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text/xu wenwen

editor/zhang xiao

douyu and huya are not far from merging?

recently, according to 36kr games, a person familiar with the matter revealed that tencent’s investment department has met and discussed with senior executives of huya and douyu respectively. one of the purposes is to discuss merger matters.the date and details of the merger have not yet been finalized, but the merger seems to be coming soon.

earlier, before this news broke, huya announced a new round of personnel adjustments, appointing lei peng as the company's acting co-ceo and cfo, effective september 5.

lei peng comes from a financial background. before taking up his new position, he served as the financial director of tencent financial technology, and other positions in tencent were also in the financial direction. prior to joining tencent in 2004, he worked at pricewaterhousecoopers for more than 10 years.

lei peng's entry into huya's core management at this time is quite subtle - the cfo takes over the top business, to some extent, often for financial due diligence. one possible guess is that he is preparing for the merger of huya and douyu.

this is not the first time that douyu and huya have sought to merge. as early as 2020, tencent tried to bring the two parties together to reach a merger, but was subsequently stopped by regulators because it failed to pass antitrust review.

tencent is now the largest shareholder of huya and douyu. in june 2022, tencent's corporate e-sports and related products announced the termination of operations, which means that huya and douyu have become tencent's two key products in the downstream distribution link of the game industry.

for huya and douyu, reaching cooperation is also a good thing.

in the past two years, platforms such as kuaishou, douyin, and bilibili have accelerated their efforts to "grab the cake" in the game live broadcast industry. huya and douyu have also encountered increasing growth challenges.

in the second quarter of this year, douyu's revenue, profits, and user numbers all showed a downward trend. live broadcast revenue, the core revenue pillar, dropped 37.2% from 1.2583 billion yuan in the same period in 2023 to 790.1 million yuan; huya is also facing due to similar problems, huya has experienced year-on-year revenue decline for 11 consecutive quarters since the third quarter of 2021.

in this situation, huya and douyu need to "huddle together for warmth."

however, even if the merger is successful, it will not help them solve all problems.with the business performance of the core revenue pillars both declining, they still have many challenges ahead.

01

with the loss of top anchors and pressure on revenue pillars, huya and douyu are in a "troubled time"

after the arrest of chen shaojie, the original founder and ceo of douyu, in november last year, major anchors "fallen the trees and the monkeys are scattered", stopped broadcasting, ran away, and even had "a small group" and other problems. several anchors were also arrested one after another, and the anchor ecosystem fell into depression for a time.

the core anchors of the past have also "chosen a good place to roost."

on august 6, 2023, xuxu baby announced on weibo that the five-year contract with douyu had ended and that he would go to douyin to start a new live broadcast chapter on august 18. pdd, on the other hand, reappeared in the public eye eight months after it was suspended, and its chat records in the fan group were subsequently leaked: pdd stated that "it still owes douyu some time" and since then "will no longer do douyu." .

the reality behind this is that in the past few years, both douyu and huya have faced a real challenge. under the accelerated layout of comprehensive live broadcast platforms douyin, kuaishou, and bilibili with more traffic, their anchors are losing their anchors at an accelerated rate.

focusing on huya again, the loss of core top anchors is actually weakening the moat. in july last year, the veteran anchor of league of legends, sao nan, also ended his live broadcast career on huya, and started live broadcast on douyin in february this year; in december of the same year, zhang daxian, the former anchor of huya and the first brother of king of glory, left huya and started live broadcasting on douyin. yin completed his live broadcast debut.

more importantly, the departure of such top anchors will also have a subsequent chain reaction - those who leave first will get more traffic on other platforms and reap higher profits, which may make others who are still in the wait-and-see stage other anchors are ready to make a move.

for example, after zhang daxian moved to douyin at the end of 2023, he gained more than 55 million fans in more than half a year, exceeding the total number of fans he accumulated in huya in four years. on august 20, as black myth wukong set off a craze for the destiny of the people, zhang daxian conducted an 8-hour live broadcast of "black myth: wukong" on douyin, attracting 27.37 million views.

zhang daxian’s personal douyin homepage, picture/douyin app

behind this, since the second half of 2023, in addition to zhang daxian and xuxu baobao, douyin has also successively signed contracts with well-known anchors from other live broadcast platforms such as feng timo and ke jie. as of august this year, the number of consumers of douyin's game content (short videos, live broadcasts, graphics and text) has reached 400 million+, an increase of 40% compared with the same period last year. the number of viewers also increased by 65% ​​compared with the same period last year;

kuaishou’s live broadcast business revenue reached 9.3 billion yuan in the second quarter, and game live broadcast is an important part. at the same time, in the past quarter, the number of guilds signed by kuaishou increased by nearly 50% year-on-year, and the number of anchors signed by guilds increased by 60% year-on-year.

the anchor ecology encounters challenges, followed by the loss of platform users and bottlenecks in revenue growth.

in the second quarter, douyu's average mobile mau (monthly active) was 44.1 million, a year-on-year decrease of 12.3% compared to 50.3 million in the same period in 2023; the quarterly average number of paying users was 3.4 million, a year-on-year decrease of 15% compared to 4 million in the same period in 2023. %.

as we mentioned above, live broadcast revenue, the core revenue pillar of huya and douyu, has also been declining at an accelerated pace in the past two years, and growth bottlenecks have emerged.

02

the core management is still changing, can it help them successfully transform?

over the past many years, a single monetization model has always been a common problem faced by huya and douyu.

both huya and douyu have long been over-reliant on live broadcast business to generate revenue, and the proportion of revenue contribution has remained at around 80% or even higher for a long time.

taking the second quarter of this year as an example, live streaming revenue accounted for 76.55% of douyu’s revenue and 79.87% of huya’s revenue. this is because both parties have vigorously promoted the diversification of revenue structure in the past two years. result.

in the previous year, from douyu to huya, from changes in core management to business adjustments, both parties accelerated their diversification exploration in an attempt to find a new growth curve for the company.

on the douyu side, after chen shaojie was arrested on suspicion of opening a casino, douyu's board of directors formed an interim management committee, composed of the company's director and chief strategy officer su mingming, the company's director and vice president cao hao, and the company's vice president ren simin.

afterwards, douyu embarked on a diversified business transformation:

for example, on the anchor side, ip content such as official event second-way commentary is launched around the head anchor, and traffic weight is given; on the business side, business weights such as the sale of game props and game advertising are increased to promote the diversification of the platform's income and put the eggs in the in different baskets.

currently, douyu has cooperated with more than 10 popular games such as peace elite, dnf, honor of kings, and lol mobile games. as a cooperation channel for game manufacturers’ commercial activities, douyu promotes game props through platform anchors, content creation, and operation activities. .

at the same time, on january 12 this year, douyu issued an internal email stating that it announced adjustments to its internal organizational structure and personnel, and a new content ecology department was established to be responsible for anchor content production, manufacturer cooperation, and event ecosystem construction. from the perspective of the industry, this is a signal for douyu to further diversify its transformation—to move closer to game manufacturers and complete the transformation of its role from a “game community” to a “service provider that cooperates with game manufacturers.”

huya is also accelerating its transformation.

in may 2023, huya announced that lin songtao, vice president of tencent, would succeed huang lingdong as chairman of huya. immediately afterwards, huang junhong, senior vice president of huya, and wu xin, vice president of finance, also became the acting co-ceos of huya. both of them also have tencent backgrounds.

in august of the same year, huya announced a strategic transformation and formulated a three-year plan, committed to helping huya complete its commercial transformation by providing more game-related services, such as game distribution, in-game item sales and game advertising.

it is not difficult to find that when it comes to breaking through the limitations of a single revenue, huya and douyu can be said to coincide with each other, and they are both trying to walk on multiple legs to make steady progress.

however, based on the financial report, their transformation has a certain effect, but it is still in the early stages, and it is still unknown whether they can continue to improve their revenue structure.

in the 2024q2 financial report, huya’s revenue from game-related services, advertising and other businesses increased by 152.7% year-on-year and 26.6% month-on-month to 310 million yuan, accounting for only 20% of total revenue.

picture/huya live official wechat official account

this does not help the decline in comprehensive revenue: in 2024q2, huya’s revenue was 1.542 billion yuan, a year-on-year decrease of 16.1%; excluding the impact of non-cash factors, non-gaap net profit was 97 million yuan, a year-on-year decrease of 15.7%.

similarly, in the 2024 q2 financial report, douyu emphasized that its "innovative business, advertising and other revenue was 242 million yuan, and the company's revenue structure has been further optimized."however, this did not reverse the overall downward trend: in the second quarter, douyu achieved revenue of 1.032 billion yuan, a year-on-year decrease of 25.8%; a net loss of 49.2 million yuan, while in the same period in 2023, the net profit was 6.8 million yuan.

at the same time, douyu’s average mobile mau (monthly active) in q2 was 44.1 million, a year-on-year decrease of 12.3% compared to 50.3 million in the same period in 2023; the quarterly average number of paying users was 3.4 million, a year-on-year decrease compared to 4 million in the same period in 2023. 15%.

in the final analysis, the mainstay business of live broadcasting makes too much money, and the gap will be difficult to fill in the short term with other diversified businesses.

03

can generous dividend payments restore confidence in the capital market?

contrary to the pessimistic revenue of douyu and huya, they are spending generously on dividends and buybacks.

at the end of 2023, douyu's board of directors approved a stock repurchase plan to repurchase up to $20 million of common stock in 2024. as of march 31, douyu has repurchased a total of us$2.7 million in adss (american depositary shares), and will spend us$17.3 million to complete the remaining repurchase plan.

in addition to its massive buyback plan, douyu also announced a special cash dividend of us$300 million in early july. on july 3, douyu’s board of directors approved the distribution of a special cash dividend of us$9.76 per ordinary share, or us$9.76 per american depositary share (ads).

coincidentally, huya is also bleeding money while buying back and paying dividends.

in august 2023, huya's board of directors authorized a stock repurchase plan to repurchase up to us$100 million in adss or ordinary shares in the next 12 months. as of the end of june 2024, 17.1 million shares have been repurchased for a total consideration of $56.7 million.

in addition, huya's 2023 fiscal year annual report also announced a special cash dividend of us$150 million, or us$0.66 per share, which has been paid in may 2024. at the same time as the second quarter financial report was released, huya also announced that it would distribute special cash dividends totaling approximately us$250 million to shareholders, which can be described as a generous spending.

from the perspective of the industry, this is a helpless move due to declining performance and user losses: when a more attractive and good story cannot be told, paying dividends to boost the confidence of the capital market may be the only option.

at the moment, this certainly has a certain effect: take douyu as an example. at the end of 2023, after chen shaojie’s incident, douyu’s stock price fell to a low of $0.739 per share and was on the verge of delisting. now, this number has steadily recovered.

however, blindly paying dividends is not a long-term solution. only a fundamental breakthrough in business is the top priority.

at this level, if douyu and huya can successfully "merge into one", it may be able to partially alleviate the current growth pressure on both parties.

for a long time, douyu and huya have actually focused on show live broadcasting and game live broadcasting respectively. after the two parties reach a merger, it will help them reduce the cost of anchors and form complementary advantages in anchoring. they have the same guns to the outside world.

but even if the two parties successfully merge, their growth bottlenecks may still exist until other revenues besides live broadcast revenue really take the lead.

because the essential problem has not been solved, the single revenue structure is a common challenge for both platforms.

and what’s different from when they tried to merge five years ago is that the market environment they face is also completely different. the scale effect after the merger between the two parties can help business growth, and the uncertainty is also higher.

in 2020, the two parties explored a merger, which to some extent was a strong alliance.

according to caixin reports, at that time, in terms of turnover, the market shares of huya and douyu exceeded 40% and 30% respectively, and the total exceeded 70%; in terms of active users, the market shares of both parties exceeded 45% and 35% respectively, and the total exceeded 80%. %; in terms of anchor resources, the combined market share of both parties exceeds 60%.

now almost five years have passed, and now the merger between the two parties is more like hugging each other for warmth.

looking back, it is since 2019 that comprehensive video platforms have begun to accelerate their encroachment on douyu huya’s business territory.

in july 2019, kuaishou launched the "million game creator support plan" at the photosynthetic creator conference, making full efforts to broadcast games, such as the premiere of the league of legends finals (s9), and vigorously exploring leading game anchors;

almost at the same time, bilibili also began to accelerate its efforts in the field of game live streaming and e-sports. specific actions include but are not limited to establishing an e-sports company, forming an e-sports club, and spending heavily to obtain the exclusive live broadcast rights for league of legends global events. etc.

but at that time, huya and douyu seemed not to have fully sensed the crisis - they were not transforming too slowly, but transforming too late.

when douyu was listed on nasdaq in july 2019, head anchors "pdd" and "xuxu baobao", as "douyu veterans", rang the bell together with douyu's original ceo chen shaojie.

at that time, chen shaojie was very proud of his success. he was sure: "today is douyu's 'highlight' moment, but it is by no means a 'peak' moment."