The e-sports company of the gambling king's son sprints to the first share of e-sports, and its revenue depends on artist management

Southern Metropolis Daily

2024-06-18 22:04Published on the official account of Guangdong Southern Metropolis Daily

"If I don't succeed in starting a business by the age of 28, I'll go back and help my family with their business." Once, He Youjun, the son of the "Macau Gambling King", once set up an "entrepreneurial flag", which has not yet been realized when He Youjun is 28 years old, but it may be officially implemented in the near future. Nandu reporters checked the U.S. Securities and Exchange Commission and learned that a few days ago, NIP Group (NIP Group) has officially submitted a prospectus and plans to be listed on the NASDAQ.

According to the prospectus, after the acquisition of Wuhan eStarPro Club and the well-known Swedish e-sports club NIP, He Youjun holds 14.2% of the shares of NIP Group, is the largest shareholder and serves as the CEO of the group. If all goes well, Xingjing Weiwu will be listed on the NASDAQ, becoming the first Chinese e-sports stock.

At first glance, it seems to be the "first share of e-sports", but He Youjun seems to want to make Xingjing Weiwu a different e-sports company. According to the prospectus, among the three major revenue segments, the artist management service sector will contribute nearly sixty percent of the revenue for two consecutive years in 2022 and 2023. The prospectus also mentions that the company will open the "e-sports +" development model, in addition to e-sports revenue, but also focus on cultivating e-sports athletes into successful online artists.

According to the prospectus, under US generally accepted accounting principles (GAAP), in 2022 and 2023, the net loss of NIP Group will be US$6.306 million and US$13.258 million, respectively, with a loss rate of 9.6% and 15.9%, respectively.

He Youjun's "buy, buy, buy" giant e-sports club is about to go public

As the son of the fourth room of the "Macau Gambling King", He Youjun is notable for his early entrepreneurial experience in addition to being admitted to Oxford and MIT at the age of 18 with excellent grades at the same time, and being admitted to the Massachusetts Institute of Technology (MIT) for a master's degree in finance in 2016.

Tianyancha shows that there are currently 8 companies related to He Youjun, including Shanghai Jiayou, Shanghai Youyong, Shenzhen Qianhai Mengyou, and Shanghai Shangyou, 4 companies that have been played by He Youjun with homophonic stalks, all of which are in a state of cancellation or existence, and their business scope includes business services, software and information technology services. The above company was founded as early as 2016, which means that He Youjun has started his entrepreneurial journey since he was 21 years old.

Among He Youjun's many start-up companies, Xingjing is the core business of He Youjun. In 2017, He Youjun founded the V5 Esports Club. The company quickly won the League of Legends Pro League (LPL) spot in the second half of 2018 in a competitive bid and created a League of Legends division, which was speculated by many at the time to cost hundreds of millions of dollars. Unexpectedly, in the LPL Spring Tournament in 2020, the V5 team won a 0-16 record, creating the worst record in the history of a single season in the LPL.

The e-sports club that spent a lot of money had such a poor record, and at that time, He Youjun urgently needed to find someone more knowledgeable in China to lead and cooperate. Coincidentally, in 2020, the Wuhan eStarPro team, founded by former Warcraft well-known e-sports player Sun Liwei (ID: xiaOt) and won the 2019 Honor of Kings World Championship Cup, suffered a financial crisis. In the end, He Youjun chose to intervene, and V5 and Wuhan eStarPro announced the establishment of Xingjing Weiwu Group after the share exchange merger, and landed its headquarters in Wuhan Optics Valley.

In January 2023, Xingjing Weiwu Group also completed the merger and acquisition of NIP, a well-known Swedish e-sports club, by way of equity exchange. As an esports brand with a history of more than 20 years, NIP is one of the earliest pioneers in the world to lay out the e-sports track, with e-sports teams such as Rainbow Six, Valorant, FIFA Soccer World, and Counter-Strike. After the completion of the acquisition of NIP, the original V5 Esports Club was renamed as the current NIP Esports Club.

After the completion of this cross-border merger, the business of Xingjing Weiwu Group has covered the markets of Europe, South America and other places from China. As a result, the original V5 Esports Club has been renamed NIP Esports Club, and it will compete in the next tournaments under the new identity of NIP Group.

According to the prospectus, after two mergers, He Youjun currently holds 14.2% of the shares of Xingjing Weiwu Group, is the largest shareholder and serves as the group's CEO. Hicham Chahine, the owner of the NIP Club and co-CEO of the group, holds 12.4% of the shares through the holding organization, making it the second largest shareholder. Sun Liwei, the founder of the eStar team and a well-known e-sports player, holds 8.7% of the group's shares.

Last year's revenue was 600 million, and artist management services contributed more than 60%.

How exactly does an esports club make money? According to the prospectus, NIP Group's net income in 2022 will be US$65.8 million (470 million yuan), and the net income for the full year of 2023 will be US$83.7 million (600 million yuan), of which the revenue will mainly come from the three major sectors of e-sports team operation, artist management services and event production.

Among the three main revenue segments, in 2022, the operating income of e-sports teams will be US$21.71 million, the revenue from artist management services will be US$38.56 million, and the revenue from event production will be US$5.57 million; In 2023, the esports team will earn $21.65 million from operations, $52.61 million from artist management services, and $9.4 million from event production.

It is worth noting that in 2022 and 2023, the revenue of the artist management service segment will account for 58.6% and 62.9% respectively, while the operating income of the so-called main business e-sports team will be 33% and 25.9% respectively. From this point of view, NIP Group is more like an MCN company.

According to the prospectus, the revenue of the e-sports team operation segment of Xingjing Weiwu Group specifically includes competition participation rewards and league revenue sharing, athlete transfer and rental fees, sponsorship and advertising fees, IP authorization for game props, skin and athlete card sales, brand product sales, talent management services for electronic competitions and reality show service fee income. The source of revenue for artist management activities is mainly to obtain income through the acquisition of agency contract rights of online artists and the expansion of artist management business.

In terms of artist management business, the prospectus also mentions that NIP Group is focused on developing esports athletes into successful online artists, further extending their success in the esports field to the entertainment industry. In 2020, Wang Jiaer, one of the world's most famous pop icons and one of the male artists with the most followers on Instagram, has become a partner and beneficial shareholder of Xingjing Weiwu.

Open the "e-sports +" model to diversify revenue? Still not out of the red

According to the prospectus, Xingjing Weiwu Group acquired the NIP Club for a total consideration of US$168 million and formed a goodwill of US$109 million. However, after a large-scale merger, Xingjing Weiwu Group still failed to get rid of the loss-making situation. According to the prospectus, from 2022 to 2023, Xingjing Weiwu Group's revenue will increase from US$65.835 million to US$83.668 million, with gross profit margins of 5.7% and 8.6% respectively. Under US generally accepted accounting principles (GAAP), in 2022 and 2023, the net loss of Xingjing Weiwu Group will be US$6.306 million and US$13.258 million, respectively, with a loss ratio of 9.6% and 15.9%, respectively.

For the growth of future performance, the prospectus mentions that in addition to ensuring that the e-sports team achieves the best results in various regions and events, it is also necessary to pay attention to the sustainable growth opportunities brought by the "e-sports +" model.

The prospectus divides the "e-sports+" model into three phases, with phase 1.0 mainly including the operation of e-sports clubs focusing on competition results, as well as fixed league slots and diversified revenue sources based on sharing. But now NIP has entered the 2.0 stage, which is to generate revenue through talent management, event production, creative studios and a thriving advertising business.

Xingjing Weiwu Group said that it has now obtained revenue from advertising, sponsorship agreements, live broadcasts, events and tourism in the artist management business by providing digital operation capabilities for online artists, e-sports and game-related anchors, etc. At the same time, Xingjing Weiwu Group also provides entertainment marketing and consulting services for global corporate brands. "For the year ended December 31, 2023, net revenue from our esports team operations, talent management and event production businesses accounted for 25.9%, 62.9% and 11.2% of our net revenue, respectively, demonstrating the diversity of our revenue." mentioned in the prospectus.

At the same time, the prospectus said that the company is exploring the third phase, which includes diversified businesses such as esports education and training, fan world (B2C monetization and metaverse), digital collectibles, esports real estate and IP.

Written by: Nandu reporter Lin Wenqi

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