Summary of Key Points
Recently, major companies such as Alibaba and ByteDance have been selling off or scaling back their gaming businesses in favor of core strategies like AI. In contrast, Kuaishou has taken a different approach, investing 1.2 billion yuan in developing a game based on the popular male IP "The Master of Mystery." The initial test results were impressive, with millions of new users within the first hour and over 700,000 players online simultaneously. However, Kuaishou faces challenges such as the depletion of IP resources, a trend of high initial success followed by declining performance, and the competitive pressure from AI initiatives that consume substantial funds. Behind this contradiction lies Kuaishou's struggle to find a breakthrough in its growth, particularly in areas like advertising, live streaming, and e-commerce, which have reached their limits. This situation also reflects the complex attitudes of large companies towards gaming businesses when making strategic decisions.
Why Are Major Companies “Fleeing” from Gaming? – Strategic Focus Over Short-Term Profit
Alibaba sold Lingxi Huyu (which generated 2 billion yuan in annual revenue) and ByteDance sold Mutong (with 110 million monthly active users) not because gaming wasn’t profitable, but because gaming is no longer considered a core area for their future development. Major companies are now betting on AI: ByteDance has increased its capital expenditure plan for 2026 to 200 billion yuan (a 25% increase), and Alibaba is also investing heavily in AI. While gaming can be profitable, it requires significant resources for research and development, which conflicts with their “future strategy” focused on AI. In short, they prefer to allocate their funds to AI, as it represents the “ticket” to success in the next decade.
Why Does Kuaishou Dare to “Go Against the Trend” with “The Master of Mystery”? – A “Lifesaver” in Times of Growth Struggles
Kuaishou is facing difficulties: its revenue only increased by 2.4% in the first half of 2026, and its adjusted profit decreased by 28.5%. Its advertising growth is slow (far behind that of Tencent Video), its live streaming revenue decreased by 13.5%, and its e-commerce share is only one-fourth of TikTok’s. Gaming has become one of the few areas where it can achieve growth.
Why choose “The Master of Mystery”? Firstly, there are few high-quality IPs left to adapt into games: out of 25 major literary IPs, 16 have already been adapted, and the remaining ones either have complex worldviews that make game development difficult or have scattered copyright rights. “The Master of Mystery” is one of the last viable options. Secondly, there is potential for ecological synergy: Kuaishou has a platform for short videos, live streaming, and e-commerce, so a successful game could boost live streaming revenue and sales of related products (for example, “Honor of Kings” related products sold 270,000 units on TikTok).
The “Curse” of IP-Adapted Games – High Initial Success, Low Long-Term Performance
The initial test data for “The Master of Mystery” were promising, but most IP-adapted games experience a decline in performance shortly after launch. For example, “Dragon Tribe: The Gates of Kassel” topped the free app charts but dropped to 49th place in the bestseller list within a month, and Kuaishou’s previous game “Xixing Ji Ran Hun” disappeared from the bestseller list within half a month. The reasons include poor long-term operational capabilities (games can only attract fans of the original works but fail to retain players) and rapid depletion of IP momentum (once the original fans are exhausted, no new users are attracted). Data from Gamma shows that the proportion of games based on novel IPs decreased from 2.1% to 0.7% in 2024, indicating a diminishing market interest in such adaptations.
Kuaishou’s Dilemma: AI Investment vs. Gaming Expenses
Kuaishou’s AI business is growing rapidly (850 million yuan in revenue in Q2 2026, a 200% increase), but it also incurs high costs: it lost 1.9 billion yuan in 2025 (with only 1.1 billion yuan in revenue) and plans to spend 26 billion yuan on AI in 2026 (more than its annual net profit last year). To maintain its AI advantage, it will need to continue investing heavily. This raises the question: Does Kuaishou have the funds to invest another 1.2 billion yuan in a gaming project? If “The Master of Mystery” fails to be profitable, Kuaishou may have to cut its gaming business and focus on AI. After all, the current priority for large companies is whether a business aligns with their core strategies, not its profitability.
Is “The Master of Mystery” a “Last Attempt” or a “New Beginning”?
For Kuaishou, “The Master of Mystery” is a risky bet. If successful, it could transform gaming from a peripheral to a core business and drive overall ecosystem development. If it fails, Kuaishou might never have another chance to acquire a top IP, and its gaming business could become completely marginalized. For the entire industry, this could mark the last attempt by major companies to develop their own games. With the pressure of costly AI initiatives, it’s becoming increasingly difficult for them to invest heavily in gaming. If “The Master of Mystery” breaks the pattern of high initial success followed by decline, it might encourage more companies to reconsider gaming; otherwise, it could signal the end of the era of major companies developing their own games.
In summary, the fate of “The Master of Mystery” not only determines the future of Kuaishou’s gaming business but also reflects the difficult choice faced by the entire internet industry between short-term profitability and long-term strategic goals.