Significant changes in the income structure
After completing the acquisition of Banana Game Media and Logging, Hero Sports VSPN ushered in another leap forward in 2021, with VSPN recording revenue of $1.322 billion in the first nine months of September 30, 2021, up 144% year-on-year from $541 million in the same period in 2020.
On 31 January 2022, it filed Form A1 with Bank of America Securities, CICC and Credit Suisse acting as joint sponsors.
According to the disclosure of the prospectus, in 2020, the market share of the main players in China's e-sports industry in terms of revenue, hero sports VSPN's market share reached 64%, and if you add banana game media acquired at the beginning of last year, the total market share reached 75.8%.
According to the Frost & Sullivan Report, VSPN ranks first in both Asia and China in terms of operating esports events and commercialization revenues.
The development of the emerging industry of e-sports has provided the soil for VSPN to grow, and as a leading enterprise in the field of e-sports operations, we can also see the current status of more midstream links in the e-sports industry through its prospectus. The expansion of more customers outside the Tencent system, the regulation of the three main revenue sources after the completion of the acquisition, and the need for development outside the country are all challenges that VSPN needs to face as a pioneer.
The growth stemmed from significant changes in the revenue mix
According to the official introduction, VSPN's event operation and related content production business is in the middle of the entire e-sports industry ecosystem, and is a hub linking upstream e-sports game manufacturers and downstream live broadcasting platforms, brand sponsors, as well as e-sports players and audiences.
As we mentioned before, China's e-sports in 2021 is dominated by internal growth, and the overall industry figures are not good. The "2021 China Game Industry Report" shows that the actual sales revenue of e-sports games is 140.181 billion yuan, an increase of 3.624 billion yuan over 2020, an increase of 2.65% year-on-year, and the growth rate is about 42% smaller than last year, and the scale of Chinese e-sports game users reached 489 million people, an increase of 0.27% year-on-year.
In this environment, VSPN can achieve a 144% year-on-year increase, which is a key to the significant change in revenue structure after the acquisition of Banana Game Media in early 2021.
At present, VSPN revenue mainly includes three categories: e-sports event operation, commercialization (mainly advertising revenue), and community operation (including live broadcast platform).
As can be seen from the figure, vsPN revenue in 2020 has declined to a certain extent, while the operating income of e-sports events in the first nine months and the first two years of 2021 has remained stable, which corresponds to the development of the industry. Revenue growth was primarily due to the surge in the commercial segment and the addition of revenue related to community operations following the acquisition.
The game value theory believes that the development of VSPN also shows that as an operator, there is a ceiling on the development of e-sports operations in China alone.
According to the prospectus, Tencent was VSPN's largest customer in the past record period, accounting for 31.2% of revenue from Tencent in the first nine months of 2021 (a higher proportion in the previous two years), and Tencent also held 13.54% of its shares. Thanks to the good partnership between the two, since 2017, VSPN has become the sole event operator of the KPL of the Glory of Kings Professional League, and the only event operator of the Peace Elite Professional League PEL and the Peace Elite International Champions Cup PEC since its launch.
The diversification of cooperation objects is an inevitable choice for VSPN to become bigger and stronger. As of September 2021, VSPN has run 94 events for 29 esports games in China and overseas, achieving approximately 5,600 matches. That number is 21 games, 77 events, and more than 2,000 matches for the whole year of 2020.
However, the above revenue data shows that the growth of e-sports event operation-related revenue is not obvious, and under the current constraints of the overall industry scale, the development of enterprises needs more open source, and VSPN's choice is to enhance and expand more business through acquisitions.
Expand around content production
From the perspective of business, VSPN is currently involved in seven major businesses, including e-sports operations, e-sports commercialization, e-sports television, program production, artist management, e-sports venues, and VSPN guilds.
In addition to the basic business investment in the operation of e-sports events, including terminal equipment such as networks and servers, retransmission and content production equipment, etc., VPSN's previous business strategy adjustment focused on content production with "e-sports people" as the core.
As a huge traffic entrance, the production of related content in this field has attracted a large number of participants, and vspn's main promoter artists are relatively stable exposure of star commentators and players, around which to produce related content. At the same time, as an event operator, it can provide a stable exposure window for various events for drainage and conversion, which is the core advantage of VSPN compared to Suren and other creative teams, because the event is the most direct and effective window for e-sports users.
Through the acquisition of Banana Game Media and Shanghai Houhan (Logging Tired) in 2021, it is also to further improve its layout in the production of e-sports content and e-sports-related talent incubation, and thus greatly increase the revenue from community operations.
As of the end of September 2021, it manages a total of 5589 active talents and anchors, and has cooperated with 18 well-known e-sports clubs to be responsible for its live broadcast and commercial activities, including Team Liquid, T1, WE, QGhappy and 4AM, and other well-known first-line e-sports clubs.
Judging from the results, this way of producing program content around high-exposure e-sports people has also led to the growth of VSPN's own brand value, and in the first nine months from 2019 to 2021, VSPN's co-sponsor brands have grown from 17 to 41, which is intuitively reflected in the growth of commercial revenue classification with advertising revenue as the core.
It is foreseeable that with the growth of the number of VSPN cooperation projects, the event window can continue to provide exposure for the artists it supports, and the continuous deepening of relevant content production capabilities and the exploration of fresh blood will become the direction of follow-up focus expansion.
The need to go abroad
According to the prospectus, VSPN's listing and fundraising are mainly used in three aspects: continue to improve e-sports-related service technology and maintain the leading position of event operations; Expand esports product selection and upgrade business models; Selected overseas markets with suitable e-sports user structure and favorable regulatory environment.
The operation of e-sports events is the foundation of VSPN, but at present, there are certain bottlenecks in domestic development. This restriction comes from both the constraints of the development of e-sports itself and the growth of stagnant e-sports users, and the game value theory has previously mentioned that it is an inevitable trend to tap more overseas markets, including India, and go abroad.
It is worth noting that as a game developer in the upstream of the industry, it already has the need to go overseas to open up the market, and this strong demand will also become a new cooperation opportunity for event operators.
Therefore, South Korea, where the e-sports industry is mature, and Southeast Asia, which has a huge demographic dividend (the enthusiasm of users in e-sports is high), are the new choices for VSPN at present.
According to the prospectus, Hero Sports VSPN has set up an office in Seoul, South Korea, and has 78 full-time employees, and in the future, Hero Sports VSPN also plans to set up offices in Europe, the United States, Southeast Asia and other places to further expand its business territory.
As an emerging industry, esports gives VSPN the opportunity to grow and grow. As a pioneer, in the face of the current situation of the industry, whether the three-legged operation, commercialization and community operation of e-sports events and the development of overseas can be feasible, its development model and strategic choice deserve the continuous attention of the industry.