Live 2021: The era of profitability is over, and the slope ahead is steep and sharp

Figure: Figure worm

Source: 21tech

Author: Poplar

Editor: Zhang Weixian

The live broadcasting industry, which has been running wild for many years, has put the brakes on 2021. According to the 2021 annual reports released by a number of companies, turning from profit to loss has become the development trend of the entire industry.

The thousand broadcast war in 2016 is a witness to the prosperity of the live broadcasting industry, and after a big wave of sand and sand, a few live broadcasting platforms have survived, constituting an oligarchic pattern in the industry.

In July 2019, with the listing of Douyu in the US stock market, almost all the head live broadcast platforms have landed on the capital market. More importantly, in terms of profitability, although the pace is different, the remaining live broadcast platforms have successively moved from losses to profits.

And now, live streaming platforms are saying goodbye to the era of profitability. There are many reasons behind this, the most essential of which may be that the life cycle of the entire industry has reached the ceiling. With the peak of user scale and the increasingly strict supervision of the standardized development of the industry, live broadcasting platforms need to make a choice, whether to go with the flow or break the situation and be reborn.

Back to the era of losses

At present, the live broadcast industry is divided according to content, mainly divided into show live broadcast and game live broadcast. Among them, the representatives of listed companies in the live broadcast of the game are Huya and Douyu, and the representatives of the listed companies on the show live broadcast are Zhiwen Group (formerly Momo Technology) and Yingke.

In 2021, Huya's revenue was 11.351 billion yuan, an increase of 4% year-on-year, and the net profit attributable to the company was 584 million yuan, down 34% year-on-year.

Although annual revenue still grows and the company is still profitable, in the fourth quarter of 2021, Huya has begun to turn a loss. According to the financial report, Huya's revenue in Q4 2021 was 2.809 billion yuan, down 6% year-on-year, and the net loss attributable to the company was 313 million yuan, compared with a net loss of 253 million yuan in the same period of 2020.

In contrast, Douyu's financial performance is even worse. In 2021, Douyu's revenue was 9.165 billion yuan, down 4.5% year-on-year, and the net loss attributable to the company was 620 million yuan, compared with a net profit of 405 million yuan in the same period of 2020. Among them, in the fourth quarter alone, the net loss of Douyu reached 193 million yuan.

In 2021, the revenue of Zhiwen Group was 14.576 billion yuan, down 3% year-on-year, and the net loss attributable to the company was 2.914 billion yuan, compared with a net profit of 2.104 billion yuan in the same period of 2020.

Other companies that do not have live broadcasting business as their main business are also declining in the live broadcast revenue disclosed in the 2021 financial report. For example, Kuaishou's live broadcast revenue was 30.995 billion yuan, down 6.7% year-on-year; Tencent Music's social entertainment revenue was unchanged from the previous year, of which the fourth quarter fell by 15.2% year-on-year.

It can be seen that the revenue capacity of the entire live broadcasting industry is in a period of decline. The high growth of the industry in the past has benefited from the rapid expansion of the user scale and the brutal growth of the industry, but now, the industry regulations that are constantly introduced require the development of the industry to return to rationality.

For example, in 2021, the Guiding Opinions on Strengthening the Standardized Management of Online Live Broadcasting jointly issued by the Cyberspace Administration of China and seven other departments regulates the reward behavior of live broadcasting platforms.

The Guiding Opinions propose that for network anchor accounts at different categories and levels, they should reasonably set limits on the total amount of rewards received per game, the popularity of live broadcasts, the length of live broadcasts, the number of live broadcasts in a single day, and the time interval between sessions, and implement necessary warning measures for anchors who violate laws and regulations; establish rules for the management of live broadcast tipping services, clarify that the tipping services provided by the platform to users are consumer services for information and entertainment, and shall reasonably set an upper limit on a single virtual consumer goods and a single tip amount. Remind users whose daily tip limit has triggered the corresponding threshold, and set a tip cooling-off period and a delayed arrival period if necessary.

Driven by these background factors, the number of paid users who directly affect the revenue of live streaming platforms has also begun to decline. By the end of 2021, the number of paying users in Huya fell from 6 million in the same period in 2020 to 5.6 million, the number of paying users of Douyu fell from 7.6 million to 7.3 million, and the number of paid users of The Zhiwen Group fell from 12.8 million to 11.4 million.

There is an urgent need to explore new growth points

So for the live broadcast industry, how to go next, some companies have taken the lead in groping for a way out.

In 2021, Yingke Group's revenue was 9.176 billion yuan, an increase of 85.4% year-on-year, and the net profit attributable to the company was 4.33 billion yuan, an increase of 113.1% year-on-year.

The reason why Yingke Group has been able to achieve double high growth in revenue and net profit is mainly due to its successful transformation in the past few years. At present, Yingke Group has developed a product matrix from the single product of Yingke App, including Yingke, Yuanyuan, Jimu, etc., covering live broadcasting, blind date, social networking and other fields.

In 2021, Yingke Group's revenue from live broadcast services was 2.56 billion yuan, accounting for only 27.9% of the total revenue, while the revenue from social products accounted for 62.6%.

Also transforming is the Huanju Group. In the past two years, Huanju Group has successively traded its Huya Live and YY Live to Tencent and Baidu, respectively, shifting its business focus to overseas markets.

In 2021, Huanju Group achieved revenue of US$2.619 billion, an increase of 36.5% year-on-year; under non-GAAP, Huanju Group achieved a net profit of US$109 million for the first time, compared with a net loss of US$160 million in 2020.

It is worth noting that the main revenue pillar of Yingke and Huanju Group at present comes from the acquired products. In 2019, Yingke Group acquired the social product Jimu for US$85 million, and Huanju Group also spent 1.45 billion yuan to acquire 68.3% of the equity of overseas video social platform BIGO in the same year, plus the previous shareholding, Huanju Group achieved 100% control of BIGO.

Today, the acquisition of products has become the pillar of support, and Yingke and Huanju Group have also achieved sustainable growth through business transformation. This is a lesson for live broadcasting companies that have not yet transformed, whether through acquisitions or incubation, as soon as possible to find new business growth points, is the way for long-term development.

Previously, Momo Group changed its name to Zhiwen Group, also in order to get rid of the excessive dependence on Momo App. In 2018, Momo made a wholly-owned acquisition of social product exploration, and subsequently incubated some new products within the company.

However, at present, the transformation effect has not yet reached the ideal state, and in the fourth quarter of 2021, live broadcast revenue still accounts for 58.5% of the revenue of Zhiwen Group. However, the proportion of value-added service revenue, mainly virtual gift revenue and membership subscription income, has reached 40%, and the revenue from the mobile game business has also increased by 163.1% year-on-year to 19.3 million yuan.

In the 2021 financial report, Huya and Douyu also expressed their willingness to explore new growth engines. Huya executives said that Huya will be committed to expanding the user base, improving operational efficiency, and exploring business diversification. Douyu executives also proposed that new growth points will be explored.

Editor: Lu Taoran