Sports IP is taking a heavy step, the new third board sports sector companies have two ice and fire days

Among the 52 sports industry listed companies on the New Third Board, in addition to the postponed release of Wanguo Sports and Ouxun Sports, 50 companies have released their 2016 annual reports. Overall, the industry's profitability has been significantly restored. The 50 companies achieved a total revenue of 7.98 billion yuan, a year-on-year increase of 38%; net profit was 251 million yuan, compared with-440 million yuan in 2015.

Original title: New Third Board sports sector companies

are in the same situation. Among the 52 sports industry companies listed on the New Third Board, except for Wanguo Sports and Ouxun Sports, 50 companies have released their 2016 annual reports. Overall, the industry's profitability has been significantly restored. The 50 companies achieved a total revenue of 7.98 billion yuan, a year-on-year increase of 38%; net profit was 251 million yuan, compared with-440 million yuan in 2015.

At present, the scale of listed companies in the New Third Board sports industry is generally small, and industry giants have not yet been born. The industry segments are clearly divided, with e-sports, consumer sports, sports, fitness and other fields leading the growth rate of net profit; sports equipment, event marketing, and sports venues leading the decline in performance or loss ratios. It is worth noting that companies in the sports event IP operation industry that have poured in heavily in recent years have performed poorly, with nearly half of the companies in the sector losing money.

The industry is clearly divided

. The performance of e-sports companies can be described as "one ride alone". The net profit growth rates of the three companies, Hero Entertainment, Online Film Culture and Aoyu Culture, all exceed 200%.

The above three companies are located in different aspects of the e-sports industry, and their respective business operations have their own characteristics. Among them, Hero Entertainment is a content provider in e-sports, and its business form is closer to online games. The launch of new products has contributed a lot to the company's performance. In 2016, the company achieved operating income and net profit of 936 million yuan and 532 million yuan respectively, year-on-year increases of 773.2% and 2587.6%, respectively. Hero Mutual Entertainment said that this issue launched a variety of self-developed games and agent games, vigorously developed competitions, increased user activity, and increased marketing efforts. Many games performed well in the online market and its business grew rapidly. Netscreen Culture is mainly engaged in the live broadcast of e-sports events and operation platform operations, and its performance has grown rapidly, but the overall scale is not large. In 2016, the company achieved operating income and net profit of 86.64 million yuan and net profit of 6.23 million yuan respectively, and net profit increased by 234.95% year-on-year. The e-sports event brands operated by the company include League of Legends LSPL League, WCS World Championship (China Station), Storm Heroes Golden League, King's Glory Champions Cup, Hearthstone Super League, League of Legends Urban Heroes Tournament, etc.

Affected by the improvement of consumption levels and national fitness awareness, the overall operating income and net profit of the New Third Board fitness training sector achieved rapid growth in 2016. Among them, Art Sports achieved a net profit of 14.7 million yuan, a year-on-year increase of 185%.

The sporting goods industry is the largest and most mature in the sports industry. At present, the domestic sporting goods industry is still dominated by traditional manufacturing, and its growth is slower than other segments such as the comprehensive sports service industry. The company's performance in this sector maintained low growth. The top growth in operating income in 2016 was Cabin Ski. The company achieved operating income of 149 million yuan, a year-on-year increase of 131%; the top growth rate in net profit was Datong Sports, which achieved a net profit of 3.57 million yuan in 2016, a year-on-year increase of 280%.

However, the performance of sub-industries such as sports equipment, sports venue construction, sports tourism, and event marketing was relatively weak in 2016, and net profit generally declined year-on-year.

CITIC Securities 'calculations show that according to the disclosed 2016 annual report data, among the seven sports companies at the innovation level, only Sports Window and Kailushi continue to meet the innovation level standards. In addition, nine new sports companies have been added to meet the screening criteria for the innovation level. Among them, there are 3 in the field of e-sports, 2 in the field of sports equipment or equipment, 1 in event operation, 1 in fitness training, 1 in venue construction, and 1 in venue operation and service.

Sports IP is stumbling.

While many companies are facing a performance turning point, companies in the upstream field surrounding the realization of sports IP are stumbling heavily. Such companies are considered to be indicators that better reflect the development of the sports ecosystem. Their generally dismal performance reflects that C-end consumption in the sports industry is still weak. The soaring IP prices in recent years have further squeezed the profit margins of related companies.

Generally speaking, sports IP monetization mainly includes revenue from ticketing and registration fees, sports sponsorship, sports media copyright and IP derivatives.

Since 2014, driven by favorable policies, capital players have poured in one after another, mainly including Internet companies and real estate companies such as Wanda Sports, Rhine Sports, Kaisa Group, Alibaba Sports, and LeSports. The price of sports IP has risen. Among them, Tencent signed the exclusive online live broadcast rights of the NBA for five years for US$500 million; LeTV contracted the copyright of the Hong Kong Premier League for three years for US$400 million;PPTV won the copyright of the China market in La Liga for five years for 250 million euros; and Sports Olympic Power won the copyright of the Super League for five years for 8 billion yuan.

Judging from the current operating situation, these sky-high copyright returns are not good. This can be seen from Sunac's 2016 results conference. Sun Hongbin said at the meeting that LeSports spent 1.35 billion yuan in 2016 to purchase exclusive copyright for new media in the Super League for one year, and only recovered 50 million yuan. If large enterprises can still withstand the "burning money" model, the new third board companies with limited financial strength will face huge profit pressure.

Compared with film, television and literature IP, sports IP has its own characteristics and development rules. A basketball industry official told a reporter from China Securities Journal that well-known sports IP is backed by strong industry associations and has a certain monopoly. For example, there can only be one World Cup event. While well-known sports IPs are scarce, they also have a "crowding out effect" on similar IPs. "For example, the NBA can attract fans around the world. From a commercial perspective, the CBA and the NBA are not in the same order of magnitude. Sports is essentially an ancient business, and sports IP needs to be slowly cultivated. The NBA has developed for more than 60 years before it reaches its current status. Sports does not belong to an industry that can grow savagely under the nourishment of capital."

Currently, the new third board companies involved in sports IP operations and marketing mainly include Evergrande Taobao, Sports Window, Ouxun Sports, Meilong Sports and New Match Points. Among them, Evergrande Taobao Club's main income comes from sponsorship, ticketing and derivative income. Sports Window is mainly involved in underwriting ticketing for Super League clubs. Companies such as Ouxun Sports, Meilong Sports and New Match Point have purchased some sports event operation rights to varying degrees. Carry out event IP monetization and development.

Among the New Third Board sports companies, Sports Window ranked first in performance. In 2016, it achieved operating income of 842 million yuan, a year-on-year increase of 65.73%, and achieved net profit attributable to shareholders of the listed company of 129 million yuan, a year-on-year increase of 24.48%. Analysis of its financial report found that the company's investment income reached 45.118 million yuan in 2016, compared with only 114,000 yuan in 2015. Investment income constituted the main contribution to the company's 2016 performance growth.

Companies such as New Match Point, Ouxun Sports and Meilong Sports rely mainly on event operations for their revenue, and their performance is even weaker. In 2016, the new match point achieved revenue of 182 million yuan, a year-on-year increase of 58.75%; net profit was-50.3141 million yuan, a year-on-year decrease of 74.78% from-28.7864 million yuan in the previous year. Ouxun Sports postponed the release of its annual report. Meilong Sports is positioned as a niche event, with revenue of only 12.99 million yuan, but a loss of 11.04 million yuan.

"At present, the right to operate the event mainly comes from the association and relevant departments, and the release of operating rights is more through bidding. Taking the popular marathon as an example, the cost of marathon in first-tier cities generally reaches 10 million to 30 million yuan, but sponsor prices have not increased much. For smaller New Third Board companies, IP operating rights assets increase the operating burden of the company. However, IP prices have soared, generally rising 10-20 times in recent years, and small and medium-sized companies are facing the risk of being marginalized. At the same time, the consumption power of the C-end is not strong. The annual ticket income of second-tier clubs in the Chinese Super League is about 10 million to 20 million yuan, and the annual ticket income of some Chinese A clubs is only several hundred thousand yuan." A chairman of the New Third Board Sports Company told a reporter from China Securities News.

"When we talk about event projects, we prefer to jointly invest and operate with local governments through professional solutions, and not participate too much in simple bidding." The above-mentioned chairman said that the IP of many events has become a heavy asset, and he hopes to promote the government to jointly operate with the PPP approach and jointly bear the incubation costs of IP.

Resource integration accelerates

the drama behind the annual report, reflecting the different plots of the New Third Board Sports Company. Many New Third Board sports companies have accelerated the horizontal integration of the industrial chain.

Previously, Sports Window and its subsidiary Liangzhi Holdings signed agreements with relevant shareholders of Lianzhong International respectively, agreeing to purchase 226 million shares of Lianzhong International, accounting for 28.76%, with a total price of approximately HK$1.38 billion. Lianzhong is the number one brand of online chess and card operation platform in China and owns multiple chess and game copyrights.

At the same time, Hong Kong stock company Beijing Sports Culture plans to subscribe for 35 million shares of Yoton Air Film through its subsidiary China Mutual Sports Culture Development (Beijing) Co., Ltd., at a subscription price of 4 yuan per share and a purchase price of 140 million yuan. After the transaction is completed, the acquirer will hold 51.66% of Joton Gas Film and become its largest shareholder. Yoton Air Film is mainly engaged in the overall design, sales, installation and after-sales service of air film building systems, providing overall solutions for air film building systems. The company was listed on the New Third Board in December 2014 and adopted a market-making transfer method. The Beijing Sports Culture Announcement stated that through this acquisition, it will enter sports-related industries to explore business opportunities. Joton's choice on the air membrane may cause turmoil among his peers. For many sports companies, joining a big club may be a wise choice.

A secretary of the board of directors of an innovative sports company on the New Third Board told a reporter from China Securities Journal that since 2016, there have been an increasing number of companies coming to discuss acquisitions, including companies listed on the main board and non-listed group companies. "The company is reluctant to be acquired at this point in time, especially when it comes to consideration." The secretary admitted frankly that the company's major shareholders expect to rely on their own development in the short term, but at the right time,"holding on to their thighs" has become the consistent goal of the company.

But this process is inevitably entangled. "Cultivating and incubating sports IP requires a long-term process and requires long-term investment. However, most financial investors are reluctant to invest in long-term periods, and industrial investors often seek controlling interests." A person in charge of strategy for a group enterprise that mainly specializes in real estate told China Securities News that the company is deploying sports business and expects to control potential sports companies, but many company's major shareholders are unwilling to dilute their shares too much.

Compared with equity cooperation, cooperation at the business level seems to be more urgent and easier to gain recognition from both parties.

In May 2017, the Sports General Administration Leading Group for Comprehensively Deepening Reform was established, which will gradually and deeply promote reforms around outstanding issues in sports reform and development, and drive the development of various sports work.

"However, sports event resources are mainly concentrated in the hands of local governments and various project associations. Moreover, the implementation of sports activities requires the intervention of local governments and other parties, and the development of the sports industry requires comprehensive coordination from the top down." A person close to the General Administration of Sports told a reporter from China Securities Journal.

Judging from the current situation, the market-oriented reform of sports associations such as football and basketball is slow, while the sports industry for mass leisure has received more policy support and has become the focus of business breakthroughs for some sports companies.

In the field of "sports + real estate", such projects are huge in size and are currently mainly led by real estate companies and listed companies. Among them, Hongkun Real Estate has created a new model of "sports + real estate" by naming the "Kunlun Battle" fighting event and building a theme sports park. Wanguo Sports, which mainly specializes in fencing training, opened at Shanghai Wanguo Sports Center. The center venue focuses on V3 events (fencing, swimming, cycling) and also supports commercial services. Wanguo Sports has the right to operate and invest in this venue.

Sports towns have become a key area for many companies to explore. A number of new third board companies such as Sports Window have participated. Judging from the current situation, local governments have given more support to the construction of sports towns.

Editor: Nancy