Since raising US$775 million on the Nasdaq, Douyu has the largest IPO of any Chinese company on Wall Street in 2019.
With 160 million monthly active users, the Tencent-backed company that focuses on game-related live streaming has more MAUs than Amazon’s Twitch with 140 million. The company is a giant in China’s live-streaming sector, along with rival Huya.
It hasn’t always been smooth sailing for Douyu, though. The company’s rise to dominance was preceded by what industry watchers called the “Thousand Live Stream War” in 2016. Although the name is exaggerated, China’s live-streaming startup boom was astonishing at the time. The country went from having barely any live-streaming platforms to more than 300 in a matter of months.
Amazon’s Acquisition of Twitch made Douyu
Douyu is not an overnight success. The company was founded by Chen Shaojie in 2013 as an offshoot of AcFun, a video platform that gained popularity by implementing bullet chat as a real-time user commentary tool.
As the game live-streaming unit of AcFun, Douyu was initially known as AcFun Live. But it officially spun out as its own product in January 2014 and was renamed Douyu, which means “fighting fish” in Chinese.
The platform wasn’t a hit right from the get-go. In the early days, the live-streaming business was dominated by non-gaming content. But the rise of Twitch and Amazon’s eventual acquisition of the US-based platform in 2014 helped build confidence in the game-centric live-streaming business. As a result, Douyu managed to secure substantial funding from angel investors and Sequoia Capital.
By 2016, China’s live-streaming era was in full swing, with dozens of live-streaming sites springing up every month. In the midst of this boom, Douyu continued to pull in more funding from rich backers like Tencent and Phoenix Capital, which propelled the Wuhan-based company to unicorn status that year.
In the years that followed, Douyu has never been short of funding. The company ranked as the most-funded Chinese gaming startup in 2018, pulling in a total of US$1.13 billion.
Dogged Pursuit of Top-Tier Live Streamers
An important part of Douyu’s success involves its ability to lock down top-tier live streamers.
Douyu now has 6 million registered streamers, more than 5,200 of whom have signed exclusive contracts with the platform, the company said in its IPO prospectus. This has helped it become the premier destination for game live streaming. Douyu has 51 of the top 100 game live streamers, and eight of them are in the top 10.
Douyu has put a heavy focus on celebrity streamers from the beginning. In 2014, Douyu spent three quarters of its angel investment -- 15 million yuan (about US$2.4 million) -- on bandwidth and poaching live streamers from other platforms, Chinese media outlet 36Kr reported. The poached talent primarily came from Huya and YY.
Getting these live streamers doesn’t come cheap. In 2015, state media reported that Douyu was paying League of Legends pro Lu Benwei an eight-figure annual salary (more than US$1.6 million at the time).
Chen, the company’s founder, gave a rallying call the following year on social media. “This year, Douyu has already raised more than 2 billion yuan (US$300 million),” he posted on WeChat. “We’ve got plenty of ammo. Locked and loaded… We must win this Thousand Live Stream War, fight!”
Carving up China’s live streaming with Huya
The carnage of the Thousand Live Stream War initially left three live-streaming giants standing -- Huya, Douyu and Panda TV. But since a cash crunch led Panda TV to end service in 2019, China’s live-streaming industry has effectively become a duopoly.
Huya beat Douyu to an IPO when it went public in May 2018, raising US$180 million on the New York Stock Exchange. Then in April 2019, Huya raised another US$327 million in a follow-on share offering. That’s still considerably lower than Douyu’s US$775 million IPO.
Douyu also maintains the lead in MAUs. Huya surpassed 100 million MAUs for the first time this year. And while Douyu recently surpassed Huya in paid users, Douyu was still behind when it comes to revenue per user as of July 2019.
The live streaming fight has gotten intense between the two rivals. Douyu has been especially relentless. In March 2019, a court in China had to issue an arbitration letter to Douyu asking the company to stop filing complaints to Apple that demanded Huya be taken off the iOS App Store.
Ironically, Douyu’s dispute with Huya started when Huya was poaching streaming talent, which Douyu had previously done itself. As a countermeasure, Douyu started filing complaints to Apple demanding Huya be taken down and accused Huya of copyright infringement.
In total, Douyu filed 23 complaints to Apple before Huya eventually took the matter to a local court. The court ruled that Douyu’s complaints were unfounded and ordered the company immediately stop filing them.
With Douyu and Huya the last standing giants in China’s live streaming industry, it could take a larger giant to bring their bitter feud to an end. Tencent is now one of the biggest investors in both companies, which it achieved through multiple rounds of funding. The Shenzhen-based tech giant is reportedly the largest shareholder of Douyu, owning 40%, and the second largest of Huya, with 31.5%.