Perfection is permanent, CEOs come and go

2024-08-05

author| Cheng Yanjing

Source | Leifeng.com

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Perfect World welcomes its new CEO Gu Liming, and both insiders and outsiders express disbelief. This personnel change indicates that the company will experience short-term pain, but long-term benefits can be expected.

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As a veteran of Perfect World, former CEO Xiao Hong led the team to launch a number of classic games and promoted the company's internationalization.

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In recent years, Perfect World has experienced large-scale layoffs and project restructuring. With the new CEO taking office, how will this once glorious gaming giant respond to the challenges?

"Communicating with him doesn't feel particularly forceful."

"Perhaps his edge has been hidden and not shown."

This was the first impression that Xu Ruoxi, a former employee of Perfect World, had of Gu Liming, when Gu Liming was still in charge of Perfect World's financing in North America.

Many years later, on the afternoon of July 22, 2024, the news that Gu Liming became the CEO of Perfect World spread throughout the gaming circle.

This sudden personnel change was also hard to believe for Perfect World employees, and some insiders even said they learned the news from outsiders.

But there are also rumors that Chi Yufeng was interviewing CEO successors as early as May and June.

However, the outside world generally believes that Perfect World’s change of leadership is actually good news.

For a gaming company of the size of Perfect World, there may be short-term pain after changing its CEO, but the long-term benefits in the future will definitely be obvious.

Perfect World changes its leaders one after another, with the e-sports president promoted to CEO

The outside world knows very little about Gu Liming.

What can be found on the Internet are his personal career experiences. He has previously worked for General Electric and Microsoft in the United States.

Compared with Xiao Hong and Lu Xiaoyin's employment time at Perfect World, Gu Liming joined Perfect World a little later, in 2013. He has since served as Perfect World's vice president, senior vice president, and president of e-sports business.

In a previous media interview, Gu Liming, then vice president, said that Perfect World would adopt a two-pronged strategy of "self-research + agency" in the console game market, creating high-quality products by investing in and acquiring overseas studios, while increasing the research and development of domestic original games.

Currently, Gu Liming does not hold any shares in Perfect World. His term of office will be from the date of approval by the board of directors to the expiration of the term of office of the current board of directors.

Compared to Gu Liming, the latecomer who rose to the top, former CEO Xiao Hong is considered an "old servant" in Perfect World.

From joining Perfect in 2008 until 2015, Xiao Hong served as Senior Vice President, Chief Operating Officer, Co-CEO and Chief Executive Officer of Perfect World Co., Ltd.

Since Xiao Hong graduated from Tsinghua University with a bachelor's degree and then studied at the University of Southern California, his understanding of Eastern and Western cultures is more pertinent and objective, and he has always played an important role in helping Perfect World "go overseas".

With an understanding of traditional culture, Xiao Hong led his team to create games such as "Wulin Wai Zhuan" and "The Return of the Condor Heroes", spreading Chinese culture while providing entertainment.

As early as 2018, Xiao Hong showed his foresight and showed great interest in the concept of AI + games. He even mentioned that in the future, Perfect World might be more integrated with AI, allowing AI to be presented in Perfect World's games as a tool.

But what’s really amazing about Xiao Hong is that he started out as an HR at Perfect World, but rose all the way to the position of CEO.

Qiu Ziye, a colleague who had dealt with Xiao, said that Xiao was "very capable" and had a sweet tongue. It was rumored that his former capable subordinate had inherited his legacy and always addressed Xiao Hong as "you", doing things flawlessly, getting along with everyone, and was promoted by Xiao.

Since August 2016, Xiao Hong has served as director and general manager of Perfect World, and since January 2019, he has served as CEO of Perfect World.

When asked why Chi Yufeng strongly supports Xiao Hong, another gaming insider, Gao Shijie, added to Leifeng.com that it was Xiao's ethics and professionalism that Chi Yufeng valued. "Even though his decision caused the company to lose tens of millions of yuan, none of the money went into his pocket."

This is true, because the company's founder Chi Yufeng cares very much about the ethics of his senior executives.

Chi never engaged in nepotism by bringing his family members into the company to work; at the same time, Chi seldom abused company resources. Legend has it that once, when Chi Yufeng's car broke down, he would rather take a taxi home than ask the company's driver to pick him up.

Xiao Hong studied in the United States and has experience in large companies, so his ethics are fine. This is why Chi Yufeng has always trusted Xiao Hong.

Legend has it that Xiao Hong once had the urge to introduce a Russian MOBA game. His idea was to use Dota2, which Perfect World represented at the time, to attract traffic to this game and generate more revenue.

But at that time, the MOBA market was already divided up by League of Legends and Dota 2. It was still unknown how much of a splash a Russian MOBA would make. Moreover, would this move affect the relationship with Dota developer Valve and jeopardize current and future cooperation?

However, Xiao Hong was a high-ranking official, and no one dared to speak directly to him. In the end, it was Zhang Yunfan who stepped forward and rejected his idea.

Unlike Xiao Hong's experience, Lu Xiaoyin has been deeply involved in the game field for many years and he himself is an art director.

“Mr. Lu is very good at management.The team, especially the game art members, all have their own personalities, but Mr. Lu can coordinate them very well."A team member who previously worked with Mr. Lu told Leifeng.com.

Lu Xiaoyin joined Perfect World earlier than Xiao Hong. From 2004 to 2007, Lu Xiaoyin served as Vice President of Perfect World (Beijing) Network Technology Co., Ltd. From 2007 to 2015, Lu Xiaoyin served as Senior Vice President and Chief Art Officer of Perfect World Co., Ltd.

During his tenure at Perfect, Lu Xiaoyin not only organized the development of well-known IP game titles such as "Perfect World", "My Own Swordsman", "Perfect World International Edition", "Zhu Xian", and "Red Cliff", but also launched projects targeting young users of Generation Z, such as urban and open world style games such as "Fantasy Westward Journey", "Black Cat Strange News", and "One Punch Man: World".

According to media interviews with Lu, Lu has not been stingy with his huge investment in research and development. According to public information, in the first half of 2022, Perfect World will increase its research and development expenses by 25% year-on-year to 1.052 billion yuan to continue to encourage innovation and promote high-quality products.

When talking about Lu Xiaoyin, we have to mention "Tong the Shopkeeper". There are rumors in the circle that there was a small friction between the two. However, this time "Tong the Shopkeeper" was not affected much. According to Wan Maixin, who is close to Tong, Tong is in Beijing recently and the next step is not known yet.

Tong Qing joined Perfect World in 2015. During this period, Tong Qing led his team to produce a number of mobile game products such as "Perfect World" and "Wulin Wai Zhuan", and finally won the trust of Perfect World. In mid-December 2023, "Tong Qing" was promoted to President of Perfect World Holdings Group.

The promotion of Tong at that time was seen by the outside world as a self-rescue move by Perfect World, with the aim of implementing flatter management of game projects to improve project output.

A few days ago, Leifeng.com exclusively learned that Tong Qing had previously launched an internal entrepreneurial project to establish a new company integrating R&D, operation and development, in which Perfect World had invested.

Frankly speaking, this personnel fluctuation at Perfect World corresponds to the company's strategic adjustment and change of direction, but it is still difficult to avoid for ordinary workers.

Senior management changes, lower-level layoffs

Looking back at Perfect World’s internal turmoil, we can actually see it from the large-scale layoffs in the past two years.

The company's annual report shows that from 2021 to 2023, the total number of employees at Perfect World at the end of each period was 6,272, 6,061 and 5,754 respectively, declining for three consecutive years.

Last month, according to Phoenix Technology, the company was undergoing a major adjustment in projects and personnel. Internal employees revealed that the total number of layoffs has exceeded 1,000, and some R&D departments have even directly reduced hundreds of people. Even the "Perfect New World" and "One Punch Man" projects that were favored by the outside world have been suspended.

In mid-December 2023, Perfect World Company split the original project center into an independent studio, reporting directly to the head of the game business. At the same time, the three major middle platforms of technology, art, and data will continue to empower game projects, and the distribution center will provide project support.

According to a report from the public account "Daily People", Perfect World has three buildings in total. Now, two of them are almost empty, with only Building A still having employees. The company's remaining projects can probably be counted on one hand.

There were even media reports that one building had a high vacancy rate and had been put up for rent.

Behind the massive layoffs is the consequence of Perfect World’s rapid expansion in recent years.

2019 can be said to be a watershed year for Perfect World. In this year alone, 24 projects were launched, all of which required a lot of R&D funds and teams to complete. From 2018 to 2020, its R&D expenditure was 1.413 billion, 1.504 billion, and 1.589 billion yuan, respectively.

Although the company's gaming business performed well in 2019, it also coincided with the recession of the Internet era, and the growth of domestic game users had reached its ceiling.

In 2021, Perfect World's gaming business is expected to achieve a full-year profit of 670 million to 690 million yuan, a year-on-year decrease of 70.7% to 69.8%. Among them, the net profit attributable to the parent company fell from 1.548 billion yuan to 369 million yuan, a year-on-year decrease of 76.16%.

It was also in this year that Perfect World began to cut staff expenses.

According to Xu Ruoxi's recollection, "In the past, Perfect World's R&D team had only about 300 people, and Mr. Chi would even personally control certain projects."

At that time, all employees of Perfect World were making games with ideals and passion. But now, times have changed and this behemoth, Perfect World, seems to be a little overwhelmed.

Perfect world, how far is it from perfection?

When asked about her view on the replacement of the two bosses, Gong Leimin, a former employee of Perfect World, told the author that the sudden change of CEO should be part of the plan. Of course, she herself believed that this group of people should have been replaced long ago.

More than one person thinks so. Leifeng.com interviewed several people in the gaming industry and they also expressed the same view.

Gong Leimin worked at Perfect World when Zulong Studio was at its peak. In March 2004, founder Li Qing merged with Perfect World Group and served as the chief designer of the group. Later, he left in 2014 to set up his own company, which has grown into the current Zulong Entertainment.

The online game "Perfect World" developed by Zulong Studio at that time was called the Chinese World of Warcraft by domestic players as soon as it was launched. It was able to reach 300,000 people online at the same time, breaking the online record of domestic online games at that time. Later, Perfect World successfully opened up the overseas market with this game, becoming the first domestic online game company to enter the overseas market, and once led the revenue of domestic game companies in the overseas market.

The Perfect World of that era was at its peak.

In 2006, Perfect World followed the trend of free online games and launched the “permanently free” “Perfect World International Edition”. At the same time, it continued to develop new works using its own 3D engine, introduced popular IPs at the time such as “Wulin Wai Zhuan” and “Zhu Xian”, and launched games of the same name one after another.

It is no exaggeration to say that the IP craze for domestic online games was driven by Perfect World.

Today, this gaming industry giant is struggling under the pressure of revenue.

The financial report shows that in 2023, Perfect World's revenue was 7.791 billion yuan, a year-on-year increase of 1.57%, and its net profit attributable to the parent company was 491 million yuan, a year-on-year decrease of 64.31%. In the first quarter of 2024, Perfect World achieved revenue of 1.329 billion yuan, a year-on-year decrease of 30.19% and a month-on-month decrease of 16.68%. The net profit attributable to shareholders of the listed company after deducting non-recurring items was a loss of 158 million yuan, a year-on-year decrease of 177.51%.

Against the backdrop of continued losses, Perfect World is also undergoing a series of executive replacements.

Just after the news of the new CEO taking over was announced, Perfect World’s stock price fell 4.7% to 7.49 yuan the next day, and now it has returned to 7.52 yuan.

As one of the leading domestic gaming companies, replacing the CEO is no small matter. Chi Yufeng was actually conflicted when he chose Gu Liming as his successor.

There were rumors that Chi Yufeng intended to invite "Fantasy Westward Journey" producer Kee Zhang to be promoted to CEO two days ago, but in the end it was someone else who appeared in the announcement.

So we might as well make a bold guess that choosing Gu Liming to take over might be Chi Yufeng's Plan B, and finding other game producers to take over is what Chi Yufeng really wants to achieve.

After all, at this stage, Perfect World, as the operator of "DOTA2" and "CSGO", blindly looking for successors will be detrimental to the company's strategic development and may even affect stock price fluctuations.

Xu Ruoxi still remembers that when he was at Perfect World, Chi Yufeng would attend new employee training sessions, and sometimes they would have dinner together to celebrate when a project performed well. When talking about Chi Yufeng personally, Xu Ruoxi gave him a high evaluation.

"Mr. Chi's strategic vision and pattern are rare among today's entrepreneurs, especially his sense of social responsibility, which is actually quite rare."

Most of the legends about Chi Yufeng in the martial arts world are about admiration for his vision.

At that time, other members of Zulong Studio intended to disband, but were dissuaded by Chi Yufeng. After Chi Yufeng observed and tried foreign games for a period of time, he decided to devote himself to online games. He established his own online game company - Perfect World Network Co., Ltd. and invited team members to join.

In the film and television industry, Chi Yufeng participated in the production of TV series such as "The Legend of Chu and Han" and "The Legend of Lu Zhen", which generated a certain degree of popularity. In 2011, he invested in the production of low-cost, high-reputation movies such as "Love is Not Blind" and "The Piano in a Factory".

Chi Yufeng definitely has an advantage in judging and controlling the industry.

However, it is difficult for a team to remain intact after going through the turmoil of start-up, listing, and delisting, and going through a long economic cycle.

Especially in the gaming industry, the current Internet dividends have been exhausted, the monetization capabilities of gaming platforms have increased, and new technologies and concepts are emerging in an endless stream. Faced with the trend of weakening mass consumption, the price reduction trend in the gaming market is inevitable. Under internal and external pressures, the situation of domestic gaming companies is becoming increasingly difficult.

We might as well give the perfect world more time.

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