After nearly a year's coaching change, Reading became the protagonist of Rebirth.

Author | Zhao Lei

Editor | Rao Feixia

In 2020, reading will face many challenges.

This online platform, which continued from the starting point to the PC era, has been the industry leader for many years and experienced many glories, but it has never encountered many controversies and storms like 2020. Especially after the announcement of interim results in August 2020, Reading recorded a performance loss. Although affected by the impairment of goodwill of Xinli Media, the performance of reading core business is still unsatisfactory.

Cheng Wu, the new CEO of Wenwen, who took office at the end of April 2020, was blunt in his financial report with a sincere attitude rarely seen by most company management: "Disappointing performance made us realize the lack of anti-risk ability of the company's underlying business model and the structural problems that have been precipitated for several years."

Structural problems, rather than ordinary problems, may fundamentally affect the long-term development of a company. Willing to admit that the problem is the basis of solving the problem, and such an attitude is also the premise of drastic reform.

In the second half of 2020, the new management responded quickly to some emergencies that affected the core business, such as holding a writers' forum and launching new contracts; At a deeper level, reading has redesigned the writer's ecology and tried to "change a new way of thinking" in copyright business, which is a fundamental change for the two core businesses of reading. Therefore, reading has also made many adjustments at the organizational level.

Although the change is short-lived, the effect has already begun to show.

On March 24th, Wen Yue Group announced its annual performance in 2020. In the second half of 2020, Wen Yue achieved a performance reversal, with its revenue rising by 665,438+0.5% month-on-month to 5.27 billion yuan, and its net profit under non-International General Accounting Standards (Non-IFRS) increased 40 times compared with the first half, reaching 895 million yuan.

This shows that excluding the loss caused by the goodwill impairment reserve of Xinli Media and the long-term investment impairment reserve of some invested companies, the core business of Reading is picking up and its profitability has also improved. Reading is coming out of the "dark moment" and returning to the right track of growth.

However, this is only the first step of the long March. The long-term solidification of the business model of the online industry leads to "insufficient anti-risk ability of the underlying business model" and "structural problems", and reading, as a leader in the online industry, cannot be shaken, thus lacking sensitivity and responsiveness to changes in the external environment.

The difficulty of the elephant's turn is that the organizational structure, business system, operational process and even corporate culture that once relied on it may become obstacles to the transformation. For reading, as the founder of the business model and the industry leader of the online text industry, its own problems are also the problems of the whole industry, and the biggest resistance to reading is not from the outside, but from itself.

60 to 90 is easy, but 90 to 100 is difficult. For reading, if you want to be the protagonist of the novel Rebirth, I'm afraid you have just left the novice village, and there are still many books to play in the future.

Let's take a look at this financial report.

In 2020, Wen Yue Group's total revenue was 8.526 billion yuan, up 2. 1% year-on-year. The net profit attributable to the mother under non-IFRS was 965.438+0.7 billion yuan, which was lower than 654.38+0.65438+0.95 million yuan in 2065.438+09.

The income from reading articles in the whole year only increased slightly compared with 20 19, and the growth rate was far less than 65.7% of 20 19. However, these two years are very special. The income of 20 19 increased significantly, but in 2020, due to the epidemic situation, the production of a large number of TV dramas and movies was delayed, and the online time of many projects could not be determined.

Separately, it is actually the poor performance in the first half of the year, which has dragged down the performance of the whole year.

In the first half of 2020, the total revenue of reading books was only 3.26 billion yuan, including 2.495 billion yuan from online business, but the combined revenue from copyright operation and other income was only 765 million yuan, even less than the copyright revenue before the merger of Xinli in the second half of 20 18, and even worse than 3.2 billion yuan in the second half of 20 19.

The income has dropped, but the expenditure has not been less. The project has started, the advertisement has been played, and both marketing and manpower are spending money. The money spent has not been earned back, which directly makes the non-net profit deducted from reading in the first half of 2020 only 22 million yuan.

However, the copyright business recovered rapidly in the second half of the year, with a revenue of 2.732 billion yuan. Although it was not as much as that in the second half of 20 19, the gross profit rate increased a lot, from 28% to 45%, and the final non-net profit was 895 million yuan, which not only exceeded the second half of 20 19, but also increased by 40 times compared with the first half of 2020.

Copyright business is the key to realize the performance reversal of reading in the second half of 2020, but there is also a premise that the online business of reading should be stable. As the basic disk of reading, the growth of network income is not as obvious as IP copyright, but it is a trickle and endless. Net text is also the source of IP adaptation and the fundamental competitiveness of the reading group industry.

In 2020, there will be some new breakthroughs in the data of online reading business.

First of all, the average MAU of self-owned platform products and self-operated channels reached 229 million, up 4.2% year-on-year, and the average monthly paying users reached 102 million, up 4. 1% year-on-year. The average monthly income of each paying user reached 34.7 yuan, a year-on-year increase of 37.2%. On the whole, online business revenue increased by 32.9% year-on-year, the highest growth rate in three years, mainly due to the in-depth operation and potential mining of users by reading articles.

In addition, the DAU of free reading content has also broken through100000, paid and free, and it has been implemented in different channels and different contents, meeting the content needs of more users and giving writers more choices, which is reflected in the new reading contract.

There are many interesting questions hidden in this financial report handed over by reading the article. For example, compared with the second half of 20 19, the copyright income is not far behind. Why did the cost of income drop sharply? The average MAU and monthly paid users of self-owned platform products and self-owned channels have increased, but how can each sub-channel distribute free and paid content to the appropriate channels? Why did the gross profit margin of online merchants drop, or did writers earn more money?

The answers to these questions should be found in the changes of reading texts in the past six months.

The reading that Cheng Wu took over seems to be solid, but it is actually domestic and foreign.

As can be seen from the previous financial report, in the first half of 20 19, the online business income of reading literature experienced negative growth for the first time. There are many reasons, such as the decline in the number of paying users and the monthly income of paying users, including the rise of external piracy and free reading, and the failure to keep up with the experience optimization of reading products and make good use of Tencent's channels.

Since the second half of 20 19, reading has strengthened the fan operation and IP incubation of works, and promoted the income of individual paying users when the internet dividend has subsided and the user scale is difficult to grow, thus promoting the growth of online business income. However, this method has low input-output ratio, slow growth rate and instability.

In terms of IP operation, although there are many external authorizations in reading the article, most of them are one-time transactions, which have not allowed IP to flow in the industrial chain. The IP development mode is single and uncertain. Speaking of explosions, everyone is very happy. Once it gets cold, it stops here, and there is no large-scale methodological precipitation.

In Cheng Wu's internal letter, he confronted the question: "The company suffered losses for the first time since it went public. Under the sudden epidemic situation in COVID-19 and the complex and changeable macro environment, the deficiency of the company's underlying business model's ability to resist risks is fully exposed. The growth of paid reading is under pressure, and the progress of free reading is not up to expectations; In terms of IP development, although the masterpiece "Joy of Life" with both word-of-mouth and popularity has appeared, the cooperation between reading and Sony is far from complete success; Most of the partners have not yet been transformed into participants in the reading ecosystem ...... "

There are many problems that need to be solved one by one, but they all come down to three categories: content, platform and ecology. Content is the foundation, and only by constantly producing good content can there be the following things; As a platform, reading should also consider how to deliver content to users more efficiently and accurately; As the source of content, how to mobilize resources and develop an IP well is definitely not enough just to look at the text, but also needs the help of partners.

Network literature is the basic disk for reading articles, but some rules of the network industry are too rigid, the content ecology lacks vitality, the Matthew effect is concentrated, and the realization mode is single. Although there are many writers and works reading articles, the times are changing, readers' interests are changing, writers' creative methods and habits are changing, and the interaction between readers and authors is also changing. How to read the article unchanged? However, the piecemeal approach is no longer desirable, which requires the cooperation of products and operations, and dares to break through some old rules and offend some people.

In the second half of 2020, some controversial issues at the writer level were first solved. First of all, the author's contract grading system was introduced to fully respect the author's wishes. It also reformed the editing system, and the author chose to edit; In addition, the welfare of writers was upgraded, and the starting point university was established to support young writers.

At the product level, by strengthening the community construction in online reading, such as "this chapter", "book circle comment" and "dubbing", the interaction between readers and between authors and readers can be enhanced, and the reading experience can be improved. However, with the influx of more young readers, products, algorithms and operations must be continuously optimized, which is a long process.

On the platform side, as a subsidiary of Tencent, Reading can reach users through Tencent's multiple traffic portals, but these channels have not been well utilized before. The typical performance is that the number of monthly activities and the number of paid users of Tencent's self-operated channel have been decreasing, because Tencent's channel is promoting free reading, but the growth of free reading users has not concealed the decline of paid reading users.

Cheng Wu and other new management teams are all from Tencent. At the platform level, the two sides have carried out deeper cooperation, increased efforts in QQ browsers, mobile QQ and other channels, distributed free works to more users, and set up a content decision-making group to carry out special overall management of free content.

No matter whether it is a black cat or a white cat, it is a good cat that can catch mice. The dispute between free and paid has been proved to be not an end, but a means. Under the fierce competition in the online text industry, the combination of paid and free can reach more people. The data also shows that in the second half of 2020, the monthly users of Tencent's self-operated channels showed positive growth for the first time, with an increase of 7.2%, which shows that the free content operation of reading articles is still very effective.

As the CEO of Reading Group, Cheng Wu is also the vice president of Tencent Group, the CEO of Tencent Pictures and the chairman of Tencent Animation. In the past, there were two ways to read articles in IP operation, one was IP authorization, and the other was Xinli Media's production of film and television dramas. However, they do their own things and sometimes even have internal competition. Although reading has always wanted to be an industry-wide integrated IP, it is not open enough and it is difficult to do well through mergers and acquisitions.

The birth of the explosion "My Wife" is based on the collaboration of Tencent Pictures, Reading Film and Television and Xinli Media. High integration brings not only the coupling and unification of all aspects of IP development, but also the improvement of production efficiency of film and television industry. Besides, Reading is also exploring new possibilities with tencent games and other Tencent business groups.

It has been nearly 18 years since the starting point of paid reading mode in online literature industry. Although online literature has grown, its core business model has not changed. It's really comfortable to read the first article, which is at the top of the online literature food chain, and thanks to Tencent. The setback in 2020 is a good thing for reading articles.

What are the consequences of long-term stability and comfort? Cheng Wu bluntly said in his internal letter: "The key layout is slow and the core business is inefficient."

Wen Yue is a subsidiary of Tencent, but it has been relatively independent for a long time. Moreover, as the source of IP, Wen Yue has the opportunity to create China's "Iron Man" and "Treasure Dream" and become China's Disney and Nintendo. In Cheng Wu's vision, Wenwen will grow into an IP-based comprehensive cultural and entertainment enterprise including literature, animation, film and television, games and derivative businesses on the basis of online reading.

It's simple. If we only regard reading as a paid network platform, then we have reached the peak of reading now, and its growth has peaked. To change the impression of the outside world, we must first change the concept of reading, stop pretending to be a network platform, and stop being dissatisfied with our current status and achievements.

From the management level down, we should not only adjust the strategy, but also adjust the organizational structure, management methods and business processes according to the new goals, attract like-minded people and eliminate those who live comfortably. Over the past six months, compared with business adjustment, Reading has made greater efforts in organizational upgrading and decision-making mechanism optimization.

Many newcomers have joined the reading, and the business lines such as copyright operation, online merchants, investment, legal affairs and finance have ushered in new heads, while the upper-level decision-making mechanism is more inclined to long-term strategic orientation than short-term business.

The long-term core is IP. The previous IP operation was mainly based on simple IP authorization, and the value of IP stopped at the sales agreement. Each link is separated from each other and has its own advantages. Therefore, there have been many cases of abuse and over-exploitation, and the vitality of IP has been rapidly consumed, lacking a mechanism to extend the life of IP from the overall situation.

Under the new guidance, Reading Association will try its best to unite partners in the industry to create an IP industry ecology, so that every participant can benefit from the long-term value of IP. To this end, the Reading Association has also set up a business center with IP as the core to explore an industrialized IP development system.

Taking Foreign Service as an example, the reading network literature platform provides IP, Xinli Media leads the professional production team in the film and television industry to create film and television content, and Tencent Pictures as the publisher evaluates, packages and markets the IP adaptation content. As an important member of Tencent, Cheng Wu can promote resource integration internally.

If this model can work, then the cake that can be divided into reading and writing will not only be an online literature industry, but also a broader film and video and game market, which will truly change from an online reading company to a pan-entertainment company based on online reading and centered on IP cultivation and development.

Nowadays, Reading is a bit like Yining in My Widow. Before "rebirth", he was a business leader and experienced success. After "rebirth", it also needs constant adjustment to gradually adapt to and become stronger in the current environment.

Those who are good at scheming seek power, while those who are not good at scheming seek children. Although reading in 2020 is turbulent, it also takes this opportunity to solve some long-standing disadvantages and look down on short-term gains and losses. If you want to be a long-term company, you must be firm in this idea and pay the necessary price. Innovation and change cannot stop, and there is still a long way to go.

* The title map and drawings are from vision china.