DONEWS reported on January 31 that on January 26, the trading card company Card Game *** hereinafter referred to as Card Game) submitted a prospectus to the Hong Kong Stock Exchange to be listed on the main board, with Morgan Stanley, CICC and JPMorgan Chase as joint sponsors.
According to Sina Technology, founded in 2011, the card game officially launched the first collectible card game series of hero duel cards in 2019, and it quickly became popular among primary and secondary school students as soon as it was launched. According to the prospectus, the company sold 232.9 billion boxes of trading cards, and the business alone achieved revenue of 393 billion yuan. In terms of total merchandise transactions, Card Games directly jumped to the industry leader during the reporting period, with a market share of 71%.
It was also around this year that Sequoia China and Tencent sold at 76The subscription cost of $5 is about 1US$500,000,000 and US$30 million, each holding shares after the completion of the transaction33%。
Based on this simple calculation, the post-investment valuation of Card Game is close to 900 million US dollars, equivalent to 60 million yuan5.3 billion yuan. On the 2023 Hurun Global Unicorn List, the latest valuation of Card Games is about 6.9 billion yuan, which is only one step away from becoming one unicorn.
However, there are hidden worries behind the triumphant progress. On the one hand, the performance of card games is highly dependent on the trading card business, and sales in 2023 have already shown a decline. On the other hand, negative problems such as well-known IP infringement, inducing minors to consume, and "blind box" addiction are frequent, and it remains to be seen whether the business model can be sustained.
The sharp decline in sales dragged down both profits
Trading card games are games in which you can strategically construct combinations and interact with others based on the collection of physical cards with a specific theme.
According to the prospectus, the card game designs card products into different rare categories, characters and backgrounds, and sells them randomly in the form of blind boxes. At the same time, the turn-based card game designed by the company requires each player to have at least 40 cards with the same IP theme in order to play. This means that players will have to buy and exchange all the character cards or draw high rarity cards in order to collect them all.
Little Dinosaur**, co-founded by Sequoia China and VIPKID, has also been researched to prove that trading card games are a category with a high repurchase rate. If there are many card versions for collection purposes, it is difficult to collect them all in random packaging; If it is for the purpose of "fighting" in the game, there will be an infinite number of ways to build cards, and as long as there is an updated version, there will be cards with stronger combat effectiveness. The act of substitution promotes the formation of a community, attracts more children to join the game, and cards naturally become a social currency.
Judging from the financial data, from 2021 to 2022, the sales of trading cards of card games are 129 billion boxes, 232.9 billion boxes, a year-on-year growth rate of 8054%；Achieve segmented revenue216.9 billion yuan, 393 billion yuan, contributing to the total revenue of the current period1%, with a net cash inflow from operating activities of 173.2 billion yuan.
As a well-deserved "cash cow", the actual cost of sales of trading cards is not high.
In the first three quarters of 2021-2023, the cost of sales of card games was 96.3 billion yuan, 128.9 billion yuan, 63.7 billion yuan, and the direct material cost accounts for between 60% and 70%. If combined with the sales volume of the products in each period, the cost of sales per box of cards is 074 yuan, 055 yuan, 059 yuan, and the direct material cost is about 054 yuan, 040 yuan, 036 yuan. If you roughly calculate with a box of 6 cards, the average cost of making each card is less than a dime.
In other words, the gross profit margin of the card business is very attractive. During the reporting period, the gross profit margin of card game trading cards was .2%, showing an upward trend, driving the company's overall gross profit margin from 58 in 20211% to 67 in the first three quarters of 20233%。
However, relying too much on a single business, card games have also firmly hung their profitability on "one tree".
According to the prospectus, in the first three quarters of 2023, the company's trading card sales will be about 107.5 billion boxes, up from 20.5 billion in the same period in 20228.7 billion boxes are almost "cut in half". The decline in sales volume led to a significant contraction in total revenue and adjusted net profit, which were recorded at 195.2 billion yuan, 57.8 billion yuan, a year-on-year decrease12%。
The main force "Ultraman" was involved in the infringement turmoil
If trading cards are the pillar business of card games, then the "Ultraman" IP is the main force of trading cards.
According to the prospectus, from 2018 to September 30, 2023, from the acquisition of the "Ultraman" IP authorization, the card game has launched a total of 274 trading card series and 28 stationery series, which is about 3 of the same index of the second largest IP "Ye Luoli".01 times, 14 times. During the first three quarters of 2021-2023, the company has launched a total of 421 trading card series and 58 stationery series, with "Ultraman" IP accounting for respectively28%。
Although it has the authorized "Ultraman" IP, the card game cannot completely sit back and relax.
In February 2023, Zhuhai Qiao Tianzun Cultural Development *** hereinafter referred to as Qi Ao Tianzun) issued a statement on social platforms stating that Zhejiang Card Game Animation***Zhejiang Card Game Culture Communication*** hereinafter referred to as Zhejiang Card Game) produced and sold the "Ultraman" series of cards, using the characters of "Ultraman Father", "Ultraman Jack", "Ultraman Ace", and "Ultraman Tairo".
The Intermediate People's Court of Zhuhai City, Guangdong Province, made a final judgment against Zhejiang Kayou, confirming that it infringed the copyright, reproduction right and distribution right of Qiao Tianzun. The company was required to immediately suspend the production of the copyright-infringing card products and destroy the work-in-progress, inventory and molds on the date of the judgment.
However, as far as the official *** of the card game on the integrated e-commerce platform is concerned, the "Ultraman" cards and card albums are still **, with sales of up to 100,000+, and the reviews often exceed one million, and it seems that they have not been affected.
Based on a number of judgments, Zhejiang Kayou's "Ultraman" IP licensor is Shanghai Xinchuanghua Cultural Development*** hereinafter referred to as "Xinchuanghua"), and from 2004 to 2008, it successively obtained the copyright of the "Ultraman" series of works in Chinese mainland from animation production Fang Yuangu Production Co., Ltd. (hereinafter referred to as Yuangu Company).
In 1976, Tsuburaya signed a contract with Thai Simpot Sandenchai to transfer the global copyrights of nine works in the "Ultraman" series outside of Japan for an indefinite period of time. In 2008, Simport transferred the rights under the 1976 contract to Umehiko Co., Ltd. (hereinafter referred to as "UM").
In 2011, UM authorized TIGA ENTERTAINMENT (Hong Kong)****, and then in 2016, TAGA ENTERTAINMENT granted the exclusive right to use and license the "Ultraman" trademark and copyright to Qiao Tianzun.
According to public information, Simpot has also authorized the "Ultraman" IP to Guangzhou Ruishi Culture Communication through its Caiyao Company. In other words, Xinchuanghua, Qiao Tianzun and Ruishi Culture all have a legal and complete copyright authorization chain, and the exclusive copyright "Rashomon" has caused the three companies to be frequently entangled in infringement disputes, and also planted a "time bomb" for the long-term development of card games.
In addition, the blind box sales mechanism of card games has also been criticized. Since the role, level, and rarity of each box of cards are unknown, minors who are not yet mentally mature are easy to become addicted. On the black cat complaint platform, many consumers reported that children stole their parents' mobile phones to draw cards for consumption without permission. "Three children spent nearly 800 yuan to buy Ultraman cards", "elementary school students stole money to buy Ultraman cards and were sent to the police station" and other negative news are endless.
In June 2023, the State Administration for Market Regulation issued the Guidelines for the Regulation of Blind Box Business Activities (for Trial Implementation), which stipulates that blind box operators are not allowed to sell blind boxes to minors under the age of 8. The sale of blind box goods to minors 8 years of age or older shall confirm that the consent of the relevant guardian has been obtained in accordance with law. Encourage relevant local departments to introduce protective measures to specifically regulate the sales model of blind boxes around primary school campuses, including distance and content.
Card Game also admitted in the prospectus that with the strengthening of the regulator's review of blind box business activities, the company's compliance costs and regulatory approvals will face challenges, and the scope and content of sales and marketing activities will also be limited, and strong supervision may have a material adverse impact on Card Game's future business, financial and operating performance.