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咏竹坊
wrote a column · May 17, 2022 18:23

Officially, cracking down on live streaming rewards, with limited impact on major platforms.

The Cyberspace Administration of China and other four ministries released new policies for live streaming platforms, casting a shadow over the live streaming industry that has been plagued by regulatory challenges, but the impact on larger companies seems relatively small.
China's Cyberspace Administration and other four ministries have released new policies targeting live streaming platforms, casting a shadow over the industry plagued by regulatory policies. However, the impact on larger companies seems relatively small. Key points: * Officially requires minors not to participate in live streaming rewards, and cancels reward rankings, to correct industry misconduct. Big platforms like Kuaishou Technology have an audience of over tens of millions for tipping, with a relatively balanced money-spending structure, combined with a large number of active hosts. They are less affected by new policies compared to small and medium-sized platforms. The author of this article is Luo Xiaoqin. The tipping culture is quite prevalent in China's live streaming industry, with many hosts earning tens of thousands of yuan per month. However, there are cases where children lacking financial concepts have tipped live streamers over tens of thousands of yuan in just a few days, attracting social attention. With increased official regulatory efforts, the live streaming industry has faced difficulties in recent years. Recently, four major ministries have jointly required that minors should not participate in tipping live streamers and have canceled tipping rankings to ensure the healthy development of the industry. However, some analysts believe that the live streaming industry has been plagued by regulatory challenges in recent years, and the impact of the new regulations is limited. In addition, companies listed on live streaming platforms seem to have been prepared early, such as $KUAISHOU-W (01024.HK)$In recent years, they have shifted their business to online marketing services, while $INKEVERSE (03700.HK)$increasing revenue through newly developed social products, so even if streamer tipping income is under pressure, companies will not be heavily impacted. Recently, the Cyberspace Administration of China, the Central Civilization Office, the Ministry of Culture and Tourism, and the National Radio and Television Administration...
Key points:
* Official regulations prohibit minors from participating in live stream tipping and eliminate tipping leaderboards to correct industry misconduct.
Large platforms like Kuaishou Technology have easily over tens of millions of rewarding customers, with a relatively balanced gold-sand structure and a large number of active anchors, making them less affected by the new policies compared to small and medium-sized platforms.


The author of this article is Luo Xiaoqin.
The culture of rewarding in the live streaming industry in China is quite popular, with many anchors earning tens of thousands of yuan per month. However, there have been cases where children, lacking the concept of money, have rewarded the anchors with over tens of thousands of yuan within a few days, attracting social attention. With the increased regulatory efforts from the authorities, the live streaming industry has faced challenges in recent years. There have been joint requirements from four major ministries to prohibit minors from participating in rewarding live streamers and to cancel reward rankings to ensure the healthy development of the industry.
However, some analysts believe that the live streaming industry has been plagued by regulatory policy disturbances in recent years, with limited impact from the new regulations. In addition, publicly listed companies operating live streaming platforms seem to have been prepared early, such as$KUAISHOU-W (01024.HK)$In recent years, shifting their businesses to online marketing services,$INKEVERSE (03700.HK)$while others increase revenue through newly developed social products. Therefore, even if the income from rewarding the anchors is under pressure, the companies will not suffer significant impacts.
Recently, the Cyberspace Administration of China, the Central Civilization Office, the Ministry of Culture and Tourism, and the National Radio and Television Administration jointly released the "Opinions on regulating online live streaming rewards and strengthening the protection of minors" to establish a long-term regulatory mechanism to curb the chaos in the live streaming industry and to take precise measures against rewarding behaviors.
As early as November 2020, the National Radio and Television Administration issued a "Notice on Strengthening the Management of Online Show Live Broadcasting and E-commerce Live Broadcasting", requiring live streaming platforms to implement real-name management for anchors and rewarding users, eliminating market misconduct such as minors rewarding anchors. This time, the joint "Opinions" of the four ministries propose a more comprehensive regulation, including canceling reward rankings, strengthening management during peak hours, optimizing and upgrading the "youth mode", and specifically banning reward amounts as ranking criteria for anchors and users, seen as the most targeted towards the industry.
Virtual gift rewards are the main source of revenue for live streaming platforms. According to the iResearch report, of the 246.2 billion yuan revenue generated by China's live streaming platforms last year, around 70% came from virtual gift rewards. Originally, rewards were a way for viewers to show support and appreciation for the hosts, but due to the lack of comprehensive protection mechanisms for minors on the platforms, there are often incidents of excessive and chaotic rewards. Many platforms have been fined by authorities for violations, leading them to reduce the proportion of live streaming business to avoid regulatory risks and shift towards strengthening advertising or other value-added service revenues.
Decrease in the proportion of live streaming revenue.
WithKuaishou TechnologyFor example, last year, the live streaming revenue was 31 billion yuan, not only a 6.7% decrease from 2020, but also the proportion of total revenue decreased from 56.5% to 38.2%; in contrast, online marketing service revenue greatly increased by 95.2% to 42.67 billion yuan, with the share rising from 37.2% to 52.6%.
Similarly heavily reliant on live streaming revenue,Yingke Interactive, which also highly depends on live streaming revenue,Successfully transitioned from single-product model to a matrix product model last year, with revenue soaring by 85.4% to a record high of 9.18 billion yuan. The revenue from newly developed social products reached 5.74 billion yuan, accounting for 62.6% of total revenue, replacing the core position of live products; live streaming revenue during the period was 2.56 billion yuan, decreasing to 27.9%.
In addition to regulatory risks, live streaming platforms, in order to compete for online traffic and revenue, need to offer discounts to powerful anchors, resulting in a thin profit margin for live broadcast platforms. Large platforms like Kuaishou Technology have over 10 million active anchors and can only give about 30% of the income to the anchors under certain conditions. However, small platforms lack bargaining chips and need to provide more generous profit sharing ratios to retain star anchors.
Having live streaming platforms such as Huajiao and LiujianfangHuafang GroupIn the listing materials submitted to the Hong Kong Stock Exchange at the end of April this year, Huajiao, which focuses on personal computer platforms, provided actual income sharing of 58.1% to the anchors last year, while the mobile platform Liujianfang provided anchors with a higher share of up to 71.5%. Due to the new regulations in the live streaming industry weakening the ability of star anchors to attract money, small platforms that rely more on live streaming revenue are more affected than large platforms with balanced income structures.
Large base of paid users
Compared with this, Kuaishou's live broadcast revenue in the fourth quarter of last year was 8.827 billion yuan, with an average of 48.5 million monthly paying users, contributing only 60.7 yuan in Koins per month per paying user, much lower than the 200 to 300 yuan for Huajiao; if calculated with the average monthly active users of 0.578 billion in the fourth quarter, Kuaishou's paid user penetration rate is as high as 8.4%, and its tipping user structure is more uniform than other platforms. Once the tipping mechanism is restricted, the impact on the company would be lighter.$JOYY Inc (JOYY.US)$Furthermore, according to Kuaishou's prospectus, the top 50 virtual tipping users accounted for less than 5% of the total tipping amount from 2017 to September 2020. Users like those on Kuaishou mainly tip to support the anchors' efforts, rather than seeking top positions in the tipping leaderboard with high tips. Therefore, the company requested to cancel the tipping leaderboard, which instead has little impact on live streaming revenue.
Moreover, according to Kuaishou's IPO prospectus, from 2017 to September 2020, the top 50 virtual tipping users accounted for less than 5% of the total tips, such users mainly tip to support the anchors, less for seeking top spots on the leaderboard. Therefore, the official request to cancel the tipping leaderboard instead has little impact on live streaming revenue.
In fact, on major platforms like Kuaishou, Douyin, and others, the number of active hosts often exceeds 10 million, with Kuaishou averaging about 0.81 million live broadcasts per day, approximately 8 times that of Joyy Group's platforms. With a large number of hosts and live broadcast sessions, the competition during peak hours is high. Additionally, due to the high cost of traffic during these times, various hosts will spontaneously adjust their live broadcast times, making the live broadcast periods on major platforms more evenly distributed, resulting in relatively lower concentration of tips during peak hours.
Ling Changnian, the CEO of Orient Securities, believes that phenomena such as minors giving million-dollar tips and well-known celebrities earning large sums of money through live streaming on e-commerce platforms have long been targeted and cracked down upon by regulatory policies. This has made live streaming platforms and hosts operate cautiously, so the impact of the new regulations is actually not significant.
In recent years, China's live streaming industry has experienced ups and downs, leading to fluctuations in related stock performances. Comparing based on the price-to-sales ratio (ps), Kuaishou had a revenue of 81.08 billion yuan last year, with a ps ratio of about 2.74 times, while Joyy and Inke had ps ratios of 1.06 and 0.27 respectively. It can be seen that Kuaishou, with economies of scale, seems to be more favored by investors, but Inke, which has successfully transformed, appears to be severely undervalued.
Risk Disclaimer: The above content only represents the author's view. It does not represent any position or investment advice of Futu. Futu makes no representation or warranty.Read more
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