Behind the huge loss of Yuewen group in the first half of the year: goodwill impairment of Xinli media

On August 11, Yuewen group announced its mid-term performance in 2020. The report shows that in the first half of 2020, Yuewen group achieved a total revenue of 3.26 billion yuan, a year-on-year increase of 9.7%, and a gross profit of 1.73 billion yuan, a year-on-year increase of 6.8%. Xinli media’s revenue and operating performance in the first half of 2020 did not meet the expectations. As a result, the company recorded a provision for impairment of goodwill and trademark rights of RMB 4.41 billion, and the net loss of Yuewen group was RMB 3.31 billion. Cheng Wu, vice president of Tencent group and CEO of Yuewen, said: “the first half of 2020 is full of challenges for Yuewen. The sudden outbreak of new crown and the complex and changeable macro environment have a negative impact on our business, and the company has recorded losses for the first time in many years. The disappointing performance also made us aware of the lack of anti risk ability of the company’s underlying business model and the structural problems accumulated for several years. We will face these problems positively and have responded quickly to some emergencies affecting our core business. ” < p > < p > from the perspective of revenue structure, Yuewen group’s revenue comes from two sectors: one is online business, mainly from online paid reading, online advertising and the distribution of third-party online games on the company’s platform; the other is copyright operation, which comes from the production and distribution of TV series, online drama, animation, film, authorized copyright adaptation rights, operation of self-employed online games and sales Income from paper books. < p > < p > among them, the online business is the main source of revenue of Yuewen group, with an income of 2.495 billion yuan in the first half of the year, a year-on-year increase of 50.1%, accounting for 76.5% of the total revenue. < / P > < p > “the growth of online business revenue of Yuewen group is unsustainable.” Some media industry securities analysts, who do not want to be named, said that the growth of the company’s online business segment’s revenue in the first half of the year was mainly due to the increase in the willingness of paying users to pay, while the number of paying users did not increase significantly. “In other words, the revenue growth is more dependent on paying users to pay more every month.” According to the performance report, due to the expansion of distribution channels and the increase of users’ willingness to pay for reading content, in the first half of 2020, the online business income increased by 50.1% to 2.495 billion yuan, the average monthly active users of self owned platform products and self operated channels increased by 7.5% to 233 million, and the average monthly income from each paying user increased by 51.6% to 34.1 yuan. < / P > < p > from the perspective of online reading business, the progress of free reading is not as expected. The overall performance of the free reading app “flying reading” launched last year does not match the leading position of online literature corresponding to reading articles. On the other hand, Xinli media, a wholly-owned subsidiary, once again dragged down the performance of Yuewen group. In the first half of 2020, Li media reported a net loss of RMB 10.73 billion, according to the new financial report. At the same time, the recoverable amount of goodwill and trademark right of Yuewen group on acquisition of Xinli media was lower than its book value, and the provision for impairment of goodwill and trademark right was 4.016 billion yuan and 390 million yuan respectively. From the perspective of business structure, Xinli media is a well-known film and television company in the industry, and has participated in the production of,, and other works. It has a high degree of business overlap with Yuewen group and has a wide range of cooperation space. However, in terms of financial contribution, the situation is not optimistic. At the time of acquisition, Xinli media made performance commitment: the net profit in 2018, 2019 and 2020 will not be less than 500 million yuan, 700 million yuan and 900 million yuan. After the acquisition, Xinli media’s performance commitment has not been fulfilled once. According to the financial report of Yuewen group, in 2018, Xinli media completed a performance of 324 million yuan, only 64.8% of the promised performance of 500 million yuan. In 2019, Xinli media achieved a performance of 549 million yuan, accounting for 78.43% of the promised performance. < p > < p > according to Yuewen group, the film and television industry is undergoing deep adjustment under the influence of the macro environment, with the number of recording, startup and online projects declining, and the profits of some individual projects are lower than expected. In addition, the novel coronavirus pneumonia epidemic has a sustained impact on the macro-economy. The film and television industry has been greatly affected, and the delay of film production and the time for release are still to be determined. In the face of these pressures, the overall cycle of Xinli media’s film and television project has become longer, and the uncertainty has increased. < p > < p > in fact, in the past six months, Yuewen group has been in constant turmoil. On April 27, Wu Wenhui, former co chief executive officer of Yuewen group, Liang Xiaodong, President shangxuesong, and Senior Vice President Lin Tingfeng retired from their current management positions. Wu Wenhui was transferred to a non-executive director and vice chairman of the board of directors, while Liang Xiaodong and other senior executives served as group consultants. At the same time, the board of directors appointed the current Vice President of Tencent group and the head of Tencent film industry Cheng Wu, executive officer, was appointed as CEO and executive director of Yuewen group, and Hou Xiaonan, vice president of Tencent platform and content business group, served as president and executive director of Yuewen group. < p > < p > then, the old contract of Yuewen group in 2019 was exposed, causing public concern. Some online writers claim that the old contract has “overlord clause”, and some even claim to launch a “55 break change Festival” protest. < / P > < p > “after the new management actively communicated and adjusted, the” contract change “storm ended with the launch of” single optional new contract “by Yuewen group The above analysts told reporters that for the new management, Yuewen group is still faced with many thorny problems. The author’s heart is floating below the waist, and the outside free reading is threatening. Xinli media has not helped but dragged the company into the quagmire. How to operate next will test the management level. In the face of internal and external development opportunities and challenges, Yuewen group said that it would adopt the same critical thinking and positive response attitude to solve the company’s problems in other business sectors. First of all, we will strengthen the core business, and promote the faster growth of IP by enhancing the IP incubation ability, consolidating the business foundation, and accelerating cross business development. Secondly, it will improve the social and community functions of the platform, and establish stronger links between reading articles and Tencent’s product matrix. Finally, we will strengthen the IP centered ecosystem, build extensive business partnerships and networks in various forms of entertainment, including comics, animation, TV series, movies and games, with the help of high-quality IP of the company, and seize the new opportunities brought about by innovative technologies, subdivision business models and partner networks. Skip to content