The rumors that have been buzzing for two years are really true, and the two men who once fought for hegemony for a long time finally went to a family.

DouYu International Holdings Limited announced that he had received Tencent's preliminary non-binding proposal on the strategic merger of DouYu International Holdings Limited and HUYA Inc.. At the same time, JOYY Inc era issued a notice announcing that 30000000 shares of HUYA Inc. Class B common shares would be transferred to Tencent at a total price of US $810 million in cash.

As of Monday, August 10, US Eastern time, DouYu International Holdings Limited's market capitalization was 4.85 billion US dollars and HUYA Inc. 's market capitalization was 5.85 billion US dollars. After the news of the merger was disclosed, the pre-market shares of the two companies began to rise in a straight line.

In other words, the hand-in-hand of HUYA Inc. and DouYu International Holdings Limited will produce a new content company with a market capitalization of more than $10 billion and a game live streaming platform with more than 300m monthly active users. Tencent, as a banker, will further consolidate his dominant position in the game track after the marriage.

This is the southeast protection of the live track. One or two people on the live game track, one from Wuhan and the other from Guangzhou, Tencent said, I want them all. But the track is not quiet. Bilibili Inc., Kuaishou Technology and byte beat are the major short video and live broadcast products, and new threats have emerged in the north.

Tencent has been buried for a long time to merge this long line. As early as 2016, Tencent led DouYu International Holdings Limited's B round of financing. Tencent, who then adhered to the double insurance principle, invested 461.6 million US dollars in HUYA Inc. on March 8, 2018, and continued to increase DouYu International Holdings Limited on the same day with 630 million US dollars.

In April this year, Tencent again bought more shares of HUYA Inc. from JOYY Inc Group, increasing his voting rights in HUYA Inc. to 50.1 per cent, while holding 38 per cent of DouYu International Holdings Limited, making him DouYu International Holdings Limited's largest shareholder. Since then, the fate of the two "Big Brothers" in the game broadcasting industry has been firmly in Tencent's hands.

For Tencent, promoting the merger of the two sides is always more beneficial than watching the left and right fight each other and one side swallows up the other.

Tencent needs to live inside and outside.

In May this year, HUYA Inc. and DouYu International Holdings Limited released their first-quarter results one after another. While HUYA Inc. 's paying users are increasing, the level of payment is falling, the growth rate of revenue is relatively slow, and the total revenue achieved in the first quarter fell 2.2% from the previous quarter. This is the first time that HUYA Inc. has experienced a month-on-month decline in live revenue.

On the other hand, DouYu International Holdings Limited has reached an all-time high in terms of net profit, MAU (number of monthly active users) and paid users, but the average MAU continues to decline. This means that DouYu International Holdings Limited users are more willing to pay, but user growth is facing bottlenecks.

Since the two great generals under his command have their own worries, Tencent, their chief, has to personally bring them together to tighten their control over strategic investment companies.

In the past, official websites, Tieba forums, app stores and WeChat accounts were used as publicity channels for Tencent games. Due to the limited source of users and low accuracy, the communication effect was proved to be general. In contrast, game live streaming has a more sense of substitution for players. Game KOL can quickly gather a group of fans in a short period of time, obtain for game customers, improve player activity, and then drive the ability to pay for conversion, eventually lengthening the life cycle of a game.

Tencent, who holds a large number of head games IP and e-sports competitions, spent more than US $1 billion to invest strongly in HUYA Inc. and DouYu International Holdings Limited, naturally to hold back the propaganda position of this advantage, and to drain his own e-sports industry through live games.

The most significant advantage after the merger is that the flow is rising again and the user stickiness is enhanced. For Tencent, only by unifying the operation and integrating the downstream link of the live broadcast platform, can we better dock with the R & D and distribution of the upstream end and open up the whole layout of the entire industry chain.

More importantly, the combination of the two can strengthen competitive barriers and defend against common enemies.

Looking outside, as the two most eye-catching wolves in the game live broadcast market in 2019, Kuaishou Technology and Bilibili Inc. are accelerating to stir up the situation. At this year's Chinajoy2020 global e-sports conference, Kuaishou Technology game vice president Tang Yuyu once revealed that Kuaishou Technology game live broadcast as of the end of May this year, the number of monthly active users has exceeded 220 million, game short video monthly active users exceeded 300 million. This is close to the sum of the monthly active users of DouYu International Holdings Limited and HUYA Inc..

From the short video content that users like to cut into the game live broadcast, relying on this efficient path, Kuaishou Technology has absorbed many users and income of the live broadcast platform. Kuaishou Technology, who has the advantage of traffic, is easy to extend around e-sports events, and then create a new game content ecology.

On the other hand, Bilibili Inc. also continues to bet on e-sports industry, not only recruiting relevant teams, but also spending 800 million yuan to win League of Legends's three-year exclusive broadcasting rights in China for the global finals. In addition, the video content of e-sports has been played more than 44 billion times on its own website, and Bilibili Inc., who has a large number of native game UP as a resource reserve, has amazing potential.

And backed by Douyin huge traffic pool of byte beat, but also high-profile game release, excellent performance in the leisure game business. Tencent understands that no matter which side is full of uncontrollable factors, the addition of new players makes it more difficult to grow the already saturated user pool, and the competition in the future will only be more fierce.

This integration, Tencent is undoubtedly to maximize the interests of the game live broadcast, reduce the internal friction of DouYu International Holdings Limited and HUYA Inc., and do not leave room for other opponents to overtake.

The future of the merger is uncertain.

HUYA Inc. and DouYu International Holdings Limited have been glued together for many years, one is good at live show, the other is better in the game anchor matrix, although there are strategic differences, but the performance of the two did not open the gap, if the two financial statements together, the feeling is the most intuitive.

From a business point of view, the revenue composition of the two is basically the same, including live streaming, advertising and others. Specifically, the revenue of HUYA Inc. 's Q1 live broadcast business in 2020 was 2.275 billion yuan, an increase of 46.5% over the same period last year, while that of DouYu International Holdings Limited's Q1 live broadcast business was 2.113 billion yuan, an increase of 56.0% over the same period last year. Both sides account for more than 90% of the total revenue from the live broadcast business. In terms of revenue growth and net profit, the gap between the two is also gradually narrowing.

In terms of user data, HUYA Inc. has maintained a consistent advantage, with the mobile MAU reaching 74.7 million and DouYu International Holdings Limited's 56.6 million; but in terms of paying users, DouYu International Holdings Limited is also ahead of HUYA Inc., with 7.6 million paying users and 6.1 million HUYA Inc..

DouYu International Holdings Limited and HUYA Inc. have their own advantages in income structure and user attributes, but on the whole, regardless of scale, market capitalization or revenue, they are basically in a state of equal strength. In such a high degree of homogenization, it is of little significance for the two giants to continue to compete, which will only increase internal friction. Prior to this, there have been a large number of job-hopping cases between the two platforms, and even resorted to the court.

Turning to a merger is a better deal.

However, after the merger, there is bound to be a situation in which one side leads and the other party gradually fades out. So between DouYu International Holdings Limited, HUYA Inc., and even the "own son" penguin e-sports, who will be the boss? How to distribute the pattern of interests? Although it is reported that DouYu International Holdings Limited's team will dominate the new company, there is no more official information disclosure, including the new management, which will become the focus of the market in the future.

Under the competitive pressure of DouYu International Holdings Limited, HUYA Inc. is looking for ways to increase various data, including program types, revenue and the number of monthly active users, in order to have a greater say after the merger.

As a rival of equal size, a merger does not mean peace. With reference to previous DiDi Global Inc. and Kuaidi, Meituan and Dianping, Trip.com and Qunar, etc., today's merger and integration is no longer a big fish eating a small fish. After joining forces, both sides have a tougher posture in terms of core team selection, personnel arrangement, organizational adjustment or split, product differentiation and positioning. No matter who becomes the leader of the new platform, there will be a change inside the other platform.

Moreover, after the marriage, the relationship between HUYA Inc. and DouYu International Holdings Limited as rivals no longer exists, but the long-term pressure of revenue and user growth on the shoulders of the two listed companies has not disappeared.

HUYA Inc. and Douyu have combined to become a larger company, but running-in is not an easy task, and "big" does not necessarily mean "good." can the integration of resources be really realized after the merger, balance the linkage of anchors between platforms, and the sharing of event copyright? there is still a long way to go to find more new profit growth points.