Author: Li Nan and Lin Xiaxi
Editor: Li Shuguang
The fat penguin with only money has started to close the net again. It has been rumored for a long time that Tencent will unify the game live broadcast industry, and now the dust has finally settled.
Game live streaming platforms Douyu and Huya announced on the 12th that they have officially accepted the merger invitation proposed by major shareholder Tencent. According to the merger agreement, Huya will acquire all issued shares of Douyu through a stock-for-stock merger, and Douyu will become a private wholly-owned subsidiary of Huya and delist from Nasdaq.
This means that the two leading game live streaming platforms in China have ended their competition and mutual consumption, and have come together. This also means that game live streaming will enter a new stage of development.
The two superpowers will become a single dominant company, and the bargaining power of the platforms will be greatly improved. The "sky-high-priced anchors" may become history. From the perspective of benefits, the industry order will be more standardized and vicious competition will be reduced.
From the perspective of hidden concerns, some netizens are worried that after Tencent dominates the market, free lunches may become less and less, and "recharge" will be the theme of the next stage.
Tencent has become synonymous with game live streaming in China
Douyu and Huya have been fighting for years to be the top live game streaming platform. Now, they don’t have to fight anymore.
According to the merger agreement between the two companies, Douyu and Huya will merge at a ratio of 1 Douyu ADS for 0.730 Huya ADS. Based on this exchange ratio, Douyu's existing shareholders and Huya's existing shareholders will each hold 50% of the economic interests in the merged company, implying that Douyu's valuation is equal to Huya's market value.
The merger is expected to be completed in the first half of 2021. After the merger, the new company will adopt a joint CEO system. Douyu CEO Chen Shaojie and Huya CEO Dong Rongjie will serve as co-CEOs, and Chen Shaojie will join the board of directors of the new company. Douyu and Huya's products and brands will remain relatively independent, and the management will remain stable.
It is worth noting that along with the signing of this merger agreement, Douyu and Tencent also signed a transfer agreement on the Penguin E-sports business. After that, Douyu will acquire the Penguin E-sports business from Tencent.
That is, Douyu first acquired Penguin Esports, and then merged with Huya into a new company. Behind the series of transactions, Tencent was the ultimate driving force. According to the agreement, Tencent will eventually obtain 67.5% of the voting rights of the new company obtained by the above merger, becoming the largest shareholder.
After years of competition, the game live broadcast industry was finally harvested by Tencent, the copyright holder at the upstream of the industry chain. Although some people were still surprised by the news, such an ending was already destined.
In 2016, Tencent led Douyu's Series B financing. In 2018, it invested $630 million in Douyu and $460 million in Huya, respectively, continuing to increase its investment in the field of game live streaming. In April this year, Tencent once again acquired more shares of Huya from Joyy Group, increasing its voting rights to 50.1%. At the same time, it holds 38% of Douyu's shares, making it the largest shareholder.
If there is no major change, Tencent will have the final say in the field of game live streaming. Game live streaming has been developed for nearly ten years and has a large number of users. Currently, the most discussed topic on social media is: Does this merger into one company and Tencent's dominance mean that it is time to "cut leeks" in game live streaming?
You Yunting, senior partner of Shanghai DaBang Law Firm, expressed his views to Shijie: "This merger led by Tencent not only has the problem of horizontal monopoly, but also the problem of vertical monopoly."
"Horizontal monopoly is a problem of concentration of operators, and vertical monopoly refers to Tencent's deepening control over the upstream and downstream industrial chains through this merger, which is definitely not conducive to market competition. Upstream refers to Tencent's control of games such as Honor of Kings and Game for Peace, and downstream refers to Tencent's control of game live streaming platforms such as Douyu and Huya."
He mentioned that according to relevant regulations of the State Council, "the total global turnover of all operators involved in the concentration in the previous fiscal year exceeds RMB 10 billion, and at least two of the operators have a turnover of more than RMB 400 million in China in the previous fiscal year" needs to be reported.
According to financial report data, Huya's total revenue in 2019 was 8.375 billion yuan, while Douyu's total revenue in 2019 was 7.28 billion yuan. In other words, this merger needs to be reported.
However, some experts pointed out that "the filing does not mean a monopoly, and the merger may be approved after review."
According to iResearch Consulting, the revenue of China's game live streaming industry reached 20.8 billion yuan in 2019, with Huya and Douyu accounting for 40.25% and 35.00% of the market share respectively. After the merger, the two companies obviously occupy the vast majority of the market share.
In addition, there are still variables in the game live broadcast industry. Although no independent game live broadcast platform has been established since last year, Bilibili, Kuaishou, Xigua Video, etc. have expanded their game live broadcast content, which will still have an impact on old players. Among them, Bilibili and Kuaishou have close relations with Tencent, but the influence of ByteDance cannot be ignored.
Zhuang Minghao, vice president of Matrix Partners China, said, "If ByteDance can have a hit game, then Douyin's game live streaming will be on the table instantly."
Why Douyu was merged into Huya
Why was Douyu merged into Huya? Douyu’s number of users exceeded Huya’s for a long time, and it was known as the largest platform for game live streaming, but this time it was Douyu that was merged into Huya.
This can be analyzed from different perspectives.
From the perspective of listed company assets, as shown in the figure below, the total assets of Douyu and Huya Live are 9.489 billion yuan and 12.178 billion yuan respectively, and the scale of Huya Live is nearly 30% higher.
Note: Only assets with a proportion greater than 1% are listed.
In the asset details of the two companies, the largest proportion is money, which is quite "asset light". Of course, this is also an important feature that distinguishes Internet companies from traditional industries.
Douyu and Huya Live hold 8.178 billion yuan and 8.347 billion yuan in cash respectively. In addition, Huya Live has 2.398 billion yuan in short-term investments, which can also be regarded as assets with strong liquidity and monetization capabilities. In this way, Huya Live is still richer.
In addition, the second largest assets of the two companies are long-term investments, with amounts of 482 million yuan and 431 million yuan respectively, accounting for 5.1% and 4.5% of total assets, respectively, an increase of 51.13 million yuan and 256 million yuan from the end of 2019. Douyu's investment rhythm is clearly at a peak.
In addition to asset structure, operational capabilities can better reflect the difference between the two.
In 2019, Huya Live’s revenue was 8.375 billion yuan, of which online live streaming and advertising revenue accounted for 95% and 5% respectively; Douyu’s revenue was 7.283 billion yuan in 2019, of which online live streaming and advertising revenue accounted for 91% and 9% respectively.
Although Huya Live's overall revenue scale is 15% higher than Douyu, Douyu's gross profit margin of 21.08% is higher than Huya Live's 17.7%, making it more profitable, and this trend continued into the first half of 2020.
From the perspective of net profit, Huya Live still maintained its leading position in 2019, with 468 million yuan surpassing Douyu's 33 million yuan, and the net profit margins of the two were 5.59% and 0.46% respectively (adjusted net profit margin was 4.75%).
However, in the first half of 2020, the profit levels of the two companies changed significantly – Douyu surpassed Huya Live with a net profit of 574 million yuan, compared with 398 million yuan of Huya Live, and was nearly 5 percentage points ahead with a net profit margin of 11.99% (adjusted net profit margin was 12.95%).
In terms of the number of users, Huya's monthly active users are slightly higher than Douyu's. In the second quarter of 2020, Huya's average monthly active users were 168 million, of which 6.2 million were paying users; while Douyu's average monthly active users were 165 million, of which 7.6 million were paying users.
So in general, Huya Live has a larger overall asset scale, with more cash and more monthly active users. Douyu just surpassed it in terms of overall profitability in the first half of 2020.
In fact, both sides have their own advantages and disadvantages, but after comprehensive consideration, Tencent, the major shareholder behind them, chose to merge Douyu into Huya Live.
Zhang Yi, CEO and chief analyst of iMedia Consulting, told Shijie that the final decision was to merge Huya with Douyu because Huya's entire live broadcast ecosystem, the management behind it, and the future talent base all have advantages.
Huya Live, located in Guangzhou, was previously separated from YY Live. From a management perspective, it is very close to Tencent headquarters. Guangzhou also has a relatively sufficient talent pool. Considering that Guangzhou is also suitable for the future development of the game live streaming industry, Huya Live still has greater competitiveness.
For Douyu, whether it is willing to be "absorbed" or not, it is powerless to influence the decision of the major shareholder. More importantly, this is something that can reduce internal friction and achieve a win-win situation. Coupled with a reasonable price and reasonable profit distribution, there is not much reason to refuse.
Looking back at the two companies' journey from listing to competition and then to merger, they also went through a process of catching up and overlapping in terms of market value.
After Huya went public first, its market value has always been higher than Douyu. In October 2019, the gap between the two even reached US$2.1 billion. However, as Douyu's profitability continued to rise, the gap narrowed to US$700 million a month ago.
After the merger announcement on October 12, Douyu closed up 12%, with a total market value of $4.978 billion, while Huya Live closed down 11.17%, with a market value of $5.095 billion. Due to the 50-50 shareholding ratio after the merger, the market value of the two companies is getting closer, which can be said to be "different paths to the same destination" to some extent.
Note: Huya Live and Douyu were listed on May 11, 2018 and July 17, 2019 respectively, and the latest closing date was October 12, 2020
What will the second half of the live story look like?
In recent years, the competition pattern of "two super and many strong" has been established in the game live broadcast. Now the marriage of the first and the second will undoubtedly have a huge impact on the entire industry.
Zhang Yi pointed out to Shijie that from the perspective of peer competition, in the past, the third and fourth largest companies were able to reap the benefits of the competition. After the merger, Tencent can act in a unified manner, and the third and fourth largest companies will face huge competitive pressure.
The story of the “sky-high-priced anchor” will most likely become history.
In June this year, the highest penalty for job-hopping in the domestic live broadcast industry was born. The Hubei Provincial High People's Court ruled on the job-hopping case of the well-known e-sports anchor Wei (also known as "Wei Shen") during the contract period, and ordered Wei to pay a penalty of 85.22 million yuan to the plaintiff Douyu's Yuhang Company.
The time goes back to September 2017. At that time, Yuxingtianxia and Wei and others jointly signed the "Commentary Cooperation Agreement", stipulating that Wei would be the exclusive commentator and conduct commentary activities on the Douyu platform from October 1, 2017 to September 30, 2019. However, two months after the contract was signed, Wei privately jumped to the Huya platform for live broadcasting.
For the anchors, in the early days, platforms were willing to spend a lot of money to compete for anchors, so "sky-high breach of contract and contracts treated as waste paper" became common occurrences.
However, after the merger of Huyu and Douyu, the bargaining power of anchors will inevitably decline. Douyu dancing anchor Xiao Shen Shen Er once talked about the merger of Huyu and Douyu. She believes that the most important impact is that the "high salaries" of anchors may become a thing of the past.
People in the live broadcast industry pointed out to Shijie that with the merger of Huyu, everyone is under Tencent's sphere of influence, and there will be much less vicious competition. From this perspective, the merger has positive value for the industry.
In fact, no new independent game live streaming platforms have been established since 2019, and the industry has entered a new stage of development. The person believes that the merger of Tigerfish means that the game live streaming industry has reached its ceiling and has shifted from the user growth stage to profit growth.
By
This also means that game live streaming will also find ways to explore more new profit methods. According to iResearch Consulting, the market size of China's independent game live streaming platform reached 20.8 billion yuan in 2019, and the platform's profitability continued to improve. From the perspective of business model, the revenue of live streaming business accounts for more than 93%, and new businesses such as live streaming e-commerce and cloud games will broaden the commercial realization model of game live streaming platforms.
During the heated discussion among netizens, there was also a concern about the platform's business model, namely, whether one would have to pay to watch live broadcasts in the future, or even become a VIP member to watch live broadcast content.
In fact, Douyu tried paid viewing during the League of Legends S9 in 2019. In this year's League of Legends LPL event, Huya and Penguin Esports also launched first-person paid viewing content. Just like music platforms charge for listening to songs and video platforms provide advanced on-demand viewing, game live broadcast platforms also focus on using high-quality content to cultivate users' content payment habits.
As industry resources further integrate, similar paid explorations will probably increase. In the long run, free entertainment content will probably become less and less.
发表回复