China’s video game live streaming duopoly

by

China’s Douyu is one of China’s largest live-streaming sites that focuses on gaming and esports content. By out-fundraising rivals and poaching top streamers, it survived China’s live streaming war in 2016 to become an industry giant. 

Douyu is the second Twitch-like service backed by Tencent to go public in the United States. The other one is Huya, which signed a deal with Western competitive esports organization Team Liquid, one of the world’s most valuable esports teams according to Forbes.

But Douyu is more focused on the growth in its hometown. “As one of the first game-centric live streaming platforms to make the foray into eSports, we are strategically positioned to benefit from the proliferation of the eSports industry in China,” Douyu said on its corporate profile.

Huya and Douyu control over 60% of the Chinese game streaming industry. And this number is expected to grow even higher with further consolidation. Huya went public in May 2018, while Douyu recently IPO’ed in July 2019, both in the US. 

Huya is more than 80% larger than Douyu with a $4.9 billion valuation, and Douyu has a $2.7 billion valuation as of August 26. Moreover, compared to Douyu, Huya has a slightly higher tilt towards game streaming with over 50% revenue derived from gaming, compared to 45% for Douyu.

Last April, Douyu filed with the U.S. Securities and Exchange Commission as it prepares to raise up to $500 million on the NYSE less than a year after its archrival floated on the same stock market.

However, looking at Douyu’s quarterly financial results, it is noticeable that the company’s performance in the third quarter of 2019 is not as good as expected. “The Company expects its total net revenues to be in the range of RMB1,950 million to RMB2,000 million in the third quarter of 2019,” while the real total net revenue increased by 81.3% to RMB1,858.5 million (US$261.0 million) from RMB1,024.8 million in the same period of 2018. 

For the third quarter, Douyu’s net loss was RMB165.4 million (US$23.2 million) compared with RMB220.5 million in the same period of 2018, implying a net loss margin of 8.9% compared with 21.5% in the same period of 2018.

However, these streaming platforms also face other challenges like ethical guidelines and piracy concerns. When a gamer live-streamed on Douyu three days before a Nintendo Switch game’s release date,  viewers were quick to realize they were watching someone flagrantly play a pirated copy of an unreleased game. 

The streamer faced immediate backlash from Nintendo fans. Eventually, Nintendo also appeared to respond. A screenshot of a cease and desist letter said to be from the company started circulating online. The letter was said to be sent to a number of Chinese websites where users were sharing pirated copies of Switch games.

We were unable to verify the authenticity of the letter, but some Chinese websites were quick to respond. Some websites and forums known for hosting pirated games have now stopped allowing users to download Nintendo Switch ROMs.

Nintendo has a complicated relationship with China, which has long been a hotbed of game piracy. This isn’t even the first time a Chinese hacker has publicly flaunted a pirated Nintendo game ahead of its release.

With strong financial support and a large audience base, China is catching up with the world on its eSports and game live streaming services. With its unique duopoly model, each platform needs to find its distinctiveness and has to deal with other concerns along the way.

The Decreasing Clout of Black Friday

by

For many, the week surrounding Thanksgiving is filled with eating, drinking, treacherous travel and reconnecting with family. And for millions of Americans, waking up early and traveling far distances to score crazy Black Friday deals is the immediate objective following Turkey Day. While Americans are projected to spend even more money –$29 billion to be exact– on Black Friday this year, Black Friday retail sales are anticipated to take a hit this year. With the popularity of online shopping and Cyber Monday only increasing, consumers are less motivated to actually shop in-store. Now, consumers are browsing, comparing prices and hunting down deals from the comfort of their own home. 

In the past, large department stores like Macy’s, Kohl’s and JC Penney held the largest power when it came to retail in the 70’s and 80’s. Around this time, the allure of black friday and retail sales in general came to the foreground. Thus, when it came to Black Friday, these department stores relied on and drew in more dollars than any other retail companies. 

Nowadays, however, the reality of the retail industry couldn’t be more black and white. Due to the disruption of Cyber Monday and online shopping in general, large retail chains like Macy’s and Kohl’s are having a hard time drawing shoppers to malls. As a direct result, their sales are in a slump. The model of Black Friday is essentially crazy deals for a limited and short amount of time. However, as Coresight Research CEO Deborah Weinswig stated, “Black Friday no longer represents a narrow window of opportunity in which shoppers have to wait in the cold and sprint into stores to get unmissable deals.” Holiday shopping begins much earlier in the season and now, actually occupies most of the month of November. While Black Friday is still expected to be the busiest shopping day in respects to foot traffic, Cyber Monday is expected to surpass Black Friday sales this year. That being said, Macy’s shares are down 47% this year and Kohl’s shares are down 27%. 

Thanksgiving 2019 shopping projects. Source: CNBC

While the days of Americans trampling each other in a race to get a deal on a flat screen TV are decreasing, Cyber Monday and online holiday shopping sales, as previously stated, have lucrative projections. This year, online shoppers are expected to spend $143.7 billion in November and December combined, according to Adobe Analytics annual calculations. This is a 14% increase in comparison to last year’s holiday shopping period. 

This year, the holiday shopping period is 6 days shorter than normal, seeing as there’s only 22 days between Cyber Monday and Christmas. Alas, Adobe Analytics projects ecommerce sales will exceed $1 billion for for every day of November and December. This will be the first year ever that this is the case. Thanks to online shopping companies like Amazon Prime and “BOPIS” (buy online, pick up in-store) services, online shopping is just that much easier. This year, smartphone purchases are projected to account for 36% of online sales this holiday season. This statistic is up 20% from last year. 

With the ability to complete our holiday shopping needs from the 4 inch device that sits in our pockets, the odds continue to stack up against the power of Black Friday retail sales. While Black Friday has yet to occur, these statistics and projections prove that retail shopping finds itself in a very interesting cross road. As large department and retail chains are closing down nationwide, I personally am very interested to see where the future of in-person retail sales lies. 

Hog Crisis in China

by


  • A pig farm in Yiyang, Henan. China has culled 1.2 million pigs to control a deadly swine fever . (Credit to New York Times)

China’s pork prices hit record levels after an epidemic of African swine fever killed millions of pigs, triggering a severe meat shortage in the world’s top pork consumer.

Pork prices in China surged past 50 yuan ($7.1) per kilogram. According to the data from the Ministry of Agriculture and Rural Affairs in October, pork prices rose more than 100 percent in October from a year earlier, contributing 2.43 percentage points to the CPI rise, and accounting for nearly two-thirds of the year-on-year increase.

For more than a year, China has been trying to contain a vicious epidemic of African swine fever, a highly contagious disease that is harmless to humans but kills almost all infected pigs. The Chinese government announced the first outbreak of the disease in August 2018, and since then, outbreaks have been reported in several provinces across the country.

In response, the authorities banned farmers from feeding swill to pigs. Leftovers are seen as the main channel of transmission to healthy herds because the virus can live for days in feces and raw meat. Officials have imposed quarantine measures and transportation restrictions in areas where the disease has broken out.

However, safety and hygiene standards have been difficult to enforce in China’s millions of small backyard pig farms, which feed most of the country’s pigs. The government says 1.2 million pigs have been culled so far to try to stop the spread of the disease, which is a tiny fraction of the 700 million pigs slaughtered in China last year.


In a supermarket located in Beijing, the pork counter reads jokingly “pork supports installment payment”. (Credit to Abuoluowang.com.)

Analysts estimate that pork prices could double by the end of 2018. As officials prepare for bigger price increases, Beijing will be faced a growing number of challenges.

To offset the surge of pork prices, officials subsidized about 3.2 billion yuan ($452 million) to low-income families who are struggling to afford pork.

Chinese authorities have also asked local governments to free up money that could be used for artificial insemination technology, a way to encourage farmers and producers to breed more hogs. The Chinese government has also drafted plans to increase subsidies, loan support and insurance coverage for the pig industry in the country.

Moreover, the Chinese government released 1,500 metric tons of pig meat in the past two months, and the majority of those were frozen pork reserves. China set up a national strategic pork reserve in the 1970s as a way to deal with emergencies and stabilize pork prices.

Although the Chinese government hasn’t released a report on the amount of frozen pork in its reserve yet, experts warn that the Chinese government may not be well prepared enough to deal with the pork crisis.

“China’s pork shortage will worsen in the rest of the year, but the government doesn’t have effective methods to fill the gap in the short term,” said Chen Wen, the Wanlian Securities analyst.

Chen estimates that China will face a shortage of about 10.8 million tons of pork this year. She added that China’s supply of frozen reserves isn’t enough to make up for that.

Goodbye Black Friday

by

With more shopping moving online, Black Friday is dying at a rapid rate. 

Clint Grant | The Dallas Morning News

“I think the traditionalists will have a hard time stomaching that Black Friday is dying,” Josh Elman, a consumer and retail analyst with Nasdaq Advisory Services, told Business Insider. “But I think at the end of the day, the whole idea and concept of Black Friday deals in store will diminish over time.”

He continued, “Ultimately, consumers really want convenience, and they want to get their item and get out of the store quickly. They don’t want to wait in long lines. They don’t want to wait for a store to open anymore.”

Frederic J. Brown | Getty Images

According to the National Retail Federation, 99 million people said they shopped in stores on Thanksgiving weekend last year. This was a 3 million drop from the year before, and according to Elman, this number will only continue to fall. 

Meanwhile, 108 million people shopped online on Thanksgiving weekend the same year. This was a five million increase from the year before. 

Other than the shift to e-commerce over in-store purchases, another issue arises. People are becoming used to having deals available all year round. 

Tory Ho | Getty Images 

There is no longer a single day – the day after Thanksgiving – that retailers offer amazing deals. These deals are now spread out throughout the holiday season and the rest of the year, and they now appear online and in stores. 

However, Black Friday still helps to kick off a critical period for retailers. But, Elman mentions that the holiday season start date is inching earlier and earlier since companies are desperate to survive the “retail apocalypse.”

Offering Black Friday-like sales before Thanksgiving may assist retailers in boosting their business compared to rivals, but it also dilutes the importance of Black Friday as a single day for destination shopping, which affects the entire retail market.

“It’s a little sad. But it’s just a sign of the times,” Elman stated. “It’s really the paradigm shift that’s occurring. I think retailers understand what’s transpiring, and ultimately are doing everything in their power to meet customers’ needs.”

Sources