After a major blow from the CEO's arrest, Douyu's financial report for the third quarter of this year finally arrived late. According to Douyu's 2023 third quarter report released on December 7th, this quarter continues the development trend of the previous two quarters, with an increase in net profit and a significant decline in revenue and paid users, which can be described as mixed.
However, in the eyes of industry insiders, the increase in net profit is mainly due to cost reduction and efficiency improvement, not the optimization of its own business. In addition, factors such as tightened regulation of game live streaming at the policy level, increasingly fierce market competition, major changes recently, and the suspension of major anchors will make Douyu's future development in the game live streaming industry even more thorny.
The downward trend of revenue is difficult to change
Douyu's performance in the third quarter is roughly the same as the previous two quarters, showing characteristics such as increased net profit, decreased revenue, and a decline in the number of paying users.
On December 7th local time, Douyu opened with a surge of over 10%, but its stock price gradually declined. As of the close, it rose 2.35%, with a stock price of $0.739 per share.
If analyzed solely from the perspective of net profit, it can be seen that Douyu has achieved a turnaround this year, turning losses into profits. In the first quarter of this year, under the general accounting standards in the United States, Douyu achieved a net profit of 14.5 million yuan and Non GAAP achieved a net profit of 25.8 million yuan; In the second quarter, the net profit of Douyu Non GAAP increased to 61.4 million yuan, a significant year-on-year increase of 161%.
In the third quarter of this year, Douyu went further. Under non US GAAP accounting standards, Douyu achieved a net profit of 71.9 million yuan, a year-on-year increase of 180% and a month on month increase of 17.2%.
In the previous two years, namely 2021 and 2022, Douyu suffered losses for two consecutive years, failing to comply with Non GAAP accounting standards in the United States. The company suffered losses of 400 million yuan and 7.6 million yuan, respectively.
Regarding the reasons for the increase in net profit, information provided by Douyu to reporters from Huaxia Times shows that in the context of market stock competition, Douyu particularly focused on deepening the exploration of profit models in the third quarter, and made diversified attempts in areas such as fan drilling services, paid gameplay, and new game promotion. The positive changes in financial report data highlight that Douyu has achieved outstanding results in exploring profit models.
But in the view of Wang Chao, the founder of Wenyuan Think Tank, the increase in net profit is mainly related to Douyu's cost reduction and efficiency increase in this quarter. He told a reporter from the Huaxia Times that Douyu should have made efforts to cut down a lot of expenses, including marketing expenses, personnel expenses, etc., so the increase in net profit is reasonable and only temporary. "Due to changes in the economic situation in the past two years, both the primary and secondary markets are facing tight funding, so everyone is reducing expenses and achieving a break even point through savings."
If combined with data on revenue and paying users, it can be seen that the improvement in Douyu's performance is actually mixed with hidden dangers.
Firstly, Douyu's revenue has been declining for three consecutive years. From 2020 to 2022, Douyu's total revenue was 9.6 billion yuan, 9.165 billion yuan, and 7.108 billion yuan, respectively. In the first three quarters of this year, Douyu's revenue has also maintained a downward trend. The total revenue in the first quarter decreased by 17.4% year-on-year, decreased by 24.1% in the second quarter, and achieved a revenue of 1.359 billion yuan in the third quarter, a year-on-year decrease of 24.42%.
The same applies to paying users. In the third quarter, the average MAU (monthly active users) of Douyu mobile was 51.7 million, with 3.9 million paying users, a significant decline compared to the same period last year. These two data points were 57.1 million and 5.6 million respectively.
This may be related to the increasingly fierce competition in the live game market, especially the accelerated layout of video platforms such as Tiktok, Kwai, and Station B in the live game field. The growth space of Douyu is limited.
However, Huya, who is also in a competitive position, has much better performance than Douyu. According to the third quarter results released by Huya, the company's total revenue in the third quarter reached 1.65 billion yuan. Under non GAAP accounting standards, the net profit was 103 million yuan, and the mobile MAU increased by 3.7% month on month to 86 million yuan.
Appointment of the Temporary Management Committee
This is the first financial report released by Douyu, which lost its "backbone" after CEO Chen Shaojie was arrested. As the incident occurred less than a month ago, the overall data is not significantly different from the situation presented in the previous two quarters.
The temporary management committee established by Douyu is composed of Su Mingming, the company's director and chief strategic officer, Cao Hao, the company's director and vice president, and Ren Simin, the company's vice president, to manage the company's operations. This performance announcement is also the first public statement made by Douyu's temporary management committee after its establishment.
Regarding the impact of Chen Shaojie's arrest on the company, Douyu's senior management responded in a conference call, "At present, Douyu's operation is normal, and the investigation has not had a significant impact on the company's operation." Cao Hao mentioned that in the past three years, the domestic game live streaming industry has been undergoing tremendous changes, and Douyu's goal is the long-term healthy development of the platform, and it will actively cooperate with regulatory authorities, Future Douyu will strive to further enhance content innovation and ensure operation in a healthier live streaming environment.
However, Wang Chao predicts that Douyu will be without a leader after CEO Chen Shaojie is caught, and many top anchors will stop watching. In fact, it is in a maintenance stage, and if there is still no major positive news in the coming quarters, the downward trend will continue.
Due to changes in the overall environment, game live streaming platforms are also seeking change in order to survive.
Douyu is more focused on the track of game live streaming. Due to the seasonal factors of the summer peak season, the Douyu platform's esports and game content was launched more frequently in the third quarter. A total of 52 large official events, including the 2023 League of Legends LPL Summer Tournament, 2023 King of Glory KPL Summer Tournament, and 2023 Peace Elite PEL Summer Tournament, were broadcasted, creating nearly 80 high-quality self-made events with high participation and more than 10 self-made variety shows.
For the future development of the platform, the Douyu Temporary Management Committee pointed out that "in the future, we will continue to be committed to the long-term growth and sustainable development of the platform. On the basis of continuing to strengthen compliance construction, we will build a 'game centered diversified content ecosystem platform', provide higher quality content and services through product upgrading and innovation, and explore new growth points to ensure the stable development of the company's business and finance."
Huya is committed to expanding its gaming live streaming platform positioning to sports event platforms. In recent years, Huya has successively introduced multiple international sports event copyrights such as snooker, Chinese billiards, WWE, UFC, and Bundesliga, expanding its content.
In the view of Zhang Yi, CEO and Chief Analyst of iMedia Consulting, the different track layouts chosen by the two are related to their respective situations. "Huya's operating mode is more 'healthy', and the desire to expand its products is also stronger. The company needs more business line support to ensure the safety of the closing and layout. However, Douyu itself has limited financial resources, coupled with recent high-level changes, so there is not much cross regional layout."