The logic behind Enlight Media's stake in cloud video and its acquisition of Danghong Technology

What is the logic for Enlight Media to spend more than 60 million yuan to invest in a cloud video solution company?

Enlight Media acquired a cloud video company

On January 12, 2016, Enlight Media announced that it would invest in Hangzhou Danghong Technology Co., Ltd.(hereinafter referred to as "Danghong Technology") with its own funds of 61.5 million yuan. After the completion of this investment, the company holds a 14.5% stake in Danghong Technology. If calculated based on this, Danghong Technology is valued at approximately 424 million yuan.

According to the announcement, Danghong Technology was established in 2010. It was once a wholly-owned subsidiary of ArcSoft, a world-renowned multimedia technology manufacturer. It owns ArcSoft's video intellectual property rights, business and team. Its main business includes ArcVideo enterprise-level solutions and ArcVideo cloud video cloud service operations.

Among them, in terms of ArcVideo enterprise-level solutions, Danghong Technology's business covers core video products such as online transcoding, cloud transcoding, intelligent identification and interaction, intelligent rapid content production, mobile multi-picture monitoring, and full-terminal playback engines, targeting radio and television, Internet video, government agencies, etc. provide high-quality, high-performance, and intelligent full-line product solutions, covering all aspects of content collection, production, transmission, and terminal operations.

In terms of Hongshi Cloud video cloud services, Danghong Technology provides a one-stop online video cloud service of "Media Processing Service + Copyright Protection + Intelligent Interactive Operation + Big Data Support Services + Video Distribution + Terminal Playing" for Internet video business needs such as media operations, online education, entertainment shows, and mobile video. It also conducts in-depth vertical customization for media entertainment, online education and other sub-industries. At the same time, it also has in-depth layout and research in the direction of VR interactive video transmission.

To put it simply, Danghong Technology is a cloud video enterprise that provides private cloud and public cloud technology solutions to corporate customers. Of course, in addition to this, one of the highlights is the provision of follow-up operational services-for customers, Danghong Technology is not only a technology provider, but also an operating partner.

Currently, Danghong Technology's customers include Guangdong Radio and Television, Beijing TV, Hunan TV, Zhejiang TV, Shanghai TV, Shandong TV, Liaoning TV, Heilongjiang TV, Sichuan TV, Hainan TV and other TV stations; well-known cable TV operators such as Huasu and Gehua; new media operators such as CNTV, CIBN, Mango TV, Southern New Media, New Blue Network, Kankan News Network, Zhejiang Online; Internet companies such as Baidu, Sohu, and Momo; There are good cooperation with CDN operators such as Alibaba Cloud, Lanxun, and Kuaidang. It can be seen that its customers are diverse, but based on the size of these customers, ArcVideo should be the main enterprise-level solutions.

Danghong Technology

revealed that the registered capital of Danghong Technology is 21.775 million yuan, and its legal representative is Sun Yanlong. Its shareholder identity is as follows:

System information also shows that since June 2015, Danghong Technology has experienced intensive registered capital and equity changes, the most important features of which are: 1) changing its shareholders from Hongruan (Hangzhou) Technology Co., Ltd. to Hongruan (Shanghai) Multimedia Technology Co., Ltd.;2) Changing legal representative, changing the nature of the enterprise from a foreign-funded enterprise to a private nature; 3) Introduce a large number of limited partnerships as shareholders. These partnerships were all registered by relevant natural persons in June 2015, and their registered address is No. 425 Zhiyuan South Road, Wukang Town, Deqing County.

As of 2015, when Enlight Media invested in shares, its shareholding structure is as follows:

The shareholding structure of "Deqing Series"(Hongtu, Hongshi, Hongchang, Rijin, and Kechi) is as follows:

The shareholder structure of the largest shareholder behind it, Hongruan (Shanghai) Multimedia Technology Co., Ltd. is as follows:

This shows that the corporate nature of Hongruan (Shanghai) Multimedia Technology Co., Ltd. is a foreign-controlled enterprise, and Danghong Technology's change of shareholders and a series of shareholder changes are likely to avoid its foreign shareholder color.

System information further shows that the three subsidiaries of Hongruan (Shanghai) Multimedia Technology Co., Ltd. are Hangzhou Danghong Technology Co., Ltd., Hangzhou Rongcai Technology Co., Ltd. and Hangzhou Yanghong Information Technology Co., Ltd. It is worth noting that the figure of "Qihoo 360" appears in the shareholder status column of Hangzhou Rongcai:

It needs to be reminded that Qihoo 360 has just established a joint venture with Light Media to establish First Watch Network, which was only recently sold. As for Enlight Media's stake in Danghong Technology, is it a tacit understanding formed by the three parties long ago?

The logic of Enlight Media's merger and acquisition

has completely wiped out Danghong Technology's capital information. So what is the logic of Enlight Media's spending more than 60 million yuan to invest in a cloud video solution company?

1) Be optimistic about the prospects of cloud video companies. With the development of media integration and new media, whether it is traditional media organizations or new Internet media, the demand for traditional media asset systems is getting lower and lower, while the demand for cloud video is getting stronger and stronger, to form ubiquitous communication channels. Relevant veterans said that this field has become a new entrepreneurial hot spot, and Danghong Technology has accumulated a lot of technology in the field of cloud video and has strong recognition in the market.

2) Be optimistic about the business model of the cloud video industry. A single technology solution is not enough to impress capital or bring high valuations. It is found that Danghong Technology's "story" is more based on the "technology + service" business model, behind which is the desire to directly face the 2C. It hopes to bring user scale through technical services, and then intervene in value-added services, precision advertising and other related operations based on user scale, and has never brought a valuation comparable to that of Internet companies.

3) Form a complementary trend with the First Look Network. Although Enlight Media first pointed out that Danghong Technology will provide a complete set of video cloud services for the network theater of the company's affiliated company Beijing Xiankan Network Technology Co., Ltd., and provide video solutions for all terminals (mobile phones, PC+H5, OTT, VR)., and will provide them with innovative video interactive product support. However, I often feel that this logic has little to do with it. First, it is only part of the transformation of Light Media, but not the whole. Danghong Technology will play an important role in the realization of Enlight Media's own content, thereby helping (Danghong Technology's business model is successfully implemented) Enlight Media realize greater value mining based on content, unlike the current role of just a CP exporter.

4) Return on capital listing. Enlight Media said in the announcement that Danghong Technology is planning to list in China and will have extremely high capital investment value. This point can be seen from Danghong Technology's similar dismantling of the VIE architecture, and the listing should be in full swing. To take a step back, even if Danghong Technology cannot be listed independently, as long as this business model has broad prospects, Enlight Media can fully merge into the listed company through a wholly-owned acquisition, which will also provide new support for the transformation of listed companies. In fact, taking a stake in the target company first, then controlling or even wholly-owned, has become a common practice for listed companies to merge and acquire, which can balance risks and benefits to a certain extent.

In fact, cloud video is not a new concept. CC Video, Video World, etc. have also used the concept of "technology + service", not to mention ONAir of Tencent Cloud, LeTV Cloud, Ali/Xinaote/Huatongyun. However, compared with the above-mentioned Internet companies, companies such as Danghong Technology have dual backgrounds in TV and the Internet, can understand the needs of 2B customers more quickly, and are easier to use in 2C operations. From this perspective, Arila's new Ott, who understands TV stations, actually understands this. It is often said that I believe that not only Ali understands this, but more giant crocodiles may have already laid out in a low-key manner.

This article is transferred from WeChat official account: Chdshuo

Editor: queenie