May, the first earnings season of 2024. After cost control in the past year, the financial performance of the "Internet giants" in the first quarter was generally outstanding, especially in terms of net profit. China's internet economy, whether it's e-commerce, gaming, live streaming or social networking, seems to be rejuvenating.
From the perspective of vertical fields, the recovery of the game live broadcast field is also obvious.
On May 13, Huya released its financial report for the first quarter of 2024 (hereinafter referred to as the "financial report"), under the US generally accepted accounting principles (GAAP), net profit increased by 79.3% year-on-year to 71 million yuan, and gross profit margin increased to 14.7%. On the second day of the earnings report, Huya's share price rose 16.7%, which shows that capital is optimistic about this report card. In the past half month, Huya's stock has risen by more than 40%, with a market value of nearly $1.4 billion.
If Huya's previous "repurchase plan" and "special cash dividend" are a shot in the arm for shareholders, then the following two points can really conquer the capital market:
According to the "Quarterly Report on China's Game Industry from January to March 2024" released by Gamma Data, the actual sales revenue of China's game market in the first quarter was 72.638 billion yuan, a year-on-year increase of 7.60%. This means that the gaming industry is gradually relieving the pressure and generating new increments.
On the other hand, it also lies in Huya's own initiative to change. Huya launched the "three-year plan" in August last year to carry out strategic transformation, and as the transformation continues to burst into effect, it is now also significantly reflected in the financial report figures.
Perspective Q1 financial report: strategy burst out of results, showing the "flywheel effect"
According to CNNIC data, as of 2023, the number of online live broadcast users in mainland China will reach 765 million. Among them, the number of live game broadcasts was 296 million, with a growth rate of 21.8% over the same period. This means that the fundamentals of the entire industry tend to grow steadily.
"In the first quarter of 2024, Huya's user base has developed healthily, the game-related service business has grown rapidly, and the overall revenue trend has become more stable," said Huang Junhong, co-CEO and senior vice president of Huya, in a quarterly analyst call. ”
"Yidian Finance" believes that the stability of the basic market is an important support for Huya to dare to take the initiative to seek change and establish a new growth curve. In August 2023, Huya formulated a "three-year plan" to promote commercialization and transformation of game services by providing game-related services such as game distribution, game props, and game advertising.
Judging from the latest financial reports, this plan has achieved remarkable results. In the first quarter of this year, Huya's game-related services, advertising and other revenue reached 244 million yuan, up 137.6% year-on-year and 30.7% quarter-on-quarter. Gaming-related services, advertising and other businesses accounted for 16% of total revenue, up from 12% in the previous quarter and 5% in the year-ago quarter.
From August 2023 to April 2024, the sales volume of Huya props will increase by 1,800 times, the game distribution turnover will increase by 12 times, and the game advertising turnover will increase by 2 times. The gross profit margin of game-related services was relatively high, and the increase in its contribution to total revenue due to its strong growth rate also contributed to the overall gross profit margin improvement.
Further observation shows that the improvement of Huya's game-related business is inseparable from the improvement of user experience brought by upgraded products and technologies. In February this year, the Huya Live APP launched version V12.0, which integrates new technologies such as AI and a number of new product features. For example, in the new version of the "Game Stylized Live Room", new technologies such as AI fun broadcasting have been added. It upgrades the traditional "watching" mode of live game broadcast to real-time commentary and interactive mode, allowing users to have more sense of participation, enhancing the interactive experience, and improving the quality of platform operations.
Specifically, in the game distribution business, Huya is expanding the scope of cooperation to cover more upcoming and existing games. Game users on the Huya platform have high potential for commercial value – at present, the average in-game consumption level of users through Huya's distribution channels is excellent; Huya is also making the most of this advantage by continuously improving its operations.
In terms of game props sales, Huya provides a wealth of popular game props for more games, and is also expanding the exclusive custom game props of anchors to strengthen the connection between streamers and fans.
In terms of game advertising services, Huya is also actively promoting cooperation with more game manufacturers and carrying out innovative anchor promotion activities.
Huya's management also elaborated on game-related services in the first-quarter earnings call, and the business segment is expected to improve the company's profitability - "Most of Huya's revenue from game distribution and item sales is recognized after revenue sharing with game manufacturers, that is, on a net basis, so the total business flow of game-related services is larger and growing rapidly." In the first quarter of 2024, the strong growth of the game-related services business further strengthened the company's confidence that the revenue of the business will continue to expand. In addition, this will drive the overall gross margin improvement as the contribution of the game-related services business with higher gross margin to total revenue increases. In the long run, business transformation will not only change Huya's revenue structure, but also increase revenue scale and profitability. ”
In addition, in the first quarter of 2024, Huya successfully attracted more users by virtue of product upgrades, iterations, and innovative cross-platform e-sports events and operational activities. The first quarter is usually the off-season for game live streaming, but through Huya's financial report, it can be found that the average number of monthly active users (MAU) on mobile devices of Huya Live still increased year-on-year in the quarter, reaching 82.6 million. Paid subscriber acquisition increased slightly quarter-over-quarter to 4.4 million.
There is a well-known "flywheel effect" in the business world, where businesses push each other like cogs that are in lock. It takes a lot of effort for the whole gear set to rotate from stationary to rotating, but the effort of each lap will not be in vain, and the whole gear set will rotate faster and faster. The upgrading and integration of Huya's technology and products has actually burst out of the "flywheel effect", accelerating the improvement of user experience and forming a greater development potential.
This "flywheel effect" continues.
On April 26, Huya announced the launch of the "Tiger Billion Plan", which will cultivate more than 1,000 industry-wide head anchors in the next three years, cooperate with more than 5,000 high-quality game projects, and help game customers to release new games through the content marketing model, leverage more than 10 billion full-platform traffic, and divide 10 billion for game commercial anchors in the next three years.
It can be expected that the plan will enhance the interests of users, players, streamers and other roles, and optimize the platform experience. At the same time, Huya's own development will continue to form new momentum.
"Those species that survive, not the most intelligent and intelligent, but the ones that respond the fastest to changes in their environment." This sentence in "The Origin of Species" is also applicable to game live streaming platforms such as Huya. Responding quickly to the changing industry environment through strategic transformation is the right way to survive.
Looking to the Future: The "New Flywheel" in Ecological Evolution
With the gradual deepening of the transformation, Huya is also interested in promoting another important trend in the game live streaming industry, that is, continuing to break down barriers between platforms, reduce competition and strengthen cooperation.
In April this year, Huya successively connected to Douyin and Kuaishou, and previously launched traffic cooperation with Douyu and Station B to push more Huya anchors to public domain traffic. The linkage of many leading video platforms in the industry was very rare in the past.
In addition, the event cooperation between the platforms is also going on simultaneously. In the first quarter of this year, the "E-sports All-Star New Year Competition" hosted by Huya invited Douyu, Bilibili, and Kuaishou to co-host, and also included Tencent's "League of Legends", "Glory of Kings" and "Peace Elite" 3 phenomenal games. In April this year, Huya announced that it would hold the 2024 League of Legends LGC Legend Cup, and streamers from other platforms such as Douyu, Station B, and Douyin will also be able to participate in the Huya Legend Cup.
Previously, the spread of self-made events on game live streaming platforms was basically limited to a single platform. Now, the strengthening of multi-party cooperation in these events will undoubtedly broaden the scope and create a win-win situation. For users, the events they watch have become richer and more exciting. For esports players, streamers, and artists, exposure and popularity will increase dramatically. For the platform, it can create more professional events by sharing resources, enhance the attractiveness of the platform, and then promote the development of the game live broadcast industry.
These platform cooperation is like a cogwheel that bites, forming an irreplaceable "connecting relationship" and creating unique ecological value. It is worth mentioning that in activities such as the "E-sports All-Star New Year Competition", WeChat Channels and Tencent Video have also made important support. From this point of view, Huya is increasing the integration of platform resources with Tencent. This also shows that the role of Huya in Tencent's ecosystem and in the industry as a whole is changing.
For Tencent, which intends to boost its game business, it is still necessary to return to Tencent's development strategy, and the core is to "connect everything".
Externally, Tencent now allows its games to be broadcast and advertised on other short video platforms, such as Tencent's "Honor of Kings", "Peace Elite", "League of Legends" and other games have successively opened live broadcast rights on Douyin. Internally, Tencent can achieve deeper integration of different products. For example, Channels is regarded by Tencent as the "hope of the whole village", and the total user time spent on Channels in the first quarter of this year increased by more than 80% year-on-year. By connecting game live streaming and advertising with Channels, you can tap more increments.
In the "internal and external connection" in the game field, Tencent needs to have an "ecological hub" to play a better role in connectivity. At present, Huya can play this role.
First of all, in essence, Huya's ecological thinking of cooperating with all parties is at the same frequency as Tencent's development logic of "connecting everything". Since it is the same frequency, it can exert a stronger synergistic effect.
Secondly, Huya's high-quality content can be delivered to various product lines in Tencent's ecosystem, such as Channels, Tencent Video, QQ and multiple game products, to enhance the content richness of Tencent's various product lines. For example, the video account needs the content resources, operational capabilities and platform anchors accumulated by Huya in the game live broadcast track, which is an advantage that other platforms do not have.
In addition, Huya's cooperation with platforms outside Tencent's ecosystem is also becoming more frequent and deeper. On the one hand, this cooperation can promote the growth of Huya itself, and on the other hand, it can also strengthen Huya's "ecological hub" attributes, inject more fresh strength into Tencent's ecosystem, and achieve better coordinated development.
From a higher industry perspective, Huya's multi-platform cooperation brings a value enlightenment to the industry, that is, platforms should not work independently, but should break down barriers, realize resource sharing, complementarity and co-creation through in-depth cooperation, and create an ecology of benign growth.
epilogue
Judging from the multi-party cooperation of game live broadcast platforms such as Huya, the industry may continue to enter the stage of competition and cooperation in the future. At this stage, enterprises must have sufficient ecological thinking, the core of which is win-win cooperation, and it is also a prerequisite for the "flywheel effect".
In the future, we hope to see more and more companies embrace an ecological mindset. If the live broadcast platform can achieve continuous ecological linkage, then the "growth flywheel" of the game live broadcast industry will become more and faster, and this track will truly become a "good business" again.