On August 7, when Lehua passed the Hong Kong Stock Exchange hearing, founder Du Hua said in his circle of friends: "Thirteen years! From nothing to something, from personal dreams to corporate goals, thank you for everyone who supports us..."

was supposed to be on Lehua , which was supposed to be on the Hong Kong Stock Exchange on September 7, and missed the listing for the third time.

August 7, when Lehua passed the Hong Kong Stock Exchange hearing, founder Du Hua said in his circle of friends: "Thirteen years! From nothing to something, from personal dream to corporate goal , thank you for everyone who supports us..." The excitement was beyond words.

However, Du Hua's happiness lasted for less than a month.

As China's largest artist management company, Lehua was listed on on New Third Board in September 2015, and the securities are abbreviated as " Lehua Culture ". In March 2018, Lehua terminated its listing on the New Third Board and began to seek independent listing on A shares , but in June 2021, it terminated its pre-listing guidance.

The reason why Lehua's listing has attracted much attention is that its top artist Wang Yibo has made an indelible contribution. Many people therefore call Lehua "Wang Yibo Concept Stock " . But the business model of a company with one person has never been favored by the capital market.

From Han Geng to Wang Yibo

The rise of Lehua also starts with Han Geng, the first generation of "traffic star" in China.

Lehua was founded in 2009 and signed Han Geng, who is developing at the peak in 2010. Han Geng is the first Chinese to officially debut in South Korea. He was once the captain of Super Junior-M, a group under the largest artist management company in South Korea. He is also the first artist to leave the boy group and return home alone.

After learning that Han Geng had terminated his contract and returned to China to develop, leading brokerage companies including Huayi and Light had all given him olive branches, but to many people's surprise, Han Geng finally chose Lehua, which had just been established for a year at that time.

Lehua and Han Geng are undoubtedly a mutual achievement.

Lehua did not treat Han Geng badly, and he gave 2.35% of the equity dividends at one move. Han Geng also successfully transformed from a traffic star to a shareholder holding capital. For Lehua, spending a lot of money to sign Han Geng is also an excellent business. Han Geng, who responded to it, became a trump card for Lehua at that time, or even the only one.

In 2010, when Han Geng joined, the domestic music performance market was booming. Han Geng's first solo album " Gengxin " released, sales volume exceeded 300,000, breaking the annual record sales record. From 2010 to 2012, Lehua held the "Gengxin" series of concerts for Han Geng for three consecutive years.

In the first half of 2016, Han Geng's revenue generated accounted for 48.89% of Lehua's revenue achieved in the current period. Although Lehua also signed contracts with Hu Yanbin and Zhou Bichang in the form of equity binding in 2011 and 2012, neither of them shook Han Geng's status as the biggest money tree.

Han Geng not only brought direct economic income to Lehua, but also allowed Lehua to see the commercial potential of the Korean idol artist training system and extended its tentacles to the Korean idol industry.

Since 2013, Lehua has successively reached cooperation with Korean idol agency PLEDIS and STARSHIP to be responsible for the exclusive agency of its artists' acting affairs in China. Through this opportunity, Lehua began to deeply learn the entire mechanism of the Korean idol industry from training, debut to group operations.

In 2014, Lehua established a subsidiary in South Korea and launched the idol boy group UNIQ, composed of members of China and South Korea. All members practiced in YG, one of the three major artist management companies in South Korea. Wang Yibo was one of the members at that time.

In 2016, Lehua further cooperated with STARSHIP to launch a large idol girl group Cosmic Girl , a group consisting of 13 members. The three Chinese members in the group, namely, Cheng Xiao , Meng Meiqi and Wu Xuanyi , who later returned to China for a second debut.

years of idol training experience have made Lehua the biggest winner when the domestic idol economy is approaching.

In 2018, the two talent show variety shows " Idol Trainee " and " Creation 101" became popular one after another. Not only did the two celebrity mentors Cheng Xiao and Wang Yibo quickly become popular, but trainees Fan Chengcheng and Huang Minghao successfully debuted, but also made the artists Meng Meiqi and Wu Xuanyi, who were originally "edged" in the universe girl group, debut again.

Du Hua herself has also started to come to the front stage. Since 2018, she has filmed two sets of magazine blockbusters for "VOGUE" and "Fashion COSMO", and then participated in two seasons of " Sisters Riding the Wind and Waves ", successively serving as the manager of the girl group and member of the production group. She has been on the hot searches on Weibo for her bold words and deeds.

All of these have established Lehua's status as a "star-making factory".

Wang Yibo, who became popular quickly in 2018 and 2019, also replaced Han Geng as the new pillar of Lehua. However, unlike Han Geng, Wang Yibo has no Lehua shares in his hands, and the interests of both parties are not completely bound.

Lehua's prospectus revealed : In 2020, 2021 and the four months ended April 30, 2022, the revenue growth from "Artists who control supplier B" accounts for more than 80% of Lehua's overall revenue growth.

According to the timeline, this "supplier B" is likely to be Wang Yibo, who became popular for "The Untamed" in 2019. According to Aiman ​​data statistics, in 2020 alone, Wang Yibo won 31 endorsement brands and 33 cooperative brands. According to the "Star Income Ranking" released by Fortune magazine from 2017 to 2020, Wang Yibo's cumulative income in the past four years has reached 1.12 billion yuan.

It is worth noting that since its establishment, Lehua has completed three rounds of financing, including Chinese Culture , Alibaba , ByteDance, Lebo Capital and Rongxi Venture Capital. According to media reports, in 2018, ByteDance invested 125 million yuan in Lehua.

dismantled Lehua's equity structure and submitted prospectus as of March this year. Du Hua, founder and chairman of Lehua, is the largest shareholder, holding 50.18%, Chinese Culture and Alibaba Pictures each hold 14.25%, and ByteDance's wholly-owned subsidiary Quantum Yuedong holds 4.74%. How difficult is it to cultivate a top stream?

From Han Geng to Wang Yibo, the two generations of top stars gave Lehua the confidence to hit the IPO, but failed to make investors have optimistic expectations. The biggest risk of

is that whether it is Han Geng or Wang Yibo, in the 13 years since the establishment of , Lehua has never gotten rid of its dependence on key artists.

prospectus shows that from 2019 to 2021 and the four months ended April 30, 2022, Lehua's total operating income was RMB 631 million, RMB 922 million, RMB 1.29 billion and RMB 353 million, respectively; the gross profit during the same period was RMB 280 million, RMB 493 million, RMB 602 million and RMB 156 million, respectively, with gross profit margins of approximately 44.4%, 53.5%, 46.7% and 44.2% respectively.

Lehua's business consists of three sectors: artist management, music IP production and operation and pan-entertainment, among which the artist management business is Lehua's largest source of income. From 2019 to 2021 and the four months ended April 30, 2022, the business generated revenue of RMB 530 million, RMB 808 million, RMB 1.175 billion and RMB 317 million, respectively, accounting for 84.0%, 87.7%, 91.0% and 89.8% of the total revenue.

The revenue from artist management business mainly comes from top artists. From 2019 to 2021 and the four months ended April 30, 2022, the total income of the top ten artists accounted for 74.8%, 83.0%, 85.6% and 84.5% of Lehua's total income in the current period, and the proportion of the number one artists accounted for 16.8%, 36.7%, 49.5% and 56.8% of the total income of Lehua in the current period. Based on other information, it is reasonable to speculate that this TOP1 artist should be Wang Yibo.

In comparison, the revenue generated by music IP production and operation business during the same period was RMB 74 million, RMB 93 million, RMB 78 million and RMB 26 million, respectively, accounting for only 11.8%, 10.0%, 6.1% and 7.4% of the total revenue; the pan-entertainment business was even less satisfactory, generating revenue of RMB 27 million, RMB 21 million, RMB 38 million and RMB 10 million in the same period, respectively, accounting for 4.2%, 2.3%, 2.9% and 2.8% of the total revenue.

The revenue sharing of artist management business is also the main part of Lehua's operating costs.How expensive is it to cultivate a top stream? In 2019, when "The Untamed" was very popular, Lehua paid 32.27 million yuan; in 2020, this figure soared to 130 million yuan, accounting for 31.1% of the total operating costs; in 2021, this figure exceeded 300 million yuan, accounting for 43.9%.

According to Lehua's prospectus, the company currently has a total of 58 signed artists and 80 trainees. From 2019 to 2021 and the four months ended April 30, 2022, the company spent 241 million yuan, 319 million yuan, 529 million yuan and 149 million yuan respectively, accounting for a proportion of total costs increasing year by year, reaching 76.8% in 2021.

And in the business system, people are the most uncertain factor. For economic companies like Lehua, whether the leading artists will establish their own businesses, whether they can renew their contracts after the contract expires, and how to continuously support new traffic stars are all the focus of external concerns.

Among the top ten artists of the Lehua family (based on Weibo fans), Han Geng and Lehua's contract was renewed four times and signed in June 2024; Wang Yibo, Meng Meiqi and Wu Xuanyi's contracts all expire in 2026; Fan Chengcheng's contract period is earlier and expires next year; Cheng Xiao, Li Wenhan to 2024; Huang Minghao, Zhu Zhengting , Bi Wenjun a little later, expires in 2028.

Once these artists do not renew their contracts, it will directly affect Lehua's income. How far is

from China SM?

Du Hua once said with a high profile: "Lehua is the first among domestic idol artist brokerage companies. Even in South Korea, Lehua in South Korea is second only to SM, YG, and JYP."

But if China's number one Lehua is put into international, compared with the benchmarking companies in mature markets, there is a big gap in both market size and business layout.

Compared with Korea, Japan and the United States, where the industry is relatively mature, artist management can be said to be an emerging market in China, but it is also a highly competitive and highly fragmented market.

According to the prospectus data, as of December 31, 2021, there were more than 1,200 market participants in the Chinese artist management market; in 2021, the top five artist management companies generated a total revenue of 3.4 billion yuan, accounting for only 5.5% of the total market share, Lehua Entertainment ranked first, and the market share was only 1.9%.

Some analysts pointed out that leading artist management companies in mature overseas markets can control the risks of relying on artists within a controllable range through scale effects and business layout.

For example, SM, the largest economic company in South Korea and CAA, the top US brokerage company. On the one hand, the lineup of artists under these two companies is very large. In addition to entertainment stars, CAA also has a large number of directors, screenwriters and sports stars. On the other hand, the two companies do not only rely on artists to "make a living", and their businesses involve the upstream and downstream of the film and television industry chain and even the IP derivative industry chain.

and Lehua and its artists can be said to have prospered and lost. Not only does it rely on the artist's share of revenue, but the cost is also restricted by the artist's promotion and distribution costs and corresponding expenses. Once the artist has negative news or even "collapses", the company may suffer a heavy blow in performance.

For example, Meng Meiqi, the leading actress in Lehua who debuted in the C position of "Creation 101", caused a large-scale "dismissal" phenomenon due to negative news, which caused a significant impact on her career; not long ago, Ding Zeren, one of the "Seven Sons of Lehua", was also criticized as a hot search on Weibo for collecting millions of fans.

Regarding the above risks, Lehua also admitted in its prospectus: "Our business relies heavily on the reputation of contracted artists and the public's perception of our brand. Any negative reports on contracted artists, our company and our company's management, business partners or industries may damage our brand image and may have a significant adverse impact on our business, financial status or operating performance."

The market environment of the domestic entertainment industry in recent years is also extremely unfriendly to "Lehuas". 's "Clean Action", banning digital rankings, and banning film and television dan-change reforms, all the time affects the industry's nerves.

Once upon a time, talent shows were the best opportunity for artist agencies to push newcomers, but in May 2021, the "milk pouring incident" caused heated discussion in society. The large-scale talent show " Youth With You " was temporarily stopped on the eve of the ending.One wave caused a thousand waves. Starting from the second half of 2021, the country's rectification of the entertainment industry began to further escalate, and a number of talent shows on platforms such as iQiyi, , Tencent , etc. were stopped.

Not only that, Weibo canceled the super-talk ranking of celebrities, , Douyin, removed the star list, and some music platforms have restricted the number of albums and singles purchased by users, and voting, volume control, and support and fundraising are also sluggish. This also means that the growth path of artists under the "Lehuas" has been greatly restricted, and the idol economy has been severely damaged.

In addition, the repeated epidemic has also indirectly impacted the pan-entertainment industry.

Domestic performance activities are restricted under the risk of the epidemic, and filming of movies, dramas, TV programs and offline promotional activities are suspended one by one. The popularity of traffic stars in recent years has almost all benefited from the influence of long-term video platforms variety shows or film and television dramas.

Therefore, the development speed of the Chinese artist management industry has always been tepid. The prospectus shows that the size of the Chinese artist management market increased from about 63 billion yuan in 2017 to about 68.5 billion yuan in 2018, decreased to about 58.3 billion yuan in 2019, and dropped to about 52.3 billion yuan after the outbreak of the epidemic in 2020, and only slightly rebounded to 61.2 billion yuan in 2021.

Lehua also stated in its prospectus that the entertainment industry is widely regulated in China and its failure to comply with the ever-changing laws, regulations, regulations, policies and other legal uncertainties may have a significant adverse impact on business, financial status and operating performance.

ending

Despite the difficulties, Lehua is still actively looking for a second curve, such as virtual idols.

In June 2020, Lehua and Quantum Yuet, a subsidiary of ByteDance, jointly launched the virtual artist group A-SOUL. The group consists of five digitally created virtual artists, namely Bella, Jiaran , Nailin, Jiale and Xiangwan.

For a long time, virtual idols have been considered to be "never collapsed", with better stability and long-term than real people, and have broad business prospects. Lehua also stated in its prospectus that in the second quarter of 2022, two companies were also jointly established with business partners with experience in developing and empowering virtual artist technology to further expand the virtual artist business.

But virtual idols who are highly anticipated will also face the crisis of "collapse of houses".

On May 10, A-SOUL issued a statement saying that the lead singer Jiale left the group due to physical and academic reasons, which means that Jiale and the "people in the middle" behind him have come to an end. Many netizens questioned that Jiale's "members" were treated unfairly, that the team training intensity was too high, that they worked for half a month without any rest, and that their salary distribution was too low. Although the official publicly refuted the rumors, it is difficult to arouse the anger of fans.

turns artists from physical to virtual, just a strategy of changing soup without changing medicine. If the restrictions on the idol economy are not lifted, the cold winter of film and television will not end, and the dependence on top artists is not resolved, Lehua will still find it difficult to gain the trust of investors.

Du Hua may have to wait longer to realize his eight-year dream of going public.

This article is from Yiou.com