Alibaba Games is about to launch an attack

Author | Liu Baodan

Editor | Huang Yu

As the "N" after Alibaba Group's split into six, the game business Lingxi Interactive Entertainment has always had a weak presence. Now, a series of remarks by Alibaba partner Fan Luyuan has given the outside world a glimpse into the development situation of Lingxi Interactive Entertainment.

On December 6, during an internal award ceremony at Lingxi Interactive Entertainment, Fan Luyuan, Chairman and CEO of Alibaba's Digital Media and Entertainment Group and Chairman and CEO of Alibaba Pictures Group, expressed dissatisfaction with the Lingxi Interactive Entertainment team. "There is no international vision, and there is completely no talent cultivation system. There is factionalism, and they are still using outdated gaming thinking to make games."

After these remarks were made public, many netizens felt that his comments were overly self-righteous. On December 7, Fan Luyuan apologized on the internal network. "I was only concerned with being verbally clever and did not consider everyone's feelings, which could inadvertently hurt everyone's emotions." For this, he stated he would self-penalize three months' salary.

In addition to the inappropriate manner of expression, Fan Luyuan mentioned many key issues regarding Lingxi Interactive Entertainment for the first time in his speech. Rather than a criticism, it can be seen as Fan Luyuan giving a motivational boost to Lingxi Interactive Entertainment, which is in a new stage of development.

Fan Luyuan joined Alipay in 2007 and has held several senior management positions, including President of Alipay and President of Ant Group's Wealth Management Business. He has served as an executive director of Alibaba Pictures since 2016 and became President of the Digital Media and Entertainment Group in 2018. In January of this year, he took charge of Lingxi Interactive Entertainment on behalf of Alibaba Group.

Lingxi Interactive Entertainment is a product of Alibaba's strategic expansion. In 2014, Alibaba entered the gaming industry and laid out its channel distribution through acquisitions. In 2016, Alibaba integrated its scattered gaming businesses under the management of Alibaba's Digital Media and Entertainment Group. In 2020, Alibaba Games launched the new brand Lingxi Interactive Entertainment, which became a department alongside Digital Media and Entertainment.

After ten years of development, Lingxi Interactive Entertainment has become a platform focused on the independent research and development, operation, and agency distribution of mobile games. Currently, Lingxi Interactive Entertainment operates several games, including "Romance of the Three Kingdoms: Strategy Edition." In the 2024 fiscal year, Lingxi Interactive Entertainment ranked among the top five in total revenue in the Chinese mainland market (iOS App Store) among global game manufacturers.

Regarding the development pace of Lingxi Interactive Entertainment, Fan Luyuan feels it is still slow. "I have very high expectations for Lingxi. I hope that within the next eight years, we can become the third largest game company in China, following Tencent and NetEase; within twelve years, Lingxi Games must become the second largest in China."

Based on this future strategic goal, Fan Luyuan believes that Lingxi must possess the capability for international productization, which is a very important requirement for the game team and also for the current management.

From his remarks, Fan Luyuan's confidence mainly comes from the prospects of the gaming industry. He predicts that in the next five to ten years, 70% of the revenue in the global gaming industry may come from Chinese companies or products affiliated with partners of Chinese companies.

In particular, gaming will become one of the main application scenarios for AI large models, and AI gaming is accelerating its arrival. On November 27, Musk announced that xAI would establish an AI gaming studio; on December 3, the Li Feifei team World Labs released its first project, which can generate a 3D world from a single image. There are many such actions, which will bring disruptive changes to the gaming industry Fan Luyuan believes that a new generation of game production models will soon arrive. "Within five years, the advantages of Tencent and NetEase will no longer exist. They previously had a large number of excellent talents, such as art and planning teams, which are very outstanding. However, due to our investment in AI digital pipelines, we will shorten the gap with NetEase and Tencent in this regard."

He emphasized that Lingxi Interactive Entertainment must integrate AI, as the filmization of games and the gamification of films will definitely be the ultimate outcome in the future.

At the beginning of the year, when Fan Luyuan represented Alibaba Group in overseeing Lingxi Interactive Entertainment, Lingxi Interactive Entertainment operated independently within Alibaba Group as Company N. At this meeting, he candidly stated that Lingxi Interactive Entertainment is now a company under the large cultural and entertainment division. "The investment in AI by the large cultural and entertainment sector will be greater than the combined investments of other video websites. In this area, both sides need to fully integrate technologically in the future."

From this perspective, Alibaba Group, which has fully committed to AI, will first bring technological empowerment to its various businesses, which is one of the biggest advantages behind Lingxi Interactive Entertainment.

The huge opportunities come with challenges. Lingxi Interactive Entertainment currently faces at least two pressures: content capability and industry competition pressure.

Like the two sides of a coin, Lingxi Interactive Entertainment, backed by Alibaba, can access more resources, but the gaming industry is a content innovation industry, and Alibaba's platform gene determines that it is not good at content innovation. Fan Luyuan has been emphasizing Alibaba's culture, and whether this will limit the gaming business remains to be discussed.

The gaming industry is highly competitive, and the requirements for talent are also very high. In addition to industry giants Tencent and NetEase, ByteDance has also begun to reinvest in gaming, while rising companies like miHoYo and Game Science possess strong innovation capabilities, all of which pose significant obstacles for Lingxi Interactive Entertainment to join the top tier or even the second tier nationally.

Fan Luyuan's call indeed lacks empathy, but he has sounded the alarm that Lingxi Interactive Entertainment must begin to face the harsh market competition independently.

In the context of Alibaba's overall strategic focus, Lingxi Interactive Entertainment must find its own way to survive