Live broadcast revenue declined, Huya 2021 revenue growth rate slowed down significantly, and monthly activities reached a new high

On March 22, 2022, huya, a game live broadcasting platform, released its financial results for the fourth quarter and full year of 2021. According to the financial report, Huya's revenue in 2021 increased by 4% year-on-year to 11.351 billion yuan; net profit attributable to shareholders of the company fell by 34.01% year-on-year to 584 million yuan; of which, the fourth quarter revenue fell by 6.07% year-on-year to 2.809 billion yuan, and the net loss attributable to the company's shareholders was 313 million yuan, compared with the net profit of 253 million yuan in the same period last year, from profit to loss.

Revenue growth slowed sharply

Churn of paid users

In the past five years, Huya's revenue growth rate has been slowing down. According to the financial reports of previous years, in 2017, 2018, 2019, 2020 and 2021, Huya's revenue was 2.185 billion yuan, 4.663 billion yuan, 8.375 billion yuan, 10.914 billion yuan and 11.351 billion yuan, an increase of 174.16%, 113.45%, 79.58%, 30.33% and 4% respectively, and the growth rate fell sharply to single digits.

The slowdown in revenue was primarily due to lower revenue from the live streaming business. Huya's revenue is mainly composed of live broadcast business and advertising business, in 2021, live broadcast business revenue decreased by 1.22% year-on-year to 10.186 billion yuan, and advertising and other revenue increased by 93.3% year-on-year to 1.165 billion yuan. The proportion of live broadcast revenue to total revenue was 89.74%, advertising revenue accounted for only 10.26%, and live broadcast business revenue accounted for nearly 90%, which had a greater impact on revenue.

The revenue of live broadcasting services is highly bound to the scale of users and paid users. According to the financial report, by the fourth quarter of 2021, the average number of mobile monthly active users of Huya Live increased by 7.4% year-on-year to 85.4 million, a new high since its listing. However, the number of paid users fell by 6.67% year-on-year to 5.6 million, and in the case of a new high in monthly activity, the number of paid users was not as good as in any quarter of the previous year, and the payment rate fell significantly.

In terms of costs and expenses, Huya's revenue cost in 2021 increased by 12.8% year-on-year to RMB9.751 billion, mainly due to revenue sharing and increased content costs, sales and marketing expenses. Specifically, in 2021, Huya's revenue share and content costs increased by 18.2% year-on-year to 8.375 billion yuan; bandwidth costs decreased by 18.8% year-on-year to 714 million yuan; research and development expenses increased by 11.5% year-on-year to 819 million yuan; sales and marketing expenses increased by 36.1% year-on-year to 760 million yuan; and general and administrative expenses decreased by 26.6% year-on-year to 326.8 million yuan.

Wu Xin, vice president of finance of Huya Company, said that due to the external environment, Huya's revenue growth rate slowed down in the fourth quarter of 2021. The company maintained strategic investment in content and esports to expand its content library and drive continued user growth, driving up costs. Nonetheless, with a solid financial foundation and operational capabilities, the company remains optimistic about its future business prospects. In the face of challenges and opportunities, the company will focus on growing users, improving operational efficiency and exploring business diversification to bring long-term value to all stakeholders.

As of December 31, 2021, Huya had cash, cash equivalents, short-term deposits and short-term investments totaling $10.959 billion.

Meet the pressure of short video platform competitors

The industry pattern changes under the regulatory entry

After experiencing the era of barbaric growth, in addition to the two head game live broadcast platforms of Huya and Douyu, as well as players in the industry such as Penguin E-sports and CC Live, Kuaishou, B Station, and Douyin are also constantly increasing their layout. Following the ban on the merger of Huya and Douyu by the State Administration for Market Regulation in July 2021, the competition in the game live market continues.

According to the disclosure, in terms of event copyright, Huya broadcast 125 rights e-sports events in the fourth quarter of 2021, reached an exclusive cooperation with ESL for 2022-2023, and also broadcast 64 self-made events and PGC programs in the quarter. In addition, in April 2021, Huya Live and Tengjing Sports reached an agreement on the exclusive content rights of LPL, bidding for the exclusive live broadcast rights, video-on-demand and distribution rights of LPL for a period of five years for 2 billion yuan.

In contrast, Douyu invests more in self-made event content, and the pressure brought by short video platforms in the competition copyright cannot be underestimated, such as B Station once bid for 800 million yuan for the exclusive live broadcast rights of the 3-year League of Legends in Chinese mainland, participated in secondary copyright distribution in other world events, and produced extended content such as e-sports documentaries to expand the scale of new users and improve user retention.

As far as the current two head game live broadcasting platforms are concerned, in terms of active users, the financial report shows that Huya is better than Douyu, and the average number of mobile monthly active users of Huya in the fourth quarter of 2021 reached 85.4 million, while Douyu was 62.4 million, and the growth rate of the two companies was approaching year-on-year. However, in terms of the number of paid users in the fourth quarter, Huya was 5.6 million and Douyu was 7.3 million, and The year-on-year decline in Huya was greater than that of Douyu, both of which lost hundreds of thousands of paid users from the same period last year.

It is worth noting that in addition to the pressure from competitors, the regulator is also constantly paying attention to the problems existing in the platform, and the industry as a whole is under pressure. In February last year, the Cyberspace Administration of China and seven other departments jointly issued the Guiding Opinions on Strengthening the Standardized Management of Online Live Broadcasting, which clarified that online live broadcasting platforms should set reasonable limits in terms of live broadcast rewards, live broadcast duration and number of sessions.

In addition, in March this year, the Cyberspace Administration of China (CAC) re-solicited opinions on the Regulations on the Protection of Minors Online (Draft for Solicitation of Comments), which mentioned that online service providers, including online live broadcasting and online games, should reasonably restrict minors' consumption behavior, and prevent and resist the tendency of bad value such as traffic first, and must not set up communities and groups such as fundraising and voting for assistance, and also require relevant themes to improve the anti-addiction system.

In 2018, Huya was listed on the New York Stock Exchange for an issue price of $12, with a market capitalization of about $3.2 billion at the time. As of press time, Huya reported $4.97 per share, with a total market capitalization of $1.18 billion, a decline of more than 80% in the past year.

Regarding the performance in 2021, Dong Rongjie, CEO of Huya, said: "Throughout 2021, we will focus on increasing investment in high-quality content and content creators, improving technical capabilities and improving product experience. Through multiple measures, we have obtained positive feedback from anchors and users, further consolidated Huya's leading market position, and consolidated the road to sustainable business development. In 2022, we will continue to bring more meaningful content and experiences to users, expanding the user base while enhancing Huya's value proposition in the huge gaming and e-sports market. ”

Written by: Nandu reporter Lin Xinxin