How can you become a star without money?

Chapter 138 One fish, multiple ways to eat it, even a hundred ways?
Wang Yao certainly doesn't own copyrights worth 10 billion.

But he was actually able to estimate the value at 10 billion.

After all, valuation is essentially borrowing money from the future.

Wang Yao currently owns 14 popular Korean dramas and 16 popular domestic dramas such as "The Myth", "The Beauty", "Seven Fairies", "Lotus Lantern", and "Magic Phone". The total price at the time of acquisition exceeded 3000 million yuan, which was borrowed from Ren Quan.

In addition, there are four unreleased projects awaiting filming: "Palace," "Empresses in the Palace," "Temptation," and "Playing with People," as well as variety shows/movies in preparation such as "Fairy Robe" and "Lost 3," and some other "volume-boosting dramas" that Dongfang Xin is representing.

All in all, there are nearly 200 works, including more than 1 episodes of TV dramas (some of which are family soap operas with hundreds of episodes each).

Given that the average copyright price in China is around 40 yuan (100 million yuan for a blockbuster and tens of thousands for a low-volume drama), the fact that this copyright was presented to Gong Yu really startled him.

Even at the average market price, this is worth almost 100 million.

How dare Wang Yao bet so heavily on copyright?
It's worth noting that Le's Entertainment currently boasts the largest stockpile of film and television copyrights, reportedly possessing nearly 2000 titles, including over 3 episodes of television dramas. This is because they began acquiring copyrights in 07, allowing them to accumulate a significant amount of content at bargain prices in the early days.

However, in their early days, they focused on quantity rather than quality. After all, the price of a single hit drama could buy ten times more dramas aimed at mass production (early on average, 1.5 to 4 yuan per drama). Therefore, only about 5% to 10% of the copyrights in Le's copyright library were of high quality.

Because the copyright trend seems to be picking up this year, Le's has started contacting major TV stations and film and television production companies in the industry, such as Huayi and Hairun, which seem to be preparing to spend a lot of money to acquire high-quality copyrights this year.

Moreover, Wang Yao doesn't even run a video platform, yet he dares to spend so much money hoarding copyrights, which shows his confidence in the market.

Gong Yu felt comforted for a moment, but remained clear-headed.

"It seems Mr. Wang's cash flow is very healthy. He's betting so much on copyrights, and even overseas ones? I heard they're not cheap." Gong Yu composed himself, his gaze sweeping over the project list.

This kid has also acquired many of the copyrights he had his eye on.

Gong Yu originally thought the copyright dispute would last at least a year or two, giving him time to prepare. After all, no one knew when the best time to enter the game would be before the higher-ups gave a clear direction.

Everyone knows that the copyright era is inevitable, but when and how it will come is not up to them. Spending hundreds of millions to hoard copyrights in cash is no different from putting money in a dead-end bank account. Although there is interest every year, the rate of return is completely different from buying flexible and controllable financial products.

For a startup like theirs, a budget in the hundreds of millions is enough to determine the company's future, so neither he nor the investors would put a large amount of working capital into this area in the early stages.

But the feeling of having something you like snatched up by someone else is indeed a bit unpleasant.

Tsk, as expected, first come, first served.

"These are the ones that have already been purchased, and some are still under negotiation. Mr. Gong should know that we have a cross-shareholding with Chengtian, and their copyright library is given priority access to us. Huayi and Bona are also our strategic partners, and they also give us priority in purchasing movie web versions."
"And for variety shows on Mango TV and Shanghai TV, I've already been in talks about purchasing the online versions of 'Huanben' and 'Da Meiren,' but the amount is too large; the other party is asking for over 1 million yuan, and we're still negotiating." Wang Yao's smile was very gentle.

But in Gong Yu's eyes, it looked particularly ferocious.

Are you trying to take all the high-quality domestic copyrights in one fell swoop?!

They didn't even leave us a drop of soup?
And where did you get so much money? Is the company shut down?
Gong Yu was terrified. If Wang Yao really acquired all these top-tier copyrights, it would be tantamount to indirectly gaining pricing power in the future copyright market.

Wang Yao can even determine the rise and fall of video platforms; whoever he partners with will have priority in gaining a stable and high-quality user base.

It seems they've come with ill intentions.

"Mr. Wang's move is quite extravagant; it's nothing short of a high-stakes gamble, and his courage is truly admirable," Gong Yu complimented.

“It’s not blind gambling. In fact, a few months ago I started to imitate YouTube’s partnership model and made a few original programs on You/Dou. Currently, the average number of views per episode has stabilized at over 500,000. Most importantly, we have found a monetization route that combines with e-commerce.” Wang Yao handed over the data analysis data of “Campus Belle” and a tablet computer.

Gong Yu was the first to get the iPad, and clicked on the video. "Oh? This thing is already on the market?"

“There probably aren’t many left in China. I had someone bring a batch back from abroad. If you like it, Mr. Gong can take it and play with it. It’s very convenient for watching videos, but there’s no compatible mobile app,” Wang Yao said with a smile.

"Mr. Wang also has some knowledge of application software?" Gong Yu's expression remained unchanged, but his heartbeat involuntarily quickened a few beats.

Kiwi's mobile platform is a strategic secret, designed to bet on the explosive growth of mobile devices and overtake other video platforms.

“Yes, I’ve always felt that mobile is the trend. Most of the platform projects I’m currently working on are developing mobile versions. I think iQiyi is doing that too,” Wang Yao asked with a smile.

"We are indeed very optimistic about the development of mobile devices, but after all, it's still the PC era." Gong Yu did not answer directly, but instead looked at the videos and data of "Campus Belle" carefully.

The more I looked, the more shocking it became.

Domestic video platforms are the most expensive in the entire internet industry because of the heavy bandwidth costs. Even for a company as large as Youku, the fixed costs of hardware bandwidth and labor accounted for more than 70% of its annual revenue last year.

Youku suffered a net loss of nearly 2 million yuan last year. Although it gained a stable user base of tens of millions, it only bought a ticket to the IPO. The reason why they are willing to sacrifice shareholder interests in order to raise funds and go public is that they are eager to go public.

Because no one can withstand such losses, they can only take a desperate gamble to see how the capital market views Huaxia Video Platform. Meanwhile, other domestic platforms are waiting for the chain reaction after Youku's listing before considering which path to take.

The root of everyone's confusion and lack of confidence lies in the uncertainty about the 'monetization path'.

Wang Yao's "traffic commission" model, although it is also a type of advertising, can more directly affect advertisers' investment because most advertisements are delivered on a CPM (cost per mille) basis and do not have this direct "monetization delivery" model.

The main reason why advertisers are unwilling to continue to increase their investment is that consumers are becoming more and more resistant to advertising, and conversion data is getting worse and worse. Advertisers are not stupid; they will know how effective their campaigns are once they do the year-end accounting.

But Wang Yao's model, with the help of e-commerce, can show almost real-time conversion results, which is equivalent to a disguised version of Taobao's direct traffic service.
More importantly, if the advertising video is well integrated, the conversion effect will be more intuitive. Wang Yao gave the data that one episode had more than 100 million views, which directly boosted the sales of a piece of jewelry to more than 10 yuan. Through the "Campus Belle" model, Gong Yu's infinite imagination was stimulated.

"Mr. Gong should be able to see that the conversion rate of this kind of soft product placement in videos is very obvious. Moreover, this is a product placement in the clothing and accessories category. A 3-minute video can incorporate at least 10 products, and guide viewers to the online store through the comments section."
"But in the future, we can also integrate advertisements for cars, 3C products, videos, and even real estate developments. I think Mr. Gong understands what I mean." Wang Yao smiled amiably.

"President Wang has truly pioneered a new model in the field of video product placement," Gong Yu said, his eyes narrowing unconsciously.

Last year, the entire online video industry suffered a total loss of over 10 billion yuan, mainly due to insufficient advertising monetization capabilities, which could not cover the fixed costs of bandwidth. Moreover, this year, copyright prices have soared several times over, causing content costs for various platforms to surge again.

Moreover, the more users a platform has, the greater the losses become. The only way to break this vicious cycle is to address the imbalance between investment and return caused by the single monetization path.

The valuation of video platforms is based on the industry ARPU, which is the revenue per user. The domestic ARPU is 0.2 yuan/user/month, while the overseas ARPU is 0.2 US dollars/user/month, a difference of at least 7 times.

Moreover, due to issues with consumption patterns and levels in China, consumers' consumption habits are relatively homogeneous.

Chinese users are the most tolerant of ads, preferring to waste 120 seconds watching ads rather than paying for a membership. This has made it difficult to promote video platform memberships in the early stages and has led to domestic platforms currently relying solely on paid advertising as a monetization path.

In China, the dominant player in this field is Youku, which holds nearly 40% of the advertising market share. However, it still operates at a loss. This is because not only Youku, but its competitor YouTube also lost nearly $500 million last year. The free platform model is destined to continue losing money until bandwidth costs are resolved. Gong Yu's Qiyiguo is actually targeting Netflix, aiming to attract paid subscribers with licensed and original content. Netflix surpassed 10 million subscribers last year, generating over $16 billion in revenue, with an average ARPU of $8 per user per month.

For domestic platforms, this is a track that they know is impossible, but they still want people to try.

However, the new model brought by Wang Yao seems to provide some realistic basis for Gong Yu's delusions.

Why must viewers pay?
Advertisers can also pay for it.

Taobao Express is essentially a platform that generates revenue by charging advertisers and members, which then drives the entire platform to operate on its own.

Kiwi is backed by Baidu, which means it has an endless supply of traffic resources, and it is far more professional than Taobao in the field of search ranking.

Hmm, it feels like this could work.

"It's not exactly a new model. It was inspired by Taobao Alliance's ideas. Discounts can stimulate consumption, but stimulating consumption with content is even more valuable. It's just a matter of the cost of content."
"My idea is to attract the attention of general consumers through soft product placement on video platforms, then import them into professional UGC promotion platforms like Mulan Street, converting general traffic into targeted traffic, and finally redirecting them back to e-commerce platforms to complete the transaction. I call this the interest-based e-commerce model," Wang Yao explained.

"Interest-based e-commerce, a good name." Gong Yu's tone turned serious. "Use the platform's general traffic to generate interest among potential consumers, and then redirect them to a professional sales platform. This way, users won't feel like they've seen an ad."

On the contrary, it feels like being shared with a product you need, and even receiving explanations from professionals—that's roughly the logic, right?

“I call it ‘planting the seed.’ Stimulating consumption is like planting crops. You have to plant seeds in the minds of potential consumers and then repeatedly stimulate and influence them through various channels before you can harvest them in the future,” Wang Yao said with a smile.

"Please, Mr. Wang, be sure to cooperate with Kiwi Fruit. We are willing to serve as a testing ground for this new model," Gong Yu said in a deep voice.

"President Gong is the first video platform I visited because I value iQiyi as a new platform with an undefined profit model, which may allow for better cooperation. Moreover, being backed by Baidu, we can accurately target users through search rankings," Wang Yao said with a smile.

“We also want Mr. Wang’s copyright, but the price is unacceptable. Since Mr. Wang is here, there must be other cooperation models.” Gong Yu is an old businessman, so he naturally knows that Wang Yao will not give him such a promising new model for free.

Wang Yao's primary need is undoubtedly copyright cooperation.

"Does President Gong know what the core advantage of online copyright is?" Wang Yao asked with a smile.

"I'd like to hear the details," Gong Yu said, raising an eyebrow.

“Title sponsorship rights.” Wang Yao smiled. “Online content’s pre-roll ads can be reused multiple times, unlike TV commercials. Title sponsorship rights are one-time events. For example, with ‘The Myth,’ I’m the title sponsor this year, and next year you might offer a higher price. The platform just needs to remake the pre-roll ad and charge again.”

Furthermore, with the improvement of editing technology in the future, it will be possible to subtly insert product shots into dramas to increase exposure. For example, several of my Korean dramas have product shots of Korean snack brands, which can be replaced with our own brands in post-production through editing and Photoshop, indirectly increasing exposure time. This flexibility is the biggest advantage of online versions.

Gong Yu was stunned for a moment; he hadn't expected it to be done this way.

Wouldn't that mean we could eat one fish in many ways, or even a hundred different ways?
Moreover, CPM is calculated based on play count and exposure duration. Wang Yao's proposed method can forcibly increase the original CPM price by one to two times!
It seems that it can still avoid affecting the user's viewing experience. After all, in a 30-minute drama, no one will care about a few dozen seconds of close-up shots and empty shots in an advertisement, right?

"So the online version is part of UGC. An excellent work can not only attract users, but also advertisers." Wang Yao tapped his copyright list.

"So, Mr. Wang can provide secondary creation services in this area?" A strange light flashed in Gong Yu's eyes.

Every proposal Wang Yao put forward hit his needs perfectly, leaving him with no reason to refuse.

But I also vaguely sensed a sense of crisis.

"If Mr. Gong needs it, let's discuss it one thing at a time. Mr. Gong, could you first give me a valuation for these copyrights I have?" Wang Yao said with a smile.

"I don't need to estimate the value of the copyrights Mr. Wang has; the market will naturally set the price. All I can say is that the total budget for content this year is 5000 million," Gong Yu said seriously.

Youku's content costs were only 8000 million last year. For a new platform like Qiyiguo, having such a budget is not small. It is almost the platform with the largest investment besides Youku and LeTV.

But in reality, Gong Yu's annual budget was as high as 2 million yuan. He wanted to save the money to discuss "Happy Camp" because he felt that variety show copyrights were underestimated compared to TV dramas.

“If it’s an exclusive copyright, just these few Korean dramas are a bit of a stretch.” Wang Yao shook his head. “How did President Gong and the Le family coordinate their copyright agreement?”

As a pioneer in copyright distribution, Le's is an indispensable partner for all video platforms.

“The prices for Le’s copyrights are basically the same because there are no exclusive copyrights,” Gong Yu shook his head.

Le's started stockpiling copyrights in its early years. Although they were cheap at the time, their funds were very limited, so many high-quality copyrights were leased in a 'short-term rental model'. In fact, they were middlemen who would first advance funds to buy short-term copyrights and then resell them to various platforms to earn the price difference. After all, Jia, the accountant, came from a finance background and was very clear about the accounts of buying and selling.

However, as producers and the industry return to recognizing the value of copyrights, the profit margins of his profit-making model will become increasingly thin due to higher costs. Therefore, this year, while he can still rely on this to generate cash flow, Le's is eager to go public and raise funds.

"I'm not too keen on doing wholesale business. I can only think of two cooperation models: one, we re-evaluate these projects and I invest in Kiwi by converting the valuation into shares."

Second, I hold the exclusive copyright to the iQiyi platform, with advertising revenue split 55%. Wang Yao proposed two options.

Gong Yu immediately rejected the first proposal after hearing it, because Qiandu would not allow multiple parties to hold shares, as they were used to monopolizing profits.

The second option is actually the most effective for the current development of Kiwifruit, as it is equivalent to obtaining a high-value copyright library at the lowest cost.

The only problem is that the platform's operating costs are close to 70%, so with a 55% ratio, they are still losing money. However, it's negotiable to use this loss to acquire copyrights and users.

Moreover, Wang Yao's copyright library basically contains all the high-quality film sources he wants, making it difficult to find comparable alternatives if he misses them.

"I will submit these two proposals to the board of directors and give President Wang a reply within about a week." Gong Yu nodded and then asked, "What about the cooperation on interest-based e-commerce?"

While copyright cooperation is important, it is not as important as monetization models.

“The core of interest-based e-commerce is content. Our company has already figured out how to create content like ‘Campus Belle’. I think we can adopt a platform procurement model for cooperation,” Wang Yao said with a smile.

Interest-based e-commerce is the future short video advertising model. In essence, it is still about product seeding, exposure, and conversion. It is a probability-based model, so the biggest cost is production.

"Purchase?" Gong Yu was stunned. This was equivalent to directly buying out the copyright of the video.

He originally thought Wang Yao would discuss revenue sharing in this area, given the huge potential for future advertising revenue in this sector, but to his surprise, Wang Yao gave up on that and chose to become the production company instead.
Why is that?
Is it because the monetization path is not mature enough?

Gong Yu immediately became alert.

(End of this chapter)