Text: Yang Yafei
Edited by Qiao Qian
The toy dealer behind the Ultraman card is also going to be released.
On January 26, Card Game Co., Ltd. (hereinafter referred to as "Card Game") submitted a prospectus to the Hong Kong Stock Exchange, officially launching an impact on the IPO. The name card game and their "trading card" mode are not well known, but their products can be found everywhere - Ultraman cards with level, attack, defense, and laser patterns.
Although it is only the size of playing cards, the Ultraman card pack in a pack of 10 cards is sold for 1 yuan to 99 yuan, but it does not hinder the ability of this business to attract money.
According to the prospectus, the revenue of card games in the first nine months of 2021, 2022 and 2023 will be about 2.30 billion yuan, 4.13 billion yuan and 1.95 billion yuan respectively, and the corresponding adjusted net profit will be about 800 million yuan, 1.62 billion yuan and 580 million yuan respectively, and the corresponding adjusted net profit margin will be as high as 34.6%, 39.2% and 29.6% respectively.
For a long time, Kagame's products were scattered around street newsstands, grocery stores, and toy stores. But for card game users, the "messenger of light" can always be found at a glance.
Seize Ultraman and drive TCG's business by yourself
The most evergreen IP
"Do you believe in light?"
This popular Internet meme comes from many people's childhood memories - the Japanese special effects TV series "Ultraman".
The first installment in the series, Ultraman Q, was born in 1966, after 2013, Ultraman was certified by the Guinness Book of World Records as the TV show with the most spin-off series. According to statistics, in the 57 years as of 2023, a total of 33 works have been born in the "Ultraman Series", and it has been extended to various content forms such as movies, animations, novels, comics, and games.
In 2018, the card game obtained the Ultraman IP trading card and stationery authorization, and the prospectus shows that as of the first three quarters of 2023, the card game has launched a total of 274 trading card series and 28 stationery series based on 50+ Ultra hero characters.
Kayu is good at bringing Ultraman from TV dramas to consumers, including placing 1:1 Ultraman life-size models in directly managed stores, holding Ultraman meet-and-greets, Ultraman merchandise displays, and other activities. A video that has been widely circulated on short video platforms is that the mall held a sitcom of Ultraman fighting monsters, and the onlookers waved their fists to help in the air.
A card-based version of the mystery box
Different Ultraman cards have obvious differences in selling price and drawing probability.
Similar to the regular and rare categories of blind boxes, the Ultraman cards of the card game are divided into more than 20 series, such as event cards, black diamond versions, gift boxes, colorful editions and other legendary editions, and according to different rarities, they are divided into more than 30 levels such as R, SR, SSR, GP, XR, etc. According to the probability of Ultraman cards released by the card game, it varies from 1:1 to 6:432 depending on the series and the quality of the card.
Card game Ultraman card logo, according to the prospectus
Unlike Bubble Mart, whose audience is mainly young people, the audience of Ultraman IP is younger. According to 36Kr's previous interviews with a number of Ultraman card users and parents, as well as on-site visits to the flagship store of card games, its audience is mainly students, mostly boys, and as they get older, their interest in buying cards gradually weakens.
The card game flagship store in Beijing R&F Plaza, photo by the author
Collectible value to be verified
According to different card types, collectible cards can be roughly divided into two categories: IP cards and star cards/star cards. As early as the 19th century, American tobacco manufacturers introduced star cards that come with cigarettes, and since then they have gradually emerged.
The circulating price of the second-hand market is not only related to its rarity, but also linked to the items and special details, and the market value will fluctuate with the change of IP heat. Due to the active second-hand trading, the demand for ratings is also increasing day by day, and well-known third-party card rating agencies such as PSA and BGS have been born.
According to the historical sales of a 1986 Michael Jordan Fleer series card tracked by Cardladder, the card was last sold on January 26 of this year, when it sold for $372,000, compared to the initial sale price of just $10. Six of the same product on sale cost an average of $235,000.
There is a similar situation with the Ultraman cards sold in the card game, but the overall collectible value is still to be verified. According to the nearly 3,000 Ultraman-related collectible cards sold on the card Tao platform, a third-party rating agency in China, the collectible cards of the card game series are sold at prices ranging from single digits to ten digits.
TCG Model and "Social Currency"
Ultraman cards are not only for collection, but for many users, they are more competitive attributes.
Trading Cards (TCGs) are a type of card battle gameplay that originated from Magic, and is especially known for the TCG cards of Yu-Gi-Oh and Pokémon. According to the statistics of the Japan Toy Association, the size of the Japanese toy market in 2022 will be 952.5 billion yen (about 45.9 billion yuan) at retail prices, an increase of 106.7% year-on-year, of which card games and TCG cards rank first in the top ten categories, reaching 234.9 billion yen, and the highest year-on-year growth rate of 132.2%.
In contrast, the domestic trading card market is still relatively rudimentary. As early as 2013, the card game launched the TCG card "Zero Dimension", which integrates classic anime IP images such as Marvel, One Piece, Naruto, Dragon Ball, and Saint Seiya, and also held a corresponding national competition, but it has never worked significantly.
Until it got the Ultraman IP authorization, the card game brought the TCG model into the gameplay entirely, which also quickly became popular among the player group and became a "social currency". From 2020 onwards, the card game has also started to run offline "Hero Showdown" activities. According to the prospectus, as of January 16 this year, more than 3,000 events have been held in more than 100 cities across the country.
Trading cards account for the vast majority of card game revenue, with Ultraman cards accounting for the most. And it is not an exaggeration to say that card games have single-handedly driven the growth of the domestic trading card market. According to the relevant statistics of CIC Consulting, in 2022, the market share of card games ranked first in the national trading card industry in terms of total merchandise transaction value, reaching 71%, while the total market share of the 2-4 players was only 5.7%.
A trendy business
After the success of Ultraman's IP, Cardgame obviously hopes to replicate this successful path on other IPs.
According to the prospectus, as of the first three quarters of 2023, the card game has as many as 44 authorized IPs, in addition to Ultraman, there are also things like Ye Luoli, Douluo Continent Animation, Egg Boy Party, Naruto, Detective Conan, Harry Potter, etc.
Among them, unlike Ultraman, which is dominated by male players, Ye Luoli is a typical female-oriented product. From 2019 to the first three quarters of 2023, the card game has developed 91 collectible card series.
According to different contracts, the use cycle of card game authorized IP ranges from 15 months to 10 years, although there are many mature IPs, but in the current pace of content form and trend change, card games obviously make more choices to choose from.
On the bright side, the cards have a very short production cycle, and with the upstream of their own industry, they have the opportunity to turn the ship around quickly. From product design to point-of-sale shelves, the time can be shortened to 20-30 days.
The ambition of card games is not only to be an IP partner, they are also trying to incubate their own IP. Previously, in April 2023, Card Game launched its first self-owned IP "Card Game Three Kingdoms". However, it is obviously still in its early stages, and according to the prospectus, as of September 2023, the cumulative total merchandise transaction volume of the three countries' themed products is only 110 million yuan.
The humble "anime kingdom", the tightened blind box policy
Not a fluke
The success of the card game in Ultraman cards is not accidental, the founder of the card game, Li Qibin, is a post-70s Zhejiang businessman who has been immersed in the toy industry for a long time. Li Qibin as early as 2000, Li Qibin started a business with 10,000 yuan, and earned the first pot of gold in the bubble gum business, in the past, there was no sticker, a box of bubble gum can only earn 1 cent, and after adding stickers, the profit can come to 7 cents 5.
By 2003, Li Qibin founded Yiwu Beetle Toy Factory to design and develop animation toy products by himself. After that, in 2009, Li Qibin invested 76 million yuan to establish Zhejiang Beetle Printing and Packaging Co., Ltd. and Zhejiang Beetle Animation Products Co., Ltd. in Quzhou, and invested 150 million yuan to build a production base. In the same year, Beetle Group set up a branch in Hangzhou, focusing on the production of 2D animation.
So far, from paper card printing, 2D animation design to terminal channels, Li Qibin has created an industrial chain for the production and circulation of printed cards. The only thing missing is high-quality IP.
This shortcoming was made up in 2011, when Li Qibin invested in the establishment of Beetle (Shanghai) Network Technology Co., Ltd. and Card Game (Shanghai) Culture Communication Co., Ltd. in Shanghai, and cooperated with global animation IP. Relevant data show that Beetle Group has acted as an agent for major well-known cartoon brands, and has the copyright resources of more than 80% of popular brands in China, and has obtained product image authorization from many well-known companies such as Aardman in the United Kingdom, Rovio in Finland, Hasbro in the United States, Smurfs in Belgium, Toei in Japan, Disney, Shanghai Film Group, Tencent, Taomee Network, and Alpha Animation.
At this point, the creation of the "Animation Toy Kingdom" of the Beatles Group is basically completed, and the card business to which the card game belongs is the most prominent existence.
Flowing IP, iron-clad channel
The toy channel is extremely scattered, but all kinds of toy products are all over the country's retail industry.
As early as 2007, Beetle Group has developed more than 180 first-class agents in major cities across the country. By 2014, the number of terminal channels penetrated by Beetle animation had reached more than 100,000. This part is due to another business segment called "Man D", which is positioned as an animation derivative customization platform, and users can DIY print their favorite animation images to notebooks, greeting cards, cups and other products.
According to the prospectus, as of the first three quarters of 2023, Cardgame has cooperated with more than 200 dealers in 31 provinces across the country, and has spread its products to the national market.
In the past three years, Card Games has always maintained a high proportion of dealer business. According to the prospectus, in 2021 and 2022, the sales revenue from dealer channels will account for 96.8% and 92.7% respectively. In comparison, the revenue contribution of direct channels in 2021 is less than 1 point. Since then, the situation has gradually improved, and by the first three quarters of 2023, the revenue of card game dealer channels has dropped to about 8%, and the direct sales channel and retail channel account for about 9.8% and 9% of the revenue respectively.
From the prospectus
Nearly 70% gross margin
The high profit level of card games is related to its high gross profit margin. According to the prospectus, in the first three quarters of 2021, 2022 and 2023, its gross profit margin will reach 58.1%, 68.8% and 67.3% respectively. In the above three periods, the gross profit margin of trading cards was higher than the overall level, reaching a maximum of 71.2%. In 2022, the gross profit margin of Pop Mart will only be 57.5%.
There are two main reasons for the high gross margin, one is that the material cost of printing cards is lower than that of blind boxes. According to the prospectus, in the first three quarters of 2023, direct material costs accounted for only 19.9% of revenue. Second, the copyright fee is not high. During the same period, royalties accounted for only 5.8% of revenue.
The high gross profit also allows them to have more flexibility in channel development, and can reserve sufficient cost space for distribution channels at the provincial and municipal levels.
Unknown possibilities for going to sea
Represented by Ultraman and Ye Luoli, the trading card and stationery authorization of card games is still limited to the Chinese mainland market. Although there is no shortage of mature markets for collectible cards and trading cards overseas, the overseas expansion of card games has not yet been verified.
The dilemma is that IP licensing is mostly regional, and to enter new markets, card games need to start everything from scratch, after all, before Ultraman cards were successful in China, card games also tried a lot of mistakes. On the other hand, IP licensing has a typical regional nature, and some mature IPs may have been occupied by other toy manufacturers in overseas markets.
Up to now, Cardgame's overseas expansion is still relatively rudimentary, and according to the prospectus, the scope of its authorized IP has been expanded to overseas markets such as Southeast Asia. One of the main representatives is "Egg Boy Party", which has obtained the former's trading card and toy licenses in Chinese mainland and Southeast Asia, but the expiration date of 2025 is approaching.
Tightening blind box policy
2021 and 2022 are undoubtedly the highlight moments for the growth of card games, but in 2023, this situation has changed.
According to the financial report, the revenue in the first three quarters of 2023 will be 1.95 billion yuan, a decrease of 46.6% compared with the same period in 2022. During the same period, adjusted net profit fell by more than 60%. Growth has hit significant bottlenecks.
This part is related to the adjustment of business strategies such as channels and products of card games, but there is also an important background that the policies related to blind boxes are tightening. Previously, in June 2023, the "Guidelines for the Code of Conduct for Blind Box Operations (Trial)" was officially released, one of which is that blind box operators are not allowed to sell blind box products to minors under the age of 8.
This will not directly touch the basic user disk of Pop Mart, but the impact on the card game is inevitable.
Card games are already trying to open up the user structure by cooperating with more age-group IPs, but judging from the financial report, short-term pains have occurred, and for new age groups, whether trading cards are also uniquely attractive is the same as going overseas, still needs to be verified.