After a year of transformation, with eleven consecutive declines, is HUYA starting to give out money?!

Editor | Yang Bocheng

Caption | IC Photo

Recently, the launch of "Black Myth: Wukong" has sparked a huge surge in commercial value. Influencers from various fields have transformed into game streamers on this day, all starting to stream this game.

As a veteran game streaming platform, HUYA provides a full-service chain from "watching" to "buying" for "Black Myth: Wukong". Under the game interface of "Black Myth: Wukong", it summarizes strategy information for passing levels, attack rates of weapons and equipment with "instructions for use", and additionally adds a purchase interface. The standard version on Steam is priced at 258, and the deluxe version is priced at 318, which is 10 yuan cheaper than the official price.

Image Source: HUYA "Black Myth: Wukong" Interface

It can be said that "Black Myth: Wukong" has brought the public's attention back to the game streaming track after a long absence.

And not long ago, the "first domestic game streaming stock" HUYA also released its financial report for the second quarter of 2024. To be honest, the revenue data in the financial report is not impressive, but once it was announced, it triggered a surge in market sentiment, closing with a 14.13% increase.

This inevitably raises curiosity, why can a mediocre financial report excite the capital market so much? How is HUYA's transformation plan progressing?

I. One year of transformation, eleven consecutive declines

For a long time, game streaming has been a "money-making" industry and has also been favored by capital.

In May 2018, HUYA successfully listed on the NYSE, becoming the "first domestic game streaming stock". On the day of listing, HUYA's IPO price was $12 per share, and the stock price once soared to $50 per share, with a peak market value exceeding tens of billions of dollars.

Back in the day, in order to compete with DouYu for market share, HUYA spent hundreds of millions signing top influencers, snatching copyrights, and revenue growth rates once reached three digits. Finally, in 2019, HUYA's revenue surpassed DouYu's completely, firmly holding the top spot in the game streaming industry.

However, HUYA's good performance did not last long. Starting from 2021, HUYA's annual revenue was 11.3514 billion yuan, only a 4.0% increase compared to 2020's 10.9144 billion yuan. Subsequently, starting from 2022, HUYA's revenue began to decline continuously, and its performance was worrying.

Financial data shows that HUYA's total revenue in 2022 and 2023 was 9.22 billion and 6.994 billion yuan respectively, with year-on-year decreases of 18.77% and 24.14%, being in a declining state for two consecutive years, and the revenue scale has long been less than tens of billions If we look at the single-quarter revenue, the situation is even more worrying.

On August 13th, HUYA announced its financial report, showing that the total revenue for the second quarter of 2024 reached 1.54 billion yuan, with a quarter-on-quarter growth. The net profit attributable to HUYA under non-US GAAP was 97 million yuan. At first glance, it seems acceptable.

However, the 15.4 billion yuan revenue for the second quarter of 2024 decreased by 16.1% year-on-year. According to Choice data, from the fourth quarter of 2021 to the second quarter of 2024, HUYA's single-quarter revenue has been in a declining state, continuously decreasing for 11 consecutive quarters. As for net profit, although it was maintained, operating profit still incurred a loss of 26.04 million yuan, relying solely on interest income to achieve a turnaround to a net profit attributable to the mother.

The downward trend in revenue is unstoppable for various reasons.

Firstly, with increased regulation and the peak of user dividends, the internet has already transitioned from an incremental era to a stock era.

In 2021, the gaming industry faced stricter regulations. With the suspension of game approvals in July, upstream game approvals were restricted, reducing the probability of hit games and causing the industry chain to enter a cold winter. As a leader in the game live streaming industry, HUYA Live was the first to be affected.

The latest financial report data shows that in Q2 of 2024, HUYA Live's mobile MAU (monthly active users) increased to 83.5 million, with slight year-on-year and quarter-on-quarter increases. However, compared to 85.5 million in Q4 of 2023, there was a decrease of 2 million. At the same time, in Q2 of 2024, HUYA had 4.5 million paying users, an increase of 100,000 compared to the first quarter of 2024, but a decrease of 800,000 compared to the first quarter of 2023.

Obviously, compared to the past, both the monthly active users and paying users of HUYA are in a declining state.

Secondly, the loss of top anchors also troubles HUYA.

According to the Xiaohulu Data Research Institute's "2021 Game Live Streaming Industry Insight Report," in terms of the number of game anchors, HUYA has decreased from 3.016 million to 2.348 million, a 22% decrease. Among them are many former top anchors of HUYA. In July last year, the veteran League of Legends anchor "Sao Nan" ended his live streaming career on HUYA and started live streaming on Douyin in February this year; in December of the same year, the former anchor of HUYA and the top player of King of Glory, Zhang Daxian, left HUYA and made his live streaming debut on Douyin.

HUYA, which once fought to the death with Douyu in the "battle for anchors," never dreamed that one day it would have to seek refuge with its old rival and compete for resources from emerging platforms such as Douyin, Kuaishou, and Bilibili.

In addition, game live streaming platforms face fierce competition from other entertainment platforms.

As mentioned above, Douyin, Kuaishou, Bilibili, and other platforms have started to compete for users of vertical live streaming platforms like HUYA and Douyu by leveraging their stable traffic pools.

According to third-party platform Guohai Securities' estimates, in 2023, Douyin had a daily active user base of 760 million, while WeChat's video account had a daily active user base of 450 million. Kuaishou's financial report shows that its daily active user base in 2023 was 380 million Looking at HUYA, the number of monthly active users is now less than 100 million. In this situation, the inevitable loss of influencers will only worsen the situation in the long run.

However, faced with various unfavorable factors, HUYA did not sit idly by. Instead, in August last year, they actively promoted a strategic transformation, proposing a "three-year plan". Now, exactly one year has passed.

II. Stepping out of the comfort zone, a three-year period of tempering

In August 2023, HUYA began actively promoting a strategic transformation and proposed a "three-year plan", with the main goal of transforming the business roadmap by providing more game-related services such as game distribution, in-game item sales, and game advertising.

In terms of specific actions, in recent years, HUYA has increased its investment in content diversification, product technology upgrades, and game-related services.

For example, in the second quarter of this year, HUYA hosted the premium event "League of Legends Legendary Cup". This event collaborated with the official "League of Legends" game and innovated boldly in terms of format and schedule. The event not only brought together former professional star players, current top players, and high-ranking amateur players, but also set new viewership records for HUYA's self-produced content, with viewership metrics even rivaling top-tier licensed professional events on the platform.

By continuously enriching content presentation and enhancing user experience to consolidate the game live streaming business, HUYA has gradually regained user attention. The high level of online discussion and sold-out offline event tickets for this event also demonstrate the IP value of the platform's self-produced events.

In terms of product upgrades, in February of this year, HUYA's live streaming APP launched a new V12.0 version, which upgraded and optimized functions such as esports news, community content, and game services, and introduced multiple innovative interactive features.

In the "League of Legends Legendary Cup" event, in addition to unique features such as dedicated discussion areas and rating cards, HUYA also specially created a voice subtitle live room for this event, where player voice communications can be instantly converted into text and cleverly integrated into the live broadcast, providing viewers with an immersive viewing experience.

At the same time, HUYA upgraded the "Game Center" section, developed integrated prop stores, optimized account binding with related games, and has begun collaborating with multiple major games to provide distribution and promotion services on the HUYA platform, as well as game item sales services.

For example, during the launch of "Star of Dreams", HUYA conducted a series of innovative large-scale promotional activities, including inviting popular influencers to live stream, virtual gift rewards, creating exclusive reservation and download areas for "Star of Dreams", and hosting cross-platform entertainment competitions.

Image Source: HUYA Live

The results show that during the launch of this game, HUYA's channel promotion effectiveness, game reservations, and download volume were all at the industry-leading level, fully demonstrating HUYA's capabilities in game-related services and the potential of this business If building a high-quality and diverse content ecosystem is the effort HUYA is making to enhance platform influence and reputation; product technology upgrades and innovative social experiences are aimed at strengthening user stickiness and loyalty. Strengthening cooperation in game promotion, distribution, and virtual goods sales is HUYA's attempt to step out of its comfort zone and carve out a second growth curve for itself.

These efforts and changes are actually reflected in the financial report.

According to the second quarter financial report of 2024, HUYA's revenue from game-related services, advertising, and other businesses increased by 152.7% year-on-year and 26.6% quarter-on-quarter, reaching 310 million yuan, accounting for over 20% of total revenue. This not only reflects HUYA's strong and high-quality game user base but also validates the development prospects of new business directions.

Currently, HUYA is striving to step out of its comfort zone, prompting the outside world to reexamine itself and the true core and potential of the game live streaming industry.

III. Growing the industry cake to achieve win-win results

With the announcement of this performance, HUYA also announced that the board of directors has approved the distribution of a special cash dividend, with a dividend of $1.08 per ordinary share or American Depositary Share (ADS), totaling an estimated $250 million.

Along with the performance announcement, HUYA also announced the distribution of a special dividend of $250 million, equivalent to $1.08 per ADS. Including the $150 million special dividend distributed in the previous months, HUYA has distributed $400 million in special dividends in the past six months, equivalent to $1.74 per ADS.

At the same time, it stated that out of the $100 million repurchase authorization granted in August 2023, there is still $43.3 million remaining, so the repurchase deadline has been extended to the end of March 2025.

A company that can generate profits and values returning to shareholders naturally receives favor in the secondary market. This is also why HUYA's stock soared on the day of the financial report release.

However, despite HUYA's average revenue performance, why dare to distribute dividends on such a large scale? Is it really because of the confidence in the second growth curve just beginning its transformation into game services?

In fact, there are two reasons why HUYA dares to be "tough": one is that they really have money in the bank, and the other is that there is still money to be made in game live streaming.

Although HUYA has faced difficulties in development in recent years, it is still the leader in the game live streaming platform industry, with a relatively solid financial foundation. According to Tianyancha APP, as of June 30, 2024, HUYA held over 8 billion yuan in cash and cash equivalents, short-term deposits, short-term investments, and long-term deposits, providing the financial backing for this large dividend distribution.

While the domestic game live streaming industry is facing a bottleneck period of peak traffic and slowing growth, reaching the peak of user traffic does not mean the end of commercial potential.

At the "HUYA Live Streaming Star Summit Extraordinary Forum" in 2024, HUYA Chairman Lin Songtao stated that from August 2023 to April 2024, HUYA's overall commercial revenue saw significant growth, with virtual goods sales revenue increasing by 1800 times, game distribution revenue increasing by 12 times, and game advertising revenue increasing by 2 times So we can see that in February this year, the "Esports All-Star Spring Festival Tournament" hosted by Huya platform, jointly organized by Douyu, B station, Kuaishou, with support from Video Number, Tencent Video, Tencent News, Tencent App Store, and Weibo media, officially kicked off.

The major players have started to break the ice, with competitors such as Huya, Douyu, and B station even working together. This means that players in the game live streaming industry are all trying to expand the industry cake to create new space and achieve higher commercial value.

In short, Huya is now embracing change with an open attitude, exploring the potential of live streaming, strengthening the interconnection of the industry chain, aiming to promote win-win situations among anchors, users, game developers, and others, and expanding commercial coverage. The new competitive and cooperative relationships that follow will undoubtedly accelerate the industry's trend towards refinement and ecological development, testing the internal strength of vertical platforms while also bringing new opportunities to the game live streaming industry