CIC China Insights Consulting: 2017 China Culture and Entertainment Industry Blue Book

The latest blue book from CIC China Insights Consulting reveals that China's 13th Five-Year Plan shows that the cultural industry will become a pillar industry of the national economy by 2020. China's cultural and entertainment industry has continued to prosper in recent years, with various new formats emerging.

On April 10, 2018, CIC China Insights Consulting released the " 2017 China Cultural and Entertainment Industry Blue Book" in Shanghai, providing industry insights and trend forecasts for popular areas such as gaming e-sports, online variety shows and film and television content, video and audio streaming, content sharing, and lifestyle entertainment.

1. Gaming and e-sports industry

 China's game industry has maintained rapid growth in the past five years. In 2017, China's game industry grew by 17.5%, with a total market size of 210.23 billion yuan, an increase from 15.7% in 2016, marking a good development of the industry. Benefiting from the improvement of copyright protection and payment awareness from industry regulations to consumer cognition, the increasing demand for spiritual consumption, and the popularization of smart phones in the game industry, the mobile game industry has gradually taken the lead in mass game entertainment consumption. The proportion of the mobile game market size in the overall size of my country's game industry has continued to grow. In 2017, it occupied a dominant market share of 69.3%, surpassing traditional client games, stand-alone games, etc., and has become the most important way of playing in the game entertainment market.

Source: China Insights Consulting

According to research by CSI Consulting, China's mobile game industry has the following development trends:

1. Online and offline traffic purchases have further become the mainstream of the market

As competition among the top game companies becomes increasingly fierce, game volume purchases have gradually become one of the links that publishers must participate in. At present, RPG game volume purchases account for about 65%, and SLG game volume purchases account for about 15%, which are the top two game types in terms of volume purchases. The game volume purchase model has the following major development trends: (i) With the fierce competition in iOS game volume purchases and the rapid growth of Android users, the volume purchase share of Android channels is continuing to increase. (ii) Online volume purchases are gradually expanding to offline channels including physical advertising and peripheral releases. In the future, precise delivery of vertical channels will become the key to successful volume purchases. The increase in payment rates and the extension of the overall game life cycle will be the focus of mobile game manufacturers.

2. Original IP content has become an industry trend and a hot spot

With the rise of the mobile game industry, more and more excellent original IPs are joining the competition with high-cost and high-threshold copyright-adapted games. The Internet provides the mobile game industry with a content publishing platform and a faster dissemination channel. In the future, the threshold for developing high-quality mobile games will become higher and higher. At the same time, with more and more new original content, market vitality is stimulated. The number of games is growing rapidly, the content is richer, and the industry chain will be further improved and formed.

3. E-sports injects traffic and explosive points into the gaming industry

In recent years, China has hosted many global e-sports events, which has promoted the hot attention and rapid development of the e-sports industry. The e-sports industry is expected to generate more than 70 billion yuan in revenue in 2018. The e-sports industry involves game copyright holders, organizers, sponsors, broadcasters and a considerable number of derivative industries, which has a vital advantage in promoting the development of the game market. In the future, the e-sports industry is expected to further develop in the direction of standardization, scale and professionalism. At the same time, the popularity of the game live broadcast industry has also brought great attention to the e-sports industry. With the explosive market response of "Honor of Kings", mobile e-sports has also begun to rise, further releasing the potential of the market.

2. Online variety shows and film content

 Since online variety shows officially entered the public eye in 2011, the online video market has risen across the board and experienced a golden period of explosive growth. From 2011 to 2017, the scale of China's online video market grew from RMB 6.3 billion to approximately RMB 85 billion, with a compound annual growth rate of 54.3%. With the further popularization of the Internet in China, the arrival of the 5G high-speed network era, the construction of a new ecosystem under the "13th Five-Year Plan" cultural development and reform, and the continuous support of the capital market, the market scale will further grow. Insights predicts that the overall scale of China's online video will exceed RMB 200 billion in 2021.

According to statistics from the State Administration of Radio, Film and Television and other public data, the number of online variety shows increased from 47 in 2014 to 197 in 2017; the number of online movies broadcast increased from 450 to 1,892 in 2017; and the number of online dramas increased from 131 in 2014 to 206 in 2017. Whether it is online variety shows or online dramas, the three major video platforms, iQiyi, Youku, and Tencent, account for more than 80% of the total number of broadcasts and click-throughs, establishing their position as the three major players in the industry.

According to research by CSI Consulting, China's online variety show and film industry will have the following development trends in the future:

1. Online learning content and models are more diversified

The current online variety show industry is still in its early stages of development, and future development depends on the transformation from quantitative change to qualitative change brought about by innovation. In the future, a number of variety shows based on vertical fields and targeting specific themes will stand out, such as debate, fitness, food, parenting, horoscopes, reading, etc. In addition, the all-round interactive mode between the program and the audience online and offline will also be sought after. User stickiness and conversion rate will be improved through content refinement and differentiated marketing.

2. Large-scale production and high-quality content

With the participation of first-line stars and high-quality teams, and increased financial investment, online variety shows and films are gradually entering the stage of high-quality and large-scale operations.

3. IP derivative diversification

Currently, IP derivative channels are mostly concentrated in the cultural, sports and tourism industries. In the future, the derivatives of high-quality IPs will be more diversified, and games, products, exhibitions, and other offline interactive activities derived from IP will become more common.

4. Diversified value output

At present, copyright and advertising revenue are the main sources of income for online variety shows. In the future, the income structure will develop in a diversified way. First, the promotion of customized advertising will enhance the attractiveness of advertising. Zhushi predicts that the Chinese online video advertising market will reach about 70 billion yuan in 2019. Second, the international export of copyrights is more frequent. Third, online variety shows are more popular in feeding back to TV stations. Fourth, the income from paid members is constantly increasing. According to statistics from the State Administration of Radio, Film and Television and relevant associations, the proportion of online paid users has reached about 43%. At the same time, users' ability to pay has also increased significantly. The number of paid members with monthly expenditures of more than 40 yuan has increased from 20.2% in 2016 to 26.0% in 2017.

3. Video and Audio Streaming

In the video and audio streaming industry, the scale of mobile short video users has continued to expand since 2013, reaching a total scale of about 200 million in 2017. As short videos are short in duration, have high information carrying capacity, and can be viewed in fragmented time, they better meet the viewing needs of users. Therefore, in the next few years, it is expected that the scale of short video users will continue to grow steadily, exceeding 500 million by 2020. At the same time, after experiencing rapid growth since 2013, the domestic live broadcast market reached a total scale of about RMB 26.2 billion in 2017, reflecting the current good development prospects of the video and audio streaming industry.

According to research by CSI Consulting, China's video and audio streaming media industry will have the following development trends in the future:

1. The original content of various video and audio platforms continues to be enriched

At present, various platforms are increasing their support for original creators. Through various dividend and cash support plans, such as the "Thousands of People, Millions of Fans" plan launched by Toutiao, the platforms encourage the creation of original high-quality content. At present, the number and quality of original videos on various short video platforms have improved under this impetus, and the homogeneity of the videos created has decreased. At the same time, the number of original broadcasters and the degree of audio refinement in the mobile radio community have further increased, attracting more and more potential listeners in specific fields such as parent-child, infant care, and life skills.

2. Monetization models are becoming increasingly diversified

In addition to traditional monetization models, various video and audio platforms are constantly trying more diversified monetization models. For example, short video platforms are trying e-commerce traffic diversion, content payment, and platform sharing in addition to advertising revenue. These new monetization models can help platforms better and more effectively convert online traffic into economic benefits. At the same time, in addition to traditional user reward income, online live broadcast platforms are also exploring platform placement advertising, membership sales, interactive entertainment, one-on-one private chat and other monetization methods, using the fan effect brought by Internet celebrities to guide viewers into more online and offline consumption scenarios.

3. The functions and gameplay of each platform are constantly extended and expanded

Many video and audio platforms have actively expanded their own functional gameplay, expanded gameplay modes in their respective vertical fields, and improved user experience. The functional gameplay expansion attempts made by various platforms will further attract more user traffic, while increasing user stickiness and consumption possibilities.

4. Content Sharing

2016 is regarded as the first year of knowledge payment. Zhihu, Guokr, Himalaya, Dedao and Weibo entered the knowledge payment field by building question-and-answer, course column or community knowledge payment platforms. Knowledge payment began to show explosive growth, and paying for knowledge began to become a consumption model recognized and accepted by more and more people.

Behind the explosive growth of knowledge payment in the past two years is the gradual emergence of middle-class anxiety and the continuous upgrading of consumption. The audience of knowledge payment is mainly young and middle-aged people aged 20-39. This group of people are usually well-educated, have a high income level and consumption capacity. At the same time, "middle-class anxiety" has become a label for this group of people along with the fast-paced life and various pressures. In this context, the added value and commercial value of high-quality paid knowledge content have begun to emerge, and it has also become a product that more and more consumers are willing to pay for.

According to research by CSI Consulting, China's paid knowledge industry will have the following development trends in the future:

1. Vertical fields continue to segment

At present, the knowledge content of knowledge payment platforms focuses on popular content such as investment and financial management, workplace skills, interpersonal communication, time management, etc., and the phenomenon of content homogeneity is gradually emerging. In order to get rid of the bottleneck brought by homogeneous competition, in the future, knowledge payment platforms will continue to dig deeper into user needs, provide more targeted knowledge content for different groups, and continue to segment in vertical fields.

2. Big data and artificial intelligence technologies continue to penetrate

At present, most knowledge payment platforms provide massive knowledge content. Users often need to fully screen and compare to find the knowledge content that suits them best. Based on this phenomenon, knowledge payment platforms have begun to use big data and artificial intelligence for precise push. As the technology continues to mature, the penetration and utilization of big data and artificial intelligence technologies in the technical support and user demand analysis of major knowledge payment platforms will continue to increase, which will reduce content screening costs for users, improve user satisfaction and increase user stickiness, and help increase repurchase rates.

3. Integration with online learning platforms

The payment effect of knowledge payment users is often difficult to measure and quantify directly. Failure to see obvious results in the short term may reduce users' trust in the content, thereby weakening their willingness to pay. This feature will lead to the emergence of more in-depth and more professional knowledge payment content in the future, and the boundaries between knowledge payment platforms and online learning platforms will become blurred.

In the next few years, the knowledge payment industry will enter a period of stable growth, breaking through the bottlenecks of content homogeneity, low repurchase rate and difficult to quantify payment results. The continuous segmentation of vertical fields, the continuous penetration of technology and the gradual integration with other formats will provide more possibilities for the future of knowledge payment.

5. Lifestyle and Entertainment

my country is gradually entering a period of transition in which the national consumption structure is shifting from physical goods to services. Cultural and entertainment consumption and sports and leisure consumption will usher in the fastest growth stage.

1. Cinemas and performing arts usher in format innovation and lead the cultural and entertainment market 

During the period of 2012-2017, the capacity of China's film market experienced rapid growth, and the total box office revenue reached RMB 55.91 billion in 2017. Among them, thanks to the annual improvement in the quality of domestic films and the increasing awareness and attention of upstream film and television production companies to cultivate domestic IP, domestic film box office currently accounts for 53.8% of the market share. With the general trend of the realization of high-quality film and television products gradually becoming healthier and the release of viewing demand brought about by consumption upgrades, it is expected that the film market will continue to show a trend of medium-to-high-speed growth in the future.

Source: China Film Distribution and Exhibition Association, China Insights Consulting

In 2016, the total box office revenue of the performance market reached 16.81 billion yuan. The overall growth rate of the traditional art market has slowed down. Affected by new entertainment methods and alternatives such as online live broadcasts, it is about to usher in a transformation towards the Internet, pan-entertainment and tourism industries, showing the following three trends:

• Improve specialization in market segments and create high-quality content to cultivate fans.
• Cross-border integration and development of performing arts resources and collaborative development of the online and offline ecosystem.
• The “tourism +” model provides a new development path for the performing arts industry.

1. The concept of pursuing health has been deeply rooted in people's minds, effectively driving the fitness craze

With the development of my country's economy, the improvement of income levels, the changes in consumption structure, and the improvement of fitness concepts, the proportion of people of all ages who regularly participate in physical exercise has increased significantly. Improving physical fitness, entertainment, and preventing and curing diseases are the main purposes of physical exercise.

Source: China Insights Consulting

The rise of sports demand among young and middle-aged people has brought more added value and space for expanding industrial value:

• Sports food: People are very enthusiastic about participating in various sports activities. The number of participants in various outdoor sports activities is increasing day by day, which has greatly promoted the development of the sports food industry. Foreign sports nutrition brands have entered China one after another.
• Fitness apps and wearable devices: Sports and fitness apps represented by WeChat Sports, Yuedongquan and Keep had an average of 34 million monthly active users in 2016, a year-on-year increase of 0%. Various health wearable devices that connect to fitness apps have also been a hot topic in recent years, and major companies such as Huawei, Samsung, and Xiaomi have all deployed fitness products.

Sports equipment and gyms: The huge fitness population will drive huge market demand for sports equipment and gyms. Among them, China's gym penetration rate has huge room for improvement. Compared with developed countries in Europe and the United States, there is still a lot of room for improvement.