Huya has successfully completed an IPO on the New York Stock Exchange, raising $180 million. This comes after the company received a round of investment totaling $462 million, led by Tencent, just back in March.
In recent months, we have seen a number of Chinese online video and live-streaming companies going public in the US, including Huya, Bilibili and iQiyi. Hunan Broadcasting’s Happi Go, which houses its online video and content-distribution business, also revealed plans to spin off the online video portion of its video for IPO. The table below summarizes this spate of IPOs.
Huya and Douyu are the leading esports live-streaming platforms in China and have cultivated substantial user base and revenues from introducing a ‘tips’ system, where, much like on Amazon’s Twitch, viewers can make small, direct payments to show their appreciation of any streamer, as they are watching. But exposure to this sole monetization model and low profit margins cast a shadow on their IPOs. Tencent’s investment will not only offer capital support but also expand their revenue sources.
We believe both Huya and Douyu will become essential channels for connecting with gamers, which is in line with Tencent’s strategy of establishing a dominant position on distribution across both PC and mobile. The video platforms will also get to leverage Tencent’s large user base, and could easily introduce a paid subscription layer that would find good traction among such an audience. We expect Douyu to file for IPO very soon.
Happi Go and iQiyi’s financials show that advertising revenues remain important for mainstream online video platforms, though shares of advertising as part of total revenues have decreased from 2016 to 2017. Meanwhile, subscription and content-distribution revenues have increased. After the introduction of the Internet Advertising Measures in September 2016, online advertising in China is subject to strict regulation. Furthermore, viewers have now shown that they are willing to pay for premium content and skip advertising.Conversely, Bilibili and Huya reported less than 10% of total revenues came from advertising. Live streaming and value-added services, whereby virtual items are sold on the platform, was a major contributor. The reason why live streaming is gaining traction in China is the ability to reach, and interact with, such expansive audiences, and the growing popularity of various hosts means that game publishers can connect directly with their potential customer bases. From this angle, it’s clear why major games publishers are keen to invest in such platforms.