Hero Sports's losses in 2021 are even higher than their own revenues, which is obviously not what a healthy commercial company should look like.
Wen 丨 BT Finance You Li
The Year of the Tiger has arrived, and it is spring again. With the new year and new atmosphere coming, there is also the "first stock of e-sports" dispute that has finally seen the dawn of the closing. On January 31, 2022, e-sports operator VSPN Group Limited (Heroes Sports VSPN, hereinafter referred to as "VSPN") handed over the watch to the Hong Kong Stock Exchange, and the dismal capital market in 2021 seems to have been rejuvenated.
Rumors of the esports industry's entry into the secondary market have long spread. Last spring, VSPN officially announced the acquisition of e-sports content company Logging Tired, and a number of sources revealed that it is likely to go public in the United States in 2021. There are reasons for the rumors in the investment community VSPN, from the timeline point of view, whether it is before or after the merger and acquisition of logging, the capital actions around VSPN are very frequent.
According to the official website of Tianyancha, VSPN's Series B financing was completed in October 2020, followed by B+ rounds and B2 rounds of financing in less than a year. It is worth noting that VSPN's Series A financing was completed in 2016, and the pre-Series B strategic financing also occurred in 2018. At the level of commercial territory, in addition to the logging accumulation of e-sports brokerage into the team, the acquisition of banana games has also made VSPN more competitive in the event operation end, compared with the past, VSPN's capital influx in the past two years can be called large and rapid.
Although VSPN officially denied the idea of listing within the Year, from its move to submit a prospectus on the last day of the Year of the Bull, VSPN is still ambitious for the secondary market. However, the analysis of investors from another angle is not unreasonable, the subtle time point of VSPN's submission of the table, whether it is due to the sense of Chinese's sense of ceremony for the New Year, or to have to snap the time for the sake of promises, the answer is not yet known.
Will play the old cop, loss-making company
According to the prospectus, VSPN's current controlling shareholder is Ying Shuling, a well-known player in the game industry, who was once called the "father of mobile e-sports" and broke into the world under the name of "game old cannon".
A year before joining hands with Teng Linji and others to establish VSPN, Ying Shuling first founded Hero Interactive Entertainment in 2015, which focuses on the game development business. However, with the failure of Hero Interactive Entertainment's direct IPO and the failure of two backdoor listings, Ying Shuling's career focus slowly shifted to VSPN, the "second son". In response to the "Investor Network" research letter, Hero Interactive Entertainment also succinctly explained the relationship between the two, "Hero Interactive Entertainment is only one of the investors of Hero Sports, and Hero Sports is not a subsidiary of Hero Interactive Entertainment. ”
No matter how Ying Shuling's "hero system" enterprises treat themselves, his own aura in the e-sports industry is still shining. According to the information given by VSPN's major shareholders, Before the IPO, Ying Shuling personally held a total of 18.87% of the shares, plus a total of 35.05% of the voting rights held by the concerted actors.
VSPN's largest institutional shareholder is Tencent, with a shareholding ratio of 13.54%, according to the official website of Tianyancha, Tencent has participated in VSPN investment as early as 2018 when it made strategic investments, and focus media, the second largest institutional shareholder, is the leading investment institution of the 2016 Series A financing.
The repeated capital injections of star investment institutions have revealed the giants' optimism about VSPN, and have invisibly become the endorsement of the corresponding Shuling e-sports cause. However, judging from the data released by the financial report, the commercialization ability of Ying Shuling is still debatable.
According to the prospectus, in the first nine months of 2019, 2020 and 2021, VSPN's revenue was 927 million yuan, 892 million yuan and 1.322 billion yuan, respectively. VSPN officials said that the decline in revenue in 2020 is mainly due to the "impact of the COVID-19 pandemic", and the rise in income during the stable period of epidemic prevention and control in 2021 also confirms this statement.
But the amazing thing is that 2019, which has relatively low revenues, is actually the only year that VSPN has achieved positive profitability. In the first nine months of 2019, 2020 and 2021, VSPN recorded net profits of RMB031 million, -596 million and -1.364 billion yuan respectively, and the latest data shows that revenue soared by 144.4%, while losses also expanded by 128.9% year-on-year. VSPN's losses in 2021 are even higher than its own revenue, which is obviously not what a healthy commercial company should look like.
In the smaller adjusted net profit column, VSPN's corresponding figures are 0.39 billion, -0.88 billion and -317 million yuan. Although the amount of losses has decreased, the situation of increasing revenues without increasing profits has not been reversed. Perhaps it is precisely because of the impact of the epidemic on the opening of offline events that VSPN has accelerated its diversified layout since 2020.
According to the prospectus, VSPN's revenue structure is mainly divided into three major sectors: e-sports event operation, commercialization and community operation. Commercialization refers to profitability through services such as advertising agencies, sponsorship activities and media distribution of copyrights, while community operations are included in revenue through the tip withdrawal of contracted celebrity anchors and e-sports clubs. In 2019, the contribution rate of e-sports event operations in revenue was 67.3%, commercial services were 28.9%, and community operations had not yet been carried out; and in the first nine months of 2021, the proportion of the three major sectors in total revenue was gradually balanced, 35.3%, 34.1%, and 25.9%, respectively.
It is worth noting that the situation of the troika going hand in hand is not unrelated to vspn's multiple mergers and acquisitions. The community operation business line is still very young in the territory of VSPN, with capital for time, the direct merger of the acquisition company has brought visible benefits to VSPN in the short term, but whether it can effectively link the three major sectors and flexibly call each other's energy is still unknown.
Is esports still a good track?
As mentioned above, VSPN is caught in the strange circle of increasing revenue and not increasing profits, and the reason why it is not difficult is actually difficult to see.
Looking at the prospectus, it can be seen that since 2019, the sales cost generated by VSPN has risen all the way, compared with the initial 791 million, the cost of sales in the first three quarters of 2021 has climbed to 1.359 billion, an increase of 160% compared with 529 million yuan in the same period of 2020, and the ratio to total income has also risen from 96.7% to 102.8%.
Many people in the industry believe that investing in e-sports is now more like investment marketing, increasing awareness through brand sponsorship of events and reputation endorsements of star players or anchors. The most prominent example in this regard is Yu Wenbo's fierce struggle that was rumored to have signed Yu Wenbo for a "transfer fee of 25 million yuan" in 2019.
In terms of knowledge, Taobo has repeatedly responded to questions about heavy gold reinforcement, saying that signing Yu Wenbo "does not feel expensive, only feels value", and the reason why its team is stronger than other clubs has also been summarized by Taobo in two words: "willing to give". This reveals not only the determination of Taobo to invest heavily in the cause of e-sports, not to seek revenue but only to achieve results, but also to reveal the company's top management of e-sports can not achieve self-hematopoiesis in the short term.
According to The interim report of Thobo's fiscal year 2021, the revenue brought by esports to the Group in the six months ended August 31, 2021 was $31.3 million, down 20.2% from $39.2 million in the same period in 2020. Compared with the revenue of 15.573 billion yuan of the entire group, the contribution of this business line of e-sports can be called a mud cow into the sea, accounting for only 0.2%.
Zheng Rongnan, a professional investor, said that the lack of self-hematopoietic ability is a common disease of the e-sports road, and the withdrawal of the rich second generation led by Wang Sicong is an example. In 2021, The banana game media founded by Wang Sicong was acquired by VSPN, and Qin Fen, who was called "the four young people in Beijing" with Wang Sicong, formed an e-sports team and sold it within two years, and Zheng Rongnan said that most people quit the game because they couldn't afford to play. "The rich second generation like Wang Sicong and He Youjun had no problem with 'subsidizing' the e-sports team with some money in the early days." However, with the development of the industry, the money of the rich second generation is obviously not enough to burn. ”
The acceleration of burning money is not unrelated to the intensification of competition, and in this regard, the biggest variable comes from large factories. According to the Frost & Sullivan report, in terms of revenue, the scale of China's e-sports industry will reach RMB1.4 billion in 2020 and is expected to rise to RMB8.9 billion in 2026, with a compound annual growth rate of 36.3%. Under the huge profits, Ali, B station and Tencent and other Internet companies are increasing, as in the past, the injection of funds into the team or the holding of live broadcast platforms has been unable to meet the ambition, Zheng Rongnan pointed out that the approval of e-sports as the 2022 Asian Games project, is to blow the horn for the competition between Ali and Tencent.
"Ali's advantage is that the 2022 Asian Games will be held in its base camp, Hangzhou. Tencent's advantage lies in holding the rights to some of the most popular games. Zheng Rongnan said, "Determining that e-sports is only the first step in entering Asia, and which 6 games are selected next is the focus of the game between all parties." ”
The continuous addition of well-funded opponents has brought more uncertainty to the battlefield. As the period of barbaric growth of grass fades, the importance of compliance is emphasized, and the trend of the e-sports industry moving closer to the head player is obvious. Industry insiders believe that VSPN's multiple acquisitions represent the industry tending to integrate, but integration does not mean good development, in their view, the decline of the track has been visible to the naked eye.
Improve the ecology, the survival of the fittest
Games are an industry with a lot of investment and a long recycling cycle, from development to launch to formal operation, which takes decades, which fundamentally opens up the difference between large factories and zero-based enterprises. After all, like Mihayou, it is a minority to completely bypass the giant competitors, and under the chase of Tencent, NetEase, and Station B, the overtaking time left for latecomers will only become shorter and shorter.
Another loud claim is that the tightening of the hosting rights of popular events by big manufacturers has greatly affected the living space of other players in the industry. People who hold such a statement believe that the hosting of the event is an inevitable choice to achieve a closed loop of e-sports business, and the big manufacturers with spare strength have accumulated star IP after many years of deep ploughing game development, and it is logical to enter the downstream of distribution and sales, and on this road, the e-sports competition with its own traffic and attention has become the best breakthrough.
This is not good news for VSPN, which started by e-sports events, and the possible narrowing of cooperation with large manufacturers means that the existing revenue pattern is shaken, and under the cruel survival of the fittest, no one dares to guarantee that he is a winning general. What's more, although VSPN's dependence on event operations is currently decreasing, the bloodshed brought by the real business to cut the business is still not easy to heal.
According to the information disclosed in the prospectus, Tencent is vsPN's largest customer and supplier, and Tencent, which holds the copyright of many explosive games such as "Peace Elite", "Crossfire", "PUBG" and so on, is an insurmountable mountain. A person familiar with the matter revealed to the media, "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%. "How to distribute this rich cake, the initiative is in the hands of Tencent, and vsPN, which can only wait for the result, is always facing the risk of being abandoned."
After analysis, some senior media people said that the combination of the previous hot investment field metacosm and virtual sports may bring new opportunities to the e-sports field, including VSPN.
But the serious problem is that the metaverse itself is still a child whose form has not yet fully developed, the investment of the giants is more like testing the water and following the trend, the high concept cannot be landed into real money and silver, and the enterprises that pin their hopes on the metaverse will inevitably escape the fate of the victims.
Welcome to pay attention to [BT Finance] to read more exciting content.
All rights reserved, unauthorized reproduction is prohibited! If infringement is involved, please contact to delete it.