CMGE Marketing Co's 2023 Earnings Turnaround: From Red to Black, Driven by Gaming Portfolio Expansion and IP Ecosystem Growth

On March 27th, Hong Kong-listed CMGE (0302.HK) unveiled its 2023 full-year performance, revealing a remarkable financial recovery. The company achieved total revenues of 2.6 billion yuan throughout the year, with adjusted net profit reaching 5.379 million yuan—a significant turnaround from the prior year’s losses. When excluding non-operating expenses, core operating profit hit 107 million yuan, signaling strengthened operational efficiency across the entertainment division.

The impressive turnaround reflects a low base effect from 2022, delivering a year-on-year profit growth of 103%. Perhaps equally noteworthy, CMGE’s board of directors announced on March 28th a share repurchase initiative, allocating up to HK$100 million for open-market buybacks. This authorization caps repurchases at 10% of the 275.27 million shares outstanding as of June 2, 2023, with all repurchased shares to be cancelled afterward. The decision underscores management’s confidence in the company’s long-term prospects and strategic direction.

Gaming Publishing: Mini-Games Emerge as Revenue Accelerator

CMGE’s publishing division generated 2.133 billion yuan in 2023, with international markets representing 10.6% of this segment’s revenue. The standout performer has been the mini-game category, which contributed over 600 million yuan—a new growth pillar for the company.

The mini-game market itself has become increasingly attractive. Industry data indicates China’s mini-game market surpassed 40 billion yuan in 2023 and is projected to exceed 60 billion yuan by 2024, providing CMGE with a favorable growth environment.

Among flagship titles, “Sword and Fairy: Wen Qing,” a role-playing card game co-published with Qingci and leveraging CMGE’s proprietary intellectual property, achieved remarkable market traction. Upon launch in June 2023, it claimed the top position on Apple’s free games chart and ranked 14th in best-sellers, earning recognition from the Hardcore Alliance. Following its December expansion into Hong Kong, Macau, and Taiwan markets, the title dominated regional charts, securing first place on both free and paid lists across these territories.

“Cultivation Fantasy,” a card mobile game developed by Love Games with CMGE investment, launched in May 2023 and quickly climbed rankings, hitting number one on TapTap’s trending list within its first month and placing third on Apple’s free tier and 21st on best-seller lists.

“Soul Land: Shrek Academy,” jointly distributed by CMGE and TanWan Games, attracted over 6 million pre-registrations after obtaining its gaming license in July 2023. Following its January 2024 formal launch, the title immediately claimed first place on Apple’s free chart and topped TapTap’s trending rankings in its opening month.

Established titles continue providing stable revenue streams. CMGE’s self-published franchises including “The New Legend of The Condor Heroes: Iron Blood and Loyal Heart,” “Rakshasa Street: Chosen One,” and “Soul Land: God of Battle Arise,” alongside co-produced titles like “One Piece: The Voyage” and “Dynasty Warriors: Hegemony,” maintained consistent profitability throughout 2023.

The mini-game portfolio, featuring titles such as “Sword and Fairy: Jiuzhou” and “Fire at Will,” contributed over 600 million yuan collectively. CMGE licensed “Country Love Story” from Ben Shan Media, initiating monetization testing in late 2023 ahead of a planned first-half-2024 official rollout.

Looking forward to 2024, CMGE’s publishing roadmap includes major IP releases: “Soul Land: Reversed Spacetime,” “Fight Break Spheres,” “Naruto: Konoha Master,” “New Romance of the Three Kingdoms - The Legend of Cao Cao,” and “Daily Life of Chat Group.” Regional expansion strategies include sequential launches of titles like “Soul Land: Shrek Academy” and “Code: FA” across Hong Kong, Macau, and Taiwan, plus an entry into Japan with “New Romance of the Three Kingdoms - The Legend of Cao Cao.” Additionally, CMGE anticipates rolling out over 10 mini-game products throughout 2024.

User Growth and Engagement Metrics Show Consistent Momentum

During 2023, CMGE attracted 92.87 million new registered users, representing a 9.8% year-on-year increase. The company’s average monthly active users rose to 17.05 million (up 9.9%), while average monthly paying users reached 1.19 million (up 5.8%).

Notably, minors contributed less than 0.01% of gaming revenue in 2023, reflecting CMGE’s mature user base and compliance posture.

In-House Development: Original Titles and AI Integration

CMGE’s self-developed portfolio generated 215 million yuan in revenue during 2023, supported by 370 million yuan in R&D investment. The company has increasingly integrated AIGC technology into artistic production, copywriting, and development workflows to reduce costs and accelerate time-to-market.

Wenmai Interactive, CMGE’s wholly-owned subsidiary, launched “World of Castellan,” a Three Kingdoms-themed strategy mobile game in November 2023, exclusively distributed domestically by 37 Interactive. The title received Hardcore Alliance Superstar recognition in its debut month. Building on this success, CMGE plans to develop and launch “Code: Lord,” a second Three Kingdoms-themed title in 2024, targeting expanded market share within the category.

Shanghai Zhoujing, a CMGE holding subsidiary, developed “Hoop City 3V3,” a sports competitive PC game that obtained its license in May 2023, commenced monetization testing in December 2023, and is slated for official summer 2024 launch.

Established self-developed titles—including “The World of Legend ? Thunder Empire,” “Legend of Dragon City,” and various chess, card, PC, and cloud games—continue receiving updates and generating consistent revenue.

The crown jewel of CMGE’s self-development efforts is “Sword and Fairy World,” an open-world title based on the Sword and Fairy IP that secured mobile and PC dual-platform licenses in June 2023. Pre-registration exceeded 4 million players following two testing phases in 2023. Commercial viability testing commenced recently, with official launch planned within 2024.

“Sword and Fairy World” distinguishes itself through narrative depth—offering mainline stories, character-specific plotlines, and side quests exploring humanistic themes—combined with expansive exploration opportunities. The integration of AI elevates immersion: NPCs behave and converse responsively to environmental conditions, while players access AI-driven customization features, voice synthesis, motion generation, and AI+UGC tools to deepen personalization and community engagement.

IP Licensing: Ecosystem Expansion Across Entertainment Verticals

CMGE’s IP licensing business achieved 257 million yuan in revenue during 2023, reflecting 75% growth year-over-year. The company has orchestrated comprehensive ecosystem development around its “Legend of Sword and Fairy” intellectual property, spanning games, film, television, animation, literature, music, merchandise, and location-based entertainment.

Within the gaming vertical, “Sword and Fairy: Wen Qing” already delivered commercial success. Additionally, “Legend of Sword and Fairy: New Start,” an idle RPG developed collaboratively with Kaiying Network and launched in 2023, achieved fifth-place ranking on WeChat’s mini-games chart. CMGE also established “Sword and Fairy Alliance,” a dedicated fan community launched in 2023 for IP enthusiasts.

Film and television productions have expanded considerably. CMGE partnered with iQiyi to produce “Legend of Sword and Fairy 4,” which premiered on the platform in January 2024. Simultaneously, Shandong Film and Television’s “Legend of Sword and Fairy 6” debuted on Tencent Video in January 2024. “Legend of Sword and Fairy 1,” co-produced with Penguin Pictures, completed filming in 2022 and is scheduled for 2024 release.

Animated content is evolving through a strategic partnership between CMGE and Penguin Pictures, collaborating on series adaptations of “Legend of Sword and Fairy 1” and “Legend of Sword and Fairy 3.” The “Legend of Sword and Fairy 3” trailer premiered in 2023, with the complete series expected in 2024.

Beyond entertainment media, CMGE has commercialized the IP through trendy collectibles and merchandise. Following the 2022 debut blind box series (“Legend of Sword and Fairy Chinese Traditional Festival Series Figures”), CMGE launched the “Chinese Traditional Musical Instrument Series Figures” in 2023 for global distribution through Pop Mart. Additional merchandise partnerships yielded Han Lingsha figures, Yue Qingshu statues, and Jiu Jianxian collectibles in 2023. In November 2023, CMGE began producing interactive image works based on the franchise alongside Qishu Youyu, HippoJoy, and INTINY.

A location-based entertainment initiative is under development, with trial operations anticipated across Shanghai, Hangzhou, Anhui, and Chongqing during 2024. This initiative seeks to bridge online community engagement with immersive offline experiences, enabling fans to interact with the Sword and Fairy universe in physical settings.

Outlook: Sustained Growth Through Portfolio Diversification

CMGE’s 2023 performance demonstrates the strength of its diversified gaming portfolio, robust IP ecosystem, and technological integration of AI-driven development. With mini-games establishing themselves as a meaningful revenue stream, established franchises providing stability, and heavyweight titles rolling out through 2024, the company appears positioned for continued momentum. The commitment to international expansion, coupled with ongoing IP ecosystem enrichment spanning entertainment, collectibles, and location-based experiences, suggests CMGE’s trajectory will benefit from cross-industry synergies and fan engagement initiatives throughout the coming period.