Text | Chen Xining
Edit | Peng Xiaoqiu
Without even relying on any physical goods, the valuation of an IP art company has skyrocketed to $4 billion, and it is Yuga Labs, the parent company of Boring Ape BAYC. Similarly, with the help of NFTs and blockchain technology, the current floor price of the Boring Ape BAYC digital collection has also reached $420,000. This defines a new level for IP commerce, i.e. a higher commercial premium is achieved at a lower cost.
On April 24, the meta-universe "top stream" boring ape BAYC has a new job, Li Ning with a variety of NFT image official announcement joint T-shirt, numbered 4102 boring ape will also become the manager of the pop-up shop. In the early hours of this morning, some media disclosed that Zhu Xiaohu, managing partner of GSR Ventures, had also bought the digital collection of boring ape BAYC #9729 and replaced the digital collection as an avatar.
In fact, this is already the Nth interaction of boring apes with the real world, and at present, bayc parent company completed a $450 million financing in March this year, such a high valuation is undoubtedly brought about by cross-border IP licensing and NFT play.
Different from the centralized IP operation model in the past, after the release of the boring ape NFT based on web3 technology, the owner chooses to open the copyright, which means that the holder of the NFT can operate the IP independently, and then enhance its value through various means such as disclosure and co-branding, which is equivalent to the holder owning real digital assets.
Of course, the case of the boring ape is still an isolated case at present, and it represents the height of the IP operation industry after the integration of various modern gameplays. But what can be seen is that the ancient business model of IP operation will not become obsolete in this era, and even has a higher commercial height.
The path where the IP is generated
Based on the experience of practitioners, there are currently two paths to IP generation, one of which is content IP, that is, through high-quality film and television works or profound role settings, so that the IP is deeper rooted in the user's mind; the other is the product IP image, which may be set up simply, but it is exposed through high frequency, and the symbolized image continues to occupy the user's mind, such as memes, hand-made tide play and other forms of presentation.
The top IP can often be freely converted between the two, occupying the user's mind more deeply and broadly, and at the same time, it can also achieve the most ways to monetize.
Statista, the statistic agency, released data, as of January 2021, since the launch of the Pokémon series of games established in 1996, it has earned $100 billion in revenue through merchandise sales, licensing transactions and retail sales, which also makes it the world's most profitable IP, while the second place is the more product-oriented IP to create Hello Kitty's parent company Sanlio, whose revenue is 84.5 billion US dollars.
From the German data agency statista: global IP-related revenue rankings
In China, in the period when various types of film and television IP were prevalent, the first batch of people to go out of the circle through the original IP image was deying holdings (HK:02250), the owner of B.DUCK.
In 1992, a freighter carrying nearly 30,000 yellow rubber ducklings set off from China to Washington, D.C., encountering strong winds and waves through the Pacific Ocean, one of the containers overturned the sea, and nearly 30,000 yellow ducks began a round-the-world rafting trip. Xu Xialin, founder and designer of Deying Holdings (HK:02250), was influenced by this incident to create the image of B. Duck in 2005.
Today, this little yellow duck has also successfully landed on the Hong Kong Stock Exchange in early 2022. According to the prospectus, the main revenue of Deying Holdings comes from IP product licensing and e-commerce, in the 2021 annual report, the total revenue of Deying Holdings reached HK$290 million, and its IP licensing revenue also exceeded e-commerce revenue, reaching HK$160 million. In addition, Deying Holdings has 54% in terms of gross profit margin, which shows that once the IP effect is formed, this is a high-margin business model.
Different from the current tide play momentum, the product licensing of veteran IP manufacturer Deying Holdings is mainly based on the licensing of daily necessities and clothing. According to its prospectus, the revenue volume of these two in 2020 reached HK$22.23 million and HK$16.08 million respectively, accounting for 35% and 25% of the revenue of commodity licensing. In addition, B.Duck is also involved in live entertainment licensing, including theme parks and classics, catering and other marketing promotion activities, such as the Nanjing Little Yellow Duck Theme Park, which it cooperated with OCT in 2020.
In the development period of Deying Holdings, Bubble Mart let the market see a greater commercial height of productized IP through the form of IP + tide play, and successfully achieved curve overtaking.
In 2010, Bubble Mart (HK:09992) was born, which initially represented some fashion toys and stationery brands. In 2016, Wang Ning, the founder of Bubble Mart who needs to expand the scale, went to Hong Kong and signed the IP that Bubble Mart has been popular with since the designer Kenny - Molly, and the later story is also clear to everyone, through the blind box, tide play and other clear play, Molly has become an evergreen tree that has not fallen since the tide play.
From the perspective of revenue scale and profit, the total revenue of Bubble Mart in 2021 is 4.49 billion yuan, compared with Deying's long-term gross profit margin of 50%-60%, Bubble Mart gross profit margin is almost stable at more than 60%, and the gross profit margin of 2021 is slightly lower than that of previous years. From the perspective of market value, although the stock price of Bubble Mart has long been cut, the market value is still about 28 times that of Deying Holdings.
Also with IP operation and licensing as the core business, behind the gap between the two is also due to the higher commercial value of IP goods given by the form of tide play - users no longer buy a product with a logo printed on it, but an investment product, collectibles and carriers with more emotional value with a higher premium.
Guosheng Securities Tide Play Report, Tide Play Industrial Chain
From this, we can also see the path of IP generation, this high-margin model is very similar to star-making - the designer constructs an original IP, the operator and the agent make the IP have influence and popularity through extensive face brushing, creating stories, diversified marketing means and consumption methods, and then the IP has commercial value, and then realizes the multi-business realization of licensing, product sales, etc., and after the IP is successfully realized, its influence is further expanded, thereby consolidating the commercial value of the IP.
Pain points of IP
Talking about the pain points of IP business, this pain is very similar to idol brokerage companies, although the gross profit margin is very high, but high-quality idols are still scarce resources, and it takes a little luck and probability to cultivate its ordinary people into high-quality idols, which lays the foundation for the uncertainty of business - how to achieve multi-IP support business from single IP profitability has become the biggest pain point of all IP business companies.
The average gross profit margin of high-quality IP is around 50% or even higher, and there are many companies in the world that rely on IP monetization to successfully leverage hundreds of billions of revenues. It seems that the IP business seems to be a million profits. However, judging from the performance of Deying Holdings and Bubble Mart after listing, the market value of the continuous bearishness also reveals the difficulty of IP business.
At the beginning of Bubble Mart's IPO, "Molly" could sell 456 million yuan a year, accounting for 27.1%. Since then, Bubble Mart has continued to launch new IP roles to enrich Molly's family, but from the 2021 financial report, this is still not enough.
A clear change is that the new blockbuster has not yet appeared, and Molly has gradually been questioned for "passing" - bubble mart revenue growth rate has slowed down. Previously, the revenue growth rate exceeded 225%, but the total revenue in 2021 was 4.49 billion yuan, an increase of 78.7% year-on-year.
However, from the 2021 financial report, Bubble Mart's own IP revenue is no longer completely dependent on Molly, and the layout is more balanced.
The proportion of IP revenue under Bubble Mart
Such a problem also exists in the IP matrix of Deying Holdings, although the concept of Deying Holdings is the little yellow duck, but after years of layout, Deying also has its own small yellow duck family, but from the perspective of revenue proportion, although the proportion of revenue of other roles has risen slightly, B. Duck still occupies half of the revenue, and the commercial value of more roles is still its problem to be solved.
The proportion of IP revenue under Deying Holdings
But that's still not enough. How to continue to achieve high growth, in addition to having more "can play" IP, but also need to dig more business stories and profit points in the increasingly "inner volume" IP track, which is also the second breakthrough of IP companies.
According to the financial report information, the solution given by Bubble Mart is summarized in three ways, one is to open up more channels including overseas territory; the second is its investment in theme parks, benchmarking Disney's practices, and bubble Mart is also actively laying out the construction of theme parks; the third is to dig deep into the commercial value of IP products, such as its production of collector's "big baby" and other collector's version of the tide play goods with higher unit price.
Deying Holdings revealed in its earnings report that it will explore more new business models such as digital collections in the future.
The next stop for IP business will be better
Regardless of whether the Future China IP market is a monopoly or a hundred flowers, it is certain that the prospects of IP business are still promising, which is also based on the degree of importance of copyright and the promotion of blockchain technology and digital collections to reach a higher dimension.
Piracy and infringement incidents are becoming less frequent, and the ceiling of IP licensing commerce is bound to be higher.
In addition, the value of IP itself is no longer entirely dependent on the "amount of goods", the active tide play market allows the public to have a new understanding of IP, it is not only a symbol of attitude and preferences that is pasted on clothes, but also becomes a commodity that can be value-added by relying on itself, which in itself has broadened the audience market of IP.
At the peak of Bubble Mart's development, according to the data released by Idle Fish to the media in December 2020, there were more than 440,000 blind box players trading, and the idle blind box transaction volume exceeded 120 million yuan in November 2020, an increase of more than 70% year-on-year. This is also why the tide play is being made bigger and more refined, collectibles, limited edition attribute goods began to increase - the value of IP is no longer limited to the ip party to the market, it is in the consumer's transaction and sharing, the influence and value are constantly improving.
In this link, in fact, the value of IP is already decentralized.
So what's next for IP?
When the era of the metacosm is really coming, the holders and beneficiaries of IP may no longer be just designers, but also consumers with different digital collections and limited collections, and an era of decentralized IP is coming.
For example, the employment path of boring ape mentioned above, but in fact, the employment opportunity of boring ape is far more than the old path IP licensing revenue in the past.
On March 18 of this year, Universal Music Group announced that it had paid $360,000 for boring ape Bored Ape Yacht Club #5537 to lead its metaverseal group called Kingship, which it founded in November. Because of the copyright transfer characteristics of digital collections, BAYC's openness can transfer commercial interests, which also means that when holders have different resources, the IP in their hands will also have new value directions.
Of course, the decentralized model may not be completely reproduced in China, but the business and imagination of IP are still fascinating and full of imagination.
Resources:
1. "On the Barriers and Space of Bubble Mart Again" Guosheng Securities
2. "The industrial chain is blooming, the tide play and IP resonance" CITIC Securities
3. "Pattern Open: NFT Holders Decide ip ceiling" open pineapple finance