Shared todayAI series in-depth research report: " 2024 AI Investment Strategy Report: Multiply The wind of AI breaks the waves of tomorrow》.
(Report produced by: Wanlian Securities)
Total report: 25 pages
1 Demand recovery, policy guidance + hot spot drivers + AI empowerment boost industry development
1.1 Market performance: The market performance in 2023 has been outstanding, and the valuation has declined compared with the middle of the year.
The media industry performed outstandingly. Valuations have fallen slightly below the six-year average. The PE of the media industry has fluctuated in 2023 and has recently fallen back to 26.13X, which is slightly lower than the average PE value of 28.28X from 2017 to 2022.
1.2 Performance analysis: The recovery in consumption has driven the market to recover steadily, with a significant rebound in the first three quarters of 2023
The recovery in consumption has driven the market to continue to recover steadily, with 23Q1-03 revenue and net profit attributable to shareholders rising year-on-year. On the revenue side, in Q3 2023, the macro environment will continue to improve, the economy will recover steadily, residents' enthusiasm for consumption will gradually increase, and the consumer market will show a positive trend, driving the media sector's operating income in the first three quarters to rebound to 347.211 billion yuan, a year-on-year increase of 6.06%: Gui Mu Net profit rose sharply by 24.72% to 32.403 billion yuan. Among the sub-segments, only the television and broadcasting segment fell. The overall performance recovered and improved: gross profit margin remained stable, slightly increasing by 1.03pct year-on-year to 32.51%. On the expense side, financial expense ratios have shrunk in recent years, while administrative expense ratios and sales expense ratios have remained relatively stable: net profit margin increased by 1.50pct year-on-year to 9.66%.
In 23Q3, revenue and net profit attributable to parent companies increased significantly year-on-year, continuing the downward cycle from the previous quarter. On a quarterly basis, operating income in 23Q3 increased by 7.41% to 119.727 billion yuan, exceeding the 111.827 billion yuan in 19Q3; net profit attributable to the parent company rose sharply by 42.63% year-on-year to 9.599 billion yuan. On a quarter-on-quarter basis, revenue in 23Q3 fell slightly by 0.12% quarter-on-quarter, remaining stable, and net profit attributable to the parent company fell by 22.19%, continuing the previous cycle of decline in revenue and net profit attributable to the parent company in Q3.
1.3 Industry Outlook: Policy guidance + hot spot drive, AIGC’s rapid development helps industry development
Policies guide the direction of the industry, hot spots drive market development, and AIGC promotes new changes in the industry. The film tax exemption policy was promulgated across multiple key schedules, and many key movies were scheduled to be released during this period, which drove the box office market to rebound and helped theaters resume operations and continue to expand: Under the limited collection order, long-term platforms also began to focus on micro-short dramas, and the market scale gradually expanded ; In the game field, with the continuous issuance of version numbers, the market is picking up. As the growth of user scale slows down, the trend of stock competition becomes more and more obvious. Major manufacturers are actively deploying small games to expand the market: the explosion of interactive film and television games and Apple MR equipment The upcoming launch will also drive further growth in the virtual reality market. Al empowers many areas of the industry, AIGC develops rapidly, and realizes a new content creation model, which helps enterprises reduce costs and increase efficiency, and promotes new development of the overall market.
2 Games: Many new games are ready for launch, and manufacturers are actively deploying small games
2.1 Game market performance: The market has recovered significantly, and many games are ready to be launched and have attracted much attention.
The market has recovered significantly and the user scale has stabilized. According to the Gamma data report, in the second half of 2022, the issuance of game version numbers was restricted, the launch of new games was restricted, and the performance of old games maintained stability. The overall market situation has shrunk. In the first half of 2023, game version numbers will be issued on a regular basis, and high-quality new games will be issued on a regular basis. The outstanding performance of tourism drove the overall market turnover to increase by 22.16% month-on-month to 144.263 billion yuan, returning to the original level. From the perspective of user scale, since the epidemic benefited, the user scale has increased significantly. Since then, the growth rate has slowed down and stabilized at a high level, and it has entered the era of stock market.
A number of games are ready to be launched and have attracted much attention, and are expected to drive steady growth in the market in 24 years. With the regular issuance of version numbers, a number of new games are ready to be released and have attracted market attention, including roguelike, open world, two-dimensional, party games, action and other categories. They have wide coverage and increase the diversity of market supply. At the same time, With many advantages such as PC-to-mobile games, additions to well-known mobile game IPs in the same series, hot IP linkage, and the first domestic 3A masterpiece, it will inject sufficient fresh vitality into the game market and drive steady improvement in the overall market in 2024.
2.2 Mini game market: Mini program platforms actively deploy mini games, and manufacturers explore new distribution models
Major manufacturers are actively looking for growth points. However, as the game user market has now entered an era of stock competition, the growth rate of user scale has gradually slowed down, and the user market capacity is difficult to support the expanding game market. At the same time, as the cost of traditional channels and purchase costs have increased, the initial investment cost has been high, and profits have been reduced. The rate is also declining, so various manufacturers are also actively seeking changes and finding new growth points. In the era of "stock game" of Internet traffic, mini programs are becoming an important way to attract traffic. Mini program platforms such as WeChat, Alipay, and Douyin have The huge user base provides a broad space for developers.
Various large and small program platforms actively deploy mini-games, which have significant advantages. From the perspective of the product itself, compared with traditional mobile games, mini-games have the advantages of being light, fast, convenient to pay, and easier to use. In terms of user scale, lower threshold + wider reach can convert potential users of Douyin and WeChat who have not had much exposure to games before, bringing in incremental game users; in terms of usage time, it can meet users' light and fragmented entertainment needs. It is expected to increase the length of time users spend in game content; in terms of payment, due to binding with payment methods such as WeChat wallet, payment is more convenient. Existing game users continue to pay, and incremental users are also willing to pay.
Judging from platform performance, the overall number of active users of WeChat mini games continued to rebound in the first half of this year, achieving a 30% growth. The number of developers exceeded 300,000, the total number of mini game users exceeded 1 billion, monthly active users reached 400 million, and traffic was monetized and advertising promotion scale have increased by more than 30%; Douyin mini-game users have significantly improved in terms of activity, duration, and retention data; Alipay also opened mini-game development capabilities to all developers on November 3. It has opened up the payment link for game players, and the Alipay user base covers a wide age group, and older users have stronger payment capabilities, which can have a positive effect on increasing the payment rate of game products and acquiring high-value users. However, there are certain deficiencies in social attributes, and the platform is gradually being developed and improved.
Domestic manufacturers are actively exploring new models for small game distribution. There are currently three mini-game distribution models on the market, namely pure mini-games, mini-games converted into APPs, and APPs converted into mini-games. Domestic listed game companies generally adopt the latter two methods, which are more based on past performance. The mid-range and lightweight mobile games have been transformed into small games, which are less difficult to transplant and require less trial and error. The representative works are "Little Ant Kingdom" and "Puzzle Continent" by Sanqi Interactive Entertainment, Gigabit's "Yi Nian Xiaoyao" ", are all products with outstanding performance in the world. When "Little Ant" was launched in 2021, its global monthly revenue reached a peak of nearly 30 million U.S. dollars; and starting from this year, many medium-sized manufacturers have chosen to skip the APP first From the stage of mini-games, we will directly focus on native mini-games, and then consider launching APPs, such as Sanqi Interactive Entertainment’s “Xundao Daqian” and Gigabit’s “Brave and Equipment”.
Unity launches the Unity Engine to assist the development of small games and help the market release new growth. As the leading game engine, Unity launched the Chinese version of Unity engine - Unity Engine in August 2023. It is not only compatible with many software and hardware platforms in the Chinese technology ecosystem, such as Windows, Android, iOS, WebGL, Weixin Mini Game, etc. , and has launched a "one-stop WeChat mini game solution" for mini games, which can effectively reduce and solve problems such as excessive memory usage and body heating, helping developers to continuously improve creative efficiency while improving the performance and experience of mini games. Go one step further. We believe that this will further increase the speed at which domestic game manufacturers develop mini-games, save a certain amount of R&D costs, shorten the R&D cycle, and meet the strong demand for mini-game production and transplantation, thus bringing new growth to the domestic game market.
3 Film and television: Policies help the market recover, and long-term and short-term platforms develop micro-short dramas
3.1 Movies: Tax exemption policy helps the market recover, and Wanda Cinema Line maintains its leading position
The market has accelerated its recovery, with many indicators showing a recovery trend. All theaters will resume operations in 2023, and policies and measures to expand domestic demand and promote consumption will continue to be effective. Movies, as an important scene for offline consumption, are showing a good recovery trend. According to Beacon Professional Edition data, as of 9 a.m. on December 1, 2023, the box office of the market was 50.979 billion yuan, recovering to 79.47% of 2019 before the epidemic, with 1.203 billion moviegoers and 119 million screenings.
The domestic market still relies on large schedules, and policies have driven significant box office growth during the schedules. Judging from the domestic box office distribution, among the top ten box office films in 2023, except for the last "Unfamiliar Life", the rest of the releases are in the four most popular domestic schedules. The domestic film market still relies on key major schedules. The performance of the large-scale period exceeded expectations. Among them, the summer period was positively affected by the policy of exempting film development funds. In order to pursue higher profits, small and medium-sized films were actively scheduled to reduce the difficulty of recovering costs. The number of film supply sides increased significantly. At the same time, against the background of intensified competition, the quality of scheduled films has been further strengthened. The double improvement in quantity and quality has driven a significant year-on-year growth in box office, which has exceeded the 2019 level.
Theater operations have resumed, and Wanda Cinema Line maintains its leading position. From the perspective of theater operations, as of the National Day holiday, theater operations have resumed. The number of theaters in operation is 11,900, a year-on-year increase of 10.5%, and the number of theaters in operation is 73,700, a year-on-year increase of 9.3%. Judging from the box office performance of the National Day theaters , Wanda Cinema Line maintained its leading position, with the box office rising 67.99% year-on-year to 487 million yuan, accounting for 17.90% of the share; judging from the performance of film investment companies, under the pressure of the general environment, most film investment companies chose to reduce the opening of theaters, while Wanda Film Investment With its leading advantage, it bucked the industry trend and added 23 theaters year-on-year in the first half of the year, earning a box office of 3.71 billion yuan.
Based on the performance of films in 2023, we believe that the trends in the film market in 2024 are as follows:
1) Realism stands out: From the previous "I'm Not the God of Medicine", "Big Events in Life", and "Send You a Little Red Flower" to this year's "The Lost Her" and "All or Nothing", there are one or more movies every year Fewer realistic-themed films have stood out. The reason is that realistic-themed movies take social life as the source of creation, reduce the audience's understanding cost, hit social hot spots, and are more likely to resonate with the audience. They not only have strong ideological and cultural qualities, but also It also has high artistic value in terms of expression, and it is expected that there will still be popular movies with realistic themes in 2024.
2) Traditional culture emerges: In the current film and television market, continuously strengthening the film and television expression and dissemination of China's excellent traditional culture is the main direction of its creative and production efforts to expand and an important area of continuous exploration, such as "Chang'an 30,000 Miles", "Chang'an 30,000 Miles" and "Chang'an 30,000 Miles". "God Part 1" all give full play to traditional oriental aesthetics. The audience gains cognitive and emotional sublimation in the theater, which effectively promotes the contemporary dissemination and living inheritance of traditional culture and satisfies the public's new aesthetic expectations for traditional culture.
3) Domestic films dominate the world: The top ten films in 2023 are all domestic films, and the overall quality is also at a high level. With frequent hits, the audience's aesthetics have gradually changed, and they are more accepting of the content of domestic films and have a higher understanding of Hollywood's original content. The genre model is beginning to get tired. Compared with the past, more profits are retained in the domestic market. The market expansion of domestic films will further feed back the investment side. With better returns, more content investment and project development can be encouraged.
4) Word of mouth has always been the king: “Traffic” in domestic movies is no longer the decisive factor in box office, from the summer release of "The Vanishing Her" and "Fengshen Part 1" to the National Day release of "Sturdy as a Rock" and now "The Mistake on the River", more and more movies prove that the era when social reputation is king has arrived. The "tap water effect" has become the core. We should truly break down the movie content and find the points that can create a spiritual fit with Internet users. We should take the content as the core and make good use of effective platforms to form a social atmosphere, develop audience reputation, and drive rapid box office growth. .
3.2 Drama series: The platform continues to strengthen the construction of member content, and the long and short platforms are focusing on the micro and short drama market.
The platform continues to strengthen the construction of member content. In terms of member playback volume, in Q3 2023, each video platform continued to increase the construction of member content. The effective playback volume of member content of the entire network increased by 12% year-on-year to 40.5 billion times. Looking at different platforms, most The platform's member playback volume of dramas has increased, among which the member playback volume of Tencent Video and Mango TV has increased significantly. Tencent Video's effective member playback volume in 23Q3 was 15 billion times, a year-on-year increase of 27%; Mango TV's was 1.8 billion times, a year-on-year increase. An increase of 40%; iQiyi’s was 15.5 billion times, an increase of 8% year-on-year; while Youku’s performance was slightly inferior, and the effective play volume of Youku members dropped to 7.6 billion times, a year-on-year decrease of 6%. In addition to member-only enjoyment, reversal payment, and advanced on-demand viewing, the platform further narrows the rights and interests of non-members. The operating model is "lock 3 episodes" and "lock 7 episodes", that is, only members can watch the last 3 or 7 episodes. This will improve member retention and payment rates and increase membership service revenue.
Total report: 25 pages