Economic Observer Network reporter Ren Xiaoning On the afternoon of August 12, China Literature Group (00772.hk) released its financial report for the first half of 2024, in which the performance of the film and television drama business was quite good. In the first half of this year, the highest-grossing movie "Hot", the most popular TV series "Qing Yu Nian 2" and the popular TV series "Rose Story" and "Traveling with the Phoenix" are all produced by China Literature.
Driven by popular movies and TV series, in the first half of this year, China Literature’s copyright operations and other businesses (hereinafter referred to as “IP development business”) revenue was 2.25 billion yuan, a year-on-year increase of 73.3%, surpassing online business revenue and becoming the third A great source of income. IP development business income includes film and television dramas, derivatives, and licensing business income, mainly income from film and television dramas.
In the first half of this year, Yuewen Group’s total revenue was 4.19 billion yuan, a year-on-year increase of 27.7%; the adjusted net profit attributable to the parent company was 700 million yuan, a year-on-year increase of 16.4%.
ip development revenue accounts for the majority.
Yuewen started out with its online literature business. Online business revenue, mainly paid reading revenue, has been its main source of income for most of the period. China Literature's revenue structure has only experienced one major change before. In 2019, "Celebrating More Than Years" became popular across the Internet, driving its IP development business revenue to increase by 341% year-on-year, exceeding its online business revenue.
In the first half of this year, China Literature’s IP development business revenue exceeded its online business revenue for the second time. There are more blockbuster movies and TV series this time than in 2019.
Since China Literature acquired Xinli Media in 2018, it has gradually found a way to produce hit film and television dramas. Popular dramas such as "Celebrating More Than Years" in 2019, "The Son-in-Law" and "Douluo Dalu" in 2021, "In the World" and "Heart" in 2022, and "The Ordinary Road" in 2023 are all produced by Xinhua Produced by Li Media.
In the first half of this year, most of China Literature’s popular film and television dramas were produced by Xinli Media. The outstanding performance of the film and television drama business in the first half of the year is partly due to the concentrated launch of hit dramas during this period, and partly due to the adjustment of the IP development strategy by the China Literature management team.
In June last year, China Literature established a film and television division and integrated Xinli Media into the division. The goal is to produce a series of hit film and television dramas and develop the entire IP industry chain.
This year's popular "Qing Yu Nian 2" is a typical case of China Literature's implementation of IP development strategy. In the early stages of the development of "Qing Yu Nian 2", China Literature established an S-level (super) project team, which is also the largest IP project team in its history, linking the entire industry chain from literature to film and television, games, derivatives, cards, etc. .
Yuewen insiders told Economic Observer that Hou Xiaonan, CEO and President of Yuewen Group, will take various teams to visit the crew, watch movies, and establish a regular cross-department sharing mechanism around the development progress of core IPs. A few years ago, after China Literature sold the copyright, it paid little attention to subsequent production, resulting in IP development being carried out independently. The strategy promoted by China Literature today will ensure the completion of IP development, thus increasing the possibility of hits.
Yuewen IP revenue increased significantly in the first half of this year, which is also related to the increase in derivatives and short drama business revenue. In the first half of the year, China Literature’s IP card sales were 100 million yuan, including more than 200,000 blind boxes of “Qing Yu Nian 2” and 20 million yuan of film and television cards. In terms of short plays, China Literature launched dozens of short play projects based on its IP in the first half of the year, with the highest gross revenue for one short play being 30 million yuan.
Online business focuses on paid
While the income of IP development business is increasing, China Literature’s online business income has declined. China Literature’s online business revenue mainly includes revenue from paid reading, online advertising and game distribution business, of which paid reading revenue accounts for the majority.
’s financial report shows that in the first half of this year, China Literature’s online business revenue was 1.94 billion yuan, down 2.2% year-on-year; revenue from its own platform products, mainly paid reading revenue, was 1.69 billion yuan, accounting for 87.3% of total online business revenue. The average monthly active users of China Literature's self-owned platform products and Tencent's self-operated channels were 176 million, a year-on-year decrease of 16.9%; the average number of monthly paying users was 8.8 million, a slight increase of 0.4% year-on-year. The reason for the changes in the business data of
is that China Literature has adjusted its online business strategy, focused on the paid reading business model, and reduced the proportion of free reading users.China Literature explained in its financial report that paid reading is a higher-quality business model, and paid reading channels have a higher return on investment.
In the online literature industry, China Literature is challenged by Tomato Novels, a subsidiary of ByteDance, and Qimao Novels, a subsidiary of Baidu . Tomato Novels and Qimao Novels adopt a free reading business model and earn revenue through advertising. This model attracts a large number of price-sensitive users.
From 2019 to 2022, China Literature also tested the free reading model. In 2022, the number of free reading users of China Literature will reach 15 million, but the free model has adversely affected its paid subscription revenue. In 2022, the average number of monthly paying users of China Literature decreased by 14.7%.
Last year, China Literature’s management made strategic adjustments to its online business, expanding investment in paid content and reducing investment in free reading. This strategy is still ongoing.
During the financial report conference call, Yuewen management was also asked about the payment rate of the online reading business. Huang Yan, vice president of China Literature Group, said that despite the current macroeconomic uncertainty, online literature users’ willingness to pay has not decreased, because online literature is a product that is in urgent demand, and readers have high loyalty and stickiness, especially For serial novels, readers are very eager to see subsequent chapters and are willing to pay for high-quality content.
