(report producer/author: Shanghai Securities, Chen Min)
1 The dawn has emerged, and the media sector is expected to usher in sectoral allocation opportunities
.1 Subjective and objective reasons cause the media market to continue to be weak
The essence of the content industry is that supply determines demand, and sufficient supply side will drive the prosperity of the demand side. On the contrary, if the supply side is weak, the demand side will shrink accordingly. Domestic content supply is limited by policy supervision, and the amount of content going overseas is small and does not have an advantage compared to native content abroad. Therefore, the overall profitability of the media sector is weaker. From an index perspective, the media bull market from 2013 to 2015 mainly benefited from the rapid development of the mobile Internet and the market's optimistic expectations for its prospects. With the acquisition of a large number of physical enterprises in the same period, the logic of increasing profits of mergers and acquisitions throughout the entire media bull market. It also lays hidden dangers for subsequent huge impairment of goodwill. In 2016, the China Securities Regulatory Commission clearly prohibited the deviant world from deviating from reality, completely breaking the logic of media mergers and acquisitions. Until now, there are still no new games or movie and television companies listed, and subsequent regulatory policies for media have gradually been refined and diversified.
We believe that the main reason for the continued decline of the media index since its 2015 high is that it is affected by objective factors in the policy and subjective factors in the company's own operating conditions, and there is no main logic that runs through the industry logic. In 2022, both subjective and objective factors will improve marginally, and the main line of the industry similar to mobile Internet (metaverse/immersive Internet) appears.
. Objective reason:
Since 2016, media policies have continued to tighten. In addition to restrictions on mergers and acquisitions, the supervision of content has been gradually strengthened. Taking games and film and television as an example, the suddenness of supervision has had a great impact on the index performance, profitability and sustainability of related sectors.
(1) Film and Television: Before 2018, the film and television sector benefited from the competition for high-quality content and one drama and two stars. The series produced by the film and television CP increased in both volume and price, and the price of a single episode online station was mostly high at 10-20 million yuan. The capital carnival caused a lot of chaos and soon attracted policy supervision. After the Yin-Yang Contract was released in 2018, the film and television industry began to be under strong supervision and the subject matter was significantly reduced, such as costume dramas, palace dramas, time-travel dramas, etc., which completely broke the growth logic of the film and television industry. After 2018, the price-to-earnings ratio of the film and television sector continued to be negative, and it has not yet emerged from the industry dilemma.
(2) Game: Game supervision mostly revolves around content quality and protection of minors. The restrictions on subject matter are relatively milder than the film and television industry. The main regulatory measures are to restrict the issuance of game version number . The main reason for the first time in mid-2018 was that the regulatory authorities' organizational structure was readjusted, which objectively cracked down on inferior skin-changing games. The first game version number After the re-issue is released, the total number of version numbers has decreased significantly. According to the official data released by the State Administration of Press and Publication, a total of 9,633 game version numbers were issued in 2017, and only 1,545 were issued in 2019. The game industry experienced the first round of survival of the fittest. According to Game Grape, the number of game companies cancelled and revoked nationwide in 2018 and 2019 was 9,705 and 18,710 respectively. There is no official explanation for the second suspension of game versions in July 2021. We believe that the total amount of regulation is mainly based on insufficient protection of minors. The suspension of the version number will once again squeeze the living space of small and medium-sized CPs. According to Guangming.com , a total of 14,000 game companies will be cancelled due to the suspension of the version number from July to December 2021.
. Subjective reason:
Media company's operating conditions are lower than expected and have accumulated huge goodwill risks. The market lacks confidence in the realization of media asset performance. Judging from the total operating income of the sector, the year-on-year growth rate of the total operating income of Media (CITIC) continued to decline from 2015 to 2020, and the certainty and fulfillment of performance were relatively weak. The growth rate of the revenue side has undergone four stages:
(1) 2015-2016: The merger of the merger and acquisition targets significantly increased profits, and the growth rate of the revenue side exceeded 25%.
(2) 2017-2018: Media asset mergers and acquisitions are restricted, the logic of increasing mergers and acquisitions is weakening, and the revenue growth rate has dropped to about 10%.
(3) 2019-2020: M&A targets generally complete performance bets, the performance of M&A targets has changed significantly, the revenue growth rate continues to decline, and negative growth in 2020.
(4) 2021 to the present: M&A risks are gradually being released, and signs of stable growth rate on the revenue side have begun to appear. We expect 2022 may be the turning point in performance.
Judging from the changes in the sector's goodwill, the media sector has accumulated a large amount of goodwill impairment risks, and was released in 2019 (performance bets are generally completed), significantly lowering the profits of media companies' financial statements. According to a vertical comparison, from 2015 to 2018, the proportion of goodwill book value of media companies in total assets remained at a high of 12.5%-13.5%. From 2019 to 2021, goodwill risks continued to be released, and the proportion of goodwill book value of total assets decreased year by year, reaching 10.51%, 8.52%, and 6.72%, respectively. According to horizontal comparison, the proportion of the total book value of goodwill in the media (CITIC) is still at the forefront of all first-level industry sectors, but the difference value has dropped significantly, and has dropped from the first place in 2017 to the second place in 2021.
From the definition of goodwill, goodwill represents the potential economic value of the merged company's business that continues to bring excess returns to the business operations in the future due to its superior conditions, that is, the capitalized value of the part of the expected profitability of the merged company exceeds the normal profitability of its identifiable net assets. In short, goodwill reflects the ability of assets to obtain excess returns. Goodwill is related to the overall enterprise and is reflected in the consolidated financial statements, rather than the concept of individual reporting (absorbing and merging individual statements to confirm goodwill). Therefore, goodwill will only arise when the assets are acquired and the control state is reached. The increase and decrease changes are mainly divided into (refer to the enterprise accounting standards):
The increase in goodwill net value:
(1) Enterprise merger under the same control (no new assets and liabilities are generated): The goodwill listed in the consolidated financial statements of the original controller is completely transferred to the consolidated financial statements of the new controller, that is, who owns the controlling equity and who fully lists goodwill, has nothing to do with the equity ratio.
(2) Enterprise merger under non-uniform control: the difference between the merger cost greater than the fair value of the identifiable net assets of the purchased party . The difference between the fair value of the identifiable net assets of the purchased party is recognized as goodwill; when further acquisition of minority shares, no new goodwill will be generated, but the difference between the newly acquired long-term equity investment of the parent company and the identifiable net assets share that should be enjoyed according to the new increase in shareholding ratio should be adjusted for the capital reserve, and the adjustment retained income if the balance of the capital reserve is insufficient to offset.
The net goodwill value decreases:
(1) Goodwill impairment occurs in to make an goodwill impairment provision.
(2) Asset disposal without losing control: Goodwill is transferred out in an equal proportion of the reduction ratio of equity .
(3) Disposal of assets that lose control: transfer of goodwill in full.
In short, there is only one situation where goodwill increases, corporate mergers and acquisitions, and there are two situations where goodwill decreases, and there are two situations where goodwill impairment and disposal, and goodwill impairment directly affects profit and loss. After 2019, media companies will mainly reduce their goodwill net value by using goodwill impairment (affecting profit and loss), while a few companies will adopt disposal methods to reduce goodwill risk.
. Main logic:
Following the logic of high growth expectations of mobile Internet and increasing profits by mergers and acquisitions, the media has always lacked the main logic throughout the industry. In 2020, the market discussed the main logic of the Douyin industry chain, that is, whether Douyin, as the first global Internet product in China, can drive the iteration and upgrading of the business models of media-related industries. The concept of the Mesozoic Universe is booming in 2021. As the next generation of Internet iteration form, it is expected to replicate the role of the early and high-speed development stages of mobile Internet to improve the overall valuation of the media sector.
.2 The influence of my country's cultural soft power is gradually expanding
The influence of my country's cultural soft power is gradually expanding at the macro level. China's current position of hard power has been significantly improved, and the country's focus is still on breakthroughs in hard technology, but we believe that the country's emphasis on soft power is expected to become the focus after hard power.At present, many of our cultural products have shown great influence. For example, ByteDance is the only Internet company in China to achieve global influence, and its product, TikTok, has produced a large-scale influence. Young people born in Taiwan from 1995 to 2005 are uniformly called the "Tik Tok Generation". They use simplified Chinese characters, use Xiaohongshu, browse Douyin, go to Bilibili, chase mainland dramas and mainland stars, and their lives can be seen everywhere in mainland popular culture. The "Tik Tok generation" has a higher acceptance of mainland life. For example, the game " Genshin Impact " produced by Mihayou continues to dominate the list in the United States, Japan and South Korea. Young people from countries with exporting these game content have spent a lot of time on Chinese games. Recently, the trend of Chinese overseas games being favored by foreign countries has become increasingly obvious. We believe that the signs of foreigners consuming Chinese cultural products in the future will become more and more obvious.
, TikTok
ByteDance Overseas Short Video Platform Tik Tok has achieved good results overseas and entered the overseas market with low threshold and unique novel gameplay. The sense of interaction and participation also captures the hearts of most overseas young people. tiktok.com is the most visited domain name in the world. It defeated last year's traffic "boss" Google.com, topped the list and continued to dominate the list for more than a month. In the first quarter of 2022, the global monthly active users were close to 1.6 billion. In the US market, TikTok became the highest-paid app in January 2022, with its total net income in the App Store and Google Play reaching US$64 million; in the Taiwan market, according to the brand geometry, the number of users of Taiwan Facebook is about 19 million, and TikTok is about 4.2 million, but young people account for only 15.8%, and TikTok accounts for 38%. Tik Tok is more popular among young people in Taiwan; Tik Tok's momentum remains unabated after logging into the Southeast market, and the five largest downloaded apps in the five applications in the markets of Indonesian , Singapore , Thailand, the Philippines, Vietnam and Malaysia. TikTok, and ranked first in the download rankings of Indonesia, Thailand and Malaysia.
After the popularity of Tik Tok, ByteDance also guides users to actively upload videos containing Chinese cultural elements to the platform through various platform activities, increase the intensity of Chinese cultural output, and demonstrate China's cultural soft power. Musica.ly, a short video platform acquired by ByteDance, was launched in August 2017. This challenge attracted many Chinese folk experts and ordinary users who live overseas to upload short videos to show Chinese folk skills and record Chinese symbols in life, such as pottery , sugar painting, Hanfu, Taijiquan , etc., which attracted many overseas users who are curious about Chinese culture. This challenge has been viewed nearly 31 million times, netizens around the world liked it nearly 4.3 million times, and more than 31,000 shared outside the site. Then, the Chinese government created cultural output through short video platforms. In April 2018, the Xi'an Tourism Development Commission reached a cooperation with Douyin short videos. The two parties plan to promote Xi'an's cultural and tourism resources worldwide based on Douyin's entire series of products, and have a reputation and influence around the world. The #Take Me To XiAn# challenge was launched simultaneously in more than 50 countries around the world. In Tik Tok and Musical.ly, the Roujiamo stickers for the challenge were used more than 60,000 times, and the total number of playbacks of the challenge video exceeded 12 million. This global challenge allowed netizens from all over the world to see Xi'an, an ancient capital of China with a profound historical context and profound cultural heritage, as well as Xi'an characteristics such as Terracotta Warriors and Horses , Huimin Street , Roujiamo, Big Wild Goose Pagoda and other Xi'an characteristics. Tik Tok uses short videos to provide more comprehensive, diverse, down-to-earth and interesting Chinese pop culture to overseas users with a more convenient way of cultural exchange and output, and has become a new bridge for cultural communication at home and abroad.
, game going overseas
A typical representative of game going overseas - Mihayou Genshin Impact Game has dominated the list in the overseas market many times, attracting billions of dollars. After Genshin Impact released the new version of 2.6 in March this year, its revenue from overseas exceeded that of a number of overseas mobile games.In terms of the strategy of going overseas for the game, Genshin Impact has implanted a large number of Chinese elements in the scene space, character design, action skills, and platform activities in the game to reflect the uniqueness of the game, and the game brand communication is also spread around the Chinese cultural theme. In terms of game scene space shaping, Genshin Impact is rooted in Chinese cultural soil to shape it into a "Liyue" scene with a very oriental charm. The river in the Liyue scene runs through the eastern plains, the mountain hills with clear problems in the central area, and the rich and beautiful Liyue Port in the south, which refers to the Chinese geographical landform. The scene also contains a large number of Chinese gardens and ancient buildings, with pavilions, towers, pavilions, pavilions, corridors and boats everywhere, allowing overseas players to feel the unique charm of Chinese ancient buildings. In terms of game character creation, combine traditional elements to create a character full of Chinese charm. In the role of storyteller "Zhongli", traditional musical instruments and the form of narration of the storyteller are used to create character PV monologues. Once released, it attracted the attention of the entire network. It has currently gained more than 20 million views on YouTube. The monologue of "Zhongli" also integrates the essence of Chinese Confucianism, Taoism, and Buddhism, allowing overseas players to understand the Eastern beliefs different from Christian Catholicism. In the character design of "Yun Jin", helmet head , , , sing flags, singing white and other Peking Opera elements were implanted. Mihayou also specially invited Shanghai Peking Opera Theater Xunstu Huadan actor Yang Yang dubbed Yun Jin's PV opera singing segment and narration, and expressed the game plot in the form of "Peking Opera Song". So far, Yun Jin's PV "The Goddess Split" has also received more than 10 million views on YouTube. The national trend games collided with traditional Peking Opera opera, helping Chinese Peking Opera and opera culture take root overseas. In terms of platform activities, in February 2021, Genshin Impact launched the game activity " Sea God Festival ", based on the Spring Festival and Lantern Festival. The event includes Chinese festival elements such as guessing riddles, putting on lanterns, pasting Spring Festival couplets, and setting off smoke and flowers. The Sea God Festival has also been highly recognized by players at home and abroad. After the version of the Sea God Festival on February 2 was updated, the Sea God Festival has also been highly recognized by players at home and abroad. After the version of the Sea God Festival on February 2 was updated, the Sea God Festival not only quickly topped the hot search lists in the United States, Japan and other countries, but also allowed players around the world to learn the Chinese pinyin "xiao (变). From going out of the game to going out of the culture, Genshin Impact takes Chinese history as the background, Chinese games as the carrier, and Chinese values as the soul, which can allow more young overseas people to come into contact with and accept Chinese culture, customs and philosophy.
Since the beginning of its overseas game, it has continuously produced excellent game works and has achieved remarkable results in overseas markets with the help of unique Chinese cultural elements. Zhimingtong's main product "The Disputes of the Kings" focuses on the design of Chinese civilization. The architecture and troops originating from ancient Chinese history, the legendary divine beast Qilin , and the legendary sword-casting master Mo Ye, etc., jointly presents a unique and powerful civilization, fighting against other world civilizations in the game. The unique Chinese civilization has helped it achieve good results in the white-hot SLG overseas mobile game market. In 2016, it ranked the highest in the best-selling list of domestic mobile games in the United States, Japan, the United Kingdom, Brazil , Southeast Asia, Hong Kong, Macao and Taiwan, and has been among the best-selling lists on Google Play and IOS many times; 7 years after it was launched, the total turnover in 2021 exceeded 680 million yuan. Lilith's ",000 Awakening " uses historical heroes from various countries and simulated real war operations to bring immersive experience to players around the world. In addition to showing the unique ancient Chinese military style, it also introduces classic Three Kingdoms characters such as Sun Wu, Cao Cao , and Guan Yu to overseas players. As of the end of April 21, the game's total overseas revenue had exceeded US$1.6 billion (about RMB 10.69 billion). At the second Global Game Creative Innovation Forum, Yin Tianming, vice president of Sanqi Interactive Entertainment product, revealed that internal data analysis shows that overseas game users are increasingly loving Chinese traditional culture. Whenever Chinese elements such as Silk Road, Paper Cutout, Candied Haws are added, users have a very high preference, and the proportion of Chinese users does not exceed 10%, and they are basically Americans and Canadians.Users in Japan also responded well to game products that integrate Chinese ancient styles, such as integrating Tang poetry and Song lyrics, Chinese cooking and other elements.
, other cultural products go overseas
Chinese online literature, film and television dramas are accelerating their expansion overseas with the help of novel and interesting plot design, unique Chinese culture, rich and implicit oriental emotions and other characteristics. Online literature is undoubtedly the blue ocean market in recent years. The number of overseas users of Chinese online literature has reached 31.935 million, with the market size reaching 460 million in 2019; and it is also growing rapidly. In the first half of 2021, the number of online literature downloads reached 1.07 billion times, with a growth rate of 20%. Online literature is laid out from both content and ecological sea. In terms of content overseas, the best-selling online literature is themed on martial arts fairy tale, horror and suspense, Danmei fan, president's romance, etc. The progressive plot, the implicit oriental emotional expression, and the national style elements of the ancient Taoist fairy style are highly sought after by overseas readers. In the early days of online literature going overseas, online literature works full of Chinese charm such as "Ghost Blows Out the Light", " Zhuxian ", " Panlong " successfully entered overseas platforms. Among them, online works on the theme of cultivating immortals are highly sought after by foreigners. Many foreigners learn about Chinese traditional culture through cultivating immortals novels and fall in love with Chinese culture and Chinese characters. Since the online literature has been going overseas, more and more excellent online literature markets with other themes have received good responses overseas, such as " Three-Body ", " Fighting Break the Sky ", "Qing Yu Nian", etc. In terms of ecological overseas travel, major manufacturers are all planning reading APP platforms and entering the overseas online literature market. From the cooperation between China Business Network and Gravity Tales in 2017 and officially launched overseas markets internationally, to the 2019 China Business Network's interactive visual novel platform Chapters logs into Apple Store to promote China Business Network to log in to the international market, China's overseas online literature ecosystem has gradually been built. As of the Q1 quarter of 2021, 11 apps from the top 20 global novel app promotion list came from Chinese manufacturers, and the scale of online readers and overall revenue have increased significantly, showing a thriving trend. Internet giants accelerated the process of online literature outreach through "money capabilities". ByteDance and Xiaomi entered the second half of 2021 through Fizzo Novel and Wonderfic; in the Q1 quarter of 2022, the advertising delivery trends of Tencent China Literature Group, ByteDance and Xiaomi Group have greatly improved, and major manufacturers are competing for and expanding overseas online literature traffic.
Domestic film and television dramas have also gained a considerable market overseas, triggering a wave of Chinese dramas overseas. Up to now, more than 1,600 excellent Chinese film and television programs have been translated into 36 languages including English, French, Russian, etc., broadcast in more than 100 countries and regions around the world, and have repeatedly set local TV ratings records. Themes of ancient costumes and martial arts are the most competitive types of Chinese film and television works, such as "Story of Yanxi Palace" and " The Legend of Zhen Huan ". In addition, modern urban dramas, family ethics dramas, suspense dramas and other contemporary works that reflect Chinese life are gradually becoming the main force of Chinese film and television going overseas, such as " Little Farewell ", " Only Thirty ", " Smile Very Beautiful ", etc. At the same time, the overseas expansion of video websites such as iQiyi in recent years has also helped domestic films and TV series go overseas. Major film and television companies have also created Chinese film and television IP through investment and joint venture projects. The Noon Sunshine's online drama "The Beginning" was released in the Korean version and broadcast on Netflix; the high-quality work "The World" was also purchased by Disney for global broadcasting rights. Behind the short videos going overseas, games going overseas and online film and television drama going overseas is the outflow of Chinese culture. In recent years, it has entered the overseas market with the help of unique Chinese culture and made some achievements. In addition, the situation where the new crown pneumonia rages around the world has also created opportunities for good development for major APPs, and reading APPs can also meet the current trend of fragmented entertainment in society. Therefore, it can be expected that with the help of localization strategies and a good platform ecosystem, games, short video APPs, online literature and online drama APPs, etc. will have brighter prospects, and Chinese cultural communication will also be better carried out.(Report source: Future Think Tank)
.3 In 22, the "policy bottom" signal appeared, and supervision tends to be consistent and stable
Media has been under comprehensive and strict supervision of policies for a long time, but at the same time it is a high-iteration and continuous innovation in the industry, and it needs relatively loose space to stimulate creative vitality. Therefore, the stability and consistency of policies are important factors in maintaining the sustainability of the profitability of the media sector. We believe that the "policy bottom" signal will appear clearly in 2022. The stable and positive policy aspect in the future will help stabilize the performance and certainty of media-related companies. Media valuation and performance turning points may have appeared.
We believe that the "policy bottom" signal appears based on:
. Policy supervision has achieved important results and has formed a relatively stable regulatory direction expectation. The probability of an unexpected regulatory direction itself is low in the future. The market is not concerned about policy supervision, but about the suddenness and ambiguity of policy supervision. The so-called "suddenness" means that the regulatory direction has no expectations or the supervision directly affects the company's business model or business logic, thus having an unexpected impact on operating performance; the so-called "ambiguity" means that the supervision goals are unclear or the direction and scope of the supervision are unclear, which brings an amplified interpretation of the degree of impact and unnecessary speculation and concerns. We believe that on the one hand, the policy supervision of the media industry and various sub-fields has achieved remarkable results, and on the other hand, the policy supervision direction has formed stable expectations, and the probability of sudden and vague changes in media policies itself has been reduced. Among them, Internet supervision mainly revolves around "anti-monopoly", "disorderly expansion of capital" and "content review"; game supervision mainly revolves around "content quality" (mainly through total quantity regulation) and "minor protection" (limited duration and consumption); film and television supervision mainly revolves around "content quality", "theme direction" and "star chaos"; live broadcast supervision mainly revolves around "minor protection" and "reward limit".
. In 222, the official level has made many statements on the stable and positive "policy":
(1) The financial committee meeting sets the tone with a positive policy, and is cautious and negative. On March 16, the Financial Committee clearly stated: "Relevant departments must earnestly assume their own responsibilities, actively introduce policies that are beneficial to the market, and carefully introduce contraction policies. Any policies that have a significant impact on the capital market should be coordinated with the financial management department in advance to maintain the stability and consistency of policy expectations."
(2) The Political Bureau of the CPC Central Committee emphasized "promoting healthy development", "complete special rectification", and "implementing normalized supervision". On April 29, the Political Bureau of the CPC Central Committee held a meeting to continue the previous meeting of the Financial Committee. It further refined from the entire industry to the Internet industry: "We must promote the healthy development of platform economy, complete special rectification of the platform economy, implement normalized supervision, and introduce specific measures to support the standardized and healthy development of the platform economy."
(3) CPPCC Digital Economy special meeting emphasizes "support platform economy" and "handle the relationship between the government and the market well." On May 17, the National Committee of the Chinese People's Political Consultative Conference held a special consultation meeting on "Promoting the Sustainable and Healthy Development of the Digital Economy" and said: "Entrepreneurs are the most important innovation subjects. We must support the sustained and healthy development of the platform economy and the private economy, study specific measures to support the standardized and healthy development of the platform economy, and encourage platform enterprises to participate in major national scientific and technological innovation projects. We must handle the relationship between the government and the market, coordinate the formulation of plans, improve laws and regulations, increase government direct investment, improve the digital quality of the whole nation, and support digital enterprises to list in domestic and foreign capital markets."
. Set the tone of the cultural value of Chinese culture from the perspective of the cultural strategy. On May 22, the General Office of the CPC Central Committee and the General Office of the State Council issued the "Opinions on Promoting the Implementation of the National Cultural Digitalization Strategy" (hereinafter referred to as the "Opinions") clearly stated that by the end of the "14th Five-Year Plan" period, a cultural digital infrastructure and service platform will be basically built, and a cultural service supply system with online and offline integration and three-dimensional coverage will be formed.By 2035, a national cultural big data system with physical distribution, logical association, quick links, efficient search, comprehensive sharing, and key integration will be built, and the Chinese culture will be presented in a panoramic view, and the digital achievements of Chinese culture will be shared by the whole people. The "Opinions" released this time focus on "the panoramic presentation of Chinese culture", and further clarify the positioning of policy in the face of cultural confidence and soft power. According to the "Opinions", future cultural construction will focus on two major directions: cultural infrastructure and cultural service platforms, and explore digital cultural experiences that integrate online and offline. We believe that this policy has set the value and role of cultural content in the general direction, and the policy orientation towards strict supervision and stable supervision has further changed to positive supervision, and the policy perspective of media continues to improve.
From the perspective of benefit logic, we continue to emphasize that we should focus on the traditional industries that were previously suppressed by policies" and "emerging industries without clear regulatory measures", and continue to be optimistic about the opportunities in the Internet, games, and meta-universe related industries. The specific benefit logic is as follows:
. Industry strictly regulated by policies and has a good business model. (1) Recommend the Internet industry that was previously affected by liquidity, Sino-US game, and strong regulatory expectations; (2) Recommend the game industry that restarts the issuance of version numbers, goes overseas to form a large-scale trend, and establishes the value of long-term fundamental investment.
. New content and new business formats that have not yet been touched by supervision, such as the meta-universe. (1) Fundamentals: In the early stage of the meta-universe, large-scale projects such as the G/B end are expected to be the first to generate economic benefits. Recommended Virtual exhibition industry with certainty in performance. (2) Theme: Focus on innovative fields with large imagination space, such as NFT, virtual digital people.
. At the same time, it is recommended to pay attention to the film and television industry that was previously suppressed by policies and impacted by business model logic; the marketing industry that urgently needs innovation.
2 Internet: The policy aspect goes from "regulation" to "support", pay attention to short videos and content e-commerce
From the index point of view, the Internet index has experienced a sharp pullback since its high level, mainly due to the policy aspect, strong supervision (future area) and liquidity depletion (funding area).
. Policy aspect: From "strong supervision" to "support platform economy". December 2020 16-18 Central Economic Work Conference clearly emphasized "strengthening anti-monopoly and preventing disorderly expansion of capital", and the Internet sector entered a strong supervision stage; on August 30, 2021, the 21st meeting of the Central Committee for Comprehensive Deepening Reform emphasized that "preventing disorderly expansion of capital has begun to take effect" and the Central Economic Work Conference from December 8 to 10, 2021 stated that "anti-monopoly and preventing disorderly expansion of capital have achieved important results", indicating that the Internet industry has reached regulatory expectations and began to send out signals that the policy side is stable; on March 16, 2022, the Political Bureau of the CPC Central Committee meeting on April 29, 2022, the policy side clearly stated that it supported the "Internet development", and the policy side showed clear supportive expressions for the first time, and the Internet "policy bottom" It is confirmed and becomes the weather vane for media supervision of other sub-sectors.
. Liquidity: China's mainstream Internet companies are mostly listed on Hong Kong stocks and US stock . Stock pricing rights depend on overseas funds. Affected by the Sino-US game, the liquidity of the Internet sector has dried up and caused the sector to fall sharply. Chinese stocks listed in on the one hand stimulate the risk aversion sentiment of overseas funds, and on the other hand, the "siphon effect" of US listed Internet companies seeking Hong Kong stock listing is obvious, which will create a larger-scale liquidity risk for Hong Kong stocks. We believe that under the background of the country's support for the development of Internet platforms, the pricing effect of domestic funds will become increasingly obvious, which is expected to drive the recovery of overseas funds' investment sentiment.
China Internet experience In 2000, PC Internet and mobile Internet in 2010 have reaped huge development dividends and have entered the second half of the era of stock competition. It is recommended to pay attention to high-quality Internet media forms such as short videos and new business models such as content e-commerce. In December 2021, China's mobile Internet users reached a high level of 1.174 billion, a slight increase of 15.1 million compared with December 2020.
.1 Short video: Currently, mainstream Internet media forms, it is recommended to give priority to
Short video usage time exceeds instant messaging and become the largest Internet media form. Against the backdrop of a significant reduction in traffic costs, the short and exquisite media form of short videos is highly consistent with the "fast-paced" and "fragmented" user experience, quickly seizing the user's mind and user time. According to QuestMobile, in December 2021, the proportion of short video users' usage time was 25.7% (+4.7pct), surpassing the previous largest media form of instant messaging (23.4% in 2020) and becoming the Internet form with the highest proportion of user usage time. The essence of traffic and monetization is "one and two sides". The advantages of short videos in traffic will gradually affect the innovation of monetization models and seize the market share of traditional Internet business models.
(1) Supply side: High-quality content will follow the traffic and further transfer. Because short videos have become the largest Internet media form, short videos ("fast pace" and "fragmentation") that have advantages in content form will further gather content creators, thereby gathering high-quality content, and creating a greater "iron effect" on traditional Internet media forms such as long videos.
(2) Money side: Innovation in monetization model + seizing the market share of the traditional monetization business model. Short videos are no longer limited to entertainment attributes, and their content boundaries have expanded to education, games, social networking, e-commerce, high-quality dramas, etc., and are constantly expanding. As the largest traffic gathering place, on the one hand, it promotes innovation in monetization models (such as content e-commerce), and on the other hand, it is also snatching the market share of traditional monetization business models (such as the grabbing effect of short video advertising on other Internet advertising).
.2 Content e-commerce is still in a stage of high growth, and the future market space is expected to be
Content e-commerce is still in a period of rapid development, and the incremental volume is expected to come from: (1) Traditional offline business further onlineization (such as shopping demand); (2) Traditional e-commerce contentization. Content e-commerce has a broad potential market space. According to China Business Information Network, my country's total social consumer retail sales in 2021 reached 44.08 trillion yuan, an increase of 12.5% year-on-year. After deducting price factors, the actual increase was 10.7% year-on-year. Among them, the national online retail sales were 13.09 trillion yuan, an increase of 14.1% year-on-year, accounting for 29.7%; from January to February 2022, my country's total social consumer retail sales reached 7.44 trillion yuan, an increase of 6.7% year-on-year. After deducting price factors, the actual increase was 4.9% year-on-year. Among them, the national online retail sales were 1.96 trillion yuan, an increase of 10.2% year-on-year, accounting for 26.34%. As of June 2021, the number of online shopping users in my country reached 812 million, an increase of 29.65 million from December 2020, accounting for 80.3% of the total netizens. Live e-commerce maintained rapid growth. In H1, my country's live e-commerce transaction volume reached 1.09 trillion yuan, reaching 84.9% of the whole year of 2020; in 2020, the annual live e-commerce transaction volume reached 1.29 trillion yuan, an increase of 191.8%.
We further divide content e-commerce into live e-commerce, short video sales, and buying and selling. Among them, live e-commerce is the main content e-commerce model, and short video sales have entered a rapid growth channel. Live e-commerce is divided into two categories: (1) Traditional e-commerce platforms have opened live broadcast areas, such as JD Live, Taobao Live, etc.; (2) Entertainment, content, and social platforms have added new e-commerce services, such as Douyin, Kuaishou, Douyu, etc. Among them, Taobao Live is the leading brand in the traditional live e-commerce platform, and Kuaishou and Douyin are the leading brand in the social live e-commerce platform.
From the perspective of user usage, in 2020, users of Taobao live broadcast, Douyin live broadcast and Kuaishou live broadcast accounted for the top three, accounting for 68.5%, 57.8%, and 41.0% respectively; among which loyal users accounted for 46.3%, 21.1%, and 15.3%, respectively. From the perspective of user satisfaction, traditional e-commerce companies such as Taobao and JD.com have been deeply involved in the e-commerce industry, and their satisfaction is clearly in the leading position in the industry; emerging content e-commerce platforms such as Kuaishou and Douyin still need to further build an e-commerce ecosystem, and the satisfaction is lower than the industry average. In 2020, the overall satisfaction of the live e-commerce industry was 79.2, while the satisfaction of Taobao Live, Tmall Live and JD Live was 82.7, 81.8 and 80.5, respectively; the satisfaction of Douyin Live and Kuaishou Live was 79.5 and 78.7, respectively.
Unlike the traditional e-commerce "people look for goods", content e-commerce belongs to the passive and impulsive consumption of "good look for people". Its sales logic is driven by content and stimulates users' desire to buy actively. At the same time, content e-commerce has the characteristics of private domain traffic monetization.
3 Game: Excellent business model, pay attention to the three major trends of increasing ARPU value, reverse "hand to terminal" and going overseas for games
From the perspective of industry fundamentals, the game industry has experienced the dividends of mobile game user growth and the dividends of mobile game IP to mobile game IP, and the growth rate of industry scale and user scale has gradually slowed down. According to the China Audio and Digital Association Game Working Committee and the China Game Industry Research Institute jointly released the "2021 China Game Industry Report", the actual sales revenue of the Chinese game market in 2021 was 296.513 billion yuan, a year-on-year increase of 6.40%, and the growth rate slowed to single digits. The stimulus effect of the home economy weakens, the number of top games decreases, the cost of game research and development and buying volume increases, and the suspension of game version numbers, the year-on-year growth rate in 2021 decreased by 14.31pct.
We believe that the growth rate of the game market industry is mainly due to the decrease in the supply of high-quality game content. Objectively, the difficulty of applying for game version numbers increases and the supply of games is approximately reduced. On the one hand, it significantly reduces the low-quality skin-changing games, and on the other hand, it also limits the growth opportunities of small game studios with original creative aspirations; subjectively, the game industry's cognition is focused on operational efficiency and certainty in making money. The industry's main R&D energy is concentrated on high turnover and homogeneous mobile games. The game innovation and precision are insufficient (cannot be compared with 3A game masterpieces), and the number of head games supply is reduced due to user aesthetic fatigue. Therefore, the growth potential of the game industry in the future may depend on the quality of development, and ultimately depends on the improvement of ARPU value (market size = user *ARPU). Among them, three types of trends are worth paying attention to:
.1 The ARPU value has room for growth in the long term, mainly due to the change in the age structure of game users, which leads to the increase in the proportion of people with high paying capabilities
The age structure of Chinese game market is undergoing structural changes. As of March 2022, the proportion of users over 31 years old has reached 51%, exceeding users under the age of 30. Among them, users over 36 years old accounted for 36.6%, which also exceeded users under the age of 24 years old. Comparison In March 2019, users under the age of 30 accounted for 55.5%, and users over the age of 36 accounted for only 30.2%. We believe that as the first generation of Chinese game users (2000 PC game users) grows older, the Chinese game user structure is developing towards the full age group, and the room for improvement in domestic game ARPU value in the future is expected to open up.
(1) User scale: The year-on-year growth rate slowed down significantly, but the penetration rate still has a lot of room for improvement. The future user growth depends on the natural growth of young game users, thereby driving passive changes in the age structure of game users. In 2021, the number of game users in China reached 666 million, an increase of only 0.22% year-on-year, but the penetration rate was only 47.6%.
(2) ARPU value: The main growth momentum of the future game market, and its growth logic depends on the changes in the age structure of game users. We believe that the first generation of Chinese game paid users (2000 PC game users) are high-value hardcore players, and their game acceptance and payment ability are relatively high. Taking this as the dividing line, older user groups have a higher acceptance of games and their willingness to pay; younger user groups have a higher acceptance of games, but are limited by their ability to pay. There is still a big gap in the ARPU value in the Chinese and foreign game markets. We believe that it mainly depends on the difference in payment willingness caused by the differences in the structure of game users in China and foreign games. Therefore, the value of Chinese game ARPU has room for growth. In 2020, 55% of Japanese players over 35 accounted for ARPU, corresponding to about 2,230 yuan; in 2021, the average age of American game users was 35 years old, of which 42% accounted for users over 34 years old accounted for about 956 yuan, corresponding to about ARPU. In comparison, the ARPU of domestic gaming in 2021 is only 445 yuan.At present, the main players in the game paying are mostly mature players born in the 1980s and 1990s, and their acceptance, payment ability and willingness to pay are relatively high. As the new generation of game users grow older, the age structure of game users in my country will further age, and the payment willingness and payment ability brought about by changes in the age structure will become the main driving force for the growth of ARPU value in my country.
.2 The domestic PC game market has strong demand and weak supply. Pay attention to the reverse "end turnover" trend of the game market
The domestic PC game market has been in a market environment with strong demand and weak supply for a long time, and the PC game market may be significantly underestimated. PC games have laid the foundation for the development and pattern of my country's game industry, while mobile games have truly opened up the space for game research and development and achieved the overtaking of domestic and foreign game research and development. Currently, the focus of mainstream game companies is on mobile games, and there are very few market participants in the PC game.
(1) From the demand side, the demand for PC games still maintains relatively strong demand. In September 2021, "New World" (produced by Amazon, MMORPG) was launched on Steam. On the first day of its launch, it exceeded 500,000 people online at the same time, and the highest was 910,000 people online at the same time (estimated to be nearly half of them). The beta test conducted in July was more than 200,000 people online at the same time; on February 2022, the "Lost Ark" Steam version was launched on the first day of its launch, reaching 980,000 people online at the same time, and exceeded 1.3 million the next day. According to Steam's official report, the monthly active users of international service reached 30 million in 2018, and it is estimated that the monthly active users of China will be 40-60 million by the end of 2021 (the global monthly active users of Steam will reach 120 million by the end of 2020). Most of these users are high-value hard-core game users. The potential market size of the PC game exceeded expectations, and the revenue scale of the international version of Steam exceeded the Chinese PC game market. The main market PC game user report released by the Japanese research institution Game Age Research Institute surveyed the Steam market share of 14 popular regions/countries around the world (mainland China, Taiwan, the United States, Japan, the United Kingdom, Germany, France, Indonesia, Malaysia, Canada, South Korea, India, Thailand, and Singapore). Among them, mainland China ranked first with 1327.2 billion yen (about 66.3 billion yuan), and the United States ranked second with 423.2 billion yen (about 21.1 billion yuan), and the subsequent rankings are Indonesia (60.2 billion yen), Germany (56.4 billion yen), the United Kingdom (56.2 billion yen), India (49.8 billion yen), and South Korea (39.1 billion yen). According to the "2021 China Game Industry Report", the domestic market sales revenue of self-researched games in 2021 was 255.819 billion yuan, of which the PC client game market size was 58.8 billion yuan, the console game was 2.58 billion yuan, and the total PC game market was about 61.38 billion yuan. We believe that the report does not take into account the national revenue of Steam's international version. If the revenue scale is added, the PC game market size in 2021 will be approximately 127.38 billion yuan, accounting for about 39.6%. According to the report, the revenue scale statistics range is Steam International Edition China, and the consumption capacity of Chinese people in other areas is not counted (some games are locked in national areas, such as "The Lost Ark" European and American servers). If the consumption income of Chinese people in other areas is counted, the market size of the PC game potential will be higher. More than half of the demand in the PC game market has spilled out, and the demand space in the PC game market may be significantly underestimated.
(2) From the supply side, few domestic PC games have been launched since 2016. The most recent one is "Yongdao Wujian" which was launched last year. Judging from the game approval situation in 2019, a total of 1,570 games have passed the approval and obtained the version number, of which there are 1,462 mobile games, only 65 PC games, and mobile games account for almost 93% of the approved games, while PC games only account for about 4%.
We believe that the reasons why the PC game industry is in a weak supply mainly include:
(1) Cost side: The average R&D cost of mobile games is smaller than that of PC games. "GTA5" R&D costs and marketing costs are US$137 million and US$128 million respectively; "Red Dead Redemption 2" reached the industry's peak with R&D costs of US$644 million.
There is a gap in R&D technology at home and abroad, and the competitiveness of R&D terminal games is insufficient. "GTA4" was developed by a development team of more than 1,000 people for three and a half years, and more than 2,000 people participated.To restore New York City in reality, the game development team spent months investigating traffic and residents on the streets of New York, and took all-round images of each building to create a more realistic 3D model.
(2) Revenue side: The operational efficiency and profitability of mobile games are significantly higher than those of PC games. Whether domestic or foreign, the mobile game market has surpassed PC games in terms of market size, with the market share of domestic mobile games exceeding 70%.
Top game companies Tencent and NetEase have begun to deploy the 3A PC game market, which may lead the reverse "hand to end" trend. In July 2021, Tencent Holdings acquired a majority stake in Stunlock Studios, the developer of V Rising, becoming the largest shareholder and providing strategic support. In addition, recently, Tencent Overseas Holdings and Investments have successively produced new PC games, such as Tencent’s overseas subsidiary Funcom released the RTS game “Dune: Spice War” on April 26; Sharkmob, the holding subsidiary, released the new chicken-eating game “Bloodhunt” on April 27; and investment company Bohemia Interactive released the armed raid game “ARMA Reforger” on May 18. In the past month, Tencent Overseas Holding Company and participating companies have released 3 and 1 PC game respectively. Since the establishment of the overseas brand Level infinite in December 2021, Tencent, a leading game manufacturer, has begun to increase investment in overseas console game developers. In addition, NetEase has actively deployed the 3A terminal game market and has set up its first self-developed studio, Jacklope Games, in the United States. In the future, it will focus on developing multiplayer online games for PC and console platforms. Domestic top game companies Tencent and NetEase have successively entered the 3A PC game market, which is expected to drive the R&D wave of domestic PC game companies and increase the supply of high-quality PC games.
China's game industry originated from PC games and became mobile games, focusing on the reverse "hand to end" trend. In the era of PC games, China's game industry is the main focus, and in the era of mobile games, China's game industry has overtaken on the curve, and has successively experienced the high growth dividends of mobile Internet users and the dividends of PC games IP to mobile games. At present, all dividends are coming to an end. In the post-mobile Internet era, game R&D companies mainly focus on high-quality mobile games, game overseas development, etc. As the largest gaming market in China's early game market, the PC game market did not attract industry attention. We believe that:
(1) There is still demand in the PC game industry. The current market shrinkage is mainly due to the lack of high-quality content supply, so leading PC game R&D manufacturers may be able to gain greater dividends when launching PC games.
(2) In the VR/AR era, companies with strong integrated game R&D capabilities may benefit. Large VR games are more similar to PC or console games, and have high requirements for the overall quality of the game. Therefore, companies with the ability to develop PC games are expected to gain first-mover advantages in the immersive Internet era. (Report source: Future Think Tank)
.3 The game goes overseas and is expected to become a new performance growth engine
Follow the new trend of the game goes overseas. The global game market has a broad market space, and Chinese games are expected to reap dividends when going overseas. In 2021, the global game market size reached US$180.3 billion, of which consumer spending was US$175.8 billion and the global mobile game market size was US$90.7 billion. From the perspective of year-on-year growth rate, the global game market is quite mature. Both the ARPU value and user penetration rate in developed countries have reached a relatively high level. Therefore, the high growth rate of Chinese games going overseas will come from its competitive advantage with overseas game companies. We believe that Chinese mobile games have completed overtaking and are relatively ahead in mobile game R&D capabilities, game themes, operation capabilities and business models. It is expected that the increase in the game going overseas market will mainly come from China Mobile Game going overseas. The development of console and PC games is more difficult and cycled, and overseas game companies have obvious advantages and are expected to be unable to surpass them in the short term.
Two game versions pauses divide the trend of Chinese games overseas into three stages:
(1) Before 2018: Chinese game companies going overseas specialize in overseas game markets, and their successful game categories are mostly SLG.The top 30 Chinese mobile games in overseas markets in 2017 are "The Disputes of the Kings", "The Age of the Kingdoms" and "The King of Avalon". The corresponding publishers are Zhimingxingtong, IGG, and Funplus, all of which are Chinese game companies specializing in overseas markets.
(2) 2018-2021: After the first game version number is suspended, domestic games have clearly controlled the total number of version numbers. In order to cope with the dilemma of difficult domestic version numbers, small and medium-sized game companies have actively sought to go overseas. Although large game companies are actively deploying in overseas markets, their main energy is still concentrated on the domestic market. The top 30 mobile game revenues in China in 2020 are "PUBG MOBILE", "Awakening of All Nations" and "Wild Action". The corresponding publishers are Tencent, Lilith, and NetEase. The game types are more diverse, and Tencent and NetEase are both in the domestic and overseas game markets.
(3) 2021 to present: The impact of the second game version number suspension is wider. Major game companies are seeking to save themselves in order to hedge the risk of domestic game revenue stalls. The strategic position of games going overseas has been significantly improved. At the same time, the game version of such companies has achieved relatively optimistic results. Therefore, the reissue of game version numbers in April 2022 will not change the trend of overseas development. In the future, game overseas development will still be an important source of performance for various game companies. In 2021, 42 mobile games in China received more than US$100 million in overseas markets, an increase of 5 models year-on-year. Among them, the US market contributed US$3.6 billion in revenue to the top 30 mobile games in China, an increase of 53% year-on-year, and surpassed Japan to become the largest overseas market for Chinese mobile games. In Q3 2021, the top 20 revenue list of Chinese mobile games in the United States shows that "Puzzles & Survival" produced by Sanqi Interactive Entertainment ranked 10th.
4 Metauniverse: a new generation of Internet forms, focusing on "basic" and "thematical" opportunities
Currently, one of the representative definitions of the concept of "metauniverse" is: "metauniverse" is a virtual space parallel to the real world and independent of the real world. It is an online virtual world that maps the real world and is an increasingly real digital virtual world. Roblox was successfully listed on the New York Stock Exchange in March 2021, which is considered to be the starting point for the rise of the meta-universe concept. The metaverse is the product of digital technology construction. In Roblox's prospectus, the company believes that the metaverse should have 8 attributes: identity, friends, immersion, low latency, diversity, anywhere, economic system and civilization.
We believe that in a narrow sense, the metaverse refers to the digitalization of human sensory experience, including vision, hearing (VR, AR), touch, taste, and smell, so that sensory experience is almost no different from the real world in the virtual world; in a broad sense, the metaverse refers to the digitization of humans, but also the digitization of everything, processes and relationships, completely mapping the real world to the virtual world. Contains the dual definitions of "virtual native" and "virtual symbiosis". Among them, "virtual native" refers to the "digital twin" of people or things built through the "digital twin" of people or things, which realizes identity, currency transactions, community ownership and career development in the virtual world; "virtual symbiosis" refers to the use of technical means to break the separation of time and space and the constraints of the laws of reality, greatly enhance human perception and cognitive abilities, realize the mutual integration of virtual and real space, and be able to influence each other.
From the perspective of layout opportunities, we believe that we should start from the two perspectives of "fundamental opportunities" and "thematic opportunities". (1) Fundamental Opportunities: In the early stages of the metaverse, large-scale projects such as G/B end are expected to be the first to generate economic benefits, and virtual exhibition industries with performance certainty are recommended. (2) Theme: Focus on innovative fields with a large imagination space, such as NFT and virtual digital people.
.1 Virtual exhibition of fundamental opportunities: It is expected to be implemented first under the demand for new cultural infrastructure, generating planned economic benefits
Virtual exhibition benefits from the increase in demand for meta-universe, and on the other hand, benefiting from the increase in demand for new cultural infrastructure, and is expected to be the first to generate large-scale economic benefits.
Referring to the discussion of the development of the virtual digital human industry by PhotoCore Technology (Qqubits), we believe that the development of the metaverse will go through three stages: G-end/B-end large-scale projects and applications promotion, B To C applications popularized, and C-end applications and content popularized:
, G-end/B-end projects and applications are implemented on a large scale: the related software and hardware and infrastructure of the metaverse are in the early stages of development, and the related construction costs are relatively high. The G-end/B-end initially attempts to embrace new technologies and new business formats, especially the G-end projects are implemented faster and faster. Mainly:
(1) Local governments gradually launch relevant documents on supporting the development of the metaverse. The G-terminal metaverse project will play a demonstration and guiding role, and has a low demand for economic benefits and returns. On the one hand, it will help provide examples of metaverse project construction. On the other hand, it can also attract large-scale private capital through government investment to promote technological development.
Governments in many places in my country have also issued a number of meta-universe policies. There is no clear official policy guidance at the central level of my country, but many local governments have issued support policies related to the Metaverse. For example, relevant policy documents in Shanghai, Wuhan, Hefei, Wuxi, Beijing and other places all mention the development of the Metaverse. The Central Commission for Discipline Inspection website published an article saying that "there is no single technology called the Metaverse in the world. The Metaverse is a combination and upgrade of various existing technologies, which can be understood as "3D version of the Internet". Extended real technology.... Digital twin technology...." The article shows the support attitude towards the underlying technology of the Metaverse.
(2) Foreign governments have different attitudes towards the metaverse, but they are generally optimistic. It is expected that the overseas demand for related G-end projects will also be strong, and the domestic digital/virtual space construction leader is expected to expand overseas business.
(3) In order to demonstrate its brand image and strength, large and high-quality B-end enterprises are expected to follow G-end projects to embrace virtual digital space.
, B To C applications are gradually becoming popular: large-scale G-end/B-end projects promote the development of metacosmic technology, and related costs are gradually reduced. At the same time, consumer habits are gradually forming, metacosmic applications are beginning to show the potential of large-scale commercialization, with certain economic benefits. At the same time, manufacturers are beginning to pay attention to the possibility of C-end content and technology monetization. The profitability of B To C projects is gradually improving.
, C-end applications and content are widely popularized: With the further strengthening of related technologies and commercialization capabilities, C-end users’ access to the metaverse channels and terminals are widely popularized, C-end applications and content have the potential for large-scale commercialization, and the metaverse will enter a stage of universal prosperity.
We believe that the metaverse will first generate large-scale demand on large-scale G-end/B-end projects, and demand is expected to maintain sustained high growth, among which virtual exhibitions and digital cities are important implementation scenarios.
(1) Virtual reality technology is an important technology in the meta-universe and will bring important changes in the field of display and imaging. However, due to the high threshold for commercialization of technology, the government will be an important customer in the early stage, such as virtual people at the Olympic Games, virtual people at the Spring Festival Gala, etc.;
(2) Metaverse is an important application scenario for new infrastructure, which can drive the development of various industries such as VR and AR;
(3) From a cultural perspective, local governments attach more importance to public cultural construction, and technologies such as the main technology of the meta-universe virtual reality will improve the exhibition effect and drive the needs of new construction and renewal and transformation of local exhibition halls.
In addition, cultural new infrastructure has great support on both the policy and capital side, and it is expected that related demand will continue to be strong after the epidemic. The General Office of the CPC Central Committee and the General Office of the State Council issued the fifth point of the "Opinions on Promoting the Implementation of the National Cultural Digitalization Strategy" (hereinafter referred to as the "Opinions"). It clearly states that new scenarios for digital cultural consumption should be developed and new digital cultural experiences combined with online and offline integration and online presence should be vigorously developed. We believe that the main implementation scenarios include cultural theme museums such as urban museums, museums, art museums, etc. (1) Cultural infrastructure is a new infrastructure that is different from traditional ones. It is in line with policy orientation and will receive key support from the government side; (2) The state promotes the use of special bonds, and the capital side is expected to be relatively abundant.The issuance and use progress of special bonds are required to be in advance: the special bonds issued in 2021 shall be allocated and used before the end of May 2022; the 2022 special bonds issued in advance in December 2021 shall be allocated and used before the end of September 2022; the quota of the second batch of special bonds shall be used as much as possible before the third quarter.
.2 Thematic Opportunity NFT: Its value depends on both "use value" and "transaction value"
NFT is the full name of "Non Fungible Token" (non Fungible Token). In essence, it is a blockchain on-chain token with uniqueness, indivisibility, and differences (different from the homogeneous token Bitcoin). Single mapping of NFT with the subject matter can be achieved, that is, digitization of the subject matter can be achieved. Although the domestic emotionally optimistic about the prospects of NFT, the actual market size is still far behind overseas. We believe that it is mainly different from that of foreign countries, and the domestic NFT secondary trading market is subject to obvious restrictions. After August 2021, the monthly sales and monthly sales of overseas NFT markets have increased significantly, of which the peak monthly sales were in August 2021 and January 2022, with sales of US$4.92 billion and US$4.63 billion respectively; the peak monthly sales in January 2022, with corresponding sales of 7.425 million pieces; the number of global monthly active buyers significantly exceeded the number of monthly active sellers from July 2021 to March 2022, and the trend changed in April 2022, but the market is still relatively hot; the average monthly transaction price of global NFTs reached its peak in August 2021 to US$1,120.2 per piece, and has basically stabilized between US$400-600 per piece in recent times.
In contrast, the domestic NFT market (especially digital collections) is generally in a niche and hot market structure. The essential difference comes from the fact that the secondary trading market has been opened for creators abroad, making NFT-related products very sufficient and belongs to the buyer's market; the domestic NFT market basically adopts the PGC release model, and the supply exceeds demand, belongs to the seller's market. We believe that the domestic policy attitude towards preventing NFT financial supervision will not change, and the pattern of secondary transactions in the future will be significantly different from that in foreign countries. According to NFT Chinese Community, in April 2022, there were 114 digital collection sales platforms in my country, among which the secondary trading markets were mostly realized through the transfer function, and the transfer function was relatively strict. For example, the Whale Teng Transfer Rule, which has the largest number of users in China, is "Digital collections can be transferred to real-name users over 14 years old after purchase of 180 days or after receiving the gift for 2 years." Currently, among the domestic digital collection distribution platforms, the proportion of platforms with and without the transfer function is 48% and 51% respectively; the proportion of platforms with and without the secondary market is 29% and 71% respectively.
China and overseas regulatory authorities have different attitudes towards NFTs, which directly lead to significant differences in NFT application scenarios and market spaces between China and foreign countries. Therefore, unlike the market, we disassemble NFT projects from the perspective of NFT value. We believe that the value of NFT can be decomposed as the sum of the use value and the transaction value. Therefore, when the domestic transaction value is limited, the value of NFT mainly depends on the use value. The corresponding subject matter from the NFT can be further disassembled into the physical object and the virtual object:
(1) The physical object NFT: The digital identifier for the confirmation of the property rights of the physical asset has no value itself, but because it is anchored to the physical object, it can be used as a certificate of circulation and transaction of the subject matter. Its use value depends on the value and price of the physical object. Related NFTs include copyright, IP ownership itself (excluding IP derivative rights, such as related IP cards, etc.), physical artwork, and goods (such as Moutai).
(2) Virtual object NFT: NFT itself and virtual object are mutually reserved and belong to two sides of the same coin, that is, NFT is the virtual asset itself. The use value of this type of NFT depends on the user's subjective intention, and the transaction value depends on the size of the transaction demand (audience). Related NFTs include digital collections, IP derivatives (such as IP virtual avatars, star cards, etc.), and game virtual props.
NFT market is highly related to the development level of secondary transactions. It is recommended to pay attention to the promotion of relevant domestic policies and the promotion of the opening process of secondary transactions. The focus is currently mainly digital collections. In the future, you can pay attention to the NFTization of game props, because compared with digital collections, game props have higher use value.
.3 Digital virtual people of theme opportunities: virtual idols, virtual anchors, virtual employees are currently mainstream application scenarios
We believe that virtual digital people refer to virtual images with "human" characteristics in a narrow sense (technical perspective), and broadly refer to virtual identities that include social relations, economic relations, and interactive relations (social perspective). At present, mainstream thematic opportunities are mostly concentrated in the narrow definition, and the broad definition involves complex sociality, with greater imagination space but corresponding difficulty in realization.
(1) From a technical perspective, virtual digital humans can be understood as interactive virtual images created through aggregation technology such as computer graphics, speech synthesis technology, deep learning, brain-like science, biotechnology, and computing science, and have the appearance, behavior, and even thoughts (values) of "humans".
(2) From a social perspective, aggregation technology brings a new space for semantic communication and barrier-free communication. The virtual digital human being born as a new media role will be widely used in the new ecology of the metaverse, and assumes the responsibility of information manufacturing and transmission. It is a new medium in the metaverse that connects or twin relationships between "people", "people" and things or things are.
Virtual idol, virtual anchor, and virtual employees are the three types with the most applications and the highest commercial value in the virtual digital human industry. Therefore, thematic opportunities in 2022 should mainly be laid out around these three points. According to the "China Virtual Digital People Influence Index Report (2021)", in the survey of the characteristics that users pay the most attention to: more than 60% of users pay the most attention to the virtual idols, "good appearance" and "good works"; 66% of users pay attention to the "hosting characteristics" of virtual anchors, and 69% of users care about the "characteristic personality and personality" of anchors; what virtual employees care most is serviceability, and 50% of users believe that "strong technology" and "cross-border cooperation and service" are very important. The survey also shows that 80% of users are currently willing to spend less than 1,000 yuan on virtual idols, and "privacy and security" is the biggest concern for users about virtual digital people.
(This article is for reference only and does not represent any of our investment advice. If you need to use relevant information, please refer to the original report.)
Selected report source: [Future Think Tank].
