Good day and welcome to the NetEase 2023 Third Quarter Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Margaret Shee, Senior IR Director of NetEase. Please go ahead, ma'am. 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 liability, as established by the US Private Securities Mitigation Reform Act. Such payments are not guarantees of future performance and are subject to certain risks and uncertainties, assumptions and other factors. Some of these risks are beyond companies' 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 a company with the Securities and Exchange Commission, including its annual report on Form 20-F and the announcement of the filings on the website of the Hong Kong Stock Exchange. A company does not undertake any obligation to update all of its information except as required by law.
During today's call, management will discuss certain non-GAAP financial measures for comparison purposes only. For a definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results, please see the 2023 third quarter earnings release news release issued earlier today. As a reminder, this conference is being recorded.
In addition, an investor presentation and a webcast replay of this conference call will be available on the NetEase corporate website at ir.netease.com. Joining us today on the call from NetEase Senior Management are Mr. William Ding, Chief Executive Officer, and Mr. Charles Yan, Chief Financial Officer. I will now turn the call over to Charles who will read the prepared remarks on behalf of William. 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. The third quarter was another period marked by outstanding results. Our beloved legacy titles and new hit games are strengthening our reach throughout the gaming world.
Our total net revenues were RMB 27.3 billion for the third quarter, up nearly 12% year over year. And our net income attributable to shareholders rose to RMB 7.8 billion, increasing by 17% year over year. Our time-honored Lexi franchises have maintained robust popularity.
Notably, we brought players updates for the Fantasy Westward Journey saga in the third quarter with a brand new storyline and captivating activities, which once again breathed new life into the saga and drove year-over-year revenue growth for a more than 20-year-old epic title. In addition to our well-established games,
We are actively expanding our portfolio by consistently launching and cultivating long-lasting franchises across more genres. We have strengthened our leadership in MMOs by pushing the boundaries of industry standards. We have also expanded our presence in broader game categories and demographics with innovative content, gameplay, and monetization models
We can see this in the enduring popularity of the games that we have introduced in recent years, such as Agipati, Naraka Blade Point. Furthermore, our recently launched titles, including Justice Mobile Game, Racing Master, and Song City Dynasty, have quickly climbed to the top of the iOS grossing charts after its release. Looking at our newest hit titles, Justice Mobile Game
launched just in June, impressively surpassed 50 million registered users in October, establishing itself as one of the largest MMOs in NetEase company history in terms of user base size. Notably, a significant portion of its player community comprises Generation Z players who were previously unfamiliar with the MMO genre.
becoming the gateway of MMO games for the younger generation in China. As a trendsetter in the MMO industry, NetEase has once again brought key innovations to the genre with the launch of Justice Mobile game and reshaped the MMO landscape. It offers players a vast array of high-quality content for free, revamping the conventional paying model for MMOs
the shift to a more balanced spending approach gives players more freedom to enjoy the game's rich features and gameplay, with optional purchases focused on avatar's cosmetics and accessories. This model was very well received by the game's player base, solidifying its stability. In late October, we introduced Justice Mobile Games' first seasonal update
which significantly enhanced player engagement with captivating storylines, new gameplay, and additional professional role options. It swiftly propels Justice Mobile game to the number two position on China's iOS grossing chart shortly after its release. The innovative seasonal mechanism we've introduced to the MMO genre gives all players a fresh start
with a focus on fair and balanced gameplay. It also reduces the gap between experienced and new players, ensuring that everyone can enjoy and engage in this game. In addition to the success of this new Blockbuster MMO title, we also achieved success across other game genres in the third quarter. Our new racing simulation game, Racing Master,
consistently ranked amongst the top three most downloaded and highest-grossing games on the iOS chart in China following each new game update, proving its broad appeal to racing enthusiasts. Notably, as China's very first AAA-standard racing simulator mobile game, Racing Master has introduced an authentic racing experience into China's mainstream gaming sphere,
with a plan for Racing Masters global market expansion, we will soon commence overseas testing to bring this exciting racing simulation experience to players worldwide. We also achieved a significant milestone with our foray into sports games, a historically less popular category in China. We've broken new ground with Dunk City Dynasty,
a street basketball game that provides various modes to deliver a casual basketball gameplay experience. Dunk City Dynasty quickly rose to the number two position on the iOS growth chart in China just a few weeks after its release. Following our latest seasonal updates, with the introduction of new basketball superstars to the team rooster, like James Harden,
The game rose to the number one position on the iOS grossing chart in China. The innovative gameplay and balanced gaming experience we've infused in Dunk City Dynasty are important differentiators for our game. By integrating players authorized by the MBPA with street basketball, we provide players with higher gameplay freedom along with expanded cosmetic options.
The game also includes a fair card for fair play, meaning increased player spending doesn't dictate who wins. This facilitates more inclusive gameplay and even more potential for the game's long-term success. Player enthusiasm for Racing Masters and Dunk City Dynasty underscores the significant demand in China for top-tier games in the casual game genre.
Along with our rich R&D capabilities, we are leveraging the inroads we've already made across a broad spectrum of genre verticals to fill these gaps. In a market with new hit games, players love. Games we've introduced in recent years continue to resonate with players, demonstrating enduring popularity
and long-term operating potential. Agipati, for example, continues to achieve remarkable milestones. In August, Agipati set new records by amassing over 100 million UGC maps and attracting 100 million MAUs. We have been committed to fostering and nurturing our UGC ecosystem, which is the cornerstone of Agipati's success.
We enhanced our self-developed editor in the third quarter by introducing more advanced and interactive functions. We also added collaborative map crafting functionality that lets users create with friends online on a shared canvas. To help foster even more creativity, we've introduced tutoring systems and a range of incentives to reward and motivate creators
through various activities. Building on the game's notoriety in domestic markets, we are actively pursuing global expansion plan for Agipati. In the third quarter, we launched Agipati in Southeast Asia, where it consistently secured dominating positions on Google Play download chart for multiple weeks, particularly in Indonesia and Thailand.
These early overseas releases also gave us valuable feedback and insights that guide our efforts as we optimize the game for a global audience. We are also proud to announce that America's Bladepoint recently reached a remarkable milestone of 40 million users. Following the transition to a free-to-play mode in July, we also introduced new heroes to the game in the third quarter
igniting greater player enthusiasm and attracting a massive influx of additional users to the game. To bolster our robust portfolio of games, we have a number of new games under development. As we get closer to some of these introductions, we are particularly excited about Where Winds Meet, our new AAA martial arts-themed action-adventure game.
Where Wings Meet infuses an immersive open-world experience with an exciting historical backdrop that's relatively untouched in Chinese gaming. This interactive sandbox-style adventure features an extensive map, a diverse array of weaponry, and captivating martial arts techniques. Players have the flexibility to explore this interactive world
both individually and in groups, with two gameplay options. Players can freely roam in the Asian-Chinese landscape in single-player mode, enjoying a highly personalized combat experience. In multiplayer mode, players can work closely with friends to complete tasks, engaging in exciting and heartwarming social interactions.
We will soon launch the second round of testing, where players will be able to see more of the game with a longer play time. Early feedback fuels our excitement as we get closer to officially launching this brand new open-world experience to our players in 2024. As the developer of China's first ACG hit title,
NetEase has made ongoing investments in the animation genre, accumulating valuable industry expertise, and we hope to impress the ACG community once again. The promotional video release of our upcoming ACG title under development, set in a metropolitan themed open world genre, Project Mugen,
has garnered significant attention from players both domestically and internationally. We are committed to infusing new vitality into the ACG arena, drawing upon our renowned innovation capabilities and experience in the realms of animated games. Beyond these titles, we also have a number of other games in the making, including Mission Zero, Once Human,
and narrative late point mobile game. On the global stage, our game development is progressing smoothly in Japan, North America, and Europe. This month, we are excited to welcome Fantastic Pixel Castle as our newest addition to the NetEase family. Fantastic Pixel Castle is led by Greg Street,
who is well-known for his contribution to massively successful games around the world, including World of Warcraft and League of Legends. Greg and his experienced founding teams are currently developing a top-tier MMO game, codenamed Ghost, to provide players with a fresh and immersive fantasy MMO experience.
We are thrilled to collaborate with so many talented industry producers, leveraging their creativity in synergy with our deep research and operational capabilities. Together, we aim to deliver even more captivating games to players worldwide. Now let's move on to Youdao. In the third quarter, Youdao achieved record high revenue of R&D 1.5 billion.
growing 10% year over year, driven by the growth in learning services and online marketing. Additionally, as part of our continued efforts to improve profitability, our operating loss for Youdao narrowed by a significant 74% year over year to RMB 58 million. A solid growth in our learning services
was due to our consistent ability to launch unique and high-quality courses. Notably, in the third quarter, our coding courses introduced a specialized program aimed at preparing students for the CSP Informatics Competition, one of the most popular competitive programming events in China. Our program features all-encompassing services that include learning,
contest practice, and an evaluation system. The evaluation system is supported by our in-house developed scoring model, allowing students to estimate their scores and assess their probability of progressing into the next round of the contest. Yodel's online marketing services have consistently grown at an impressive rate of approximately 100% for the second consecutive quarter.
This underscores our expertise in proprietary algorithms and the effectiveness of our customized solutions that are precisely crafted for diverse industry sectors. Revenues from our smart devices declined in the third quarter as we strategically optimized our channel mix by reducing sales through less cost-effective channels. Although this may have a temporary impact on Yodao's revenue,
We believe it will lay a solid foundation for sustained long-term growth and enhance Youdao's profitability potential over the long run. Our focus on technological innovation remains our driving force. In addition to Youdao's tech-boosted performance, we upgraded AI Box on Youdao translation products in the third quarter
which enables more accurate and natural translation across various types of documents. With the support of our machine-generated functions, third-quarter revenue from subscription fees for translation increased by over 160% year-over-year. Furthermore, following the August introduction of our digital human language code, Pi Echo, through Yodao Dictionary Pen X6 Pro,
We expanded our reach to a broader user base through an independent app in October, attracting over 100,000 user registrations within just a month. We will continue to iterate High Echo with a new update coming soon. Looking forward, we will look to drive more technological innovation and introduce more products that genuinely meet our users' needs
by harnessing our expertise in machine learning technology. Next, turning on to Madee's Cloud Music. In the third quarter of 2023, Cloud Music continues to navigate quality development across our core music-centric ecosystem while further extending the robust monetization momentum in the core online music sphere and improving overall profitability.
Total online music MAUs remained largely steady, staying about 200 million in the third quarter. Total revenues for the quarter were RMB 2 billion, on par with last quarter. Growth in our music-centric memberships accelerated, demonstrating our ability to introduce premium offerings, including extensive content and innovative features. Additionally,
Our social entertainment services started to stabilize on a monthly basis during the latter part of the third quarter, following our strategic positioning refinements in live streaming, which resulted in short-term setbacks. With solid monetization momentum in the core online music businesses and continued cost structure optimization, cloud music maintained steady margin improvement for the period.
we are constantly expanding our music library to provide a comprehensive selection of music for our diverse audience base. During the third quarter, we broadened our extensive music collection by adding songs from popular Chinese pop artists like Karen Mok, Zheng Jun, and Zhang Jie. In addition, we were delighted to release albums by pop stars including Jam, KeyNG,
and Shen Yichen. As part of our ongoing commitment to enriching our music-centered ecosystem, we remain dedicated to empowering and assisting independent artists. As of the end of September, we proudly served a thriving community of over 660,000 registered independent artists, showing strong growth of 16%
compared with the same period last year. We've also broadened our support for emerging music talent. Our new programs are tailored to regional roots and distinctive styles in different areas, including programs like Localized Sound and Project Stone Season 5 to unearth and promote more diverse artists. At the same time,
We hosted offline music festivals, such as 65 Park Camp Music Festival, providing more exposure for our independent musicians. In addition to broadening our content selections, we continued our product innovation initiatives, aiming to elevate users' music listening experience and foster our music-centric community. We recently officially launched
the private DJ feature incorporating music recommendations with an intelligent and personalized music introduction and explanatory experience. This feature allows users to record old-fashioned radio DJ while enjoying a more personalized music accompaniment as part of their listening experience. Building on our iconic comments section,
Our common square has emerged as a vibrant gathering place for users to express and find connections with one another. Moving on to Yanxuan. In the third quarter, our private label consumer brand launched more popular products through diversified channels. We saw robust sales growth in selected categories like pet supplies and home cleaning products.
that sellers like ergonomic chairs, bathroom fragrances, and cat food consistently outperformed competitors across various platforms. Our strategic efforts, including efficient warehouse and distribution management and personalized packaging, have also proven successful. Thanks to the innovative marketing campaign, our down jacket series
which is highly acclaimed for its exceptional quality at affordable price, gained immense popularity during this year's W11 online shopping event, driving the collection to hit top positions on multiple best-selling charts on several e-commerce platforms. In summary, innovation is at the core of all of our businesses, driving our growth and our competitive edge.
We believe that great content, product, and services stem from new and creative ideas. This principle lies at the heart of NetEase. Whether it's games, cloud music, Youdao, or Yanxuan, we consistently strive to reach new heights. In doing so, we help drive the industries we serve forward while delivering value to our growing global community, our partners,
our team members and our stakeholders. This concludes William's comments. I will now provide a brief review of our 2023 third quarter 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 further details.
Total net revenues for the third quarter were RMB 27.3 billion, or U.S. dollars 3.7 billion, representing an increase of approximately 12% year over year. Total net revenues from our gains and value-added services were RMB 21.8 billion, up 16% year over year. The growth was primarily due to increased revenue contributions
from newly launched games, such as Justice Mobile Game, Racing Master, and Agipaki. Net revenues from our mobile game accounted for nearly 78% of our total net revenues from online games operation. YoDao's net revenues were RMB 1.5 billion, a year-over-year increase of nearly 10%, primarily due to increased revenue contribution
from learning services and online marketing services. Net revenues from cloud music were RMB 2 billion, a 16% decline compared to the same period last year. As we explained earlier, this result reflects declining revenue of social entertainment services as we adjust our focus to improve profitability in a sustainable manner.
net revenues for innovative businesses and others were relatively flat in the third quarter at RMB 2 billion. Our total gross profit margin continues to grow, exceeding 62% in the third quarter compared with 56% in the third quarter of 2022. Looking at our third quarter margin in more details,
Gross profit margin was 69% for our games and related value-added services compared with 65% in the same period of last year. The increases were primarily attributable to changes in the revenue mix of the NetEase self-developed and co-developed and licensed games. GP margin for Youdao was 55.9%
compared with 54.2% in the same period of last year. The increase mainly resulted from increased revenue contribution from its learning services and online marketing services segment. Gross profit margin for cloud music improved in the third quarter, reaching 27.2% versus 14.2% in the same period a year ago.
The margin improvement primarily resulted from increased revenues scaled from membership subscription and continued improvement to our cost management measures. For innovative businesses and others, gross profit margin was 27.3%, compared with 25.5% in the third quarter of last year.
The increase was primarily the result of margin improvement in Yanshan and some of our innovative businesses. Total operating expenses for the third quarter were RMB 9.4 billion or 35% of our total net revenues. Taking a closer look at our expense composition, our selling and marketing expenses as a percentage of total net revenues were 13% in the third quarter
compared with 15.4% for the same period of last year. This reflects our ongoing efforts to consistently enhancing marketing efficiency. Our R&D expenses as a percentage of total net revenues also remain stable quarter over quarter at 16%. As always, we are committed to ongoing investment in content creation and product development.
We are also seeing leverage in our R&D investments longer term. Our GMA expenses as a percentage of total net revenues was 5.5%. The slight increase from the previous quarter was primarily due to certain one-off items. Our other income was R&D 1.5 billion for the third quarter of 2023.
versus RMB 2.8 billion in previous quarters. The decrease was mainly due to the exchange rate of the U.S. dollar against the RMB fluctuating over the period. As per applicable accounting standards, we are required to reflect these fair value changes. The effective tax rate was 14.2% for the third quarter. As a reminder, the effective tax rate is presented on an accrual basis.
and the tax credits differ for each of our entities at different time periods, depending on applicable policies and our operations. Our non-GAAP net income from continuing operations attributable to our shareholders for the third quarter totaled R&D 8.6 billion or U.S. dollar 1.2 billion. Non-GAAP basic earnings
from continuing operation per ADS for the quarter was US$1.84 or US$0.37 per share. Additionally, our cash position remains robust with net cash of approximately RMB104.4 billion as of September end compared with RMB95.6 billion
as of the end of last year. In accordance with our dividend policy, we are pleased to report that our Board of Directors has approved a dividend of U.S. dollars 0.099 per share or U.S. dollars 0.0495 per ADS. Lastly, under our current U.S. dollar 5 billion share repurchase program starting in mid-January this year,
we have repurchased approximately 7 million ADS as of September 30, 2023 for a total cost of approximately US$588 million. Thank you for your attention. We would like now to open the call to your questions. Thank you. If you wish to ask a question,
Please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you are on a speakerphone, please pick up your handset to ask your question. For the benefit of all participants on today's call, if you wish to ask your question to management in Chinese, please immediately repeat your question in English. Please limit your questions to one at a time.
If you wish to have a follow-up question, please rejoin the queue. Our first question comes from Richie Sun with HSBC. Please go ahead. Good evening, Li Cheng. Thank you for your question. Congratulations to the company on your strong performance in the new game.
I would like to ask the management team's opinion on the competitive pattern of the Party Game. Do you think the winner can still have two players? We can see that Danzai Party already has a strong user group and the ability to generate content for users. Considering the competition brought by other competitors, what measures will NetEase take to maintain a leading position?
I will translate these questions myself. Thank you, Mechman, for taking my questions. I have a question about the competitive landscape for party games. Does Mechman think it is a winner-takes-all market, or can it have two players? And we noticed that AK Party has strong user base and UGC content already. Given that there are more potential competition from other platforms, what would NetEase further do to sustain the leadership? Thank you.
I think competition is a very normal thing. In the future, NetEase will continue to provide satisfied services to users through innovation. So we are very confident to continue to work hard on party games. Thank you.
Yeah, just do a translation for William. So we think it's absolutely normal to have a competition. So from that perspective, we'll continue to drive innovation and provide good services to our users, and that's how we lead the market. So we have full confidence in keep pleasing our users in the party game genre. Thank you. Next question, please. Our next question comes from Sue Quinn Jane with
BICC, please go ahead. My question is about the flagship games
I want to go back to the topic of the game. First, you have to innovate. Second, you have to provide high-quality
to meet the needs of the users. In this way, you can keep the longevity of the game. Don't do anything short-term and do something for the short-term benefit. In the past 20 years, the operating experience of the game has been based on this long-term concept. Thank you.
So I want to say the most important thing for a game is innovation and to provide high quality content for our users. And it's important for us to focus on the long-term longevity of our games and never make any short-term decisions. So based on our 20 years operation experience, we think that a long-term goal is the key. Thank you. Next question, please.
Our next question comes from Felix Liu with UBS. Please go ahead. 谢谢管理层接受我的提问,也恭喜我们三季度非常好的业绩。我想问一下我们公司Pipeline的情况。首先恭喜我们近期获得了射雕的版号。在我们已经有版号的几款新游戏里,射雕,燕云石油生和零号任务,
Can the management team provide us with the progress of their development? When can we launch these three games to the players? We also have some games that are still waiting to be released. For example, the mobile game of Eternity and the title Infinity. Do we have any good news on the development progress of these two games? We can share with you.
Let me translate myself. Thank you, Manjiban, for taking my question, and congratulations on the strong third quarter results. My question is on the pipeline. Among the three games that already have Banhao, including She Diao, Where Wind Meets, and Project Zero, how is the R&D progress for these games, and when do you think these games can come to market? And for the other games that are still waiting for Banhao,
such as Naraka Mobile and Project Mugen. Does management have any color on their R&D progress? Thank you. Every product launched by NetEase is a product that has been seriously polished. We believe that as long as it is guaranteed, we will continue to provide services to users.
So, we are still preparing for the final release of the game, such as Colorful 0. We will release it before the second quarter of next year. We will be ready to release it before the second quarter of next year. Thank you.
So for each of our games, it's always after very careful adjustments, moderation, before we are ready to release them to the market. And so games such as She Diao, Ling Hao Ren Wu, we are still in the final stage of preparation, and hopefully we'll get them released to the market
No later than the second quarter of next year. Thank you. Next question, please. Our next question comes from Thomas Chung with Jefferies. Please go ahead. Good evening. Thank you for your question. My question is about our overseas business.
Thanks, management, for taking my questions. My question is about our overseas strategies. Given that we have demonstrated various good sets of results in the domestic market with a very solid pipeline, how should we think about our overseas expansion
in the coming years, as well as our investment strategies. Thank you.
So, on a global market, we will continue our strategy of high-quality focused direction. We'll continue to look for partners who share the same mentality, share the same passion for games as we do, and continue to invest in good teams to produce and create great content for users all around the globe. Thank you. Next question, please.
Our next question comes from Lincoln Kong with Goldman Sachs. Please go ahead. Thank you for your explanation. Congratulations to the company for its strong profit performance in the third quarter. My question is, this year, the success of Danzai and Nishan may be different from our traditional long-term game. They have a large number of users and a large scale of activity.
So in the future, we can think about more innovative ways to play and similar experiences. We are looking forward to the success of the next Snowblade.
So thank you, Mitchell, for taking my question. So we have seen this year a very successful title from Aggie Party and Justice Mobile, which is a bit different from traditional legacy games, have a very big user base and DAU. So when we think about the future upcoming launching games,
Especially for next year, where we meet and shut down. Should we expect some of the similar type of features and anything we can sort of a copy from the past success? When should we expect the next success of Justice Mobile? The future of large-scale gaming products is definitely a very important direction for us. We will continue to summarize our previous
the success of big DAO products. We will continue to launch more new products in this direction. At the same time, I would like to emphasize that we will also build more high-quality hammer-type game products to meet the needs of players with similar interests. For example, the basketball and racing cars we launched this year are all very good examples, which shows that we have the ability to make breakthroughs in different types of hammers. NetEase should have such a very large DAO product
Thank you. Let me do the translation. So the large DAU games is definitely a very important direction for us. We'll continue to find the key takeaways from the games that have succeeded in order for us to produce more games of this type.
But at the same time, you know, it's also very important to create high-quality games of a particular niche category to meet the different requirements and preferences of different types of users. For example, this year we launched a basketball game, racing car games. So these are good examples of top-performing games of each of their respective categories.
So within NetEase we have teams who specialize in large EU games and our teams that focus on a particular niche. So we have various different teams within NetEase and we encourage them to apply their unique edges and unique experience. Thank you. Next question please.
Our next question comes from Richie Sun with HSBC. Please go ahead. Thank you for accepting my question. The sales version of the IOS app is excellent, but it is not available on Android. Although the Android platform may have a higher demand cost, it can still attract more users and extend the life cycle of the game.
So the Dump City Dynasty has been quite successful despite launching without Android App Store. Although it could have higher channel costs, Android can also bring in more users potentially, which can sustain the game longevity.
So how does management accept the ROI of not using Android at all? And what type of titles would absorb a Sibyl launch strategy in the future? Thank you. We think that products that are easy to use and popular with the general public are more suitable.
In the future, we will continue to maintain cooperation with players under the appropriate conditions. Players like basketball players need to be precisely matched to the player group of this basketball hobby. And we can also find such a player group through some other channels. So in this case, we are inclined to maintain such a user and then build a long-term operation
basketball lovers' community. In this way, we can communicate more directly with our users, so that our products can be better distributed. I would like to emphasize that although we don't have an Android channel, users of Android phones can still download games through our official website, such as TapTab. In fact, the number of game players we have on the Android channel is not small.
Thank you. So for games targeting towards a massive user base, like party games, games targeted for all ages, for these type of games, the distribution platforms are more effective in reaching out more users. But for games such as basketball games, it requires a specific
group, a specific community of game players. So we can find these players through various different platforms and channels. So in order for us to bring them onto NetEase platform and to operate these games for a long period of time, in order for us to get to know these users a little bit better and then to continue to perform different iterations
to give better and better service and experience to our users. We also want to add that for the Android platform users, they can also download our game through our own website and TapTap and various other channels. Thank you. Next question, please. Our next question comes from Alex Poon with Morgan Stanley. Please go ahead.
Thank you, Mr. Kwong, for accepting my question. Congratulations on a strong performance. My question is about AIGC. AIGC has a problem with the efficiency of content updates in our recent games. In the past, some large files may take 3 to 6 months to update. Will it be faster in the age of AIGC? For example,
Congratulations on a very strong quarter. My question is related to AIGC. Can AIGC, for our future game updates, expansion packs, be much more frequent than the current three to six months, becoming on a monthly basis or even weekly basis?
and such that the longevity and gaining user stickiness monetization can go, can get better. Thank you very much. First of all, I would like to emphasize that AIGC has been a great help in our development. We are planning to use AIGC for such a platform design.
such as coding, art, creative design, and some code applications. In fact, our entire development team has improved in the last few months, so we are getting better and better at IT technology. I believe this will be faster in the future. However, although our production capacity has improved, the pace of development is still dependent on the pace of operation and the players' preferences.
Yes, we agree that AI is extremely helpful in increasing and enhancing the R&D efficiency
particularly areas of game design, storyline design, mission design and arts, etc. So almost every month we can see another upgrade in terms of R&D efficiency. But while the productivity is increasing, the pace of us pushing out expansion packs is not completely dependent on that. We need our users to enjoy our content fully.
So the pace and frequency of those rolling out expansion packs is still very much dependent on the preference of our gamers. So we want to run each of our games for a long period of time. So with the increased efficiency, we can provide higher quality content within the same announced time frame. Thank you. Next question, please.
Thank you. I have a follow-up question. I would like to ask, will DaHaWuXianDa and YongJiuWuDian mobile phones be available in 2024? Thank you. My second question is about Naropa Bay Point Mobile and Project Mugen. Are they likely to be released in 2024? Thank you very much.
As for the first game of Unlimited, it's been a long time since we've done such an in-game player test. We are well prepared for the upcoming game. We are mainly waiting for the title to be released. I believe it will be released in the next few days. As for Unlimited, this is a game that we and the players
Okay, so for America's Play Point mobile game,
As you know, the game has been under preparation for a while now. I think we are fully prepared. The only thing we are waiting for is the license approval. So once we receive the license approval, the product should be ready to go. In terms of project medium, it is one of the games that is highly anticipated by both us and the gaming community.
So we want to keep surprise our players with great content. So we're going to continue to invest in more resources in developing that game in order to create the next generation quality content. So for now, we do not have a timetable to share. Thank you. The last question, please.
Our last question comes from Alicia Yap with Citigroup. Please go ahead.
I have a question about water-resistant mobile games. Besides new users, do we know which online games these players have played before playing water-resistant mobile games? And for non-online players, which games did they play before playing water-resistant mobile games?
Also, is the payment ratio and R2 higher than other games? Thank you.
My question is related on Justice Mobile. So in addition to the new user for those existing NetEase gamers, where do these gamers come from? Which NetEase games that they were playing before and which non-NetEase games that these players used to play before Justice? Is the paying ratio and also the R pool for Justice
is much higher than the other NetEase games. Thank you. We have done statistics, and about 1% of the users have never played NetEase games before. These users are mainly from other large-scale products in the current market, and the same as NetEase. This proves that NetEase is a
It's a friendly game for both players and users. We also have other games. For example, the basketball and the speed of the wind. There are also a lot of new games that we haven't played before. The second question is about the cost of the game. Because the game we use is a more affordable one.
is the forced digital payment mode. So its payment ratio is actually relatively high because it is a small amount of payment compared to other products. At the same time, its cost-benefit ratio is relatively low. We are trying to create a healthier and less stressful mode for players to maintain their long-term healthy operation.
So for Justice Mobile, based on our stats, about roughly a third of our users have never played NetEase games before. And this game has mostly come from, you know, other large DAU products around the market, which means that this is actually a very friendly and productive moment for a lot of users. In fact, I mean, this year, some of the other games that we launched
such as the basketball game and Racing Master, they also enjoyed many, a large proportion of gamers who've never played net-ease games before. So in terms of the pain ratio of monetization of Justice Mobile, so for Justice Mobile, we opted a more lighter monetization model, and because of that, the uphold is relatively lower,
with a much higher pain ratio. So we purposely chose this monetization model so that we can create a more healthy and balanced in-game environment, giving our game players less pressure in terms of pain to give them a long-term enjoyable environment in which they can enjoy their games. Thank you. Yeah, so I think that's all the questions we have for today.
Thank you. That concludes the question and answer session. I would like to turn the conference back over to management for any additional closing comments. Thank you once again for joining us today. If you have any further questions, please feel free to contact us directly of your Centre for Network Communication. Have a great day. Thank you.