Judging from the data of the annual report and the first quarterly report of the media industry, the revenue side of the track enterprises has achieved single-digit growth. Instead, it validates the previous logic, that is, the entire industry is still in a strong recovery.
In 2024, under the background of the core trend of the media industry's boom recovery, another media company is trying to rush to the secondary market. According to Zhitong Financial APP, Unitrend Entertainment Group (hereinafter referred to as Zhongxi Media), a Cayman holding company of Beijing Zhongxi Heli Culture Media Co., Ltd., recently submitted a registration form to the SEC (Securities and Exchange Commission) to be listed on the NASDAQ IPO with the stock code INHI.
According to public information, Zhongxi Media plans to raise $6 million through the issuance of 1.3 million shares, with the issue price ranging from $4 to $5 per share. At the midpoint of the proposed offering price range, the company would have a market capitalization of $186 million. The outstanding shares of the IPO represent only 3.0% of the total share capital.
Revenue just crossed the $20 million threshold
According to the prospectus, Zhongxi Media was founded in 2014 and is a comprehensive media company integrating investment, planning, production, post-production and publicity. As a bridge between TV production companies, TV stations and media platforms, advertising agencies and well-known multinational brands, Zhongxi Media's core business includes TV program distribution and advertising.
From 2022 to 2023, Zhongxi Media's revenue will be 16.131 million yuan (unit: USD, the same below) and 21.033 million yuan respectively, a year-on-year increase of 30.4%; gross profit was 5.1516 million yuan and 5.9552 million yuan respectively, a year-on-year increase of 11.6%; The corresponding net profit was 1.0881 million yuan and 3.2763 million yuan respectively, a year-on-year increase of 201.1%.
According to the observation of Zhitong Financial APP, the net profit growth rate of Zhongxi Media is significantly higher than that of the income side, on the one hand, its operating income has increased significantly, during the reporting period, the company's operating income was 937,100 yuan and 3.0197 million yuan respectively, a year-on-year increase of 222.2%; On the other hand, the company's total operating expenses decreased significantly year-on-year, with the company's total operating expenses of 4.215 million yuan and 2.935 million yuan respectively in the same period, a year-on-year decrease of 30.4%. One rise and one fall, the company's net profit recorded a two-fold year-on-year growth.
In terms of business, Zhongxi Media's revenue comes from three parts: advertising agency services, content asset income, and post-production services. During the period, the revenue from content assets, as the company's largest business, was 13.435 million yuan and 18.860 million yuan respectively, accounting for 83.28% and 89.66% of the total revenue. Specifically, the content asset business can be divided into self-produced content and licensed content. During the period, the income of self-made content was 10.101 million yuan and 10.807 million yuan respectively; The revenue of licensed content was 3.325 million yuan and 8.052 million yuan respectively. During the same period, the revenue of advertising agency services was 2.693 million yuan and 1.744 million yuan respectively, accounting for 16.39% and 8.29% of the total revenue. The small scale of post-production service revenue has little impact on the change in total revenue for the time being. Overall, Zhongxi Media's business is becoming more and more concentrated, and the content asset business contributes nearly ninety percent of its revenue.
How many cups can Zhongxi Media share in the drama distribution market?
According to the prospectus, Zhongxi Media's TV program distribution business contributed nearly ninety percent of its revenue, which shows that its business development is related to the development of the domestic drama distribution market.
In recent years, on the one hand, under the influence of macro factors such as the goal of building a cultural power by 2035 and the convening of the "20th National Congress", the national cultural department has taken multiple measures to guide the creation, production, distribution and dissemination of TV dramas; On the other hand, changes in market demand have prompted the TV drama industry to gradually standardize and standardize, optimize the creation and production structure, and improve the efficiency of distribution revenue.
According to the data, the scale of the domestic drama distribution market increased slightly from 44.1 billion yuan in 2019 to 44.8 billion yuan in 2023, with a compound annual growth rate of 0.4%. Estimate. The drama distribution market is expected to reach RMB 58.1 billion in 2028, growing at a CAGR of 5.4% from 2023 to 2028.
The industry is expected to use the advantages of capital and scale to accelerate the integration of small and medium-sized film and television production companies with small scale and insufficient cash flow, which is expected to accelerate the clearing of the industry, and the head companies are expected to use the advantages of capital and scale to accelerate the integration with the support of policies, further increase market share, and consolidate the leading position in the industry.
However, from the perspective of the competitive landscape, Zhongxi Media's market share is not dominant. In terms of drama distribution revenue in 2023, INHI ranks 9th among all drama distributors in China, and there is still a big gap with the top companies.
As we all know, while the production and distribution of TV dramas are scattered and competitive, the number of TV drama distribution departments of Huayi Brothers, Xinli Media, Noon Sunshine and other head companies is relatively stable, and the distribution share of the top ten TV drama companies accounts for about 20% of the market share.
To make matters worse, Zhongxi Media's TV distribution business apparently relies on a small number of customers, and its growth is flawed. For the year ended December 31, 2023, the Company had three major customers, Zhejiang Media Group, Zhejiang Satellite TV and Jiangsu Broadcasting Corporation, accounting for 32.0%, 14.6% and 12.6% of the Company's total sales, respectively, and the three together accounted for 59.2% of the total sales. The sequelae of customer dependence are difficult to solve, resulting in high receivables. During the period, the net receivables were 11.914 million yuan and 12.169 million yuan respectively, accounting for 74% and 60.2% of the total revenue, respectively. Relying on large customers, the fragility of its operation can be seen.
The important thing is that under the trend of high-quality TV dramas, for TV dramas of average quality, their bargaining power is weak, and they can only passively accept relatively low purchase prices. Therefore, the past performance of film and television drama production companies and industry popularity are important factors in determining the sales performance of works. Zhongxi Media's recent works such as "Beautiful Days", "Hurried Youth", "Miss Sweet and Mr. Leng" have not broken the circle, and are deeply bound to Zhejiang Satellite TV and Jiangsu Satellite TV. At present, satellite TV has a stronger right to speak, and if Zhongxi Media cannot produce high-quality "explosive models" to improve its right to speak, it will inevitably be shackled by the downstream.
It is undeniable that from entrepreneurship to sprint to the US stock market, Zhongxi Media's performance growth is remarkable. However, the production and distribution of drama series is capital-intensive, and under the "curse" of the industry with fluctuating revenue, will investors pay for the lack of popular dramas?