Tencent wants to dominate gaming streams: Huya & Douyu before merger

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While Twitch.tv dominates the western market as a gaming stream provider, in recent years China has offered several platforms on which entertainers and professional players could be watched. After Panda.tv went bankrupt in March 2019, Huya (虎牙 直播) and Douyu (斗鱼) are the two largest platforms on the market.

Both companies are listed on the US stock exchanges and the largest shareholder in both cases is Tencent, the world’s largest gaming giant with over 100 investments in gaming-related companies.

Now Huya and Douyu are to be merged and, according to a statement from Douyu, it was confirmed that an offer from the largest investor has already been made . By 9 September – in an unusually fast process – the deal is to be completed and the share structure changed as follows:

Current shares (voting rights)Offer shares (voting rights)
Huya36.9% (50.9%)
51% (70.4%)
Douyu38.0% (38.0%)
not final yet

It becomes clear that Douyu is to be integrated into Huya and shares are acquired from the current CEO Rongjie Dong (董荣杰) in order to obtain the increased voting rights. It remains to be seen whether he will continue to act as CEO.

From a strategic point of view, it makes sense that Douyu shareholders are compensated with the new shares of the merger, since it is the smaller platform with a lower valuation. At the moment (August 12, 2020) the market capitalization of Huya (NYSE: HUYA) is $ 5.28 billion and Douyu (NASDAQ: DOYU) is totaling $ 4.58 billion.

Tencent has also already occupied Huya’s supervisory board and important decision-makers have been installed since the beginning of 2020: Lingdong Huang, Zhi Cheng, Hai Tao Pu and Guang Xu.

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Nevertheless, according to Similarweb and the Chinese SEO analysis website 5118.com, Douyu has significantly better values ​​for desktop computers. However, according to the official quarterly reports for investors, Huya owns around 3 million MAU (Monthly Active Users) more.

The turnover of the two platforms is almost identical. Still, Douyu has around 1.40 million more customers willing to pay for the platform’s service.

Both companies are profitable according to their own non-GAAP data and the data also appear almost identical here. Cost of Revenue, Gross Margin and Profits make it difficult to distinguish between the two companies.

On paper, a merger would defy the western monopoly Twitch.tv. However, the planned merger of the two companies means that China’s gaming live streaming world is losing diversity and competition – once again by the hand and control of Tencent.