Why is there a "hundred-group war" on live streaming platforms? Tencent, watching the fun, is laughing

If 2015 was the year of O2O, then 2016 was undoubtedly the year of live streaming. Hundreds of live streaming platforms were born in a short period of time. Douyu, Huya, Inke, etc. all raised hundreds of millions of yuan in financing, with more than 100 million active users every day. The news of poaching, burning money, and fake traffic was overwhelming. In the past few days, there have been reports that "Inke is seeking investment from Tencent and does not rule out a merger with Douyu". Why does Inke want to cooperate with Douyu and Tencent? Will the Hundred Group War in the live streaming industry stop?

The rise of mobile live streaming

It all starts with mobile live streaming.

Live streaming shows are no longer a new concept on the Chinese Internet. YY, the leader in PC live streaming, had revenue of over 6 billion last year. Six Rooms and 9158 also had annual revenues of over 1 billion. There are also stories of wealthy people spending lavishly in live streaming rooms. However, as industries such as BAT, games, e-commerce, and O2O have completed the transition from PC to mobile, the mobile live streaming market did not really take off until the end of 2015. What is the logic of mobile live streaming, and how is it different from PC live streaming platforms?

Live broadcasting in the PC Internet era is a stage for a few people. You must first be good-looking or sing well, then you must have a set of professional equipment, complete some simple training, and have no other work, so that you can become a "full-time anchor". At this time, the advantages of the mobile terminal are revealed. With the popularization of 4G, mobile live broadcasting has become a national live broadcast. "17" invested by Wang Sicong became popular overnight. The girls in the coffee shop, the second-generation rich racing, and the fans at the football game all picked up their mobile phones to broadcast their lives, announcing the arrival of the era of mobile live broadcasting.

Unlike the limitations of live broadcasting scenarios on PC—nothing more than a girl singing and dancing in front of a camera at home—the scenarios on mobile are endless. When Inke was first launched, I once broadcast a Chinese Super League match at the Workers' Stadium, and dozens of fans were interacting in the room. Now when we open Inke, Panda, and Douyu, we no longer see the same old female anchors on YY. Instead, there are live broadcasts of themselves shopping, surviving in the wild, and even live teaching and live litigation. The diversity of content and scenarios has made mobile live broadcasting truly a flourishing UGC, rather than a pure "show" as before.

Because mobile traffic has long exceeded that of PC, viewers can watch live broadcasts on the subway, while eating, and before going to bed. Fragmented time is being utilized, and users are no longer the old men in fourth- and fifth-tier cities who sat in front of computers, but white-collar workers and students in Beijing, Shanghai, Guangzhou and Shenzhen. Mobile live broadcasts have surpassed the original PC live broadcasts in terms of content scenarios and threshold frequency. Although YY's revenue on the PC side seems to be still high now, it is only a matter of time before the revenue on the mobile side exceeds that on the PC side in the future.

Game live streaming suffers long-term losses, while live streaming by internet celebrities generates huge profits

In fact, the first thing that became popular in 2015 was game live streaming. Douyu, Huya, and Zhanqi all made plans for game live streaming and signed in a large number of professional players. At that time, statistics showed that more than 90% of the traffic went into the rooms of these professional/semi-professional players, and there were tens of millions of people online at the same time. However, game live streaming has always been difficult to make money. YY has also repeatedly announced that it would no longer support Huya. Why is game live streaming so profitable, but never profitable?

First, there is the issue of bandwidth costs. Game live streaming has a huge amount of traffic. There are usually millions of people online in the rooms of anchors like Xiaozhi, and there cannot be any delay or lag. This is a huge technical challenge for start-ups such as Douyu and Quanmin TV (until now, Wang Sicong's Panda TV has not been able to solve the lag problem, and is nicknamed "seesaw live streaming" in the industry because when it lags, it is a panda sitting on a seesaw). These platforms have to pay tens of millions of dollars for bandwidth every month, which is the most difficult cost for live streaming platforms to avoid.

The second is the signing fee of the anchors. Last year, "Xiaozhi" was poached to Panda TV and paid an annual salary of 20 million, and then poached to Quanmin TV with an annual interest doubled. This year, "Qiuri" and others were poached by Quanmin TV with an annual salary of tens of millions. "Androny" and "Mengtaiqi" ​​also received a signing fee of 100 million from Huya. Now the annual salary of first-line anchors has already exceeded one million, and the highest has exceeded tens of millions. The cost of signing and poaching has even exceeded bandwidth and has become the largest expense of game live broadcast platforms.

Tragically, under the dual pressure of bandwidth fees and contract fees, game live streaming is not profitable. The main income of live streaming platforms is not advertising, but gifts from fans to anchors. For example, on Douyu, the anchors have to split the gifts they receive with Douyu 55%, and most of the anchors' income will first be stored on the Douyu platform, only in this way can Douyu make money.

But game anchors are different from show anchors:

The first is the users' ability to pay. Most of the people who watch game live broadcasts are students and otakus. At most, they can give some free fish balls as a token of their appreciation, and it is difficult for them to spend a fortune like the rich.

Secondly, the interaction between game anchors and users is very low. Most game anchors need to focus on the game, otherwise they will lose fans if they make a mistake. However, the tycoons are willing to give gifts based on interaction. If a female anchor says something cute, some tycoons will send hundreds of rockets. However, when game anchors see the rockets, they can only say thank you. Game anchors like "Douyusongsan" don't even read the comments.

So, it seems that game anchors easily have two to three million online viewers, but the payment rate and interaction rate of these viewers are very low, resulting in the game anchors not bringing much income to the platform. The income of first-tier game anchors is not even as much as that of fourth- and fifth-tier female anchors.

Looking at the live show business, YY had a net profit of over 100 million yuan every month last year, and Inke also claims to have a monthly income of over 100 million yuan. Compared with Douyu, Panda, Quanmin and other platforms that lose 100-200 million yuan each month, it can be seen that the profit model of female show hosts has skyrocketed on the mobile side, while game live streaming will continue to lose money.

Game live streaming feeds back to the game platform

Douyu pays hundreds of millions of yuan for bandwidth and anchors every month, but cannot make money from them, so how can it maintain its business? Douyu recently introduced Tencent as a strategic investor. "Douyu is Tencent's most valuable investment this year," said an executive of Tencent Investment. Why is Douyu, which continues to lose money, so valuable to Tencent? In essence, it is "using loss-making game live broadcasts to feed back high-profit game revenue."

First of all, what games are popular right now is not decided by the media, advertising is useless, and China does not have IGN rankings or communities like Steam, but once a game anchor plays a game, the game will inevitably become popular.

For example, recently, the hosts of Overwatch, DOTA, League of Legends, Hearthstone and other channels all started broadcasting themselves playing Overwatch, and tens of millions of traffic was directly directed to the game. In the future, Tencent's games, such as League of Legends, Clash Royale, DNF, CrossFire and the upcoming copycat Overwatch, will be released on the Douyu platform first, and even save tens of millions of promotion costs to gain more traffic than before.

Douyu had previously banned the live broadcast of Clash Royale, and then after Tencent finally decided to acquire SuperCell (the parent company of Clash Royale), Clash Royale was recommended on Douyu’s homepage.

Tencent can not only use Douyu's anchors and traffic to feed back to its own games, but also take the opportunity to suppress competitors' games, just like the case of Clash Royale mentioned earlier; for example, Blizzard's Overwatch severely suppressed Tencent's CrossFire. Once Douyu can really monopolize most of the anchors and traffic in the gaming industry...

At the same time, Tencent's dominance in the gaming industry will in turn establish Douyu's monopoly in game live streaming. A few days ago, a case regarding game live streaming and copyright was just ruled that the owner of the game copyright can prohibit other platforms from live streaming the game, which means that LOL may become Douyu's "exclusive game". On the other hand, more than 90% of the traffic on Panda TV and Quanmin TV is on LOL live streaming. Once Tencent decides to "fatten the pigs before killing them" and issues a ban to other live streaming platforms, those platforms will instantly cut off traffic. Anchors like "Xiaozhi" can only return to Douyu, and the national husband Wang Sicong can only "look at the geese and sigh."

Therefore, Tencent's chess game is very clever. On the one hand, by investing in the leader of the game live broadcast industry, it ensures that traffic always flows to Tencent; on the other hand, through its monopoly on game copyrights, it ensures that Douyu can complete industry integration. Compared with Tencent's annual game revenue of hundreds of billions, the 100 million yuan invested in Douyu every month is exchanged for dozens of times the return.

Live streaming platforms return to high traffic entrances

In March 2016, Inke started a new round of financing, with a valuation of around RMB 3-4 billion, which made the market exclaim "cannot afford it". However, this round of financing has not been closed. Some people revealed that investors do not recognize the sustainability of the model, and there have been many posts on Zhihu claiming that it is cheating traffic...

Why can’t Yingke develop independently?

Let’s review first. All startups in China face the threat of competition from BAT, but some companies survive and some do not.

Companies such as Didi, Xiaomi, DJI, Meituan Dianping, JD.com, and Ele.me are market giants that have managed to survive under the shadow of BAT. They all have one thing in common, which is that they "do not rely entirely on traffic, but have more or less the shadow of offline entities." Because they involve offline transformation which BAT has no time to take care of, they can survive for a long time.

However, online companies are not so lucky. Wandoujia, which was once valued at US$2 billion, was sold to Alibaba for US$200 million a few days ago. Now the online distribution of apps has been monopolized by Tencent App Store, Xiaomi, Baidu 91, and 360 Mall.

The competition in the video industry used to be dominated by PPTV, iQiyi, Sohu and Youku Tudou. Now PPTV has been sold to Suning, Youku Tudou has also been sold, and Sohu is struggling. iQiyi is barely surviving with the help of Baidu, but Tencent Video has become the market leader.

Even Changba, a vertical industry leader, has lagged far behind Kugou in terms of new users and active users in the past year, and has been several hundred places behind Kugou on the App Store charts. Companies that rely solely on online traffic cannot survive in China's current Internet world, and this has been proven time and again. The companies that can really grow big are new giants with physical links, such as Didi, Meituan, and Xiaomi.

Let’s take a look at Yingke. It was revealed a few days ago that “98% of Yingke’s traffic is fake.” Later, Yingke’s investor Zhu Xiaohu actually admitted in person that there are robots, in order to “encourage new anchors.” This further confirmed the reality that Yingke lacks traffic. If the traffic is fake, then it is unknown how much of the so-called daily revenue of over one million is water.

At the same time, several other live streaming platforms have also been seeking mergers and acquisitions recently. For example, Longzhu TV has decided to look for buyers because it does not have the money to sign big-name anchors, and Quanmin TV, which has made a series of big moves, is also said to be looking for the next buyer.

With this kind of development, the live streaming industry will no longer be a scene of a hundred schools of thought contending within 6 months. It will either go bankrupt together with the small platforms, or find a big supporter to cling to like Yizhibo and Huajiao to survive, or it will undergo industry integration, which is the route that Yingke chose to merge with Douyu.

Inke has been focusing on the "mobile show" route, while Douyu has been the leader in "game live streaming" with Tencent's traffic and game ecosystem as its backing; Inke has built a good live streaming environment and reasonable monetization value, but is in urgent need of online traffic. WeChat has begun to try to connect the live streaming interface in WeChat two months ago. It seems that Inke has content and products but needs traffic, while Tencent and Douyu need to make up for the shortcomings of mobile live streaming.

This live broadcast war started with the popularity of Twich-type game live broadcasts, became popular as mobile live broadcasts overturned PC live broadcasts, and gained huge market influence amidst the hot money. However, it will eventually die out in the dilemma of content homogeneity, service homogeneity, and traffic costs greater than user monetization.

In the end, this vigorous Internet wave of live streaming, like countless online Internet revolutions, has become a chess piece in BAT's traffic layout.

end

The live streaming war is about to end, but it does not mean the end of the internet celebrity economy, nor does it mean the end of pan-entertainment.

With the integration of online celebrity platforms, the demand for content and surrounding economic industries will be magnified. How do game anchors make money? How do grassroots online celebrities package and monetize? A number of online celebrity economic companies have emerged in Beijing, Shanghai and Hangzhou, dedicated to packaging online celebrities, opening online stores and operating them, including discovering, creating stars and hyping online celebrities, operating in the same way as traditional artist management companies. The valuations of several of them have exceeded 2 billion yuan, which is much more valuable and profitable than second-tier live broadcast platforms.

At the same time, the transformation of pan-entertainment has gradually shifted to offline. The online video industry is in a downturn, but the box office of offline movies is rising steadily. Private cinemas such as Amy 1895 have also begun to expand across the country; Changba's online live broadcast has been tepid, with only a few hundred people online, but the number of offline KTVs has increased. Companies such as Kmi, Yiqichang, and 9158 are also upgrading the industry of offline KTV gatherings; the popularity of home computers has not stopped the opening of Wangyu Internet cafes. Internet cafes have become social places, and Yupaopao and VR will soon be stationed in offline stores.

2016 is destined to be the year of pan-entertainment. Opportunities and risks are always there. We look forward to more startups to be reborn from the ashes.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.