Behind the crisis of the main stop of station B UP: the self-developed game has not yet "gone out of the circle", and it burns money while reducing costs

Image source: Tuworm Creative

In the past weekend, the topic of "B station UP main initiation to stop the tide" once topped the Weibo hot search list, and attracted a large number of media and netizen attention.

This topic comes from the in-depth report released by Southern Finance on the morning of the 2nd, the article pointed out that many UP owners posted videos that suspended updates, saying that they would not upload new content in the short term. As for the reasons for the suspension of the update, 2 UP owners made it clear that the difficulty in balancing income and expenditure was the main reason for the suspension of the update. At the same time, the article believes that for the middle tail UP owner, a more intuitive factor is the decline in platform revenue.

For this statement, according to people who know the inside of station B, the statement of stopping the tide is not very accurate, the total number of UP owners with more than 500,000 fans is about 3,000, and only three have stopped recently.

All three have publicly responded to the reasons for the suspension, all of which said that the suspension has nothing to do with platform incentives, or that the original planned video content will be postponed for personal reasons, or due to major changes in the company. "For the head creators of any platform, the platform's traffic share is always a small head of revenue, and no one will expect to rely on this to make money." There are analytical representations.

It pointed out that the real reason for the main stop of the B station UP may be: the head UP owner stops changing because he cannot receive the business order, and the small and medium-sized UP owner stops changing because the platform incentive declines.

However, from the financial report, in 2022, the platform's incentive share to UP owners in the live broadcast and advertising business increased by 18% year-on-year to 9.1 billion yuan, so where does the contradiction appear?

Mobile dividends fade, gaming business awaits the next "blockbuster"

Recently, Station B released its fourth quarter and full year 2022 financial report. In the fourth quarter, platform revenue was 6.1 billion yuan, a year-on-year increase of 6%; Net loss was $1.5 billion, 29% lower than the loss of $2.1 billion in the same period in 2021.

For the whole year of 2022, station B's revenue was 21.9 billion yuan, a year-on-year increase of 11.4%, and the net loss was 7.5 billion yuan, a year-on-year increase of about 10.2%; Non-GAAP net loss was $6.7 billion, up 21.8% year-over-year.

Specific to the income of each business, the main business of station B is currently divided into mobile games, value-added services, advertising and e-commerce and other four parts. For the whole year of 2022, the revenue of the game business will be 5 billion yuan, a year-on-year decrease of 1%; Value-added service revenue was RMB8.7 billion, a year-on-year increase of 26%; Advertising business revenue was 5.1 billion yuan, a year-on-year increase of 12%; E-commerce and other business revenue was 3.1 billion yuan, a year-on-year increase of 9%.

The game business became the only segment in the main business of station B to decline. Talking about the reasons, Chen Rui, chairman and CEO of Station B, said frankly at the earnings conference that the entire game industry has entered a new stage in 2022, and the version number is only one of the reasons, and the bigger reason is that the dividend of mobile users is gradually fading. And players' requirements for game quality are becoming more and more mature. "This has a big impact on the industry because it directly affects the increase in the cost of game development and the decline in the success rate of new games."

"When there is a user bonus, as long as the game content is done well, you will definitely make money. But when the game industry becomes a stock market, there are only two kinds of money-making games: the first is the super game of the head, and the second is to become the head in the vertical category. Only in these two cases can there be sustained profits. Chen Rui thought.

In fact, until the fourth quarter of 2020, the game business has been the main source of revenue for Station B, and its exclusive Japanese role-playing mobile game "Destiny-Crown Designation" (referred to as "FGO") has topped the APP Store for three consecutive quarters. The game business also accounted for 83% of the company's total revenue at one point, and the game "FGO" alone contributed more than seventy percent of the revenue.

But from the fourth quarter of 2020, the game business gradually "took a back seat". By 2022, the proportion of B station game business revenue has dropped to 22.9%. This change has a lot to do with the company's overall strategy in recent years: reducing the proportion of game revenue and diversifying revenue.

Therefore, Station B began to "walk on two legs" and develop two kinds of games: self-research and agency. Chen Rui revealed that last year, self-developed games accounted for 5% of the company's total game business revenue, and this proportion will continue to increase this year.

However, self-research revenue has always been affected by the supply side of game version number issuance, and not getting the version number means that the game cannot be commercialized, which will directly affect the revenue. At the same time, the platform's current self-developed game revenue is still small, and it is still necessary to wait for the emergence of a "blockbuster" product.

The average monthly contribution of a single user is -2.27 yuan, how to increase revenue and reduce losses

After the "de-gamification" strategy, in order to accelerate the commercialization process, Station B increased its investment in live broadcast, e-commerce, advertising and other businesses on the one hand; On the other hand, you need to acquire more users and get them to start spending money on the platform or spending more money.

Let's look at the first aspect, the financial report shows that the value-added service revenue of station B in 2022 will increase by 26% year-on-year, mainly driven by paid activities such as live streaming and large membership, of which the annual revenue of live broadcast business increased by more than 30% year-on-year; At the same time, the platform's annual advertising business revenue increased by 12% year-on-year, mainly in the form of advertisements related to the UP owner.

Behind the revenue growth is the large-scale layout and investment of Station B. For the whole year of 2022, the platform's incentive or share to UP owners in the live broadcast and advertising business reached 9.1 billion yuan, a year-on-year increase of 18%. In addition, the platform has also built a lot of commercialization infrastructure, including live streaming, take-off plans to enhance brand exposure, and fireworks, a one-stop UP main content cooperation platform.

It is not difficult to see that the share of station B to UP owners is constantly increasing, so why are there still many UP owners reflecting their income decline? This is actually a change in the content monetization mechanism.

After 2022, the platform will gradually reduce the proportion of data such as playbacks, coins, and likes, increase the weight of business cooperation, and pay more attention to the commercial value of UP owners. At the moment when the UP master is strongly associated with the platform, the advertising revenue of the two is directly linked.

The second aspect comes from users, the financial report shows that the average daily active users of station B in the fourth quarter reached 92.8 million, an increase of 29% over the same period in 2021; The average monthly active users reached 326 million, an increase of 20% over the same period in 2021; The average monthly paying users reached 28.1 million, an increase of 15% over the same period in 2021.

However, judging from the monthly activity data, the retention ability of platform users seems to be weakening. In the fourth quarter, the monthly active users of station B, including apps, PCs, TVs, etc., were 326 million, a year-on-year increase of 20%, a year-on-year growth rate hit a new low in recent years, and a decrease of 6.6 million month-on-month.

The platform has invested huge customer acquisition costs for more than 300 million monthly activities. In 2022, for every 1 yuan of revenue that users contribute to site B, station B will pay a cost of 3.27 yuan, and a single user will contribute an average of -2.27 yuan per month. This means that as users grow, the investment in the platform continues to increase.

Analysts said that the current B station, if you want to retain users, you must increase the unit price of revenue, and increase the unit price needs to achieve breakeven. "The growth of user scale depends on high costs to a certain extent, so cutting costs will inevitably lead to a decline in growth."

It is not difficult to see from the fourth quarter data that after the marketing expenses have been cut, monthly active users have been lost month-on-month. And coupled with the impact of the decrease in UP main income, resulting in a decline in creative enthusiasm, there is still a question mark on whether the scale of users can continue to grow in the future.

Regarding this year's plan, Chen Rui said: "This year, our company's business will be more focused, and the most important things for the whole company are two things: first, increase revenue and reduce losses; Second, the healthy growth of DAU. ”

At a time when the Internet dividend is fading, Internet platforms such as Station B are facing growth difficulties. How to expand new businesses while retaining users and UP owners is an urgent issue that the platform needs to pay attention to.