At the beginning of the new year, domestic independent variety show production and operator Yusheng culture through the Hong Kong Stock Exchange hearing, attracting the attention of many investors, but also made the media sector become the focus of the Hong Kong stock market.

Yusheng Culture officially launched the international placement on February 27. judging from the investment feedback on the day of the international placement, it reached the excess expectation within half a day of the sale, and won the order explosion of many international well-known investment institutions, such as Softbank Corp. of Japan, the father of ATV, the Qiu Degen family and International Merchants Holdings, and set off the best part of the first wave of placing of Hong Kong stocks in the New year 2020.

It is reported that Yusheng Culture began to sell to investors today (February 28), the specific time is: February 28, 2020 to March 5, 2020.

According to people familiar with the matter, Yusheng Culture, which opened the international placement on the 27th, has issued orders to customers includingJapanese Softbank Corp., the Qiu Degen family, the father of ATV, and International Merchants HoldingsAnd other internationally renowned investment institutions. Thus it can be seen that investment institutions and investors have taken practical actions to show a high level of recognition and concern for this "first share of variety". However, why does Yusheng culture, which is known as the dark horse of the industry, cause many investment institutions to burst orders in a short period of time?

This starts with the daily life of each of us. Think about the video you click on after a busy day. Is it a variety show? Think again, since when variety shows have become a topic of conversation with friends? Yes, watching variety shows is becoming an indispensable entertainment program for people's daily leisure.Yusheng culture is the dark horse rising in this wave of variety trend.

Use sales and fixed production to crack down on the pain points of the industry

The business model of a company that can stand out in the industry must be different from the conventional model. Many variety operators outsource copyright, which gives rise to a lot of problems.

Because the copyright is all acquired from foreign variety show operators, the copyright fee is very expensive, and the copyright owners all sell the right to use the copyright in the mainland for a certain period of time. In other words, if the benefit after the broadcast of the program is obvious, the price increase is inevitable when the copyright owner renews the contract.

If the contract is not renewed after the copyright expires, it will not be easy for operators to build a good program on their own. "Fashion style" is difficult because it is difficult to copy with money. More money may be invested, and the effect is not as good as it used to be.

In addition, the "popular style" in the guest lineup is obtained by burning funds. Whether the variety issuing institutions that continue to launch "popular styles" can guarantee higher profit margins and the logic of stable growth remains to be observed by the industry. Relying on foreign ideas to make "popular styles" cannot be a long-term solution for the development of China's film and television variety industry.

The management of Yusheng culture has a deep insight into the pain points of this industry, and the company has created a different stable growth model of "industrial production" variety shows.

When it comes to the industrial production of Yusheng culture, we have to mention "two in and two out". Specifically, the company first asked the five teams of the creative department to come up with 50 ideas, and cut 50% of the ideas through internal blind selection. Then the marketing department participates in the review, which focuses on the fit of the idea to the customer's needs and the potential scale of the project, and then cuts down 30% of the idea.

Next, the creative department integrates the team according to the selected ideas and turns the ideas into the basic plan. The marketing department is also involved in this segment and works with the target customers to make the basic solution executable. Finally, the internal decision meeting of the company, after passing, take the customer with the broadcast platform to determine the terms of the contract.

Through this model, the company can fully activate the creative team, and can always maintain coordination with market demand to ensure high-quality and efficient creative output. As a result, the company is able to firmly grasp the most valuable content link in the industrial chain, and all its variety shows have their own copyright.

This model is called "fixed production by sales", and this business model is better able to lock in customers and improve the certainty of performance. While the same industry companies still rely on "popular styles" to attract public attention, Yusheng culture explores a mode of industrial production of variety arts through a unique business model and the integration of the industrial chain.

The research and development of Yusheng cultural content follows three principles: the rigid needs of society; opening up the industry; conducive to replication.

End of 2019 Yusheng Culture has successively launched the country's first workplace observation variety show "the Boss is here", the traditional New year food culture program "the Taste of time through time", and China's first astronomical science fiction science fiction program "starting from the Earth". China's first Xingsu practical business variety show "I want to open a shop", college students' campus creative demeanor show "JD.com Campus Star Open World" and other diversified, multi-angle innovative film and television projects. It is distributed on the three major platforms of Satellite TV and Aiyouteng. Among them, there is no lack of all kinds of film and television celebrities, with high production standards and industry reputation.

Rapid growth without burning money

Yusheng culture is such an excellent and multi-stakeholder business model, so the development is so fast. From 2016 to 2018, the company's revenue rose from 120 million yuan to 280 million yuan, with an average annual compound growth rate of 53%; net profit increased from 13.9 million yuan to 85.7 million yuan, with an average annual compound growth rate of 148.7%.

According to the company's financial data, the source of revenue during the company's track record period is corporate advertising sponsorship and program production fees on the media platform, with a compound growth rate of 48%. The overall gross profit margin remains at a high level of 40% to 55%.

The reason why the company can maintain such steady growth is that the company has a very rich project reserve. Three products (including variety shows and TV dramas) contribute to revenue in 2018, and six of the nine products planned to be broadcast after May 2019 have been broadcast as planned, and two more have been completed and are waiting for release. The company expects to release 20 programs in 2020.

Based on the issued market capitalization of HK $3.8 billion, the price-to-earnings ratio for 2020 is 9.6 times, while the average price-to-earnings ratio of the Hong Kong film and television sector is-8.50 times. It shows that Yusheng culture has better profitability than the industry level.

The variety industry that is growing against the trend

Of course, if the industry is not good, even if the company has the power to recover, it is also difficult to compete with the industry trend. Coincidentally, the variety industry where Yusheng culture is located is a subdivision of film and television culture that is rarely thriving in China.

It also starts in 2017, when China's film and television industry experienced a cold winter of policy and capital, and the opening rate of film and television projects dropped sharply, and this depressed situation lasted until 2019.

However, during the period, the variety industry has achieved counter-trend growth in the cold winter of the large industry, and variety shows have become the main channel for artists to maintain exposure and income. It is true to say that variety has become the best track in the film and television sector.

The best proof is that the advertising revenue of variety shows is growing against the trend. China's variety show advertising market in the first half of 2019 was close to 22 billion yuan, an increase of 16.12 percent over the same period last year, leading the advertising market, of which Reality Show programs accounted for nearly half of the video programs and more than half of the advertising revenue.

By contrast, macroeconomic growth has slowed, advertising spending has declined as a whole, and the scale of the TV advertising market has begun to shrink. It is not easy to achieve in this context.

In addition, compared with animated TV dramas and movies, the production cycle of variety shows is relatively short, the profit model is mainly based on advertising, and the income certainty is higher. These advantages have driven the growth of the variety industry in the past three years and will continue to be discovered and recognized by the market in the future.

In 2018, more than 18000 organizations have obtained the license for the production and operation of radio and television programs. It can be seen that the current variety distribution production industry is highly dispersed. However, according to the China Radio, Film and Television Development report (2017), less than 4% of program production organizations generated profits of more than 10 million in 2016, and the industry is very divided. In such a highly competitive environment, Yusheng Culture was founded in 2014 and ranked eighth in the industry in 2018.

The strength of the company, the compound growth rate of income, the low valuation, and the upward trend of the industry. Variety dark horse Yusheng culture is a combination of advantages, so the major institutions will flock to the international placement. However, investors have long been waiting for the best time to invest this value. Today (February 28) Yusheng Culture is officially on sale to investors, when investors can seize the same investment opportunities as institutions, just like lying on the sofa in the living room at home watching wonderful variety shows. Feel the value and charm of Yusheng culture up close.