汇丰银行-中国-互联网服务业-中国游戏直播：对两家电子竞技市场领先者的研究-2019.9-99页 (2).pdf

Disclosures&Disclaimer:This report must be read with the disclosures and the analyst certifications inthe Disclosure appendix,and with the Disclaimer,which forms part of it.Play interview withBinnie WongEquitiesChinaSeptember 2019By:Binnie WongChina game live-streaming Game on:Initiate coverage on the two e-sports market leadersWe analyse the opportunities,entry barriers,and concentration risks in Chinas game-streaming market Its success is underpinned by the huge popularity of online games and synergies generated by TencentInitiate coverage on market leaders Huya(Buy)and Douyu(Hold).Our deep dive into key metrics shows why we prefer HuyaSP OTLIGHT 1 Equities China September 2019 Game on the battle between Chinas two leading e-sports platforms Live broadcasting in China,one of the countrys many extraordinary online success stories,is going from strength to strength.What started a few years ago as the streaming of live performances of entertainers,game shows,and ordinary people chatting,dancing or simply sharing their everyday experiences,has mushroomed.One of the latest,fastest-growing,and glitziest offshoots is game live-streaming live broadcasts of experts playing blockbuster multi-player e-sports games like Tencents League of Legends and Honor of Kings.The content may have evolved but the business model for live-broadcasting in China remains the same.The vast majority of revenue comes from the sale of virtual gifts sent by viewers to their favourite e-sport players,who share the proceeds with the streaming platform and talent agencies(in the US and Europe revenue on leading platforms like Twitch comes from a mix of advertising,subscriptions,donations,and sponsorship).The main attraction for the viewers who buy these gifts is that they can interact with the stars of the show.Chinas domestic e-sports audience hit 288m in 2018,with revenues reaching RMB13bn(USD1.9bn).The rewards are substantial.The top players,known as streamers,are national celebrities and can gross up to RMB70m a year before revenue splits the live-broadcasting platform usually keeps c.50%.Aside from the popularity of online gaming,the other important factor helping to drive growth is policy support.After clamping down on other areas of the live-broadcasting and online gaming market,the Chinese government is actively encouraging the development of e-sports.Local governments have taken note.Live tournaments held in stadiums can attract tens of thousands of fans not to mention online audiences in the multi-millions and cities around the country are looking to cash in by building e-sports venues.This report initiates coverage on the two biggest e-sports platforms,Douyu and Huya,which both have the advantage of counting Tencent,the countrys leading game supplier,as a shareholder and strategic partner.To assess their prospects,we drill deep into the data that determine success and failure in this industry monthly active users(MAU),the percentage of them that generate revenue,the average revenue per paying user(ARPPU),and their dependence on the leading streamers who play the games and have a huge following.Both companies are growing rapidly but we prefer Huya(Buy)to Douyu(Hold).Huya is already profitable at the operating level,the business is more broad-based,and is less reliant on the top 100 streamers,and Tencent has an option to raise its stake in the company.The focus charts that follow give a snapshot of the companies and the industry landscape.Why read this report?We analyse the opportunities,entry barriers,and concentration risks in Chinas game-streaming market Its success is underpinned by the huge popularity of online games and synergies generated by Tencent Initiate coverage on market leaders Huya(Buy)and Douyu(Hold).Our deep dive into key metrics shows why we prefer Huya Binnie Wong*The Hongkong and Shanghai Banking Corporation Limited .hk+852 282 22590 *Employed by a non-US affiliate of HSBC Securities(USA)Inc,and is not registered/qualified pursuant to FINRA regulations.The Chinese government is encouraging the development of e-sports Equities China September 2019 2 Why read this report?1 China e-sports:Game on 3 Related research 4 Stay tuned,consolidation ahead 8 Chinas game live-streaming industry 20 Huya vs.Douyu:A deep dive 35 The Tencent factor 56 Huya(Huya US)65 Douyu(DOYU US)78 Disclosure appendix 93 Disclaimer 96 Contents 3 Equities China September 2019 China e-sports:Game on Source:Company data,iResearch,Questmobile,Xiaohulu,HSBC estimates Chinas e-sports live-streaming market is worth RMB13bnHow the platforms compareTencent has major stakes in both Huya and Douyu,the market leadersMarket share(2018)20182023e(25%CAGR 2018-23e)The market is forecastto expand rapidlyPopularity of e-sports(2018)RMB13bnRMB40bn288me-sports viewers in China(4.7x more than the US)351me-sport gamers in China(7.1x more than the US)35%HuyaHuya32%37%Douyu28%Douyu37%OthersTencent stakeTencent stakeLarge user base(Monthly average users)Ample room for monetisation(Quarterly paying ratio is lowerthan other live-stream peers)Lower ARPPU than peers(Average revenue per payinguser in 2Q19,RMB)Non-game content revenue(Contribution from top 100streamers in 2Q19)HuyaDouyu56mmobile51mmobile144m163mHuya86%Douyu56%Others5%-10%(range)HuyaDouyuOthersDouyu2.8%(2018)4.1%(2Q19)Huya3.9%(2018)3.4%(2Q19)392255953(range)350 Equities China September 2019 4 Related research Recommended reading.China online travel Friend or foe Initiate Buy on Ctrip and Tongcheng-Elong,14 May 2019 Tencent Initiate at Buy:Look at the bigger,broader,connected picture,31 January 2019 China Internet advertising What slower growth and new players mean for the future of online advertising,13 December 2018 5 Equities China September 2019 Focus charts Exhibit 1:Chinas game-centric live-streaming market is worth RMB13bn a quarter of the total live-streaming market and is forecast to grow at a CAGR of 25%over 2018-23e Source:iResearch estimates Exhibit 2:Game-streaming platforms have sustained the success of Tencents Honor of Kings by live-streaming the King Pro League(王者荣耀职业联赛王者荣耀职业联赛)Source:Company data,Sensortower,Questmobile,HSBC estimates Exhibit 3:Live-streaming of League of Legends e-sports tournaments is extending the games monetisable period for Tencent,despite declining MAU Source:iResearch 138131824293440618263443495358637203447617282921030%10%20%30%40%50%02040608010012020152016201720182019e2020e2021e2022e2023eRMBbnChina live streaming industry size Game-centricNon-game-centricGame-centric as%of total(RHS)020406080100020406080100120140160180Jan-17Mar-17May-17Jul-17Sep-17Nov-17Jan-18Mar-18May-18Jul-18Sep-18Nov-18Jan-19Mar-19May-19Jul-19TournamentsCNY HolidayHoK grossing before channel cost(RMBm)HoK(DAU m)HoK avg.daily time spent per user(mins)KPL Spring SeasonKPL Fall SeasonKPL Spring Season6.6bn viewsChampion Cup IntlTotal views:17bnKPL Spring Season3.3bn viewsKPL Fall Season4.7bn viewsChampion CupTotal views:10bnChampion Cup Intl27364358100303633282205101502040608010012020142015201620172018RMBbnmLoL World Championship Finals unique viewers(m)MAU for LoL(m)LoL global revenue(RMBbn,RHS)LoL viewers upLoL MAU downLoL revenue largely stableExtending the games lifespan Equities China September 2019 6 Exhibit 4:According to Xiaohulu,31%of Huyas revenue comes from the top 100 streamers Exhibit 5:according the Huya,25%of revenue comes from the top 100 streamers Source:Xiaohulu,Company data,HSBC Source:Company data,Xiaohulu,HSBC Exhibit 6:According to Xiaohulu,41%of Douyus revenue comes from the top 100 streamers Exhibit 7:according to Douyu,28%of revenue comes from the top 100 streamers Source:Xiaohulu,Company data,HSBC Source:Company data,HSBC Exhibit 8:Huya leads in monetisation Exhibit 9:Douyu leads in MAU Source:iResearch,Company data Source:Company data 31%23%25%21%98.9%0.8%0.2%0.02%Mix of total active streamersRevenue contribution(%)Top 100Rest of streamersHuyas streamer and revenue mix(%),Xiaohulu dataTotal active streamers=471,000Top 101-1000Top 1001-500025%67%8%98.5%1.5%0.01%Mix of total active streamersRevenue contribution(%)Top 100 Top 101-10000Rest of streamersHuyas streamer and revenue mix(%),Co+Xiaohulu dataTotal active streamers=667,00041%28%21%10%99.3%0.6%0.1%0.01%Mix of total active streamersRevenue contribution(%)Top 100Rest of streamersDouyus streamer and revenue mix(%),Xiaohulu dataTotal active streamers=691,000Top 101-1000Top 1001-500028%34%39%98.6%1.4%0.02%Mix of total active streamersRevenue contribution(%)Top 100 exclusiveTop101-6500 exclusiveRest of streamersDouyus streamer and revenue mix(%),Co dataTotal active streamers=450,00028%23%28%28%27%35%44%50%37%0%20%40%60%80%100%201620172018Game-centric live streaming revenue market share(%)OthersHuyaDouyu6483100124144861131361591630%20%40%60%0501001502002016201720181Q192Q19mHuya total MAUDouyu total MAUHuyas%of mobile MAU(RHS)Douyus%of mobile MAU(RHS)Huya has less revenue concentration from top streamers than Douyu,thanks to its well-established talent agency model The companies are leaders in different categories 7 Equities China September 2019 Exhibit 10:Huyas paying ratio used to be higher than Douyu,which stepped up in 2019 Note:For YY and YY+Huya,we used total paying users(Mobile+PC)/Mobile MAU.For Bilibili,we used Monthly Paying Users/MAU.Source:Company data,HSBC Exhibit 11:Huyas ARPPU is higher than Douyus,but lower than other platforms Source:Company data,HSBC Exhibit 12:due to more revenue from non-game content Exhibit 13:talent agency concentration risk is low for both platforms Source:Xiaohulu,HSBC Source:Newzoo,Xiaohulu,Company data,Bloomberg,HSBC 3.2%2.2%10.3%8.8%7.9%1.5%3.7%2.9%3.9%2.8%8.8%8.6%10.3%3.8%4.3%3.8%3.4%4.1%4.9%6.5%10.4%5.7%4.6%4.8%0.0%2.0%4.0%6.0%8.0%10.0%12.0%HuyaDouyuYYYY+HuyaMomoBilibiliTME-socialentertainmentTME-onlinemusicservicesQuarterly average paying ratio(%)201720182Q191921566274352851,64826227280208697485286814342263922559536513505903912605001,0001,5002,000HuyaDouyuYYYY+HuyaMomoBilibiliTME-socialentertainmentTME-onlinemusicservicesQuarterly average ARPPU(RMB)201720182Q1914%44%27%86%56%73%0%20%40%60%80%100%HuyaDouyuIndustryTop 100 streamers revenue mix on game live streaming platform in 2Q19Game contentNon-game content2%5%3%3%6%4%4%3%0%1%2%3%4%5%6%7%of platform live streaming revenue contribution from agency in 2018Huya/YYHuyaDouyuBoth Huya and Douyu have lower paying ratios than other platforms with live-streaming services Huyas top 100 streamers generate more revenue from non-game content(e.g.live shows)Live show streaming has higher annual ARPPU(RMB677)than game live-streaming(RMB365)Equities China September 2019 8 Battle stations get ready for more live screen action To the uninitiated,the success of live-streaming e-sports can be hard to fathom.Why do people go online to watch other people playing online games?The New Yorker nailed it in a November 2017 article when it quoted a spokesman for Twitch,the US platform that pretty much started the life-streaming industry,as saying:“Thats like saying to a chef,Why are you watching the Food Network?Shouldnt you be in the kitchen,cooking?Or to an athlete,Why are you watching ESPN?Shouldnt you be out shooting hoops?No.People enjoy watching others who are good at what they do.”And then theres the virtual icing on the cake.Its interactive.Live-streaming is like watching a live television show that talks back to you.That helps explain why Chinas domestic e-sports audience hit 288m in 2018.This report delves deep into this market,a relatively new and fast-growing subset of both the countrys huge games industry and the broader live-streaming market.Its a business with its own idiosyncrasies.Despite the rapid audience and rapid revenue growth,on some metrics e-sports trails far behind other types of online entertainment.For example,in the key online“time spent”category the share of game live-streaming is less than 1%.In addition,the number of people who are willing to pay and average revenue per paying user(ARPPU)are both lower for game live-streaming than for more general audiences who prefer to watch game shows.To us,this suggests there is plenty of room for many of these metrics to improve.Our focus is on the two market leaders,Huya and Douyu.We analyse the metrics that make or break companies in this business revenue from sales of the virtual gifts that viewers give to streamers to show their appreciation,the number of monthly active users,the length of time they stay on the platform,how many of them are willing to spend money,and if so,how much.We have a clear preference for Huya,largely because it is already profitable for a longer period,has a better content mix that generates a better paying ratio and ARPPU,and is less reliant on leading streamers,who are expensive.We also discuss the importance of Tencent,Chinas biggest game supplier,which holds substantial stakes in both companies.Access to Tencents giant game ecosystem gives Huya and Douyu a big advantage.Its games have turned the top online e-sports players,or streamers as they are known,into celebrities.And then,of course,there is the view of the government to consider.Beijings policymakers see e-sports as being good for the strengthening of intellectual property rights,a hot button issue.This a very good news as other parts of the industry have run into serious trouble with the regulator over content.Stay tuned,consolidation ahead Tencent has its own e-sports platform and major stakes in both market leaders,which points to industry consolidation We use third-party data to better understand the investment risks in terms of concentration of streamers and talent agencies and explain why we prefer Huya over Douyu 2019e revenue Huya:RMB8.4bn Douyu:RMB7.5bn 2Q19 total MAU Huya:144m Douyu:163m Douyus total MAU is 13%larger than Huya 2Q19 mobile MAU Huya:56m Douyu:51m But Huyas mobile daily active users(DAU)is 10%larger than Douyus 9 Equities China September 2019 The market in China The game live-streaming market in China is valued at RMB13bn and is forecast to expand at a CAGR of 25%over 2018-23e.Despite this,it represents only a quarter of the countrys overall live-streaming market,which features a wide range of performance,lifestyle,and social content.Its success is founded on the publics love of online games.China is the worlds largest games market,generating revenue of RMB251bn(USD37bn)in 2018 according to iResearch,ahead of the US(USD27bn),the EU(USD22bn),and Japan(USD14bn).But game live-streaming is not simply a popular new form of entertainment.It is also an effective marketing and promotion tool that allows game publishers to extend the lifecycle of the leading multi-player e-sports games.For example,the number of monthly active users(MAU)of Tencents of Honor of Kings in China fell from 184m in 2017 to 177m in 2018,but the games total viewership rose from 10bn to 17bn over the same period.For League of Legends,its MAU dropped from 30m in 2014 to 22m in 2018 but viewing figures for the LoL Wor