Industry on the rise, but returns not too promising: insider
With its massive population, China's entertainment industry has long been a priority for investors at home and abroad. A new window of opportunity may have just opened, as a growing online fan base of Chinese youth, hungry for local pop stars, has driven a burgeoning idol-making industry that is expected to reach tens of billions of dollars within two years.
Over the past few months, two online talent shows - "Produce 101" and "Idol Producer" - have become internet sensations in China, with unorthodox, eager-to-entertain performers rising to fame overnight, not necessarily because of their talent so much as their "candid character."
The two shows stream the entire process of picking young pop stars among tens and thousands of hopefuls from across China, offering them training and eventually forming what's known as an "idol group."
Backed by tech giant Tencent, "Idol Producer" aims to create a boy band, while "Produce 101," by Baidu Inc's video service unit iQiyi, will assemble a girl group.
As of press time on Monday, "Produce 101" had a total of about 5 billion views for 10 episodes, while "Idol Producer" had about 2.8 billion views for its 12 episodes, according to view stats on their respective websites.
"The success of the two idol-making shows reveals that there is such a huge market," Liu Dingding, a Beijing-based industry analyst, told the Global Times on Monday.
At the end of 2017, there were 565 million consumers for online video content in China, and a majority were young viewers under 30, a group likely to be attracted to the pop idol format, according to a report released by entertainment industry information provider EntGroup Inc in April.
There are various ways for companies to cash in on this huge fan base quickly, including advertising and subscriptions, according to Liu. "In the social media age, the money is in the number of followers, likes or reposts on your account," he said.
Content providers like Tencent and iQiyi can boost the number of subscribers to their videos services, and performers can attract advertising deals for both traditional media and social media, while agents can easily attract investment, according to Liu.
The EntGroup report estimated that by 2020, China's idol-making reality show market could reach 100 billion yuan ($15.11 billion).
Eyeing such a huge market, investors have also showed great interest in grabbing a piece of the pie. According to a report from the China Business Journal, many venture capital firms, including big names such as Sequoia, have moved into the market.
The China Business Journal report cited several agents as saying that investors are "frequently" talking with them for potential investment deals.
However, even as several hot idol-making reality shows have gained attention from both fans and investors, the prospects for long-term returns on any investment in the industry may not be as hot as the shows themselves due to unevenly distributed profits and the fast-changing market, one entertainment industry insider said.
"Yes, the shows are very popular, but from an investor's perspective, the return is not very promising," said the insider, who invests in the entertainment industry and has been watching the idol-making industry.
He requested anonymity in order to speak candidly about the situation.
"In fact, I've been talking to some of these agent companies. Many of them have a hard time finding investments," he said.
"Investors are seeking long-term, steady growth, but idol-making is betting on 15 minutes of fame online. Obviously, that's not sustainable."
While the Chinese idol-making industry has largely taken after that in South Korea, the Chinese market is growing much faster because of its huge fan base online, while South Korea's industry is still focused on traditional media such as TV, Liu said.
