Author | clearly
Edit | fig
The once sought after "star concept stocks" have fallen into an embarrassing situation.
On October 12, "Luhan Concept Stock" submitted its listing application to the main board of the Hong Kong Stock Exchange for the fifth time. The company manages a total of eleven music artists and 10 trainee artists, including Black Panther Band (since 2012), Lu Han (since 2015), Hao Yun (since 2016), after submitting prospectuses to the HKEX four times on January 22, 2021, September 27, 2021, November 15, 2021 and April 1, 2022.
On October 5, the "Jay Chou Concept Stock" superstar legend updated its prospectus and fought three battles for IPO. On September 30, 2021 and March 31, 2022, the company submitted its forms to the Hong Kong Stock Exchange twice. The four founders are Jay Chou's family and friends group, Ma Xinting, CEO of Mojie E-sports, holds 27.63% of the shares, Jay Chou's mother Ye Huimei and her agent Yang Junrong hold a total of 27.6% through Legend Key, and Chen Zhong, general manager of Giant Room Music Entertainment Production Co., Ltd., who performs his concert, holds 9.2%. Jay Chou's old partner and lyricist Fang Wenshan serves as the chief cultural officer of Superstar Legend.
Coincidentally, Lehua Entertainment, which is regarded as a "Wang Yibo concept stock", announced on September 2 that it would suspend its listing, "In view of the current market conditions, after consulting with the joint global coordinators, the company has decided that the global offering will be delayed and will not proceed in accordance with the prospectus." ”
Relying on the IP of top artists, these entertainment companies have shown characteristics such as single revenue structure and weak anti-risk ability. Time changes, market confidence is insufficient, cold "star concept stocks" have repeatedly failed, and the capital market does not believe in the top stream.
The "head artist & major customer heavy dependence" that cannot be shaken off
Several companies from different fields reflect the current companies with music agency, artist agency as the main business, and star IP derivative development as the main business, similar shortcomings, and difficult to get rid of.
One phenomenon is the "heavy dependence of head artists", and the consequent problems such as single revenue structure and unstable profitability.
According to CIC's report, in terms of revenue generated by music copyright licensing and music recording in China in 2021, Fenghua Qiushi ranked 15th among more than 400 music record companies, with a market share of about 0.6%. According to the prospectus, due to the impact of the epidemic, the hosting and production business of Fenghua Qiushi concerts has shrunk significantly, and all the physical concerts originally scheduled for the company's music artists in fiscal 2020-2021 have been cancelled. In the first half of this year, the company's revenue was 42.239 million yuan and profit was only 833,000 yuan. Its revenue is mainly derived from music licensing, and its exclusive music contract with Luhan lasts from 2015 to 2024, with 3 years left before its expiration. In the prospectus, Lu Han's name has been mentioned more than 200 times.
In addition, from 2018 to 2021 and the first half of 2022, the revenue from Luhan was 70.9 million yuan, 14.2 million yuan, 15 million yuan, 7.6 million yuan and 10.7 million yuan respectively, accounting for 70.6%, 25.5%, 21.2%, 9.3% and 25.2% of the total revenue, respectively. In this regard, Fenghua Qiushi reminded, "If we fail to renew the contract with Luhan, the music works may be adversely affected, which will affect the willingness of customers to cooperate in the future and have a material adverse impact on business, operating results and financial condition." ”
The same is true of the superstar legend where "Jay" traces are everywhere. According to the prospectus, from 2018 to 2020, the company achieved 95 million yuan, 87 million yuan and 457 million yuan respectively, and the net profit was 8.765 million yuan, 22.719 million yuan and 75.631 million yuan respectively.
Its business is mainly divided into two major sectors: new retail and IP creation and operation. The former is a new consumer brand built around star IP, through the reality show "Travels", Jay Chou concert, etc., with the help of micro-business network distribution, in 2019, 2020 and the first half of 2021, the sales of the main product Bulletproof Coffee accounted for 83%, 72.8% and 72.4% of the total revenue, respectively, and the gross profit margin was as high as 70%. The latter includes exclusive licenses for IP projects such as Jay Chou's World Tour, reality show "Zhou Travel", and "Classmate Zhou".
According to Lehua's prospectus, from 2021 to the first four months of 2022, Wang Yibo's revenue accounted for half of Lehua Entertainment's total revenue. As Leroy wrote in its prospectus: "The company's business depends to a large extent on the reputation of the contracted artists, but the company cannot guarantee that the contracted artists and trainees will not be involved in unpredictable events beyond their control, such as unethical behavior or non-compliance with laws and regulations, which may cause negative publicity and reputational damage to the company and the contracted artists." There can also be no assurance that it will be able to detect or effectively respond to future negative reports involving contracted artists or trainees. ”
Another notable phenomenon is "big customer dependence". According to the prospectus, from 2018 to 2021 and the first half of 2022, Fenghua Qiushi's revenue from its largest customer X accounted for about 26.2%, 78.6%, 68.1%, 38.1% and 4.9% of the Group's total revenue respectively. The outside world speculates that customer X is Tencent Music.
Several major Internet capitals have layouts for a number of film and television dramas, music and other companies, in order to ensure the exclusivity of content, in business cooperation and other aspects of a certain degree of exclusivity. The asset-light entertainment companies themselves have weak bargaining power, which also makes the general income source of many entertainment companies rely heavily on a specific platform. Ningmeng Pictures is bound to Tencent, Naikan Entertainment is bound to Alibaba Pictures and Youku, Straw Bear is bound to iQiyi, and Lehua, which owns Alibaba Pictures and Byte as shareholders, has a deep cooperative relationship with Youku.
Whether it is "head artist heavy dependence" or "big customer dependence", it is not what the capital market likes. It should be pointed out that the current environment is changing, and with the advancement of the Internet anti-monopoly process, concepts such as "exclusive" may be further weakened.
The environment of "star concept stocks" has changed dramatically, is it possible to de-label?
Since 2017, the strengthening of refinancing regulatory policies, coupled with the withdrawal of capital after the tax storm in 2018, has led to the cooling of the capital market in the entertainment industry for four consecutive years, and has not yet fully recovered. Previously, Sunray and Bright Star Culture (Chinese Starry Sky) and others have collapsed their IPOs.
Since the beginning of this year, Bona, Ningmeng and other leading companies in the field of movies and TV dramas have been listed, injecting a trace of confidence and hope into the entertainment sector. The emergency suspension of Lehua's IPO, which was originally scheduled to be listed in September, released a signal: the "star concept stocks" that are deeply bound to stars are still facing many difficulties and challenges in capitalization in the future.
Film and television companies without physical assets as collateral are not easy to finance loans, and star agencies that lack content output and mainly rely on the revenue of artists' commercial activities need to be examined.
From the perspective of star IP as a special commodity alone, it has IP emotional stickiness, brand appeal, and irreplaceable commercial value, but its life cycle and commercial value changes are full of uncertainty. Also around the construction of IP around people, the Internet celebrity economy and the star economy have many similarities. Creating a top stream usually requires a lot of resources, time, and energy, and just stepping on the wind of the times, and it is always powerless to "copy the top stream".
The capital market cares about whether its business model is "sustainable and large-scale replication", as well as its own "stable profitability" and "low risk", which is the eternal pain point of "star concept stocks". In recent years, the regulatory environment has become stricter, and the successive "star house collapse accidents" from last year to this year have intensified the concerns of the outside world about "star concept stocks".
Why are these companies still indomitable in their repeated defeats on the road to IPO?
According to outside speculation, investors may bring pressure to go public and realize within a certain period of time. In addition, under the impact of the epidemic, the decline in film and television production and the suspension of offline performances, enriching financing channels will help the company reduce financial pressure and cope with external risks, thereby reversing the decline in performance.
Even if it is successfully listed, its prospects are still not optimistic. The industry is still paying for the after-effects of unfulfilled performance promises and huge goodwill impairments. Ningmeng Film and Television broke on the first day of listing, and the share price of Straw Bear hovered at more than HK$1.
"Episode restriction orders" and "salary restriction orders" have been issued one after another, video platforms have held high the banner of "reducing costs and increasing efficiency", traffic has been repeatedly iterated, and the era of sky-high dramas and celebrities' sky-high incomes has gone away. The Notice on Further Strengthening the Management of Literary and Art Programs and Their Personnel issued by the State Administration of Radio, Film and Television in September 2021 requires radio and television organizations and online audiovisual platforms to resolutely resist illegal and unethical personnel, and that platforms sign negative public opinion clauses with artists in order to demand relevant compensation. Many "star concept stocks" have repeatedly hit the capital market to reduce their own risks, but investors have become increasingly reluctant to pay for high risks.
"Jun has a disease in the body, and if he is not cured, he will be afraid of deepness." The companies themselves are aware of these problems. So, is it possible for companies to go to celebrities to rely on labels and promote the diversification of revenue structure? But getting rid of head artist dependence, as well as big customer dependence, is not easy.
In order to get rid of "Wang Yibo dependence" and explore revenue diversification, Lehua not only opened the official live broadcast room "Le Orange STORE" to explore live broadcast e-commerce, and co-created the virtual girl group A-SOUL with Byte as PLAN B, and also launched self-made dramas, founder Du Hua in variety shows, short video platform actions constantly, like "the next Yang Tianzhen". But most of the new business has not caused much splash, and with the draft and the delay being stopped, it is almost impossible to create the "next Wang Yibo".
Superstar Legend tries to constantly enrich the product line and "de-Jay". Launched new products such as magic carcass pastries, as well as kim's carcass probiotic freeze-dried powder, kim's carcass herbal drinks, skin care products, etc. without Jay Chou's relevant IP authorization, but sales were not good. In 2021, Magic Prebiotic gummies only achieved revenue of 2.47 million yuan. In the first half of 2022, the revenue of kongo probiotic freeze-dried powder was only 3.99 million yuan, accounting for only 3.2%.
In terms of content production, other star IPs are introduced, such as planning and creating the pop music talk show "If you come, you are happy" with Yu Chengqing as the protagonist. In November last year, Superstar Legend and artist agency W&V established a talent planet expansion cooperation to plan and produce a variety show centered on Liu Genghong, which generated about 8.5 million yuan in revenue as of December 31, 2021, "which shows that we can co-create IP with other artists other than Jay Chou." In addition to selling its products in Liu Genghong's live broadcast room, it also launched the "Short Video Elite Training Camp" course. In the prospectus of this superstar legend update, Liu Genghong, who has exploded in fitness live broadcasting, has been mentioned more than 300 times.
However, after reducing the dependence on Jay Chou from the second half of 2020, the superstar legend's revenue in 2021 decreased by 20.13% year-on-year, and the gross profit decreased by 2.58% year-on-year; In the first half of 2022, the company's revenue decreased by 24.7% year-on-year, and gross profit decreased by 27.45% year-on-year.
Deep binding of celebrity popularity is the natural "golden signboard" of entertainment companies, but also a "curse" and a "hill" that needs to be crossed. Can these star concept stocks adhere to "content is king", find a business with more room for growth imagination, and successfully go public? Only the winner will be remembered.