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Text / Xue Yaping
Source / Bento Finance (ID: daxiongfan)
ByteDance, which has been in the entertainment industry for a long time, finally waited for a listed company.
On August 7, Lehua Entertainment, which owns stars such as Wang Yibo and Fan Chengcheng, passed the hearing of the Hong Kong Stock Exchange (hereinafter referred to as the “Hong Kong Stock Exchange”), and may be officially listed on the Hong Kong Main Board in September.
According to the data, Lehua Entertainment, founded in 2009, has become a cultural and entertainment platform covering three major business modules: artist management, music IP production and operation, and pan-entertainment business. Specifically, artist management is the core business of Lehua Entertainment. From 2019 to 2021, artist management accounted for 84%, 87.7% and 91% of total revenue, respectively.
As the “first stock of artist brokerage”, Lehua Entertainment was listed on the New Third Board in September 2015. After delisting from the New Third Board in March 2018, it began to plan to be listed on the main board of the Shanghai Stock Exchange, but in 2021, Lehua will be listed on the New Third Board. Entertainment terminated pre-market coaching. This also means that the impact on the Hong Kong Stock Exchange is Yuehua Entertainment’s third IPO attempt.
With the finalization of the listing process, not only Du Hua, the founder of Lehua Entertainment, but also two Internet companies participating in the investment, Ali and ByteDance, will realize the dream.
According to the prospectus, before the IPO, Du Hua, executive director, chairman and CEO of Lehua Entertainment, held 50.18% of the shares. Dongyang Alibaba Pictures holds 14.25% of the shares through Interform Construction, and Quantum Jump holds 4.74% of the shares through Afflatus. The controlling shareholder behind Quantum Jump is ByteDance.
ByteDance’s pursuit of the entertainment industry is not limited to Lehua Entertainment, but also invested in Taiyang Chuanhe, a brokerage company including Angelababy, Zhou Dongyu, and Chen He. At that time, it was reported that Taiyang Chuanhe was valued at 5 billion yuan, and some U.S. IPO plan. However, the front foot of byte invested, and the back foot Zhou Dongyu and Angelababy left one after another. As of now, the financing information of Taiyang Chuanhe has stayed on ByteDance’s Series B financing two years ago.
Compared with Taiyang Chuanhe, although it holds less than 5% of the shares in Lehua Entertainment, it is a successful investment by ByteDance in the entertainment industry. Moreover, by investing in Lehua Entertainment, ByteDance has further extended its tentacles to the current hot virtual idol field.
01
According to the company’s investigation, in July 2021, Lehua Entertainment accepted investment from Chinese Culture, Alibaba Pictures, ByteDance, etc., and the financing amount was not disclosed. However, according to the “Daily Economic News” report, in 2018, ByteDance invested 125 million yuan in Lehua Entertainment.
Most of Lehua Entertainment’s revenue comes from its artist management business. According to incomplete statistics, although Lehua Entertainment has signed a total of 66 artists and 71 trainees participating in the trainee program at this stage, the artist management business still relies too much on Wang Yibo. In the prospectus submitted by Lehua Entertainment, it is mentioned that Wang Yibo has 36 endorsements and more than 60 commercial contracts.
In the supplier information it provided, “Supplier B” was also speculated to be Wang Yibo. In 2021, Supplier B’s transaction value as a percentage of total operating costs will reach 43.9%. The prospectus shows that from 2020, 2021 to April 30, 2022, Lehua Entertainment’s revenue growth from “supplier B” accounted for more than 80% of the overall revenue growth.
In addition to contracted artists, virtual artists are becoming the second growth curve of Lehua Entertainment. Its virtual artist group A-SOUL launched at the end of 2020 consists of 5 digitally created virtual artists, namely Bella, Jiaran, Nailin, Jia Le and Xiang Wan. When A-SOUL debuted, it became the top stream of station B and has nearly 10 million fans on the entire network. However, these virtual members still need behind-the-scenes actors to play the business.
This is also the most talked-about cooperation between Lehua Entertainment and ByteDance so far. According to “Chopped Pepper TMT” report, the virtual idol group A-SOUL, jointly planned by ByteDance and Lehua Entertainment, provides the underlying technical support by ByteDance, while Lehua provides the person in the middle (virtual image player), content planning operations, etc.
And in June 2021, Beijing Youyi Technology Co., Ltd., a wholly-owned subsidiary of ByteDance, wholly invested in Hangzhou Kanchao Information Consulting Co., Ltd., which owns the copyright of A-SOUL. The actual controller is Zhang Yiming.
From this point of view, ByteDance is the actual helmsman behind A-SOUL.
The A-SOUL project was originally a “Project V” project, which started in April 2020, but did not directly form a group at that time. “Chopped Pepper TMT” quoted an industry source as saying that the recruitment of Zhongzhiren was initially led by Byte to find suitable seiyuu, and finally reached a cooperation with Lehua, “Lehua has the experience of creating traditional stars in the past, and also has professional skills. The data, operation and maintenance team. It also proved after the fact that the choice of bytes was correct.”
A-SOUL is the main force of Lehua Entertainment in the pan-entertainment business. According to the prospectus, from 2020 to 2021, Lehua Entertainment’s pan-entertainment business achieved revenue of 37.869 million yuan, a year-on-year increase of 80.95%, and its gross profit margin was also as high as 77.7%, exceeding the overall gross profit margin of Lehua Entertainment of 46.6%. According to Lehua Entertainment, this is mainly due to the “revenue generated by the commercial development of A-SOUL” and the relatively low operating costs associated with Lehua’s virtual artist portfolio, which has a relatively high gross profit margin.
However, in May of this year, the top group of virtual idols “collapsed”, and Jiale, the lead singer of A-SOUL members, left the group, which means that the careers of Jiale and the “people in the middle” behind them have come to an end. The reason is that some netizens questioned that Jiale’s “people in the middle” suffered unfair treatment, and there were problems such as low salary distribution. Subsequently, A-SOUL officially opened up rumors about “squeezing employees” and “bullying”.
After Jiale left the group, A-SOUL continued its activities as a four-member group, and entered the Pico platform on June 17 this year, and started the first group VR live broadcast that night. Pico is a VR head-mounted display manufacturer acquired by ByteDance for 9 billion yuan and merged into the ByteDance XR business line.
Lehua Entertainment’s investment in virtual artists does not stop there. In May of this year, Lehua Entertainment invested in the tens of millions of seed round financing in Nice Future, a company focused on creating virtual artist IP. Up to now, Nice Future has launched Quantum Youth, which consists of 4 male virtual artist members, and EOE, which consists of 5 female virtual artist members.
In addition, the “Xiaoxiang Morning Post” reported that in the second quarter of 2022, Lehua Entertainment jointly established two companies with business partners experienced in developing technologies that empower virtual artists to further expand the virtual artist business.
02
Lehua Entertainment is not the only entertainment brokerage company that ByteDance has invested in. According to Qichacha data, in March 2020, ByteDance exclusively invested 180 million yuan in Taiyang Chuanhe’s B round of financing.
Taiyang Chuanhe was established in 2015. Its main business is artist brokerage, its MCN business, and it has short video experts like papi sauce. It has incubated more than 160 short video artists including Bigger Institute and unpopular uncle Joey through papitube. Video blogger.
In terms of artist management, Taiyang Chuanhe has signed contracts with artists such as Angelababy, Zhou Dongyu, Chen He, etc., and also participated in the film “The Wandering Earth”, film and television dramas “Soul”, “Spring Breeze Ten Miles, Not as Good as You” and other works.
But in fact, as early as 2018, ByteDance established Xi’an Byte Qiushi Information Technology Co., Ltd. wholly-owned. Its business scope includes artist brokerage, film and television program planning, production and other businesses. According to the “Investment Circle” report, it is reported that in 2018, Byte began to plan investment with Taiyang Chuanhe, and even Zhang Yiming personally participated.
It can be said that Taiyang Chuanhe is a symbolic move by ByteDance to enter the entertainment industry, that is, it has moved to the upstream field of entertainment ecology. For ByteDance, which is eager to make up for the shortcomings of long videos, artists are a necessary reserve resource. However, with the departure of Zhou Dongyu and Yang Ying one after another, the financing information of Taiyang Chuanhe has always stopped in March 2020.
In April 2020, Quantum Leap, a wholly-owned subsidiary of Byte, became a new shareholder of ZOSE Mingda, with a shareholding ratio of 20%. According to the data, ZOSE Mingda’s main business scope is artist brokerage, variety show production and distribution, music production and copyright operation. Most of its artists are musicians who have become popular on the Douyin platform. The most famous artist is the one who quickly became popular on the Douyin platform in 2019. Taiwanese singer Yan Renzhong.
In addition to brokerage companies, ByteDance has also concentrated on investing in a group of MCN institutions in various vertical fields such as audio and video animation, Weilong Culture, and Xiuwen Technology, and even invested in Weinian Technology, the company behind Internet celebrity Li Ziqi. However, with the departure of Li Ziqi, ByteDance also withdrew its investment in Weinian Technology.
In addition, Byte is still trying to participate in projection video content, and is one of the co-producers of the movies “Detective Chinatown 3” and “My Motherland and Me”.
In the Spring Festival of 2020, the movie “囧 Mom” was played on all platforms of ByteDance on Douyin, Xigua Video, Toutiao, and Douyin Volcano Edition, which also demonstrated ByteDance’s determination to enter the film and television industry.
The cooperation between ByteDance and Huanxi Media behind “囧Mom” is not limited to 630 million yuan movies, but also includes two years of cooperation behind it. According to the announcement of Huanxi Media, Huanxi Media and ByteDance will cooperate in various fields related to online video. During this period, Huanxi Media will open the resources of film and television projects to ByteDance, and the two parties will also jointly build a cinema channel.
ByteDance’s layout for entertainment is not limited to external investment, but is also increasing investment in self-made content.
In 2018, Watermelon Video, a subsidiary of ByteDance, announced that it would enter the field of self-made variety shows with a fund of 4 billion yuan, and then launched variety shows such as “It’s Okay If You Are Bad in the Exam” and “Uncle’s Little House”. On the other hand, Toutiao also announced the “Shine Plan”, announcing that it will invest 20 billion yuan in traffic to support the promotion of high-quality film and television projects and cooperation with high-quality star content.
At the end of 2020, Douyin launched a self-made talent show variety show “Infinite Idol”, but until the end of the show, the variety show did not come out of the circle, and did not achieve Douyin’s purpose of making stars through variety shows.
Recently, Douyin once again launched the variety show “Baichuan Variety Season”, inviting more than 40 groups of artists, including Li Jian, Deng Ziqi, Da Zhangwei, Ouyang Nana, and Xue Zhiqian, to try to create variety shows with different contents through the explosion model incubation mechanism.
03
The Internet giants that lay out the entertainment track are not only Bytes. Among the more popular brokers, Lehua Entertainment, led by Du Hua, stands behind Byte and Ali, Yixin Entertainment co-founded by Yang Tianzhen, and Wow Haw Haw founded by Long Danni, all accepted Tencent’s invest.
Tencent, which mainly entered the entertainment field through investment, successively participated in the angel round investment of Yixin Entertainment in March 2018, and the strategic investment of wow haw wow. Yixin Entertainment was the top entertainment brokerage company in China at that time. It was founded by Yang Siwei (Yang Tianzhen), Lu Yao, Chen Jie, and Chen Jiaying. It mainly engaged in “brokerage business”. It owns popular artist Mao Buyi. “China Times” reported that after 2018, wow haw wow also won the Tencent talent show “Creation 101”, “Creation Camp 2019” and “Creation Camp 2020”. The Rocket Girls Team, R1SE Boys Team, Hard Candy Girls The operation rights of the 303 girl group.
In terms of external investment, in addition to Lehua Entertainment, which invested in Du Hua together with Byte, Alibaba Pictures also took a 14.82% stake in Yuekai Film and Television, founded by broker Jia Shikai, and became the third largest shareholder. Its artists include Yang Yang, Song Qian and Ying Er.
On the other hand, Ali Pictures established its own brokerage company. In 2017, Alibaba Pictures and Youku established an artist agency, Cool Young Entertainment, dedicated to cultivating and managing artists. Yang Weidong, the then president of the Great Youku Business Group, once said, “We are not acting as artist brokers to compete with traditional brokerage companies for the market and interests, but more hope to generate ecological synergy and cooperation to form a strong complementarity.”
Cool Young Culture also has two wholly-owned subsidiaries, Beijing Liyu Culture Communication and Beijing 102 Artists Agency. For example, 102 artists Tan Jianci and Xiao Shunyao participated in the reality show “Chase the Light!” jointly created by Youku, Dragon TV and Canxing Productions. elder brother”.
Baidu is deeply cultivating the entertainment track through its holding company iQiyi. In 2018, an artist brokerage service provider named Aidou Century was established. The largest shareholder behind it is iQiyi, with a shareholding ratio of 55%. Among them, the chief producer of “Idol Trainee” and iQiyi Vice President Jiang Bin is the chairman of Aidou Century. The signed artists of this company include NINE PERCENT group, and Cai Xukun is one of the members of the group. Currently, NINE PERCENT has been disbanded. In addition, iQIYI has also established its own artist agency, as expected, and the signed artists have also participated in some online dramas and online variety shows produced by the platform.
Behind the dream-chasing entertainment circle, the market competition between Internet giants for the entertainment industry is highlighted.
However, with the arrival of Internet antitrust in the second half of 2021, Internet companies are also shrinking their investment boundaries. For example, Huayi Brothers, which has accepted investment from Ali and Tencent, suffered a reduction in Tencent’s holdings recently. Huayi Brothers announced that the shareholding ratio of Tencent, the company’s second largest shareholder, has dropped from 7.9% to less than 5%. This means that Tencent’s investment front in film and television entertainment is shrinking.
Ali also liquidated his shares in Mango Supermedia last year. In September 2021, Mango Super Media announced that Ali Ventures plans to transfer 5.01% of the company’s shares it holds by agreement. After the agreement is transferred, Ali Ventures will no longer hold the company’s stock.
For Internet giants, continuing to expand their layout in the entertainment field through acquisitions is ushering in potential risks in policy supervision.
ByteDance, which got a piece of the pie in the listing of Lehua Entertainment, also had to face the torture of the above-mentioned risks.
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