Is Le Sports really profitable next year?

After becoming the myth of China's GEM, Jia Yueting, the founder of LeTV Holdings, is pushing its LeTV Sports to an extreme point. Last week, this sports video company, which had attracted many heavyweights such as former CCTV sports Ma Guoli and Liu Jianhong, joined the movement.

On April 12th, LeTV Sports officially announced that it had completed round 8 billion financing in B round. The round of financing was led by HNA Capital. The investor included more than 20 institutions and more than 10 individual individual investors such as Sun Honglei, Liu Tao, Chen Kun, Huo Siyan and Zhou Xun. After the B round of financing, LeTV’s sports valuation was as high as 21.5 billion, setting a new record for financing in the sports industry.

On April 14th, LeTV opened the “414 Ecological Day” and urged sales. According to the data obtained from the interface news, LeTV 414 Ecological Festival achieved a total of RMB 2.02 billion in member income on that day, among which LeTV Super Films and TVs accounted for the majority of sales, reaching 1.69 billion, while LeTV Sports' member sales reached 330 million.

LeTV's limelight undoubtedly grabbed another company at the same door. In the same week last week, LeTV also announced that the brand name of its super car was formally named "LeSee". The LeTV Super car has been talked about by Jia Yueting for a long time and has never expected before.

In fact, starting with LeTV’s launch of Super TV, the company told investors about one and another attractive capital story. LeTV's borderless and LeTV's connected traffic intelligence are all continuations of the story. Now, this story turns to LeTV Sports.

Leshi Sports was established in March 2014 with a registered capital of 10 million yuan. The first A round of financing was conducted in March 2015, with a valuation of 2 billion and at the same time increased the registered capital to 296 million. In the following year, A+ round of financing and B round of financing were conducted, and the final valuation was fixed at 21.5 billion yuan. Shareholders of the company, in addition to the original shareholder LeTV, A-round and A+ round financing Beijing Pusi (Wanda's) and Shanghai Yunfeng (Ali's) have also participated. According to the data obtained from the interface news, as of November 2015, LeTV Sports had total assets of 5.2 billion yuan, and the current operating income was 291 million, but the loss range also exceeded 500 million.

Even so, LeTV Sports still advertises itself as the platform with the world's most abundant event copyright resources: the core user groups that have been accumulated in the LeSco ecosystem, the copyrights of continuously purchased sports events, and the “China Sports” that are getting lower and lower into LeTV Sports. The management team of Dream Team has made Letv Sports a leader in the industry.

According to the description of the LeTV Sports Fundraising Statement obtained from the interface news, after the completion of the financing, LeTV Sports will deploy its force in the fields of copyright content, event operations, smart hardware and internet applications, and further acquire event resources and develop hardware, and strive to In 2017, it will turn a profit, and it also promises investors to complete the IPO application materials by the end of 2018.
The internet sports company founded in 2014 is telling its investors that after we burn money for two years, we will make money and we may make a profit.

This time, the dream will shine into the reality of Le Sports?

1. The main source of income for LeTV Sports and spending interface news exclusively understood that the main income source of LeTV Sports is divided into two modules: copyright content and event management, accounting for about half of the total. Among them, the revenue from advertising of copyrighted content accounted for about 43% of the revenue, the revenue from competition operations accounted for about 35%, the revenue from super TV electricity accounted for about 9%, the on-demand and broadcasting fees accounted for about 1%, and other hardware and other revenue accounted for About 12%. In the event of the competition, it mainly includes the tickets and advertising sponsorships brought about by the operation right of the ICC International Champions League, as well as the marathon and other events.

In summary, LeTV relies mainly on three pieces of income, advertising, event management and membership income. According to LeTV’s own estimates, revenue in 2016 will double to reach RMB 2.8 billion based on revenue of RMB 500 million in 2015, and it will reach RMB 3.8 billion by 2017, and it will turn profitability into profit.

Before you can make money, you must first spend money. Let's enjoy sports in this area. According to the statistics on the interface news, LeEco has purchased a total of no less than 18 ball games since 2014, among which the high-profile ones include the exclusive rights of the new media of the Super League, Premier League 2015-2019 (Hong Kong) season’s full media broadcast rights, Wimbledon tennis. The new media exclusive rights for the 2016-2018 season and the Serie A exclusive rights for new media for the 2015-2018 season. It must be admitted that LeTV’s ability to purchase in this industry is still outstanding.

As for the purchase price, you can use expensive words to describe it. Among them, the largest amount and the most influential one were the “Hao Buy” of the new media broadcast rights of the 2.7 billion won. On February 23, 2016, LeTV announced that it had established a comprehensive strategic cooperation relationship with the Chinese Olympics subsidiary, with a royalty of 2.7 billion, becoming the exclusive new media broadcaster of the Chinese Super League for the 2016-2020 season. As for the value of 2.7 billion in the end is still not worth, for the time being not considered, it can be determined that, before the Super League copyright, Le Li went around and bought more than a dozen copyrights, there is no quite core copyright. Compared to Tencent's NBA and PPTV's La Liga, LeTV seemed underpowered.

In the acquisition of copyright, it needs to be clear that most of the purchases are exclusive copyrights of new media, and only the Women's Football Super League, Premier League 2016-2019 Hong Kong broadcasts and AFC’s leagues are all media rights.

The so-called all-media copyright includes broadcast distribution rights such as television broadcast and media broadcast. However, due to the rapid entry of capital, the price of broadcast rights has risen. For example, after the "China Football Reform Overall Plan" was published in March 2015, the Chinese Football Association launched a competition for copyright bidding, and 14 media participated in the bidding, including Tencent, NetEase, China Vision Media (CCTV), LeTV and Xinying Sports, with Premier League broadcast rights, and Infront of Wang Jianlin Holdings. Finally in this purely market-based bidding, CCTV bids lower than its competitors were squeezed out. If you get the full media broadcast rights, you will resell the TV broadcast rights to the TV station.

According to the estimated income of 2.8 billion in 2016, and the proportion of broadcast income and paid-on-demand revenue totaling 0.8% in 2016, LeTV Sports has a total revenue of 22 million. In other words, LeTV’s abacus is to receive 2,200 broadcasting rights revenues from TV stations and so on through the purchase of all-media copyrights.

And those non-full-media broadcast rights, such as the 2.7 billion yuan of Super League spending, may only have advertising and membership fees.

2. The income of the ecosystem is mainly the advertising LeTV ecosystem has been the focus of its various business propaganda. The core is to use Levision's hardware as the channel entrance, supplemented by the powerful endogenous and outsourced film and television resources of Levision, forming a closed loop of the terminal and the content, thereby allowing users to generate a deep viscous consumption habit and transfer them to mobile phones and automobiles. And other hardware.

As can be seen from Table 1 above, no matter how successful the eco-story story is, the 43% of LeTV’s income to make money is still advertising. The so-called ecosystem, which was repeatedly emphasized before, is just a good name for selling advertisements. But can you really earn it by selling ads?

Tencent’s practice of buying and broadcasting rights from the hands of the NBA for a total of RMB 3.1 billion over five years is regarded as an example of LeTV’s purchase of SuperCopyright. However, we must know that Tencent Sports’ purchase of the 3.1 billion U.S. dollars in the NBA is still barely maintaining the balance of profits and losses. According to an industry insider who is close to Tencent, Tencent Sports’ advertising revenue can barely cover copyright fees. "According to Tencent's first-quarter advertising revenue, we can barely cover the cost. However, the practice of not making money certainly cannot be maintained, so now Tencent is also trying its best to push membership fee income. But because Tencent Sports has not yet become independent, the scope of action Certainly better than LeTV."

The reason why Tencent’s NBA ads can be reluctant to maintain balance has its own reasons. “Because the NBA is an exotic event, CCTV and local stations broadcast very limited, and the broadcast time is mainly from the morning to the midday. Since it is a working day, there is a great demand for the PC side and the APP side view.” When it comes to the Super League The problem of advertising revenue is that he also predicts that the situation may not be so optimistic. “The Super League is a very regional event. For example, Shanghai fans only watch the Shanghai team and these local TV stations will turn. Give me on the internet. How many people will look at the Beijing team competition? Natural advertising will not sell much."

Blood stains on the road ahead, Le Sports is still brave. Based on the projected revenue of 2.8 billion in 2016, the amount of advertising by direct investment (direct advertising on LeTV Sports) will need to reach at least 900 million in that year, and it will need to reach 1.2 billion by 2017. In addition to the 300 million yuan of income from advertising and advertising (which was placed on and the parent company is evenly distributed to LeTV Sports), the total number of ads that sold in 2016 was 1.2 billion to reach the first leading indicator of 2017 earnings. But from the perspective of Tencent’s revenue, it seems that it is hopeful.

In addition, 35% of the revenue comes from the ICC International Champions Cup. The event takes place mainly in summer, in the form of invitations to European clubs for commercial competitions. Since the income form is the event ticket income and advertising sponsorship, the final suction ability is still the advertiser. According to speculation, this revenue will reach about 1 billion in revenue in 2016. However, Interfax News learned that the 2015 revenue was far below this figure. The event was held for the first time in 2015 and was held in three sessions, respectively in Guangzhou, Shenzhen and Shanghai. According to official data, Shenzhen played for AC Milan against Inter Milan, attracting 38,497 people in total; Guangzhou played against Inter Milan and attracted 39,896 people; there was no official data on the number of Shanghai players. A total of three box office receipts amounted to 60 million yuan, which is about twice the advertising revenue. Of course, since 2015 was the first year of the event, the preparation was relatively hurried, and the income was basically around 100 million. However, if we want to say that the scale of revenue of 1 billion in 2016, even if given more time to prepare, it will be a very big challenge.

3. The major move of LeTV Sports is that the membership fee is based on the “414 Ecological Day” mentioned in the previous article. It seems that LeTV members received far more income than LeTV Sports Members. But even so, the income from membership fees is always the most important aspect of the LeSports ecosystem.

LeTV Sports has such a strong belief that the realization of traffic flow will be a future trend, mainly drawing lessons from foreign experience. According to ESPN's direct ESPN development path, 60% of ESPN's revenue structure in 2015 comes from limited television subscriptions, with a revenue scale of 6.54 billion yuan; 3.52 billion revenue comes from television advertising, accounting for 32%. The remaining 8% of revenue is digital advertising and magazine advertising. TV subscriptions account for the vast majority of revenue. This is also when LeTV and Tencent believe that the era of paying members will finally come.

But now it may not be.

The interface news simply gives LeTV an account. Leshi Super Sports Members are priced at an annual fee of 590 yuan, a quarterly fee of 159 yuan, and a monthly fee of 59 yuan. According to the average membership fee of 640 yuan/year/person, according to the 2016 revenue forecast of 2.8 billion yuan and the income share of 9%, that is to say, the income from membership fees for Super TV sports is estimated to be around 252 million yuan. By the practice of “Buying Members to Send Hardware” on 414 Ecological Day, LeTV’s member sports non-member sales exceeded 313 million. On the surface, it is estimated to have reached 250 million in revenue.

The key point is that these revenues will be recorded in the LeTV Sports account?

The focus of the Letv Eco Day is not on “sending hardware” but on “buying members”. Even if it is marketing, it will not stop LeTV from earning money. To know that there is no such eco-day "deliver hardware" approach, LeTV (hardware company) has been deep in the loss. Even if the revenue is 2.02 billion yuan, there will not be enough teeth on the hardware company's level, not to mention even sports to LeTV. So the so-called "send hardware" is just a gimmick. More is to bind members. As for Le Sports, it is not profitable. The final accounting treatment will not be known until LeTV’s semiannual report reveals. Therefore, even if the sales target is achieved through the Eco-Day, it will not necessarily be LeSports’ sales revenue in the end, and the ability to realize the content will remain worrying.

LeTV Sports also understands the crux of the matter. When the interface journalist asked LeTV Sports whether or not the user's spending habits would be developed in 2017, it was surprisingly answered: “We believe that the payment habits need to be cultivated and nurtured in China for a certain period of time. As soon as we can do it in one go, we do not think that the 2017 China sports content payment habit can be formed immediately, but we believe that the payment habit must be an important link in the formation of the value chain of the sports industry, and Le Sports is willing to work hard for it.”

After carefully analyzing every income that LeTV Sports had to survive, the result was that no one was determined except to spend money. Yuanpei Investment Research Director Jiang Peiming told the UINews that there is no doubt that LeTV will lose money in 2016, but the situation will depend on this year's situation. “2016 is a major sports year. Major events include the Olympic Games and the European Cup, so 2016 is The key years of accumulating users, whether or not the performance will break out in the future depends on the accumulation of resources this year, and LeSco is developing user habits through ecologically subsidized hardware (hardware low-cost or even free of charge). , but whether 2017 will achieve profitability, but also need to see the growth of advertising and membership fees in 2016."

Of course, if Le Sports is really profitable next year, it will be a very inspiring story.

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