Financial Services Association, Feb. 26 (Reporter Cui Ming) Yuanlong Yatu (002878.SZ), which created popular IPs such as “Ice Dun Dun” and “Rong Bao,” announced that it is joining hands with top stars.

This evening, Yuanlong Yatu announced that the company signed a “strategic cooperation agreement” with Beijing Lehua Entertainment Culture Communication Co., Ltd., a subsidiary of Lehua Entertainment (02306.HK). According to the agreement, the two sides will cooperate in IP derivatives development, sales channels, IP brand management, advertising and marketing, and metaverse digitalization. Leroy Entertainment also disclosed this cooperation on the Hong Kong Stock Exchange at the same time.

The announcement mentioned that Yuanlong Yatu will focus on tapping the commercial potential of artists under Lehua Entertainment and creating IP derivatives that consumers love, enriching product categories, further increasing the attention and exposure of Lehua Entertainment and its artists, and promoting comprehensive commercial cooperation between the two sides in the field of IP derivatives development.

Yuanlong Yatu's official account also revealed the above cooperation today, which also emphasized that the two sides are based on “artist collaboration.”

“Behind celebrity periphery and derivatives, there is a huge fan economy that supports them.” A market analyst told the Financial Federation reporter that fan groups with high loyalty and strong purchasing power are the main audience for star derivatives, and this relationship also determines that product sales will be very dependent on the traffic and influence of the stars themselves.

As a leading domestic artist agency, Lehua Entertainment held Wang Yibo's trump card and flourished in the entertainment industry. It was even once known as “Wang Yibo Concept Stock” when it went public.

Lehua Entertainment once disclosed in its prospectus that in 2020 and 2021, the company's revenue growth from supplier B's artist (referring to Wang Yibo) accounted for more than 80% of the company's overall revenue growth. Wang Yibo's revenue contribution to Lehua Entertainment increased from 36.7% in 2020 to 49.5% in 2021, and further increased to 59% in the first three quarters of 2022.

According to public information, most of the entertainers under Lehua Entertainment are celebrities who debuted as trainees and relied on a fan base, including Han Geng, Wang Yibo, Cheng Xiao, Fan Chengyong, Zhu Zhengting, and Wu Xuanyi. According to the 2022 report, Lok Wah Entertainment has 68 signed artists and 58 trainees participating in the trainee program. Of these, 18 trainees debuted in 2022.

However, the artist business of Leroy Entertainment in the past two years has not been easy. The company's revenue pillar, the artist management business revenue, fell 27.5% year on year in 2022 and 26.6% year on year in the first half of 2023. The analysts mentioned above believe that, on the one hand, this is due to the decline in artists' business activities; on the other hand, the company relies too much on Wang Yibo and has not cultivated a team of artists.

The reporter noticed that perhaps in order to create a source of revenue, Lehua Entertainment is also actively developing “side businesses” recently. Currently, it is already involved in e-commerce tracks such as food, beauty, clothing, and live streaming.

But the secondary market doesn't seem to be paying for it. Leroy Entertainment plummeted 80% in the intraday market on January 16 this year (the company revealed that the ban was lifted on the same day due to the one-year anniversary of its listing). Since then, the stock price has continued to weaken, and recently fell below HK$1. As of today's close, Leroy Entertainment dropped 5% to HK$0.95.