We are an established artist management company in China. According to Frost & Sullivan, we ranked first among artist management companies in China with a market share of 1.9% in terms of artist management revenue in 2021. Since our establishment in 2009, we have grown into a culture and entertainment platform comprising three complementary businesses of artist management, music IP production and operation, and pan-entertainment business.
Consumers’ ever-expanding demand for high-quality entertainment has put increased spotlights on established artists, around whom the entertainment industry has been evolving for many years. Today’s established artists no longer limit themselves to one particular genre in which they originally specialize. They perform in various types of entertainment content, including music, variety programs, drama series and movies. Further, through endorsement deals and business promotion activities, established artists help corporate customers raise the market awareness of their products or services. As a professional artist management company, we arrange our managed artists to provide high quality services to our customers, and assist our managed artists to pursue commercial opportunities and develop their career. Our business covers the entire artist management industry value chain, from artist training, artist operation to artist promotion. Our extensive industry expertise has laid the foundation for us to lead China’s artist management market and embrace the opportunities.
Our business model consists of the following three business lines:
‧ Artist management. We have established a full-fledged professional artist management system, which has enabled us to assemble a diverse team of managed artists and a robust pipeline of trainees. As of the Latest Practicable Date, we had 66 managed artists and 71 trainees enrolled in our trainee program. We continuously identify candidates with high artistic potential, and train them into artists with solid performing skills, strong professionalism and sound moral character. Benefiting from their positive public images and popularity, our managed artists have entered into endorsement deals with, and participated in business promotion activities for, a wide selection of well-known domestic and international brands. In addition, our managed artists have played important roles in various popular productions, such as the drama series “Faith Makes Great: Choice (理想照 耀中國之抉擇),” “Luoyang (風起洛陽)” and “Floating Youth (冰球少年),” the movies “The Pioneer (革命者),” “The Founding of An Army (建軍大業)” and “Beginning of the Great Revival (建黨偉業),” and the variety programs “Street Dance of China (這！就是街舞)” and “One More Try (極限青春).” In a highly fragmented artist management market in China, we have the largest market share, in terms of artist management revenue in 2021, of 1.9%, according to Frost & Sullivan.
In the artist management business, we generate revenue primarily from providing services to customers, which include corporate customers, media platforms, content producers and advertising agencies, by arranging our managed artists to (i) participate in commercial activities, such as endorsement deals, business promotion activities and other commercial activities, and (ii) provide entertainment content services such as performing in movies, drama series and variety programs. Our cost of revenue consists primarily of payments to our managed artists and their related entities, who are our major suppliers. Pursuant to the artist management contracts, we share revenue with our managed artists after deducting relevant expenses, according to percentages set out in the artists’ contracts, which vary according to the terms of the contracts.
During the Track Record Period, we entered into cooperation agreements with certain media platforms, which allowed them to manage some of our managed artists for a period typically ranging from 18 to 24 months. We share the revenue generated with these platforms based on agreed percentages. After the conclusion of such arrangement, we will continue to manage the artists pursuant to their artist management contracts.
‧ Music IP production and operation. As many of our managed artists were trained to sing, we started our music IP production and operation business in 2009. We have established an extensive library of music IPs, comprising approximately 1,100 original music recordings and videos we produced for our managed artists and more than 56,000 musical works we licensed from third-party copyright holders as of April 30, 2022. The musical works in our music IP library cover a diverse range of genres, including pop, ballad, electronic dance, hip hop and rock. The digital singles and albums we produced for our managed artists enjoy high popularity. As of April 30, 2022, “No Feelings (無感)” and “My Rules (我的世界守 則),” two digital singles we produced for Mr. Wang Yibo, sold over 17 million and 15 million copies, respectively. “Chapter Z,” a digital album we produced for Mr. Zhu Zhengting, sold approximately two million copies as of the same date. Musical works we produced for our managed artists are distributed on China’s top music streaming platforms, such as NetEase Cloud Music and Tencent Music, as well as international music streaming platforms for listeners to stream or download.
In the music IP production and operation business, we generate revenue primarily from (i) licensing of our original music IPs to music service providers, (ii) sub-licensing of our licensed music IPs to music service providers, and (iii) sales of digital and physical copies of our music IPs. Our customers primarily include major music streaming platforms and telecommunication companies in China. Our cost of revenue consists primarily of production cost of music content, such as licensing fees paid to service providers who provide us with demos, music compositions and lyrics. During the Track Record Period, in addition to our in-house music production team, we engaged third parties to facilitate our music production process from time to time. For more details about the business model of our music IP production and operation, see “Business—Our Business—Music IP Production and Operation.”
‧ Pan-entertainment business. Leveraging our industry experience in the artist management market, we have actively expanded our footprint in the pan-entertainment business, including commercial development of virtual artists, variety program format licensing and sales of artist-related merchandise. We collaborated with a business partner to develop ASOUL, a popular virtual artist group consisting of five digitally created members, which debuted in November 2020.
In the pan-entertainment business, we generate revenue primarily from (i) commercial development of virtual artists, (ii) variety program format licensing and (iii) sales of artist-related merchandise. During the Track Record Period, we collaborated with a business partner in the commercial development of A-SOUL and engaged third parties in the production and sales of artist-related merchandise.
We experienced rapid growth in 2019, 2020 and 2021. Our revenue increased from RMB631.4 million in 2019 to RMB922.0 million in 2020, and further increased to RMB1,290.4 million in 2021, at a CAGR of 43.0% between 2019 and 2021. Our profit for the year increased significantly from RMB119.3 million in 2019 to RMB291.9 million in 2020, and further increased to RMB335.3 million in 2021, at a CAGR of 67.6% between 2019 and 2021. Our revenue increased by 3.4% from RMB341.3 million in the four months ended April 30, 2021 to RMB352.9 million in the four months ended April 30, 2022. Our profit for the period decreased by 27.3% from RMB110.7 million in the four months ended April 30, 2021 to RMB80.5 million in the four months ended April 30, 2022, primarily due to the equity settled share-based payments incurred in the four months ended April 30, 2022.
Source: Zhengwei Group (02147) Prospectus (IPO Date : 30/12/2022) |