Bicheng Group (08220.HK): Dual-driven by IP licensing and AIGC, building a new ecosystem of technology and entertainment.
April 22, Beijing, late spring.
One day before the iQIYI conference, $BINGO GROUP(08220.HK) announced a five-year memorandum of cooperation with Beijing iQIYI and Shanghai Zeus Culture Media, involving an investment of 1.5 billion yuan (RMB).
This collaboration not only ranks among the top in terms of scale in the film and television industry in recent years but also represents a groundbreaking innovation in the cultural and entertainment sector across China and the broader Chinese-speaking world.
Specifically, under this agreement, Bingo Group will primarily provide intellectual property resources, invite Mr. Stephen Chow to participate in acting, directing, or serving as an executive producer for suggested projects. In short, the company will focus on the production and operation of IP resources.
Since its establishment, Bingo Group has actively expanded its presence in the film and entertainment industry chain, accumulating extensive experience in cinema investment and management, and owning a series of high-quality cinema assets. Against the backdrop of the AI revolution transforming industries, Bingo Group's focus on IP resources will create a novel model distinct from traditional filmmaking, positioning it as a leader and pioneer in the AIGC era.
The group also released its 2024 interim results today, which, in my view, reflect the company's achievements in deepening its IP resources and its vast potential in the AIGC field. The combination of IP resources and AIGC is expected to open a second growth curve for the company.
1. Interim Performance Report Highlights
For the six months ending September 30, 2024, Bingo Group reported operating revenue of HK$4.525 million, gross profit of HK$2.8 million, and a gross margin of 62%. In the same period last year, operating revenue was HK$5.39 million, and gross profit was HK$2.91 million.
Although total revenue declined year-over-year, the structural shift reflects the company's successful transition toward IP resources. Specifically, the company operates in two segments: cinema operations and licensing (IP) business.
From March to September 2023, cinema operations contributed HK$3.77 million, while IP business contributed HK$1.62 million, with cinema operations accounting for nearly 70% of revenue. From March to September 2024, cinema revenue fell to HK$890,000, while licensing revenue rose to HK$3.63 million. Licensing revenue now accounts for 80% of total revenue, up from 30% last year, demonstrating the success of the company's transformation.
Cinema operations have long been the company's traditional strength. The decline in cinema revenue in the first two quarters of this fiscal year was due to the closure of its Shanghai cinema in May 2023 following a rent dispute with the landlord.
Additionally, the Hangzhou cinema was temporarily closed for repairs for about 1.5 months, further reducing cinema revenue. However, the company's focus on video entertainment and licensing businesses is expected to offset the decline in cinema revenue, with the new businesses offering greater growth potential.
Notably, the company signed an agreement with an independent third party to license certain intellectual property rights for "The King of Comedy" and "The New King of Comedy," along with project planning and promotion services. The total service fee under this agreement is RMB 6 million (approximately HK$6.5 million), with RMB 3.3 million (approximately HK$3.6 million) already recognized and received.
Furthermore, the financial report shows cash and cash equivalents of HK$53.47 million, a fourfold increase from HK$13.59 million in the same period last year.
The surge in cash is attributed to a sharp increase in contract liabilities, which rose nearly eightfold from HK$8.28 million last year. Under the latest accounting standards, contract liabilities primarily consist of customer deposits, reflecting signed contracts that will drive explosive growth in the company's performance over the next six to twelve months.
Moving forward, as the company deepens its focus on content creation and generates more intellectual property (IP), licensing revenue is expected to grow significantly, transforming Bingo Group into a fundamentally different entity.
2. Deepening IP Resources, Exploring New Frontiers in Content Creation
Early this year, Bingo Group began actively planning its future direction, particularly in content creation, with substantial investments and exploration.
The company is responding to technological shifts—from the internet to mobile internet and now AI—each of which brings new business opportunities. Leveraging AIGC, Bingo Group is exploring new frontiers in content creation to deliver top-tier entertainment experiences.
As Mr. Yang Weikang, senior advisor to Bingo Group, noted during a luncheon, "Bingo Group is actively responding to technological changes, seizing opportunities in each era." The company has already achieved significant milestones, such as signing Hong Kong's largest content production contract to date.
Bingo Group is also collaborating with platforms like iQIYI to develop sequels and spin-offs of classic IPs, including those associated with Mr. Stephen Chow. These partnerships involve not only substantial financial investments but also joint production of original films, animations, TV series, reality shows, and musicals.
Beyond short-video platforms, the company is expanding into social media marketing and fan engagement, building direct connections with audiences to enhance loyalty and tailor entertainment offerings.
Bingo Group's IP programs have garnered strong acclaim, and its partnership with iQIYI has proven highly profitable. Recently, the company signed a five-year strategic framework agreement with iQIYI and Zeus Culture Media to co-develop Mr. Chow's classic IPs.
The company has secured free licensing for IPs like "The Mermaid," "Journey to the West: Conquering the Demons," and "CJ7," with sublicensing rights for specific uses. For instance, "The Mermaid" has been licensed for use in tourbillons.
The successful licensing of "The King of Comedy" and "The New King of Comedy" to iQIYI, coupled with positive audience feedback, ensures this segment will remain a robust revenue source.
Additionally, under an agreement with Wanwei Cat Animation, Bingo Group's subsidiary, Yigao Holdings, will produce three animated films based on Mr. Chow's IPs—"Flirting Scholar," "Hail the Judge," and "Fight Back to School"—with one film released annually from 2025 to 2027.
Financial data indicates rapid growth in licensing revenue, with signed contracts expected to contribute to future earnings. Over the next five years, licensing revenue is projected to rise sharply, forming a new growth curve.
Beyond IP, the hottest trend in the media industry is AIGC (AI-generated content). The integration of AIGC with Bingo Group's IP opens new possibilities.
3. Betting on AIGC, Building a New Tech-Entertainment Ecosystem
From ChatGPT's debut in late 2022 to OpenAI's Sora video-generation model in early 2024, AIGC is rapidly advancing from concept to reality.
Precedence Research projects the AIGC market to reach $73.16 billion by 2030, up sevenfold from $10.79 billion in 2022, with a CAGR of 27%. IDC estimates China's AI investment will hit $26.69 billion by 2026, making it the Asia-Pacific region's primary growth driver.
Mr. Yang Weikang believes AIGC is a key future trend in content creation. Bingo Group is exploring AIGC applications in gaming and VR, partnering with developers to deliver immersive experiences.
While AIGC still faces technical hurdles in film and TV production, Mr. Yang is confident that purely AIGC-generated movies will emerge within two to three years.
Looking ahead, Bingo Group aims to become a globally recognized tech-entertainment leader in three to five years, investing in AI, talent, and digitalization to enhance decision-making, efficiency, and audience engagement. The company will also expand cross-platform operations, replicating successful live-streaming models for sustainable growth.
In summary, Bingo Group is transitioning from a cinema-centric model to an IP licensing business, shifting from heavy to light assets. AIGC further enables this shift by reducing capital intensity and production cycles.
4. Conclusion
In January, Chinese short-video platform Douyin announced an exclusive partnership with Stephen Chow to co-develop the "9527 Theater." In August, the theater released "A Chinese Odyssey: The Wandering Earth," a micro-drama adaptation of the classic film. The series topped charts upon release, benefiting from star power and high production values.
Despite the booming micro-drama market, quality has been inconsistent. If "A Chinese Odyssey" succeeds, it could attract more established players, with Mr. Chow pioneering a new model for short-form content.
Bingo Group's deep industry expertise and Mr. Chow's iconic creations position the company to thrive in the AIGC era, leveraging technology for renewed growth.
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