After being suspended by the General Administration of Market Supervision in July, HUYA Inc. and DouYu International Holdings Limited disclosed their results for the second quarter of 2021, the first since the merger was terminated.

From a fundamental point of view, DouYu International Holdings Limited and HUYA Inc. have their own difficulties-DouYu International Holdings Limited's data continues to decline, the business performance is poor, and the financial report data is dismal; although HUYA Inc. is better than DouYu International Holdings Limited in terms of revenue and net profit, the net profit has dropped by 32%. Paying users continued the decline of the previous quarter, in the large competitive environment, the growth pressure is not small.

After the announcement, DouYu International Holdings Limited's share price fell to an all-time low, with its market capitalization falling below $1 billion for the first time, a cumulative decline of more than 80 per cent from its peak.

After experiencing the merger storm, how will HUYA Inc. and DouYu International Holdings Limited face the final situation?

DouYu International Holdings Limited's data declined, HUYA Inc. 's income increased slightly.

According to the second-quarter results of HUYA Inc. and DouYu International Holdings Limited, HUYA Inc. 's revenue in the current quarter was 2.96 billion yuan, up 9.8% from a year earlier. Under non-Non-GAAP, the net profit attributed to HUYA Inc. was 250 million yuan, down 32% from 330 million yuan in the same period last year. DouYu International Holdings Limited's total revenue was 2.34 billion yuan, down 6.8% from the same period last year. The net loss under non-US GAAP was 145 million yuan, compared with a profit of 320 million yuan in the same period last year, which has changed from profit to loss for three consecutive quarters, and the loss has greatly expanded month-on-month.

From the financial data, DouYu International Holdings Limited's loss is mainly due to the expansion of marketing expenditure in the case of declining revenue. According to the financial report, DouYu International Holdings Limited's sales and marketing expenses were 295 million yuan in the second quarter, compared with 142 million yuan in the same period in 2020, an increase of 107.6 percent over the same period last year.DouYu International Holdings Limited's investment in promotional channels and promotional activities as well as brand activities increased significantly in the past quarter, but the revenue performance was dismal.

Among them, DouYu International Holdings Limited's main source of income is live broadcast service revenue of 2.18 billion yuan, down 6.4% from the same period last year. Advertising and other revenues, which account for a relatively small share, also fell 18.7% year-on-year to 158.7 million yuan.Obviously, DouYu International Holdings Limited vigorously invested in marketing and promotion behavior, did not actually bring revenue growth, a substantial increase in costs led to income beyond expenditure.

It is worth noting that DouYu International Holdings Limited's investment in content has not increased, and its revenue sharing fees and content costs have increased by 3.0% compared with the same period last year, accounting for 77.3% of revenue. HUYA Inc. 's revenue sharing fees and content costs increased by 21.2% year-on-year, accounting for 68.8% of revenue.

From HUYA Inc. 's point of view, the growth was mainly due to the increase in advertising and other revenue, which increased by 189.9% compared with the same period last year to 383 million yuan, mainly from content licensing revenue.

However, the revenue of HUYA Inc. 's core business live broadcast service was 2.5792 billion yuan, an increase of 0.6% compared with 2.5651 billion yuan in the same period in 2020.In this quarter, HUYA Inc. 's live broadcast growth mainly benefited from the growth of overseas live broadcast business revenue, while the domestic live broadcast growth performance was not satisfactory.

In terms of net profit, HUYA Inc. declined significantly in the second quarter, because it was related to costs and expenses, and its income and cost increased by 12.2%, mainly due to the increase in revenue-sharing expenses and content costs. In addition, its R & D expenses increased by 15.6% year-on-year to 208 million yuan, while sales and marketing expenses increased by 45.9% to 167 million yuan.

In terms of business composition, the main source of revenue of the two live streaming platforms is live broadcast revenue, of which DouYu International Holdings Limited accounts for 93.2% of revenue and HUYA Inc. accounts for 87.1% of live broadcast revenue.The revenue composition of the two platforms is relatively simple, in contrast, DouYu International Holdings Limited relies more on live streaming.

Customers are weak in acquisition and abandoned by millions of users.

In terms of the number of households paying fees, HUYA Inc. and DouYu International Holdings Limited declined to varying degrees. In the second quarter, HUYA Inc. decreased by 600000 and DouYu International Holdings Limited by 400000. It is worth noting that in the last quarter, the number of paying households of the two companies was also declining compared with the same period last year, with HUYA Inc. reducing by 200000 and DouYu International Holdings Limited by 600000.In other words, HUYA Inc. and DouYu International Holdings Limited lost 800000 and 1 million paying users respectively in the first half of 2021, and users' desire to pay continues to go down.

At present, HUYA Inc. 's average mobile MAU is 77.6 million, compared with 75.6 million in the same period in 2020, an increase of 2.6 per cent over the same period last year. The total number of paid households is 5.6 million. DouYu International Holdings Limited's average mobile MAU was 60.7 million, an increase of 3.9% over the same period last year. The average number of paying users is 7.2 million, and the payment situation of users is more obvious than that of HUYA Inc..

Obviously, both HUYA Inc. and DouYu International Holdings Limited have entered the growth bottleneck in the growth of monthly active users.The two platforms are going all out to drive growth through content investment and marketing strategies. But at present, the number of monthly active users of the new power video platform is increasing, and the user time is preempted, and the game live broadcast platform will only hesitate to rely on the original user ecology. How to solve the growth bottleneck has become another mountain in front of HUYA Inc. and DouYu International Holdings Limited.

At present, HUYA Inc. and DouYu International Holdings Limited still have a large overlap of business priorities in the second half of the year, which is reflected in the investment in overseas markets on the one hand and the integration of video + live broadcast on the other. In addition, there is the copyright contention and layout of e-sports events. Through these inputs, the two live streaming platforms are expected to drive the growth of users and revenue.

As for the decline in live broadcast revenue and the slowdown in growth, the market explained that it was due to the reduction in user time at home after recovering from the epidemic. However, this also shows that before the epidemic, there was a bottleneck in the growth of the game live broadcast platform.

On the whole, the game live broadcast industry is facing the practical problems of the disappearance of user dividends and the dilemma of the growth of payment rates. At the same time, the live game business of video platforms such as Bilibili Inc., Kuaishou Technology and Douyin is also relatively mature, which has strongly suppressed the growth of HUYA Inc. and DouYu International Holdings Limited in terms of volume, traffic and boundaries.

More importantly, the two established live game players who could have occupied the larger market by huddling together also continued to stand in opposing camps because of the failure of the merger.

"abandoned son" DouYu International Holdings Limited, how to turn over?

On October 12, 2020, the news of the merger of HUYA Inc. and DouYu International Holdings Limited was officially announced that the new company would set up a joint CEO by Tencent and DouYu International Holdings Limited would be delisted. But in less than a year, on July 10, 2021, the General Administration of Market Supervision banned HUYA Inc. from merging with DouYu International Holdings Limited International Holdings Co., Ltd. The marriage failed, and Tencent's wish to sit on the game live broadcast on the top of the mountains and rivers failed.

In terms of market share, Tencent ranks first in the upstream online game operation service market share of more than 40%, while HUYA Inc. and DouYu International Holdings Limited rank first and second in the downstream game live broadcast market share of more than 40% and 30% respectively.

Now that the merger has stopped, what is the impact on both HUYA Inc. and DouYu International Holdings Limited?

In this earnings call, HUYA Inc. CEO Dong Rongjie said that the management actually made two versions of the plan for whether the merger was approved or not. HUYA Inc. has been pushing forward in accordance with the previous plan. This year, there will not be much adjustment to the overall strategy, including the content strategy and the overseas strategy. The investment in content will increase moderately in the second half of the year.

When talking about the issue of "merger termination" at the earnings call, DouYu International Holdings Limited CEO Chen Shaojie said that DouYu International Holdings Limited fully respects regulatory decisions, actively cooperates with regulatory requirements, and operates in compliance with the law. Whether DouYu International Holdings Limited's future development will be affected. He believes that DouYu International Holdings Limited has always been an independent company with independent operation, independent decision-making and independent development, so the decision of the General Administration of Market Supervision will not have a significant adverse impact on DouYu International Holdings Limited's current operation and financial situation.

But the truth is even more brutal, and the external arguments of the company's management are unconvincing in the face of capital markets and financial data. Since the merger was announced, DouYu International Holdings Limited's revenue has begun to decline and there have been persistent losses.DouYu International Holdings Limited's share price soared to $19.18 after the news of the merger, but now it is only $3.42, down more than 80%, and its market capitalization fell below $1 billion after the quarterly results were released.HUYA Inc. is in a relatively less miserable situation, with a market capitalization of about $2 billion, which has tripled the overall market capitalization of DouYu International Holdings Limited.

Compared with when the merger was announced at that time, HUYA Inc. 's market capitalization was about 5.7 billion US dollars, and DouYu International Holdings Limited's market capitalization was about 4.4 billion US dollars. After the merger, a giant game live broadcast platform with a market capitalization of more than 10 billion US dollars will be created. HUYA Inc. and DouYu International Holdings Limited are in a relatively difficult position.

Among them, DouYu International Holdings Limited has lost money for three consecutive quarters, and the number of paying users has declined. at the same time, negative news from anchors is constantly dragging down the platform.

It is worth noting thatTencent has sole control over HUYA Inc. and joint control over DouYu International Holdings Limited. Now that the merger ends, more questions arise: whether Tencent's resources will be more inclined to HUYA Inc., and with DouYu International Holdings Limited in the doldrums, will he become an outcast one day?

In the original merger, as the party to be acquired, DouYu International Holdings Limited, who is relatively weak, is now in a more awkward position and seems to be able to walk on the edge of Tencent's game live broadcast ecology and be self-reliant.

At the beginning, Tencent took the lead in merging the two, just to reduce internal friction, but now it seems that internal friction will continue, and the open and secret struggle between HUYA Inc. and DouYu International Holdings Limited will be more intense.