Rhino Entertainment Original
Text|Fat Department Editor|Park Fang
Entering the earnings season, the performance of the entertainment industry has become the basis for reviewing the key year of 2022.
With the peak of mobile Internet dividends, in the face of slowing or even stagnating growth, platforms have adjusted their overall operation ideas in 2022, shifting their focus from "growth" to "turning around losses", and "reducing costs and increasing efficiency" has become the main theme of the entire industry. In the past year, the financial reports of various platforms have also tried to improve the market imagination in this regard.
For example, iQiyi, which achieved operating profitability throughout the year, Tencent Video, which achieved profitability in the last two quarters, and Kuaishou, whose domestic business achieved single-quarter profits for two consecutive quarters; Platforms such as Youku and NetEase Cloud Music, which have not yet achieved profitability, will also announce news of narrowing losses.
The "turnaround" strategy of each platform will be different based on the reasons for the loss. Combined with the financial report information, you may wish to review the gains and losses of the platform's "turnaround" in the past year.
Overall idea:
Don't grow revenue, look for new revenue points
Whether it is a long or short video or a music platform, the problems faced before are similar, that is, the efficiency of the original new strategy has become lower and lower, the unit price of customer acquisition has gone all the way up, and the losses caused have seriously dragged down the entire platform ecology. For example, Kuaishou spent RMB44.17 billion in sales and marketing in 2021, a year-on-year increase of 66%.
Since last year, the operational focus of each platform has been to consolidate the fundamentals, reduce operating costs through various means, and open up as many revenue streams as possible. It can be analyzed from the specific situation of different industries.
● Long video platform: Ai, You, Teng, Mang
Content cost is always a pain for long video platforms, "100 billion burned in ten years" is like a shadow shrouded in the industry prospects, which has made the industry choose to fight in the past year, and news such as the optimization of organizational structure and layoffs on related platforms has appeared.
The results deserve recognition. iQIYI's total revenue in fiscal 2022 was RMB29 billion, operating profit based on non-GAAP metrics was RMB2.2 billion, and operating margin was 7%, achieving operating profitability for four consecutive quarters. Previously, Tencent Video has announced that it will be profitable from the third quarter of 2022; In Alibaba's latest earnings report, it was announced that Youku's losses narrowed for seven consecutive quarters.
According to Alibaba's report, Youku "prudently invested in content and production capabilities, and continued to improve operational efficiency", narrowing the loss of the digital media and entertainment segment, which decreased to 25 million yuan in the fourth quarter of 2022 from 1.374 billion yuan in the same period of the previous year.
The effect of "cost reduction" is commendable, but it still needs to be seen that under the influence of the unstable economic environment and the decline in advertising revenue, what finally supported the platform's operation data and achieved the explosive growth of iQiyi's membership for two consecutive quarters was the explosive effect of a number of consecutive "breaking 10,000" dramas in the third and fourth quarters, that is, the strong pull of content "efficiency".
This growth is common to the industry, and Mango Supermedia's performance forecast shows that the number of effective members reached 59.16 million by the end of the year, an increase of nearly 9 million from 50.4 million in the same period last year.
It was at this stage that Teng, You, and Mang all tried strategies to increase revenue such as the finale screening ceremony; On this basis, more refined user operations are also achieved by increasing member prices, limiting member account sharing and screen casting.
However, Mango Super Media forecast may also reveal the problems of the current model, with negative growth for the first time in nearly five years, with a total operating income of 13.704 billion yuan, down 10.76% year-on-year; The net profit attributable to the parent after deduction was 1.584 billion yuan, down 23.07% from the same period last year. In addition to the decline in revenue from the advertising business, the higher spending on Mango TV's content is also obvious.
From this point of view, the first is whether the advertising business can pick up in 2023, of course, there are many positive signals in this regard; Second, it is difficult to find more breakthroughs in the compression of operating costs, as the content gap expands in 2023 and it is almost inevitable for platforms to increase content investment, the demand for driving membership income will continue to increase, and it is still unknown whether it can maintain this year's financial situation.
● Online music platform: NetEase Cloud Music
Compared with Tencent Music, which made early profits with social entertainment, NetEase Cloud Music's performance pressure has been great. The current loss problem has spanned two copyright cycles since 2018, with losses of RMB1.81 billion, RMB1.58 billion, RMB1.57 billion and RMB1.04 billion respectively from 2018 to 2021, while the loss in 2022 has been reduced to RMB110 million, which has narrowed by 89% year-on-year.
The improvement in financial position is attributed to "scale effect and cost optimization" in the financial report, which can be interpreted separately from these two aspects.
The first is the scale effect, that is, the conversion efficiency after the improvement of paying users, the key is the growth of social entertainment service user base, in the past year social entertainment paying users increased from 683,000 at the end of last year to 1.332 million, and this revenue also increased by 42.8% to 5.29 billion yuan.
The focus of cost optimization is the "reasonable payment settlement model" mentioned in the financial report.
The annual operating costs actually increased, increasing by 12.3% from the previous year to 7.699 billion yuan, of which the content cost reached 6.71 billion yuan; but the financial report explained that the main part of the increase was the increase in sharing fees with the increase in social entertainment service revenue, which is obviously much healthier than copyright procurement, and it can be judged that this part of the expenditure is also decreasing compared with 2021.
It should also be noted that NetEase Cloud Music's strategy is not stable.
In terms of scale effect, behind the continuous growth of the number of members is that marketing expenses increased by 47% last year, such a growth model is now very rare; The platform's key data, including revenue growth rate, online music service monthly active user growth and revenue per paying user, have all declined rapidly in the past few years, and the lack of growth is obvious.
At the same time, many attempts in the social entertainment model such as MUS and Yin Jie have been verified to be invalid, and there is also a lack of convincing fist products, and the prospect of attempts in social entertainment is not enough to support imagination.
With the ushering in the copyright procurement node in 2023, NetEase Cloud is bound to usher in a round of large-scale procurement to retain users, greatly driving content costs, so whether it can maintain this year's financial situation is still unknown.
Compared with NetEase Cloud Music, which still hovers between growth and development stock, Kuaishou's "cost reduction and efficiency increase" is more resolute. According to the previous three quarterly reports, the adjusted net loss was 672 million yuan, a year-on-year decrease of 85.4%; The domestic business was profitable for the second consecutive quarter.
Kuaishou's previous huge losses were mainly due to high customer acquisition costs, with sales and marketing expenses of 44.17 billion yuan in 2021, a year-on-year increase of 66%, but the growth rate of active users in the same period has fallen from 50% in the previous year to about 10%. Therefore, a significant contraction strategy was adopted in 2022, with sales and marketing expenses and R&D expenses reduced by 17.1% and 16.2% respectively in the third quarter.
In terms of open source, Kuaishou focused on e-commerce last year. After three rounds of internal organizational structure adjustments, this part of the business was determined to be directly responsible for Cheng Yixiao. Compared with the increasingly weak advertising and live broadcast business, Kuaishou has pinned more hopes on this revenue point, hoping to get out of the performance winter.
In the third quarter of last year, the GMV of Kuaishou e-commerce business increased by 26.6% year-on-year to 222.5 billion yuan; The monthly active buyers of e-commerce exceeded 100 million, and the user repurchase rate increased by about 1.1% year-on-year, and Kuaishou said that it "achieved performance beyond the industry growth level".
But the process will obviously take time. Compared with NetEase Cloud, Kuaishou is obviously more resolute in its business goal transformation from growth to profit-seeking, but in terms of finding new commercialization tipping points, Kuaishou's volume difficulty can be described as exponential growth.
At the new Magnetism Conference, Kuaishou also proposed more growth paths based on the traditional model.
For example, short dramas, mini games and other business surge points, as well as real estate business, recruitment and other vertical content that connects traditional industries, forming a space for expanding commercial traffic; As of February this year, the number of search customers has increased by nearly 9 times year-on-year, which has also opened up higher conversion efficiency.
As the overall economic environment improves, these businesses will also bring more possibilities.
Can we replicate the accelerated "turnaround" of 2022?
After combing, it can also be seen that the strategies of the above platforms actually have their limitations, and some throttling strategies are actually difficult to normalize, such as the long video platform will inevitably start to release water to the production end, and the increase in content costs is inevitable; For example, if NetEase Cloud Music wants to invite "Jay Chou" back to the platform, it is necessary to prepare a checkbook in the new year.
Understanding the platform "turnaround" in 2022 may be of greater significance to establish a healthy platform and even an industry ecology, further sort out the supply mechanism from the production side, and improve the original growth model with high customer acquisition costs.
More specific changes can be left for further sorting after platforms such as Kuaishou and Station B release their annual reports.
Compared with the above platforms, Station B had a net loss of 6.011 billion yuan in the first 9 months of 2022, a year-on-year increase of 27.53%. However, in the third quarter, the company's marketing and sales expenses decreased by 25% year-on-year, so the net loss in the quarter narrowed by 36% year-on-year to 1.7 billion yuan. In December, some media reported that Station B carried out a round of layoffs, and it remains to be seen what results these actions can achieve.
In this process, uncontrollable factors are inevitable, such as whether there will be many long-form video series explosions in 2023, or whether Kuaishou's e-commerce business can meet expectations, how station B can strike a balance between reducing content costs and maintaining high user activity, and so on.
However, it should be believed that looking back at the collective "turnaround" of 2022, it should still affirm its positive significance for the entertainment industry, and the main platforms have come up with a set of solutions that have achieved results in both open source and cost reduction, and are making changes based on healthy development. In this relatively long-term approach, last year's achievements are expected to continue.