更廣泛、更廣泛地分發我們的手機遊戲。話雖如此，我們相信我們在為網易分銷產品和服務方面已經擁有非常堅實的基礎。比如說，我們在 PC 遊戲開發方面有著非常好的表現或地位，我們也預見並相信人們可以透過體驗手機遊戲來充分利用這個（戲劇性的）時代。

Somehow we would also make some efforts say for example by extending certain game play from our existing PC games to the global platforms so that our people can experience various kinds of playing styles on different devices or different platforms. In the end we do feel that this is just a matter of how the people would be making good use of their time both their core times while they are playing the PC games or (inaudible) times when they are playing the mobile games. Basically we are quite positive to it.

我們也會做出一些努力，例如將現有 PC 遊戲中的某些玩法擴展到全球平台，以便我們的玩家可以在不同的裝置或不同的平台上體驗各種遊戲風格。最後，我們確實覺得這只是一個關於人們如何充分利用時間的問題，包括玩電腦遊戲時的核心時間，以及玩手機遊戲時（聽不清楚）的時間。基本上我們對此持相當正面的態度。

Thank you and your next question comes from the line of Jiong Shao from Macquarie. Please go ahead.

謝謝，您的下一個問題來自麥格理的邵炯。請繼續。

Hey good morning William, Onward and Brandi. This is George calling on behalf of Jiong. I have two questions. The first one is on your MMO games so I remember that you actually increased the pricing -- the unit pricing for the time based games by 50% in February so I wonder what's the result currently in terms of like user churn and pushback from users? Also in terms of the coin card you sell, actually we found that you actually cut the discount rate to the distributors. So can you also elaborate a little bit more on that?

嘿，早上好，威廉、昂沃德和布蘭迪。我是喬治，代表 Jiong 打電話來。我有兩個問題。第一個問題是關於你們的 MMO 遊戲的，所以我記得你們實際上在二月份提高了價格——基於時間的遊戲的單位價格提高了 50%，所以我想知道就用戶流失和用戶反饋而言，目前的結果如何？另外，就您銷售的硬幣卡而言，實際上我們發現您實際上降低了對經銷商的折扣率。那麼您能否對此進行更詳細的闡述呢？

(interpreted) So basically we believe that lately the price increase, the performance of (inaudible) has still been within our expectations and in terms of the timeframe, because the price increase was announced and implemented on 10 February (inaudible) and so far the timeframe is not that long. But so far we still believe that the feedback and also the responses would be within our expectation.

(解釋) 所以基本上我們認為最近的價格上漲，(聽不清楚)的表現仍然在我們的預期之內，就時間範圍而言，因為價格上漲是在 2 月 10 日宣布並實施的，(聽不清楚)，到目前為止時間範圍還不是那麼長。但到目前為止，我們仍然相信回饋和回應將在我們的預期之內。

Then in terms of the changes of the discounts to the distributors, which is just a 1% or so variations. We believe those two methods would not (inaudible) significant impact to our overall gaming performances. As always, we believe that we've got very strong capabilities in developing and research -- and doing the research and developments of our new games.

那麼對於分銷商的折扣變化而言，只有 1% 左右的變化。我們相信這兩種方法不會對我們的整體遊戲表現產生重大影響。像往常一樣，我們相信我們在開發和研究方面擁有非常強大的能力——並且能夠進行新遊戲的研究和開發。

Okay thanks. My second question is regarding your mobile games. So first of all is those mobiles games designed by your in-house team or actually you acquire some mobile game studios to do that? Also in terms of the (inaudible) because when you mention it will be some you know extensions from the PC and MMORPG games, but also there will be more -- some you know mobile only ones.

好的，謝謝。我的第二個問題是關於你們的手機遊戲。那麼首先，這些手機遊戲是由你們的內部團隊設計的嗎，還是你們實際上收購了一些手機遊戲工作室來製作這些遊戲？另外就（聽不清楚）而言，因為當您提到它會是一些來自 PC 和 MMORPG 遊戲的擴展，但還會有更多——一些僅限行動裝置的擴展。

So do you still -- are you going to focus on those you know more heavier mobile games or you will also do like some of this (inaudible) mobile games and also because you mentioned expansion from PC, so will you consider doing cross platform, meaning PC plus mobile, the same account, the same character or you will still keep a separate mobile game?

那麼您是否仍將重點放在那些更重要的手機遊戲上，或者您也會做一些這樣的（聽不清楚）手機遊戲，而且由於您提到了從 PC 進行擴展，因此您是否會考慮進行跨平台開發，即 PC 加手機，使用相同的帳戶、相同的角色，或者您仍將保留單獨的手機遊戲？

(interpreted) So basically the accounts were (inaudible) processed were specifically distinct for both users playing on the PC or on the mobile platforms. Basically they would be adopting the cloud synchronizations approach in achieving this aim. In terms of the playing genders or the types, basically we would also consider the features that can better utilize different (inaudible) times of the players while they are playing on a mobile handset.

（解釋）因此，基本上，（聽不清楚）處理的帳戶對於在 PC 或行動平台上玩遊戲的用戶來說是截然不同的。基本上，他們會採用雲端同步方法來實現這一目標。在玩家性別或類型方面，基本上我們也會考慮能夠更好地利用玩家在手機上玩遊戲時的不同（聽不清楚）時間的功能。

Apparently, in terms of the overall strategies in doing our -- in achieving our mobile games strategies, we would consider both our in-house developments and also the investment and also the potential acquisitions.

顯然，就我們實施手機遊戲策略的整體策略而言，我們會考慮內部開發、投資以及潛在的收購。

Thank you and our next question comes from the line of Andy Yeung from Oppenheimer and Company, please go ahead.

謝謝，我們的下一個問題來自 Oppenheimer and Company 的 Andy Yeung，請繼續。

Oh hi, good morning. Thank you for taking my questions. My question's actually about your mobile app. You know you obviously have a number of very popular mobile apps right now. Can you also you know, let us know what other mobile app products you are developing right now and also what's your go to market strategy and monetization strategy for those apps?

噢，你好，早安。感謝您回答我的問題。我的問題實際上是關於您的行動應用程式的。您知道現在顯然有許多非常流行的行動應用程式。您能否也告訴我們您目前正在開發哪些其他行動應用產品，以及這些應用的市場策略和獲利策略是什麼？

(interpreted) So with regard to the Company's mobile application strategies, basically we would take a diversified approach in achieving this strategy. So far, the applications that we have are launched at the markets are covering the information categories, like applications like the news, the news read and also the music. Other categories like the utilities type of applications we got the Youdao Dictionaries and also the Youdao Clouldnotes and in terms of the education categories we have our open education applications.

(解釋)所以關於公司的行動應用程式策略，基本上我們會採取多元化的方式來實現這項策略。目前，我們在市場上推出的應用程式涵蓋了資訊類別，例如新聞、新聞閱讀和音樂等應用程式。其他類別，例如實用類應用程序，我們有有道詞典和有道雲筆記，在教育類別方面，我們有開放教育應用程式。

For the social networking applications we have got another online dating application called the Hua Tian. In the futures I think our -- one of our main focus will be on the mobile games developments and we believe that as always our strategies would be a very full coverage approach and also make sure that's the products or services would be of the highest quality. Thank you.

對於社交網路應用程序，我們還有另一個名為“花天”的線上約會應用程式。在未來，我認為我們的重點之一將是手機遊戲開發，我們相信，我們的策略將一如既往地採取全面覆蓋的方式，並確保產品或服務具有最高的品質。謝謝。

Thank you.

謝謝。

Thank you and our next question comes from the line of Thomas Chong from BOCI, please go ahead. Pardon me, Thomas, your line is open at this time.

謝謝，我們的下一個問題來自中銀國際的 Thomas Chong，請繼續。對不起，托馬斯，您的線路現在是開放的。

Hi, good morning. Can you hear me?

嗨，早安。你聽得到我嗎？

Yes.

是的。

Hi, I have two questions. My first question is regarding your overseas expansion strategy. Is there any timeline we should expect you guys to license your games to the overseas market? So is any update about your further cooperation with (inaudible) such as the [Apple III] and I have a follow up.

你好，我有兩個問題。我的第一個問題是關於你們的海外擴張策略。你們將遊戲授權到海外市場的具體時間表是怎樣的？那麼，您與（聽不清楚）的進一步合作有什麼進展嗎，例如[Apple III]，我會跟進。

(interpreted) So basically our overseas expansions, our business developments we would be accessing two ways. One would be -- we have already made some success to certain of our game titles and in particular there is one which is Ghost II which we believe that it has already recorded a (inaudible) in open market. Look forward of also pushing this product to the market. Secondly with regard to our cooperation with (inaudible), we would still (inaudible) our core operations by considering our future licensing of game titles that we consider fit and appropriate to the China market.

（翻譯）所以基本上我們的海外擴張、我們的業務發展將透過兩種方式進行。一是——我們的某些遊戲已經取得了一些成功，特別是《幽靈 II》，我們相信它已經在公開市場上創下了（聽不清楚）的紀錄。期待也將該產品推向市場。其次，關於我們與（聽不清楚）的合作，我們仍將（聽不清楚）我們的核心業務，考慮未來授權我們認為適合中國市場的遊戲。

Hi, thanks. My second question is regarding marketing expenses. Given you have a lot of expansion packs going to be launched in the second quarter, how should we look at the market expanses in second quarter compared to the same period last year?

你好，謝謝。我的第二個問題是關於行銷費用。鑑於第二季將推出大量擴充包，與去年同期相比，我們應該如何看待第二季的市場擴張？

With regard to the selling market expanses, I think basically as the benchmark, so to call, because we do not give out any specific guidance about our financial results. But as an annual yardstick or a benchmark we do see that we will upkeep around 10% of our total revenues (inaudible) marketing prefaces and across the year, because there would be also differences seasonality's and different seasons across the year. Usually first quarter would be the lowest one and you will also see that there has been a trending down in terms of the selling market expanding in the first quarter. But we will see that in the outcoming for the starting from Q2 or so and especially more stuff will be coming out in the Q3, we would expect that more, certainly much more spending will be happening in the upcoming quarters. But in the general case, we do believe that on an analyzed basis that we would try to strike a balance of up keeping the stable overall percentages of our expanding out of our total revenues.

關於銷售市場擴張，我認為基本上可以作為基準，因為我們沒有對我們的財務表現給出任何具體的指導。但作為年度標準或基準，我們確實看到，我們將維持全年總收入的 10% 左右（聽不清楚）行銷前言，因為全年不同季節也會有差異。通常第一季是最低的季度，你也會看到第一季銷售市場擴張呈現下降趨勢。但我們將看到從第二季左右開始的結果，特別是第三季將有更多東西出來，我們預計在接下來的幾個季度中將有更多、肯定會有更多支出。但在一般情況下，我們確實相信，在分析的基礎上，我們會努力在保持我們總收入中擴張的總體百分比穩定之間取得平衡。

I see, thanks. Okay back to the queue.

我明白了，謝謝。好的，回到隊列。

Thank you and our next question comes from the line of Karen Tai from Piper Jaffray, please go ahead.

謝謝，我們的下一個問題來自 Piper Jaffray 的 Karen Tai，請繼續。

Hi everyone, this is Karen calling on behalf of Mark. I have two follow up questions. One is regarding your 10 year anniversary expansion pack for Fantasy Westward Journey. When do you expect this launch to take place?

大家好，我是凱倫，代表馬克來電。我有兩個後續問題。一個是關於《夢幻西遊》十週年紀念資料片的。您預計此次發布會什麼時候舉行？

Karen hold on one second.

凱倫，等一下。

So basically the role of the new expansion pack will hopefully be happening in the second half of the year.

因此，基本上，新擴充包的作用預計將在今年下半年實現。

Okay thank you. When is the annual dividend going to be paid?

好的，謝謝。年度股利甚麼時候發放？

I think so far the Company has already got the Board approvals in terms of the -- hopefully the end of dividend policy and I will give you more colors when it come to the more appropriate time where we determine the timing.

我認為到目前為止公司已經獲得了董事會關於終止股息政策的批准，當我們確定時間的更合適時間時，我會給你更多細節。

Thank you. I'll jump back into the queue.

謝謝。我將重新回到隊列中。

Thank you. At this time I'd like to turn the conference back over to management for closing comments.

謝謝。現在，我想將會議交還給管理階層，請他們發表最後評論。

Thank you once again for joining us today. Please feel free to contact us, Cassia Curran is NetEase's IR Manager based in Hangzhou or the Piacente Group if you have further questions. Have a wonderful day. Thank you.

再次感謝您今天加入我們。如果您有其他問題，請隨時聯絡我們，Cassia Curran 是網易駐杭州的投資者關係經理，或 Piacente 集團的投資者關係經理。祝您有美好的一天。謝謝。

Ladies and gentleman this does conclude our conference for today. If you would like to listen to a replay of today's conference you may do so by dialing 303 590 3030 or 1800 406 7325 and then ring the access code of 461 58 33 pound. We thank you for your participation and at this time you may now disconnect.

女士們、先生們，今天的會議到此結束。如果您想收聽今天會議的重播，可以撥打 303 590 3030 或 1800 406 7325，然後撥打接入碼 461 58 33 英鎊。感謝您的參與，現在您可以斷開連接了。