Good day, and welcome to the NetEase 2022 third quarter earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Margaret Shi, IR Director of NetEase. Please go ahead.
Thank you, operator. Please note the discussion today will contain forward-looking statements relating to future performance of the company and are intended to qualify for the safe harbor from liability as established by the U.S. Private Securities Litigation Reform Act. Such statements are not guarantees of future performance and are subject to certain risks and uncertainties, assumptions and other factors. Some of these risks are beyond the company's control and could cause actual results to differ materially from those mentioned in today's press release and in this discussion. A general discussion of the risk factors that could affect NetEase's business and the financial results is included in certain filings of the company with the Securities and Exchange Commission, including its annual report on Form 20-F and announcements and filings on the website of the Hong Kong Stock Exchange.
The company does not undertake any obligation to update this forward-looking information except as required by law. During today's call, management will also discuss certain Non-GAAP financial measures for comparison purposes only. For a definition of Non-GAAP financial measures and a reconciliation of GAAP to Non-GAAP financial results, please see the 2022 third quarter earnings news release issued earlier today. As a reminder, the conference is being recorded. In addition, an investor presentation and a webcast replay of this conference call will be available on the NetEase corporate website at ir.netease.com. Joining us today on the call from NetEase's senior management team is Mr. William Ding, Chief Executive Officer, and Mr. Charles Yang, Chief Financial Officer. I will now turn the call over to Charles, who will read prepared remarks on behalf of William.
Thank you, Margaret, and thank you everyone for participating in today's call. Before we begin, I would like to remind everyone that all percentages are based on RMB. We saw healthy growth across our businesses in the third quarter, with solid gains in each of our core business segments. Our total net revenues for the period were RMB 24.4 billion, an increase of over 10% year-over-year, despite high base effect in the third quarter of last year. This demonstrates the resilience and improving operational efficiency of NetEase through different macro cycles. Our online games continues to be our primary growth driver, with net revenues from our games and related value-added services coming in at RMB 18.7 billion for the third quarter, up 9% year-over-year. Our flagship titles delivered another quarter of solid growth.
In the third quarter, with new expansion packs launched for the summer holidays, our legacy P.C. titles, including Fantasy Westward Journey Online and New Westward Journey Online II, continues to attract players. Even with two decades of operations, we are constantly exploring, creating, and introducing innovative new elements to our games. Keeping our content fresh boosts engagement levels and naturally spurs players' continuous willingness to spend. This further proves our long-term operational know-how on franchise titles, a unique strength of NetEase Games that we are hoping to replicate to our other self-developed proprietary titles. For our new titles, Diablo Immortal was launched in China in July, topping China's iOS download chart shortly after its release. Following its launch, Diablo Immortal has enjoyed similar popularity in Western markets. Players are enjoying the exciting adventure in the authentic Diablo world and the thrilling MMORPG social experience.
Diablo Immortal is of great strategic importance to us. It showcases our game development expertise on the international stage and further demonstrates that NetEase has the right capabilities to produce AAA games for worldwide audiences. As with all of our other games, our team works very hard to regularly and rapidly introduce exciting new game content to invigorate our players and ensure the longevity of our games. In September, we issued our first major update, Forgotten Nightmares, after Diablo Immortal's official launch, introducing a new dungeon, an exploration system, and a battle pass, and players loved it. Naraka: Bladepoint maintained strong popularity in the third quarter, amassing a community of fans that are extremely passionate about this title. With the game's one-year anniversary in August, we released our very first major new map, Holoroth.
Wealth of new features such as weather systems, interactive objects, and new areas to explore, bringing in both new and returning players in a large scale. As a result, the number of active users for Naraka: Bladepoint hit a record high in this August. To keep this game fresh and engaging, we will follow a continuous rollout schedule, adding new content updates such as more heroes, weapons, and new gameplay to this exciting game. Naraka: Bladepoint introduces a unique melee combat style gameplay, easy to learn but hard to master. To bring more players into the mix, we have been introducing more beginner-friendly mechanisms, such as a new beginner's guide and shortcut keys for combat. By helping new players quickly learn the skills to fully enjoy the fun of combat, we have made the game more accessible to a wider range of players across the world.
Simultaneously, we are in active development of Naraka: Bladepoint for mobile and are making very solid progress. We are going through vigorous testing rounds to make sure we can replicate the melee combat gameplay experience on mobile screens. On the console side, we released Naraka: Bladepoint on Xbox Series X, S and joined Xbox Game Pass in June. Adapting from P.C. to console is not an easy process, involving a highly different user interface and controls. We are very pleased to have smoothly transitioned Naraka: Bladepoint into the console arena, bringing our users a satisfying game experience. Our next move will be to make the new game available on Xbox One, which will expand the fan base for this I.P. even further. In addition to Naraka: Bladepoint mobile game, we have a number of other exciting upcoming games in our pipeline.
We conducted the first round of testing in October for Justice mobile game and saw very encouraging results with over 10 million players pre-registered. With lots of exciting new technological innovations and the state-of-the-art game design, we hope Justice mobile game can represent what a next-generation game looks like, and further boosts the user base of Justice franchise as a whole. Equally exciting is our planned global market launch of Harry Potter: Magic Awakened, which has fascinated the Chinese market since its launch last September. We are putting great effort into the global version, leveraging all the lessons we have learned along the way from game development to a year-long operation. We are working intensely to optimize the game's mechanics. Simultaneously, we are preparing expansion packs ahead of the launch to enable timely, frequent new content updates after the game sets in.
With great effort and dedication to its development, we hope to do justice to this great I.P. and impress fans on a global scale. Harry Potter: Magic Awakened is now expected to be launched globally in 2023. We are confident that this highly anticipated game will stand the test of time with great longevity and stability. Turning to our licensed games, as previously disclosed, we have entered into certain licensing agreements covering the publication of several Blizzard titles in Chinese Mainland. These licenses will expire in January of next year and will not be renewed. Net revenues and net income contribution from these licensed Blizzard games represented low single digits of our total net revenue and net income in 2021 and in the first nine months of 2022.
The expiration of such licenses will have no material impact on our financial results. The co-development and publishing of Diablo Immortal mobile game is covered by a separate long-term agreement. In the third quarter, we continued to make great progress with our global operations. At the end of August, we announced our acquisition of Quantic Dream, which is now officially our first fully owned studio in Europe, based in Paris. Since our initial investment in the studio three years ago, we have been working very closely together, and we just realized how like-minded and complementary we are to each other. Having Quantic Dream as a studio of our own exemplifies our vision of supporting innovation and game development around the globe. We will continue to fulfill our promise to support Quantic Dream to realize its full potential.
Also, during the quarter, we are very pleased to have announced that Jonathan Morin came on board as New Creative Director in Montreal. Here, he will be working together with Emile Liang and the team to build up the next exciting game. With more than 24 years of experience making AAA games, Jonathan played a key role in shaping the critically acclaimed Watch Dogs franchise at Ubisoft, and was one of the main contributors to the Far Cry series and many other AAA brands. In Japan, earlier this month, we announced GPTRACK50, a new first-party studio in Japan led by Hiroyuki Kobayashi. The studio will primarily focus on producing high-quality console and PC games with the goal of delivering original entertainment content from Japan to users worldwide.
We've also announced our investment into startup studios such as Liquid Swords in Sweden and Something Wicked Games in the U.S. Both are being led by top industry veterans who are using their creativity to forge their best titles yet to come. After years of strategic planning, our self-owned overseas studios now span multiple regions, Japan, North America, Europe, and more to come. Through investments and partnerships, we've welcomed in a great number of best-in-class game developers worldwide who will be pivotal to attracting more talents in their local developers and gamers community. Our investment philosophy attaches a high value to top talent and their passion for games. We will continue to attract, invest in, and support these creative minds, combining talent with our powerful resources and execution capabilities.
Turning to our education business, total net revenues of Youdao continues to improve in the third quarter and reached a record high of RMB 1.4 billion, led by increased sales of new services and smart devices. Net revenues of Youdao smart devices reached RMB 356 million in the third quarter, up 40% year-over-year, with robust contribution from its flagship product, Youdao Dictionary Pen and Youdao Listening Pod. Meanwhile, we continue to expand Youdao's portfolio with more AI-empowered educational tools. In August, we launched Youdao Dictionary Pen X5, featuring a self-developed operating system that accommodates a variety of external applications such as NetEase Cloud Music and Ximalaya FM to further enhance our user experience on these products. This new version has been very popular among users, and the initial batch of products quickly sold out.
In addition, Youdao Smart Learning Pad X10, which is released in October, also showcases several user-oriented and customized AI functions to better serve the learning needs of different age groups. We expect more growth opportunities for this product. We made additional headway with our learning services as well, maintaining a healthy trajectory with net revenues reaching CNY 888 million. Net revenues for our STEAM courses more than doubled in the third quarter comparing to the same period of last year, and now accounts for over a quarter of the segment's total revenue. In addition to further content upgrades to Youdao Go courses, we have also coordinated with local board game associations to hold open tournaments for students, which have been advocated by the General Administration of Sport of China for their positive contribution in expanding the popularity of board game amongst students.
We are very proud of what Youdao has achieved in the last 12 months, which confirms that we are swift in transitioning, and we are on the right track for future sustainable growth. Looking ahead, we will continue to serve more learning needs of our users by leveraging our leading technological capabilities while diversifying our content and product offerings. On to Cloud Music. We completed the third quarter on a positive trajectory with our key operational trends and financial performance. During the quarter, we further improved our music-oriented community and content ecosystem, as well as continued to advance our monetization efforts and gain meaningful operating leverage. Our total MAU remained steady while the DAU over MAU ratio stayed well above 30%. Our paying user ratio was also stable quarter-over-quarter.
Amid a challenging macro environment, total revenues of Cloud Music grew by 22% year-over-year as we continued to expand our paying user base and optimize our pricing strategy. We also witnessed the gradual recovery of our advertising business, aided by rapid performance-based ads growth, along with solid momentum in social entertainment services. Our strong top-line growth and better operational efficiency drove solid margin gains, with gross margin expanding for the fourth quarter in a row, reaching 14.2% in the third quarter. Additionally, Cloud Music's net loss further narrowed in the third quarter, both year-over-year and quarter-over-quarter. Adding to our robust music content, we continue to augment and diversify our copyright library. Since the regulator's antitrust ruling last July, NetEase Cloud Music has been actively in discussion with label companies to secure best content for our music lovers.
By now, we have managed to bring back most of the major label content, including those from Modern Sky, Emperor Entertainment Group, China Record Group, 丰华秋实, 乐华 Entertainment, Linfair Records, SM Entertainment, TF Entertainment, YG Entertainment, and KAO! INC. We are still working very hard to get back more titles at reasonable cost. Additionally, we continue to nurture aspiring musicians, serving more than 570,000 independent artists as of today. Our in-house music production capabilities are showcased by another hit song, Ruò Bǎ Nǐ , which recorded over 200 million streams within a week and topped multiple music charts. Enhancing our music-inspired ecosystem and user connections with our innovative new products continues to attract users to our community.
In the third quarter, we further boosted our community atmosphere through innovative offerings, including star-rated comment section to display high-quality user comments and fans space to strengthen bonding between artists and their fans while encouraging user interaction. We also added new offerings such as style recommendation that brings users more personalized options in the daily recommendation function to better reflect their tastes, as well as Dolby Atmos feature, allowing users more authentic and immersive ways to listen to music. Turning to our private label consumer brand, Yanxuan, it continues to build its brand awareness by constantly creating highly popular products. For example, pork buns and goose down duvet are some of the new top-selling products this quarter. In Q3, we saw solid growth in sales from external e-commerce channels, particularly with short-form video platforms. Over the years, Yanxuan has gained increasing recognition for its excellent designs and creative style.
Most recently, Shanxi Mature Vinegar and Oriental Scent Series won the prestigious Pentawards for their unique and elegantly presented Chinese-style packaging. In summary, we are confident in our ability to realize strategic growth across our business lines. The portfolio we have curated of diverse and long-lasting games in China provide a sturdy base for us to build further upon. Coupled with our globalization strategy, our prospects are exciting, and we believe we are well-positioned for continued growth. As we advance each of our businesses with innovative products and services, we will continue to use our strong cash position to buy back shares and pay dividends that directly reward our shareholders. This concludes William's comments. I will now provide a brief review of our 2022 third quarter financials. Given the limited time on today's call, I will be presenting some abbreviated financial highlights.
We encourage you to read through our press release issued earlier today for further details. Net revenue totaled for RMB 24.4 billion in the third quarter, or $3.4 billion, representing a 10% increase year-over-year. Total net revenues from our games and related VAS services were RMB 18.7 billion, up 9% year-over-year. The growth was primarily due to increased revenue contribution from both mobile and PC games, including our existing games such as Fantasy Westward Journey Online series and Infinite Lagrange, as well as newly launched Diablo Immortal. Net revenues from our mobile games accounted for approximately 69% of our total net revenues from online games operation. Youdao's net revenues were RMB 1.4 billion, a moderate increase from last year.
Last year's revenue contained a big portion generated from K-9 after-school tutoring services, which was later terminated in Q4 of last year. The decreased revenue related to K-9 termination is now offset by the increased revenue from Youdao's new services and smart devices as a result of a successful and smooth business transition. Net revenues from Cloud Music were RMB 2.4 billion, up nearly 22% year-over-year. The increase was mainly due to increased revenues from social entertainment services and membership subscription. Net revenues for innovative businesses and others were nearly RMB 2 billion, up 14% year-over-year, mainly due to increased contribution from Yanxuan in the third quarter. Our total gross profit margin rose to 56.3% in the third quarter, compared with 53.2% in the third quarter of last year.
Looking at the composition, GP margin was 65% for our games and related VAS, compared with 61.3% in the same period of last year. The year-over-year increase in gross profit margin was mainly due to more revenue contribution from our organic channels. Our gross profit margin for Youdao was 54.2% compared with 56.6% in the same period of last year. The year-over-year decrease was mainly resulted from the decline in net revenues from its learning services due to the termination of K-9 course offerings. GP margin for Cloud Music continues to improve in the third quarter, climbing to 14.2% versus 2.2% one year ago. The significant margin improvement primarily resulted from strong top-line growth as well as improved efficiency in content investment.
For our innovative businesses and others, G.P. margin was 25.5% compared with 27.2% last year. The year-over-year fluctuations were mainly due to changes in G.P. margin from advertising services. Total operating expenses for the third quarter were RMB 9 billion or 37% of our total net revenues. If we look at our cost composition, our selling and marketing expenses as a percentage of total net revenues was 15.4% compared with 14.1% for the same period last year. The increase was mainly due to increased spending on certain new games promotion, such as Diablo Immortal during the quarter. Our R.&.D. expenses as a percentage of total net revenue remained relatively stable year-over-year at 16.2%. We remain committed to investing in content creation and product development. We are also seeing leverage in our R.&D. investment.
Our other income was RMB 3.5 billion for the quarter compared with RMB 785 million last year. The quarter-over-quarter increase was mainly due to investment income arising from the disposal of certain equity investments. Additionally, the exchange rate of the U.S. dollar against RMB fluctuating over the last couple of periods also contributed to the accounting gain in other income line. Our effective tax rate for this quarter was 19.3%. As a general reminder, the effective tax rate is presented on an accrual basis and the tax credit deferred from each of our legal entities at different time periods depending on applicable policies and our operational results. Our Non-GAAP net income from continuing operations attributable to shareholders for the third quarter totaled RMB 7.5 billion or $1.1 billion.
Non-GAAP basic earnings per ADS from continuing operations for the quarter was $1.61 or $0.32 per share. Additionally, our cash position remains strong. As of the quarter-end, our net cash position was about RMB 95 billion compared with RMB 86 billion as of the year-end of last year. In accordance with our dividend policy, we are pleased to report that our Board of Directors has approved a dividend of $0.087 per share or $0.435 per ADS. Lastly, we continue to buy back shares during the volatile period.
Under our current share repurchase program for up to $3 billion, which expires in March of next year, approximately 27 million ADS has been already repurchased as of September 30th for a total cost of approximately $2.5 billion. Today, our board announced the approval of a new share repurchase program of additionally up to $5.0 billion of the company's ADS and ordinary shares in open market transactions for a period not to exceed 36 months. Meanwhile, under NetEase Youdao's repurchase program for up to $50 million, approximately 2.3 million ADS has been purchased for a total cost of about $20.7 million as of September 30th.
In addition, NetEase purchased 0.7 million ordinary shares of NetEase Cloud Music for a total cost of about $6.9 million during the third quarter. Thank you for your attention. We would like now to open the call to your questions. Operator?
Thank you. We will now begin the question-and-answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. For the benefit of all participants on today's call, if you wish to ask your question to management in Chinese, please immediately repeat your question in English. Please limit your questions to one at a time. If you wish to have follow-up questions, please rejoin the queue. Our first question today will come from Kenneth Fong of Credit Suisse. Please go ahead.
嘿，丁总，Charles，Margaret，你们好，谢谢接受我的提问，也恭喜你们非常好的业绩。好，我有一个问题，其实关于今天网易跟暴雪的部分的合作，在明年合约到期以后呢，就不再续约。我想请问可不可以分享一下不续约的原因以及后续的安排呢？我自己翻译一下。Thank you very much for taking my question. On today's announcement about not renewing certain license with Blizzard in China, that is due to expire next year.
Can you please share with us the rationale behind and the subsequent arrangement that we should expect? Thank you.
对，我来回答这个问题。我们呢，是非常希望继续能够代理暴雪的游戏。这中间呢，我们也付出了非常多的努力。但在过去的一段时间，整个的谈判过程难度其实远超出我们的预期。对于一些涉及到这些游戏的可持续运营和中国市场，以及玩家核心利益的关键性的合作条款，动视暴雪提出来的要求对我们来说是不可以接受的。今天早上我们也看到动视暴雪宣布终止合作的新闻，我们感到非常的遗憾，我们也不得不遵守这个决定。对于中国的玩家，我们会尽全力做好善后工作，为玩家服务到最后一刻，保障玩家的消费者权益和信息安全。
Thank you. We had very much hoped to continue operating Activision Blizzard games in the Chinese mainland. We have put in a great deal of effort to achieve this. However, negotiations had been much more challenging than we had originally expected, and we were unable to accept certain key terms requested by Activision Blizzard. We regret to see the early announcement from Activision Blizzard, and despite our best efforts to prevent the deal from falling through, we accept their decision. In the meantime, we will try our very best to fulfill our responsibility to serve our players until the last minute, ensuring the safety of their data and other assets. Thank you.
谢谢。
Our next question today will come from Xueqing Zhang of CICC. Please go ahead.
谢谢管理层接受我的提问，恭喜今晚版号获批。我第一个问题想请教一下，就是三季度拉格朗日获得了多终端的版号批准，那我们知道永劫无间也做多终端的版本，所以想请教一下公司如何看待未来多终端游戏的发展趋势。然后另外很快问一下关于游戏IP的想法，就公司之前基于海外的一些大型游戏而有一些IP，包括哈利波特、指环王、EVE做了一些游戏，那除了哈利波特获得版号外，其他海外IP游戏的版号审批进度是怎么样的？然后公司如何定位这些海外IP和我们自己的梦幻西游这些本土IP，那从长远来看，他们会怎么样各自帮助公司的业务。我自己翻译一下。
Uh, thanks management for taking my question and congratulations to your approval tonight.
In the third quarter Infinite Lagrange obtained approval of multi-device version. We also know that also supports multi-terminal, could management discuss the trend of multi-terminal games in the future? My second question regards to game I.P. franchise. NetEase has created some overseas I.P. games, such as Harry Potter, Lord of the Rings and EVE. What's the progress of approval for the domestic version except Harry Potter? How does NetEase position its overseas I.P.s and local I.P.s such as FWJ? How can they help the company's business in the longer term? Thank you.
首先第一个问题，关于多终端的游戏。我们在这么多年产品运营过程中，有非常多的手游产品玩家，他们非常希望我们推出其他终端版本，比如PC版，这样可以方便他们通过PC电脑更大的游戏屏，更大屏幕沉浸体验游戏世界。也是基于此，我们一些手游产品增加了PC模拟器版本，以及纯粹的PC版，满足了玩家的多终端需求。另外，我们同时也注意到，有一些地区，一些城市，我们有很多用户同时拥有和使用PC电脑、手机、主机玩游戏的习惯，他们也特别希望平时能够在多终端无缝切换游戏产品。因此我们的一些产品会考虑推出包含主机的支持全平台的游戏产品。我们开发和运营全平台游戏目前在技术上并没有什么技术障碍。在现在和未来，我们会根据用户的需求，结合具体每个产品的特征以及市场反馈等因素，综合考虑开发产品的多终端版本。
等 一 下 。
Let me just translate answer to this question. Over the years of operation, we realized many of our mobile game players also want to be able to play our games in other formats. For example, on PC, right? They want to be able to experience a more immersive gaming world through a much larger screen. This is why you've seen us providing a PC simulator for many of our mobile games or creating a standalone PC version for them. This is to provide our users a much better gaming experience. At the same time, we noticed that in certain regions, many of our users actually own PC and mobile and console all at the same time, and they play games on all three platforms.
For these players, they would also like to be able to switch seamlessly between these platforms, which is why we are also looking into developing cross-platform games. For us, there's no real technical barrier for developing and operating cross-platform games. Therefore, you know, we will take into consideration of users' needs, product features, market feedback, and other factors before deciding whether we should do a multi-platform version for each of our games.
关于另外一个问题，海外IP的...
我们目前海外的IP产品在申请版号的数量并不多，已经提交申请的在按照相关的流程有序地进行中。另外，海外IP和我们自研的IP产品，比如梦幻西游，它们最大区别在于不同游戏IP最终所呈现给玩家的虚拟世界有很大差异。我们过去开发了很多非常成功的东方文化题材的游戏，比如梦幻西游、大话西游，还有逆水寒，永劫无间等等。我们引入了海外的IP，像哈利波特、指环王、星战等等这些海外IP，极大地丰富了我们的虚拟世界的背景题材，满足了玩家想体验更多样的虚拟世界的需求。当然，因为游戏世界观的差异，不同的文化题材，不同的世界观背景，游戏的具体类型会有极大的不同。比如虚拟世界中如果存在冷兵器和热兵器的这种差异，会导致最终游戏体验将是一个MMO游戏体验，或者更大差异的FPS游戏体验。因此从长远来看，海外IP的一些游戏最终会进一步丰富我们公司的产品线。
Okay. We do not actually have that many foreign IP currently being submitted, but for those submitted, we are currently going through the relevant procedures as required. For these foreign IPs and our self-developed IPs, the ultimate difference is that in a virtual world, you know, the virtual world we can bring to gamers are different. In the past, we have built a lot of games based on oriental culture, such as FWJ, WJ, Justice, and Naraka. By introducing IPs like Harry Potter, Lord of the Rings, Star Wars, we can actually diversify and enrich the different world that we can create for our users, allowing them to experience different things.
Of course, because of these IPs are different, the worldviews are different, so the types of games we can create on the different IPs are different. For example, in a Oriental world, you will have cold weapons such as swords and knives, and in a Western world you will have firearms. This will actually lead to a very different game experience, like MMO, for Oriental-based theme versus FPS game in a Western setting. Therefore the reason for having all those IPs is to further enrich our game pipeline and create different game experience for our gamers. Thank you.
Our next question today will come from Lincoln Kong of Goldman Sachs. Please go ahead.
你好，谢谢林总。Charles，麦克。那我的问题是想问一下咱们海外这个市场的，那其实也看到了这个公司从今年年初以来一直在这个投资海外市场，包括一些投资入股，包括并收购一些工作室。那我们想问一下，对明年二三年这边我们是怎么样的一个规划，那尤其是在这个端游和手游端，这个明年应该怎么样去想海外市场的一个增长和规划计。我翻译一下。So the question is about overseas expansion.
We've found that NetEase has been investing in the overseas market since the beginning of the year, especially including investing or acquiring a series of studios. When we think about the 2023, how should we expect our growth plan and growth catalyst, in particular in the PC and mobile game market?
我想海外的市场主要是两条腿走。第一条腿呢，就是我们自己研发的游戏走到海外市场上，比如我们过去的第五人格、荒野行动在日本。未来我们还会有更多的PC游戏走到海外，包括我们去年在海外的Naraka，就是永劫无间PC游戏也很成功。但总体来说，海外的游戏是以终端类型来分，以PC为主。第二个呢，我们也投资了海外相当多的游戏工作室，就像你看到的一样。我们希望这些工作室能够和我们紧密地开发出一些成功的游戏作品。所以是自研加投资的作品去开拓海外的市场。
In short, there's basically two core strategies for our overseas market. One is through self-development, another is through investment. In the past few years, you've actually seen a number of very successful titles from that we've self-developed in overseas regions such as Identity V, Knives Out in Japan. Also we've seen some very successful PC titles in the global market as well, like Naraka: Bladepoint that we launched last year. I think in the overall, if we look at the overseas market, I think PC or console probably be the mainstream format. Secondly is our investment overseas, as you've seen in more recently, we actually announced a number of studios that we have invested overseas.
Over long term, we would hope to work very closely together with those global studios to create global blockbusters for our worldwide game players. Thank you.
Thank you.
Next question.
The next question today will come from Charlene Liu of HSBC. Please go ahead.
Thank you. I would like to ask about the gaming market outlook. We observed that both the domestic and overseas mobile game market revenues declined further year-on-year in the third quarter. Obviously, you know, there are some short-term headwinds, such as weaker consumption. We also see the latest batch of Banhao came through. With that positive development, how should we think about the timing and magnitude of recovery of the market, as well as the long-term outlook for the domestic market? Thank you.
Our understanding is that the gaming market is driven by content. Whether, you know, in particular time, whether the market is thriving, it depends on the game quality themselves. If at a certain time we will have a number of high-quality games available for gamers to play, that will see the market thriving. At the same time if the gaming content available is not interesting, it's mediocre, it's a duplication of previous games, then the market it's low. In our view, it's right now, it's not about market saturation, but rather that being lack of high-quality games. Thank you.
Our next question today will come from Alex Poon of Morgan Stanley. Please go ahead.
丁总，Charles，谢谢接受我的提问，也恭喜很好的业绩。我想问一下，过去一两年我们在海外上线了很多新的游戏，想请教一下，玩家的反馈，还有游戏的生命周期如何，以后我们也为了适合海外的玩家口味，会不会研发更多的休闲游戏？第二个问题是想问一下关于成本方面，能不能讲一下现在我们员工人数的一个趋势，和其他运营支出未来的一些趋势。谢谢。My first question is related to overseas games.
In the last 1-2 years, we have launched many new games overseas. Can management share the gamers' feedback and longevity of these new games? Secondly, about the development, are we developing more casual genres to fit the taste of overseas gamers? About our cost structure, can we talk about our headcount trend and other OpEx trend in future? Thank you very much.
我这里来讲一讲，就是关于无限在海外的一个表现。我们自从在海外上线之后，包括今年六月份在平台上线之后，我们是密切关注海外的玩家社区，收集了他们的意见。目前看起来的话，我们的核心PC玩家和主机玩家对我们这款游戏非常独特的玩法，近战的这样的一个格斗的体验是非常满意的。我们经常可以看到有玩家说已经玩了两个小时，而且是乐此不疲。当然其中的话我们也是发现，就是有更多的平台，比如说低端的主机平台，像Xbox One这样的主机平台上的玩家对这款游戏依然是非常渴望的。那么我们现在在努力对前景进行效率上优化，让它能够适应更多平台的一个硬件的需求，满足更多的玩家。与此同时，我们也会努力地优化这个游戏在海外玩家的新手阶段的教学，因为海外玩家他的新手阶段的教学需要有不同的一些需求。这方面的话，我们是和我们蒙特利尔工作室的相关的这样的专家密切合作，几乎每天我们都在讨论相关的这样的一些优化的方案。我相信在随后的版本里面，我们会拿出更好的一个就是前期的优化方案，满足更多的这样的玩家的需求。
Since we launched Naraka last year and also Xbox in June this year, we've been very closely monitoring the reactions and feedback from the gamers community. From what we've seen, we think the players overall is very satisfied with our game, with its very unique melee combat user experience. Some gamers say they will spend hundreds of hours in this game and still feel good. One thing to notice that there are a lot of gamers, you know, there are gamers who are on the lower spec platform such as Xbox One, they are also craving for this game. We are now working on adapting this game onto different levels of devices, different level platforms.
At the same time also massive optimizing the beginner's guide. The game is harder to kind of get into. We're looking, we're optimizing, finding ways for beginners to kind of get into the game more quickly. This is a task that we are working on with our Montreal office. Every day we are having discussions on how to make our users happier within the game. Hopefully we'll be able to bring Naraka: Bladepoint to more game players on more platforms. Thank you.
Alex, for your second question about the overall trend of headcount and operating expenses, over the last 5-6 quarters, our overall total headcount stays relatively steady at above 30,000 overall headcount. More specifically, in the last quarter, by the quarter end, we have a north of 31,000 overall headcount, representing a quarter-over-quarter about incremental 1,000 headcount, which is consistent with our summer recruiting season of campus recruiting. I think, in terms of the overall operating expenses for many of you who have been tracking NetEase for long enough, we are very cost-conscious and effective in spending our organic investment into ourselves in a very, I would say, ROI return-oriented manner.
Oftentime when you see an increase in R&D, in selling marketing, that is actually a indication that we are developing a strong pipeline or we are about to launch an exciting new games. If we are patient enough, you will see the huge reward that we are planting the seeds today. For the future outlook, I think we are continue to grow. We will continue to invest. Absolute dollars of our operating expenses will continue to increase, but we will be hugely rewarded by operating leverage when we see the next cycle of product launches in both domestic and international market. Operator. Thank you, Alex.
Question today will come from Felix Liu of UBS. Please go ahead.
晚上好，管理层。恭喜我们今天的版号获批，也谢谢各位的时间来接受我的提问。我想再追问一下我们关于海外的这个布局。首先我们看到就是公布了更新，或者更新了哈利波特在海外的这个上线时间，所以想就是可以，可以管理层能否 remind 我们一下，就是具体的这个海外的市场会有哪些？然后在哈利波特之后，我们有没有可以和大家分享的这个海外的 pipeline？然后更长远一点的这个问题就是关于我们现在已经在投的这些工作室，他们当然现在的工作可能比较早期，但是有没有他们会 focus 的这个品类，或者是这个发行的市场，可以和我们有一个这个分享。Thank you, management, for taking my question.
My question is on the overseas market. We noticed that we had updated publishing time for Harry Potter. Could you share more color on the overseas market focus on for Harry Potter and any pipeline to share after Harry Potter's launch? More on the longer-term question is on the overseas positioning in terms of genre and market position. What are these genres and markets you'll be focusing on with your extensive investments right now? Thank you.
Uh, .
Firstly, Harry Potter will hopefully be launched very soon. As we mentioned in the call earlier, we scheduled for launch in 2023. Currently we actually have a pretty plentiful of games to be launched in the overseas market. We have about three games in Japan market that include genres like CCG, racing, MMO. We have about four games in the Europe and North American market, including TPS, TCG, and combat competitive games. Our focus now is basically the Asian Pacific region and European and American and North America market. Thank you.
Our next question today will come from Natalie Wu of Haitong International. Please go ahead.
Let me translate myself. My question is regarding the Diablo Immortal. It'd be great that if NetEase can talk about the latest cash revenue and user activeness of Diablo Immortal so that we can better understand the game longevity and contribution. Also, you've mentioned before that Diablo Immortal is covered by a separate long-term agreement with Blizzard. It'd be great to know exactly how many years does the long-term mean, and will there be uncertainties regarding the future collaboration, especially in overseas market for that title under the backdrop of the latest change with Blizzard? Thank you.
Uh, .
Diablo Immortal has actually done really good job across the world since launch. It's been launched for almost six months now in overseas market and the China version came about a month later. Right now, if we look at the revenue contribution, the China part and overseas part is pretty much on par with each other. Going forward, we are going to launch more expansion packs with more content to keep the users engaged. I think we're going to continue to balance the need of both the Chinese users and the overseas users.
We have noticed that, you know, the Chinese users, a lot of, you know, people in their 30s, 40s, 40s is mostly based in second, third and fourth tier cities. For the North American users, a lot of them come from you know, the original PC game background. Going forward, we're going to explore, to discover more game users and promote this game to a greater range of audience. Thank you.
Yeah.
Natalie.
Oh, hi.
Natalie, for your second question, we can follow up off the line.
Okay. Operator. Thank you.
Thank you. This concludes the question and answer session. At this time, I would like to turn the conference back over to management for any closing remarks.
Thank you once again for joining us today. If you have any further questions, please feel free to contact us directly or TPG Investor Relations. Have a great day. Thank you.
Thank you, everyone.
Thank you.
The conference has now concluded. We thank you for attending today's presentation. You may now disconnect your lines.