Five months ago, Chen Shaojie, the founder and CEO of Douyu (DOYU.US), was arrested by the Dujiangyan Public Security Bureau in Chengdu on suspicion of opening a casino. On April 23, the news that Chen Shaojie had been released on bail pending trial after the Spring Festival this year spread again.
At present, the outside world's discussion and speculation about Chen Shaojie's case are still fermenting. As of press time, there has been no new response from Douyu on the specific progress of this case, including the trial date or further legal procedures.
In fact, since Chen Shaojie's arrest, many top anchors on the Douyu platform have suspended live broadcasts, and then only a few anchors announced the resumption of broadcasting.
At that time, it was rumored in the industry that this series of suspension incidents was related to the Chen Shaojie case, and the reason was mostly involved in gambling and money laundering.
On April 23, the news that the well-known Douyu anchor "A Small Tuantuan" was arrested quickly appeared on the Weibo hot search list, and some netizens speculated that the reason for the anchor's arrest may involve large gambling and be implicated in the Chen Shaojie case.
The domino effect continues, and the sharp drop in Betta's share price also reflects the capital market's concerns about the company's future prospects. As of the close of trading on April 22, Douyu's share price was $8.29 per share, with a total market capitalization of $265 million, compared with more than $3 billion at the beginning of 2021, and has now evaporated more than ninety percent.
Chen Shaojie may face a real sentence
Headquartered in Wuhan, Douyu is one of the top game live streaming platforms in China, formerly known as ACFUN Shengbo Live, which was renamed Douyu in 2014. The founder, Chen Shaojie, has a background in game research and development, and has been the chairman and CEO of Douyu since May 2014.
Chen Shaojie last appeared in the public eye on August 14 last year, during Douyu's second-quarter earnings analyst conference call. According to media reports, he pointed out at the meeting that in the future, Douyu will continue to implement the development strategy of "a diversified content ecological platform with games as the core", and explore new growth points while optimizing content production and product innovation, so as to consolidate Douyu's comprehensive competitiveness and leading position in the domestic game content industry.
At the beginning of November 2023, the news of Chen Shaojie's disappearance will ferment on major social platforms, and most of the rumors in the industry point to the violations of laws and regulations involved in the live broadcast room of the Douyu platform. At that time, Douyu officials did not respond positively to this incident. Until November 21 last year, Douyu issued an announcement saying that Chen Shaojie, the chief executive officer and chairman of the board of directors of Douyu, was arrested by Chengdu police around November 16, and the company had not received a formal notice of the investigation against Chen Shaojie or the obvious reason for his arrest.
The next day, the Chengdu Dujiangyan Public Security Bureau officially reported, "After investigation, our bureau found that Chen Shaojie was suspected of opening a casino, and he has been arrested in accordance with the law." Further investigation is ongoing. ”
Chen Yuanxi, a lawyer at Shanghai Hiways Yongtai Law Firm, said in an interview with the International Financial News that according to the relevant judicial interpretations of the Supreme People's Court and the Supreme People's Procuratorate, for the purpose of making profits, establishing a gambling website on a computer network, or acting as an agent for a gambling website, and accepting bets, belongs to "opening a casino" as stipulated in Article 303 of the Criminal Law. Specifically, as long as it is a gambling website set up on the Internet, accepting bets or organizing gambling for others, or acting as an agent, or participating in profit sharing, it will be considered as the act of opening a casino.
At present, the relevant details of the case have not been disclosed, but in view of the fact that Chen Shaojie's case may involve multiple anchors on his platform, it is very likely to meet the serious circumstances stipulated in the Criminal Law and relevant judicial interpretations, that is, taking more than 30,000 yuan, or accumulating more than 300,000 yuan in gambling, and more than 120 people participating in gambling. Chen Yuanxi said that if the suspect in the case is convicted, he could be sentenced to 5-10 years in prison.
It is worth noting that after Chen Shaojie's incident, Douyu set up a temporary management committee, and said on the third quarter post-earnings call at that time that "at present, Douyu Company is operating normally, and the investigation has not had a significant impact on the company's operations." Since then, Douyu has not disclosed any information about Chen Shaojie.
With many years of criminal defense experience, lawyer Shao Yijun, a doctor of law from the University of Minnesota and a partner of Shanghai Riying Law Firm, said in an interview with the reporter of "International Financial News" that Chen Shaojie was arrested in accordance with the law around November 16, 2023, and in accordance with the provisions of the Criminal Procedure Law, the period of investigation and detention after arrest shall not exceed two months, and for complex cases, it can be extended by one month with the approval of the higher procuratorate," At present, it seems that if Chen Shaojie is released on bail after the Spring Festival, it is very likely that he will be transferred from criminal detention to bail pending trial around February 16, 2024. ”
"Release on bail pending further investigation applies to criminal suspects who may be sentenced to fixed-term imprisonment or higher but do not pose a danger to society, for a period of one year. Shao Yijun further said that because the amount of money involved in Chen Shaojie's case is not yet clear, but according to the scale of the Douyu platform and the law, if his behavior is confirmed, he may face seven to eight years in prison. However, at present, there is insufficient public information, and there is also the possibility that Chen Shaojie, as the person in charge of the platform, is unaware of his subordinates to engage in online gambling activities, which may lead to unclear circumstances of the case, thus affecting the decision-making of the judicial authorities. ”
Where is the betta fish going?
"This fish is fierce and aggressive, and it will be a fight when two males meet. Chen Shaojie once publicly told the origin of the name of the live broadcast platform "Douyu". Since its establishment, Douyu has completed a total of 8 rounds of financing, including US$630 million in financing from Tencent's exclusive investment in March 2018. According to the latest equity information released by Douyu, Chen Shaojie personally holds 17% of the shares, and the largest shareholder is Tencent, which holds 37.7% of the shares.
On July 17, 2019, Douyu was officially listed on the NASDAQ exchange in the United States, with an issue price of $11.5 and a maximum fundraising of $891 million. In the same year, Chen Shaojie ranked 1507th in the "2019 Hurun Report" with 2.5 billion yuan, and ranked 43rd in the "2019 Hurun Post-80s Self-Made Rich List" released by the Hurun Research Institute.
In recent years, due to the market share seized by platforms such as Station B and the rise of short video platforms such as Douyin and Kuaishou, the entire game live broadcast industry has been turned upside down, and the time point of Chen Shaojie's East Window incident coincided with the critical stage of Douyu's difficult transformation.
In 2023, Douyu will finally usher in its first annual report in nearly three years, but its revenue will continue to decline. According to the financial report, from 2019 to 2023, Douyu's revenue scale shrank from the highest point of 9.6 billion yuan to 5.53 billion yuan, and in terms of net profit, Douyu lost money for two consecutive years in 2021 and 2022, and finally turned losses into profits in 2023, with an annual net profit of 35.5 million yuan and an adjusted net profit of 154 million yuan.
Douyu's revenue growth trend in recent years Chart: Ma Yunfei
The decline in revenue and the turnaround of Douyu mainly came from cost control. In the fourth quarter of 2023, Douyu's sales and marketing expenses decreased by 32.2% to RMB84.0 million from RMB123.9 million in the same period of 2022, and R&D expenses decreased by 26.7% to RMB59.1 million from RMB80.6 million in the same period of 2022.
At the same time, Betta is also facing the severe challenge of user churn.
According to the latest financial report, in the fourth quarter of 2023, Douyu's average mobile MAU was 51.7 million and its paying users were 3.7 million, compared to 57.4 million mobile MAU and 5.6 million paying users in the same period in 2022. Obviously, at present, how to effectively prevent churn, stabilize and attract more users has become an important issue for Douyu to solve.