Author | Hu Shu Editor| Luo Lijuan
Hero Sports (VSPN), which claims to cover more than 70% of domestic e-sports events and is the world's largest e-sports operator, recently submitted a prospectus to the Hong Kong Stock Exchange.
There is no doubt that the esports market has great potential. However, in the eyes of e-sports practitioners, third-party event operations similar to VSPN's are no longer a good business.
Since 2010, major game manufacturers dominated by Tencent have opened up relevant layouts of e-sports business. Driven by capital, the e-sports industry has also entered the stage of a hundred flowers from the barbaric growth before 2010. Some event operators have become event suppliers for game manufacturers such as Tencent with the e-sports talents and live broadcast resources accumulated in the early days, and have grown rapidly.
However, with the rapid development of the e-sports industry and the increasing attention of domestic and foreign game companies to their core data, the game manufacturers led by Tencent have gradually withdrawn the right to hold e-sports events for their popular games.
In the uneven development of the e-sports industry, the market attention is almost only focused on "League of Legends", "Glory of kings" and other related events. When these super IP events are taken back by manufacturers, there is not much "cake" left for event operators.
After 10 years at the best of the track, esports operators are inevitably starting to go downhill. A veteran media personality who has tracked the esports industry for many years is pessimistic: "This is a track that is dead. ”
The listing of VSPN is also seen as the last glory of this track.
01 "Fat" Hero Sports
The story of Hero Sports (VSPN) needs to start in 2016.
At that time, Hero Interactive Entertainment, founded by Ying Shuling, pulled together two major domestic e-sports operators, NiceTV and PLU, and jointly created Hero Sports (VSPN). The three parties are bundled at the business level, and their main event resources are injected into VSPN.
Under the strong combination, VSPN won the exclusive operation and investment rights of the TGA Tencent Mobile Game Grand Prix, hpl"Hero League", and the hosting right of "Glory of Kings" Professional League (KPL), becoming the world's first mobile e-sports operator.
Under the continuous fever of the e-sports industry, VSPN has become the darling of capital, completing 7 rounds of financing in 5 years. Among its investors, there is no shortage of tencent, Kuaishou, Sequoia, Zhenge, Tiantu, SIG and other capital figures.
The largest of these rounds was a Series B funding led by Tencent in October 2020, amounting to $100 million. Prior to its IPO, Tencent held 13.54% of the shares and was VSPN's largest institutional shareholder.
Ying Shuling, the actual controller of VSPN, holds a total of 18.87% of the equity and a total of 35.05% of the voting rights with the co-actors.
Driven by capital, VSPN rapidly expanded its market share. According to its prospectus, in the nine months ending September 2021, VSPN ran 94 events for 29 esports games in China and overseas, achieving about 5,600 matches.
According to Frost & Sullivan, in China, VSPN provides event organization and operation services for nine of the top ten most popular e-sports games (ranked by the 2020 Baidu Index), accounting for more than 75% of the market share of e-sports organization operations, and is the undisputed market first.
An industry insider told All-Weather Technology that in order to undertake more game events, VSPN has not hesitated to spend money in recent years. From its financial report, VSPN's cost of sales showed a trend of rising year by year, from 791 million in 2019 to 1.359 billion in the first three quarters of 2021.
While the cost of sales has risen, due to the impact of the epidemic, the holding of VSPN offline events has also been seriously affected, so that its losses have continued to increase, and the adjusted net profit has fallen from 39.496 million in 2019 to -88.406 million in 2020, and further declined to -317 million in the first three quarters of 2021.
After experiencing the impact of the epidemic in 2020, VSPN has also begun to vigorously develop diversified businesses. In addition to the operation of e-sports events, there are two businesses: commercialization and community operation.
The so-called commercialization refers to the realization of commercialization through branding and sponsorship activities, distribution of media rights, provision of advertising agency services, etc. Community operation is the operating income of MCN such as VSPN's anchors, talents and cooperative e-sports clubs.
It is reported that its community operation is a very young business. At the beginning of 2021, Hero Sports VSPN acquired Banana Game Media, founded by Wang Sicong, and then pocketed a large number of well-known e-sports hosts, commentators and other artist resources owned by Banana's MCN agency.
According to the prospectus, in the first nine months of 2021, VSPN recorded revenue of 1.322 billion yuan, an increase of 144% from 541 million yuan in the same period of 2020. The three revenues contributed 466 million yuan, 451 million yuan and 343 million yuan respectively, accounting for 35.3%, 34.1% and 25.9% of the total revenue, respectively.
02 Big factory "dependence"
VSPN's biggest trump card is the Glory of Kings Pro League KPL, which has been the sole operator of KPL events since 2017.
In addition to the KPL, the many e-sports events it hosts are "Peace Elite", "Crossfire", "PUBG", "PUBG MOBILE" and other related events, which are all games owned by Tencent.
Its prospectus discloses that Tencent is VSPN's largest customer and largest supplier, and if the company is unable to maintain its business relationship with Tencent, its business may be adversely affected.
For the full year 2019, the full year 2020, and the nine months ended September 30, 2021, VSPN generated revenue of 44.6%, 48.2% and 31.2% respectively in providing services to Tencent.
To a certain extent, VSPN's business and revenue are very dependent on Tencent's game event outsourcing services. And "Tencent dependence" also greatly limits the ceiling of VSPN.
A senior practitioner in the e-sports industry told all-weather technology, "From the perspective of traffic and attention, the Chinese e-sports market "League of Legends" accounts for 70%, "Glory of the King" accounts for 20%, and other events add up to about 10%. ”
The above-mentioned people believe that even if the number of events held by VSPN can reach 75% of the market share, these events are far from the head e-sports events, whether in terms of traffic, attention and commercial value.
Moreover, in recent years, Tencent is gradually taking back the right to host e-sports events.
Tencent first began to lay out e-sports in 2010, and the professional event LPL of "League of Legends" is its most core e-sports event.
In the early days, Tencent did not form its own e-sports team, and the stability and continuity of e-sports events were difficult to guarantee, in which case it was most cost-effective to use event outsourcing. In the years that followed, LPL also worked with several third-party companies, including VSPN.
In 2017 and 2018, as IG won the S8 championship, the enthusiasm of domestic audiences for e-sports continued to rise, and in January 2019, Tencent Interactive Entertainment and Riot Games jointly established Tengjing Sports, and since then, the LPL of "League of Legends" has been independently operated and managed by it.
This is a huge blow to VSPN and many third parties to the event. For VSPN, the bigger crisis is that Tencent is also taking back the hosting rights of "Glory of Kings".
At the end of 2021, Tencent's Tianmei Studio officially launched Tianmei E-sports. Tianmei Studio owns a number of games such as "Glory of the King", "QQ Speed Car Mobile Game", "Call of Duty Mobile Game" and so on, and the establishment of Tianmei E-sports also means that the KPL or will be operated independently by the studio like the LPL, and will no longer be handed over to third parties.
Among the current stable events held by VSPN, the traffic is also relatively large, and the PEL of "Peace Elite" is also large. "But with the future events of the Peace Elite covering the whole year, or the heat is higher, Tencent will definitely have to do it independently." said the above-mentioned person.
In addition to Tencent, VSPN has also undertaken game e-sports events from game manufacturers such as NetEase and Perfect World. But in fact, not only Tencent, NetEase, Perfect, etc. have set up special e-sports teams in recent years.
In August 2018, NetEase Esports NeXT was officially launched, not only covering games produced by NetEase, but also hosting e-sports events for Blizzard Games and partners.
Perfect World has established Perfect World Esports, the exclusive operator of the well-known esports products DOTA2, CS:GO and Steam Platform in Chinese mainland.
For the operators of e-sports events, after the game manufacturers divide the territory, there is little left in the market "cake".
03 The track is dead?
The development of e-sports in China has been less than 20 years since the listing of StarCraft.
As one of the earliest senior practitioners in China to track e-sports competitions, Wang Ying (pseudonym) experienced the era of barbaric growth of e-sports events before Tencent entered the game.
At that time, there were already third-party e-sports organizers such as PLU, GTV, Game Fengyun, and Neotv in China. Founded in 2005, PLU, as an established game live broadcasting company, has hosted hundreds of games such as StarCraft, Warcraft, and Crossfire. Teng Linji, the co-founder of VSPN, was also the host of GTV and single-handedly formed the star commentary team of GTV.
In this period, the development of e-sports events is still in its infancy, and several games with competitive colors are mostly single-player games, and game manufacturers have not interfered much in this regard. Under the restriction of no copyright, the third-party esports event occupied the small market of the cake in a "wild" manner.
"At that time, when two foreigners were pulled, the competition could be called an international event." Wang Ying said.
The turning point of the industry comes from Tencent's layout of the e-sports industry, under the influence of capital promotion and event outsourcing, the entire track has ushered in the outlet, and some new players have also begun to seize this piece of the market.
Taking Lejing Culture as an example, after its establishment in 2014, it produced the "Crossfire" e-sports interactive live reality show, and also co-hosted the International Game Alliance IGL with Tencent Sports, which is the only event organizer of Clash Royale in China.
Banana Game Media, founded by Wang Sicong in 2015, is regarded as the industry's biggest "spoiler". Although the company with capital promotion started late, according to industry insiders, it took the lead in "sticking money" to seize the right to hold popular e-sports events, so that the industry accelerated its internal roll.
But today, Lejing culture has long been one of the founders of VSPN's early days, and bananas were also acquired by VSPN in 2021. VSPN, which is seeking to go public, is a product of industry consolidation.
VSPN+ artists Bottle, Lai Shen, Gemini won the award Source: VSPN official website
But integration does not mean sustainable development, and in Wang Ying's view, this track has gone into decline.
The most critical reason is that the big factory is gradually withdrawing the right to host popular events from third parties. For large factories, in addition to the reasons for mastering the core data in their own hands, the more important point is that self-run e-sports events are an inevitable choice for improving the ecology.
Taking "League of Legends" as an example, the game itself has invested a lot in building the e-sports ecosystem, and has completed the formulation of rules in the form of "alliances", coordinating the resources of various e-sports clubs, and promoting the commercialization of members in the entire ecosystem.
Earlier, Huang Lingdong, the head of China of League of Legends, said in an interview with all-weather technology, "One of the goals of the alliance is to make more people make money." "And more people benefit from related events, they will be more motivated to devote themselves to the cause of e-sports, forming a virtuous circle."
League of Legends has evolved for more than 10 years. The establishment of Tianmei E-sports may also mean that the KPL of King glory is currently continuing this development path to create an ecology.
As a third-party event platform, it is difficult to participate in the creation of an event e-sports ecology, and its participation in the entire industry chain is not high, so that when the game manufacturer wants to take back the right to host the event, VSPN and so on do not have much say.
In fact, VSPN has long been aware of this drawback. In some recent years, VSPN has tried to co-create an e-sports ecosystem with some games.
"But it is still relatively passive, the strength of third-party companies is already very weak, may only be able to do co-construction with some small-scale, low-investment game companies, but also may be because of their own investment and drag down performance." Wang Ying said.
At present, VSPN has begun to vigorously develop diversified businesses, including commercialization and community operation business, and seek new growth. However, the hosting of e-sports as its foundation business may have already determined the ceiling of this enterprise.