China Literature (772) H1 2020 earnings summary

Executive summary

• H1 2020 recorded a loss for the first time in many years; management attributed the disappointing performance primarily to accumulated structural issues, with COVID-19 adding pressure.

• Priorities include strengthening paid and free reading, improving writer support and user growth, and building a more systematic IP adaptation ecosystem.

Financial highlights

• Revenue rose 9.7% YoY to CNY 3.3bn, mainly on online business growth; total costs rose 13.3% to CNY 1.5bn.

• Selling and marketing expenses increased 30.1% YoY to CNY 1.3bn, or 39% of revenue, reflecting user acquisition and game promotion.

• Content costs increased 4.9% YoY to CNY 584m; platform distribution costs rose 214.3% to CNY 619m, while TV and film production costs fell 81.1% to CNY 68m.

Outlook and guidance

• Over the next 6–12 months, plans include greater investment in IP incubation, platform social and community features, and stronger links with Tencent products to extend user reach.

• Free reading investment will increase alongside continued focus on paid reading; Qidian remains focused on paid reading, while Tencent traffic will support free-reading reach.

• IP plans include clearer pricing, faster adaptations, franchise development, and a cross-segment team; management expects progress from H2 2020.

• NCM will focus on top-quality projects and work with Tencent Pictures and other partners; movie plans will remain cautious pending pandemic and theater recovery.