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HoYoverse, the international brand for Shanghai-based Mihoyo Co., has had an unprecedented hit rate with its anime-inspired fantasy games. It followed Genshin Impact with Honkai: Star Rail and, in 2024, Zenless Zone Zero, a trio of games that’s collectively generated more than $8.4 billion on mobile, per Sensor Tower. But recently, its titles have begun to cannibalize each other. With each new release, HoYoverse’s audience migrated and the prior game’s mobile revenue roughly halved in the two subsequent quarters.
Sales at the closely held company fell 23% to $4.7 billion in 2024, according to data from Niko Partners. The need for fresh ideas is clear and urgent. As HoYoverse plots its next step toward growth, the answer will have to come from something other than cute warriors and selling tokens for in-game lotteries. Billionaire co-founder Cai Haoyu, now in his late 30s, stepped aside from running HoYoverse to help discover the answer.
Still, games are HoYoverse’s first step. For its upcoming titles, the company has poached top developers who have worked at Western companies like Ubisoft Entertainment SA and Electronic Arts Inc. It’s building new open-world and farming-simulator games, according to current and former employees. That’ll be a necessary departure from the anime role-playing genre — to expand the potential audience — but a risky one as HoYoverse tests new ground in an industry with flat revenue, diminishing hit rates and increasingly higher costs.
“Otaku have a strong inner need to communicate with girls, yet are afraid to act,” Liu said in one 2011 video, where he pitched a project involving “sweet, cute, kawaii pretty girls” to a room of potential investors with an excited energy. Otaku are “lonely and isolated people,” and with the company’s virtual characters, “we are here to meet such needs.” HoYoverse released games on that theme for years that earned downloads, prizes and investors.
Others praise HoYoverse’s success, but take issue with its strategy. “They take an economic system and then put on a veneer. For example, Genshin Impact is like Zelda. Zenless Zone Zero was Persona,” says Robert Wynne, co-founder and chief operating officer of Rising Tide Studios, which operates in China. “They have mastered player behavior to the point where they know exactly what you want when. They’re like economists and psychologists making video games.”
Zenless Zone Zero, its most recent foray, did not perform on par with the company’s expectations, according to two people with knowledge of the company. In its launch quarter, it earned less than half its anime predecessors’ opening quarter revenue, according to Sensor Tower.
“They’re dealing with cannibalization,” said Sensor Tower analyst Sam Aune. “The launch of Zenless Zone Zero shows they may be approaching market saturation for what they can do with role-playing games.”
Evidence of strain with this focus shift has already emerged. The company’s ambitious open-world game, for which it recruited talent from top Western studios, has been rebooted more than twice, according to two employees. Current and former employees said the game, initially codenamed Project Shanghai and inspired by Grand Theft Auto, is more ambitious than Genshin Impact. Cai also led that development. US-based staff have been laid off due to challenges with coordinating projects across time zones, according to current and former employees.
China is today the No.1 video game market internationally, generating an anticipated $50 billion from games this year, according to Niko Partners. HoYoverse is a comfortable titan in that market, though the company has its sights set on conquering more distant horizons. To do that, it’ll have to tap its deep talent pool of young otaku and rekindle some of the magic that helped it do unprecedented things in the past.