17● Game streamer DouYu profits big from gifts
to its stars. But can that business model last?Mining Gold
From China’s
Fanboys
Cameras flashed and fans screamed as Liu Mou
stepped into the spotlight on a sweltering sum-
mer evening. In the industrial heartland city of
Wuhan, tens of thousands of spectators packed
the waterside strip that bore witness to Chairman
Mao Zedong’s iconic swims across the Yangtze
River half a century ago. In unison, the mob roared
“hubby”—the moniker jokingly bestowed on many
male celebrities in China—and Liu, 28, waved back
with a smirk. The crowd was mostly men.
Their adulation was a testament to Liu’s status
as one of the brightest stars among China’s gamers.
He and his fans were on the waterfront for a car-
nival hosted by one of the nation’s largest video
game streaming companies, DouYu International
Holdings Ltd. Liu, its biggest celebrity, spends atTHE BOTTOM LINE France has strong restrictions on its
broadcasters. Now, as U.S. web giants steal TV advertising,
President Macron is ready to scrap some of the constraints.THE BOTTOM LINE Amazon’s Twitch video game streaming
service is barred in China. That’s left local platforms to develop the
market, often bypassing the advertising-driven model in the U.S.Macron first announced his intentions to shake
up the TV industry in 2017, his first year in office,
but the yellow vest social and economic movement,
which began last fall, pushed parliamentary consid-
eration of the reforms to the back burner.
Because his party dominates Parliament, strong
opposition is unlikely. But lawmakers may have to
take into account opposition from regional news-
papers and radio stations, which fear allowing
national broadcasters to do targeted advertising
would eat into their business. “We are opposed to
this deregulation,” says Bruno Hocquart de Turtot,
executive director for Alliance de la Presse d’Infor-
mation Générale, the union representing national
and regional press. “This liberalization is meant to
be helping free-to-air broadcasters against U.S. web
giants, but it can’t be done against the interest of
the press.”�Angelina Rascouet, with Helene Fouquet◼ BUSINESS Bloomberg Businessweek August 19, 2019least four hours a day playingLeague of Legends
and other popular titles, streamed to his more than
10 million subscribers and followers.
DouYu is counting on stars like Liu to generate
revenue via virtual gifts given by fans, potentially
showing tech giants such as Facebook Inc. and
Amazon.com Inc. a new way to monetize game
streaming beyond ads and sponsorships. Liu’s fans
lavish him with virtual fish balls and rockets, rang-
ing from a few pennies to $300 per item. He and
DouYu split the money in half. Analysts predict the
industry could grow to be a $3.5 billion business
in China in 2020, from $2 billion in 2018. “I choose
DouYu because the platform has accumulated a
huge base of League of Legends fans,” says Liu, bet-
ter known as PDD. “So far our success is built upon
each other, and we complement each other.”
Twitch, acquired by Amazon for almost $1 billion
in 2014, is the No. 1 U.S. game streaming platform.
Its absence in China—the government has banned
it—has set local startups vying for dominance there.
Liu plays exclusively on DouYu, which went pub-
lic in New York in July; 91% of the company’s reve-
nue came from virtual gifts in the quarter ended in
March. He alone may have contributed as much as
3% of DouYu’s revenue in the second quarter, says
Aequitas Research’s Ke Yan, who analyzed statis-
tics from xiaohulu.com, which monitors virtual gift
spending across Chinese streaming services.
By putting in 15-hour days training as a teen, Liu
became captain of Invictus Gaming, one of China’s
top e-sports clubs—it won the country its first League
of Legends world championship last year. After retir-
ing in 2014, Liu began to stream his gaming ses-
sions full time. Now he lives in a 3,200-square-foot
Shanghai apartment, where he broadcasts from.
Platforms such as DouYu pay Liu and other top
gamers at least $4 million a year to retain them
exclusively, he says. That’s in addition to his share
of the money from followers’ virtual gifts.
The high cost of marketing and retaining per-
formers has caused investors to question the busi-
ness model of China’s game streamers. Shares
of DouYu archrival Huya—which has fewer stars
but higher profit margins—trade at only half their
2018 peak. DouYu founder Chen Shaojie, 35, says
its advantage over Huya is a bigger user base and
wider game offerings, which in time will help it gen-
erate more revenue. “Top streamers are extremely
valuable for us,” says Chen. “After we’re public
[longer], we’ll become more experienced with
monetization.” �Zheping Huang2b10● Annual losses, in yuan
◼DouYu
◼ Huya2016 2017 2018ILLUSTRATION BY GWENDAL LE BEC. *PROJECTED. DATA: ZENITH; COMPILED BY BLOOMBERG