Douyu

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Douyu

caption Site Type type Launch Date 2016; 7 years ago Status Active Product Line Online streaming Platform Online streaming service provider Website www.douyu.com

Douyu(斗鱼) (Nasdaq: DOYU) is a Chinese website service that provides gaming, e-sports, and outdoor streaming contents. As reported on March 31, 2019, there are 6.5 million registered streamers, 280.9 million registered users, and 159.2 million monthly active users. Douyu is the first Chinese streaming website which enters Series D funding(the fourth round the fundraising). On July 17, 2019, it announced its initial public offering of 67,287,110 American Depositary Shares (ADS) at US$11.5 per ADS. The ADSs began trading Nasdaq Global Select Market with the Nasdaq symbol "DOYU". Morgan Stanley & Co. LLC, J.P. Morgan Securities LLC, BofA Securities, Inc, and CMB International Capital Limited were the book runners of this public offering.

According to the analysis result of Alexa, Douyu has been a top 300 website globally and top 30 in China in terms of the number of users and traffic data. There are 90 thousand to 100 thousand streamers streaming every day. At the peak time, there are over 20 thousand streamers streaming at the same time.

A Brief History of Douyu

• In Jan 1, 2014, Douyu was founded.
• In April 2014, Douyu received RMB 20 Million in Angel Investment from Aoifei Animation.
• In Jun 2014 Douyu Received a $20 Million Series A Investment from Sequoia Capital.
• On March 15, 2016, Douyu announced a Series B round funding of over $100 million led by Tencent, while Tianshen Entertainment and Series A investors Sequoia Capital and Nanshan Capital both continued to invest.
• On August 15, 2016, Douyu completed Series C of RMB 1.5 billion, which was led by Pheonix Capital and Tencent.
• On March 2018, Douyu received a new round of $630 million in funding from the exclusive investment of Tencent.
• On July 2019, Douyu announced that it priced its ADSs at $11.5 per share. The listing took place on the NASDAQ exchange on the morning of July 17.
• In 2020, Tencent announced its plan to merge Huya and Douyu to streamline its investment in both firms. Tencent owned over a third of Douyu. The merger of Douyu and Huya was prohibited by the State Administration for Markey Regulation of the People's Republic of China (SAMR).

The Streamer Regulation System

To maintain a healthy streaming platform, Douyu introduced a credit system for online streamers. Each streamer is initially given 12 credit points. Streamers who lose over 12 points will be permanently banned from the platform.

• Streamers who apply for streaming authorization must register with their government-issued id.
• The host of the violation of rules will be deducted corresponding points. Streamers with a credit score of fewer than 4 points cannot receive gifts from viewers.
• A streamer can gain points by successfully regulating their live content, speech and behavior after the deduction of credit points.

Ethic Concerns And Disputes

The Gift System and Consumerism

Douyu sets up a complex gift system that enables viewers to purchase virtual tokens to redeem gifts and donate them to streamers. Some streamers encourage viewers to donate them by classifying viewers into different groups and allowing them to compete with each other by donation amount. In order to get more attention from streamers, viewers have to donate more gifts. A streamer named Li Gan once denounced that only the viewers who donated money to him were qualified to be a "real" fan, and those who did not were "dog fans".

"The Fish Ball"

"The Fish Ball" (斗鱼鱼丸) is typically offered daily to users for free when users start to watch subscripted streamers.

"The Shark Fins"

"The shark fins" (斗鱼鱼翅) require users to top up real-world money in exchange for a virtual token. Users can purchase various gifts using "the shark fins". As users purchase more gifts for a streamer using "the shark fins", they gain a higher level in that streamer's streaming room and unlock various benefits such as special chat fonts.

Potential Gambling Concerns

In Jan 18, 2021, a report by fund manager and investment research firm Grizzly raised the warning that Douyu has benefitted by allowing and encouraging users to engage in online lottery operations, which is illegal under the regulation of mainland China. According to Grizzly, Douyu is involved with illegal online gambling on its platform, and it has been one of its sources of revenues.

One typical lottery activity is called "lucky treasure", in which users are encouraged to top up money in exchange for awards. The highest award can be over 50,000 "Shark fins"(鱼翅)(a kind of virtual token of the platform). The tokens are mutually interchangeable with fiat currency.

In addition to the platform-hosted lottery activities, some registered streamers are also reported to involve in illegal gambling activities. There were users who spent millions of RMB on the lottery activities of the streamers. Grizzly reported one such case: a user spent 1.4M RMB on the lotteries activities and that money was intended to purchase a house. The user also revealed that streamers used certain words to avoid gambling-related phrases. After the loss of millions of RMB, the user thought that though streamers should be responsible for his loss, the platform should be the more serious liable party because it did not ban the activities. On the contrary, the platform encouraged such lotteries because it induced users to buy virtual tokens and gifts. Moreover, the platform trained the streamers so that they could avoid flagged words and continue their gambling activities with a little suspicion. For example, "5L 2.8" means 5 Leyuan (a gift on the platform) and the streamers will return 28,000 RMB to the donor. By participating in lottery activities, streamers were able to raise their income by 10 times.

Douyu does not have a lottery issuance certificate or the ability to do so, therefore, it is illegal for such a platform to operate gambling activities. According to criminal law, if such activity reaches a certain amount of participants and money, it will be viewed as illegal gambling. In addition, if the online platform purposely offers assistance and support to such lottery activities, it may also be a violation of the law.

339 Outdoor (彡彡九户外)

On September 12, 2020, a short video published by a Chinese authority organization exposed that a streamer 339 Outdoor (339 thereafter), who had already been arrested, was involved in lottery activities including "6 RMB for 50,000 RMB", "6 RMB for 40,000 RMB", and "10 RMB to win 2 of 10,000 RMB". The lottery activities were 15 to 20 minutes long, in which users spent 6-10 RMB to purchase virtual tokens. After the lottery, 339 would purchase the same amount of virtual tokens in RMB through third-party from the winners of the lotteries. According to the video, the gift revenue of 339 in August 2020 solely was 10 million RMB (roughly 6,896,551 USD at that time). There were more than 2,000 viewers participating in the lottery and 80% of them were students.

Changsha Gansidui (长沙敢死队)

On Jan 22, 2021, a streamer (Chinese: 长沙乡村敢死队) is reported to encourage users to donate money to him in the form of virtual tokens. If participants donate a certain number of "Shark fins" over a given period of time, they are eligible to participate in a virtual token lottery worth tens of thousands of Chinese RMB. After the lottery, the streamer will then purchase virtual tokens in equal amounts to cash in the winners' prizes through third-party apps such as Alipay. Most of the participants in gambling are students. In order to avoid regulation, the streamer does not explicitly advertise it. Because the live broadcast usually starts at 10 pm, the public word code of the lottery is "10 pm economy class" and the prizes are also called "souvenirs". It is reported that in 2020, the annual profit of the streamer from donations was over US$25,165,423..

Si Xiang (斯祥)

Si Xiang offered a lottery system called "Cracking Eggs". The activity was separated into 3 cash categories. In that system, 300 RMB's value of "cracking" could generate 5,000 RMB worth of awards. At its peak, the number of daily users was 20,000 to 30,000.

Fake Number of Viewers And Order Brushing

Activities such as faking online traffic and order brushing are now a quite big industry in China, with over 1000 traffic/order brushing organizations and more than 9 million people working in this industry.

Fake Number of Viewers

In 2015, a streamer Xiaozhi(小智) disclosed that the platform had been intentionally falsely displaying his "popularity score" (a metric of the platform indicating the number of viewers). At the peak time, the website displayed the number of viewers of the streamer as 4.4 million. After discovering this issue, the streamer posted on Weibo and complained about it. He claimed that it was not he who managed to falsely display a high number of viewers for better exposure. After the public criticism of the streamer, the platform limited the number of viewers in Xiaozhi's streaming channel while allowing a higher number of viewers in other steamers' channels. Also, during this period, there are other streamers who continued to use illegal software or bots to boost their "popularity score" in order to compete with Xiaozhi.

Another incident of the fake number of viewers happened on a streamer called Weixiao(微笑), who was a League of Legends streamer. Once his streaming showed that there were 1.3 billion people watching him, which was roughly the population of China at that time. Some sources reveal that the "popularity score" is a metric calculated based on the number of viewers, but not the actual number of viewers

Order Brushing

According to Grizzly Report, it is possible to use order brushing through third-party platforms to purchase the virtual tokens of Douyu. Some streamers or organizations are able to buy 1 RMB worth of virtual tokens using 70 cents. Using the purchased tokens through order brushing, they are able to gift other streamers at a cheaper price. By doing so, there are several benefits to both streamers and the platform: streamers can gain a higher popularity score and thus more exposure; the platform can record these fake revenues because Douyu extracts half of the gifted value. .

Inappropriate Contents

Vulgar Contents

Throughout the development of the platform, there are many streamers famous for using profanities. One example of this could be Lu Benwei. As a streamer of League of Legends, he was initially known by claiming that he had a 50-50 chance to win the world champion "Faker". Later he started to speak and made up new profanities to attract viewers. His audience, mostly underaged students, started to imitate him and caused serious internet violence issues. Another streamer, Sun Xiaochuan (带带大师兄) is also known for inappropriate language. He is famous for "the Abstract Bible", in which he verbally abused his viewers for over 5 minutes after being criticized by the viewers for his passive attitude while streaming. Both streamers have been banned by the platform.

In June 2020, the State Internet Information Office of China in conjunction with the relevant departments of 31 domestic major online streaming service providers, including Douyu, carried out a comprehensive inspection in order to standardize of management of online streaming content to depth. It is reported that some streamers are dressed in too exposed clothes and some are vulgar in word and deed.

False Advertising and Pornography

During the covid time, Douyu opened up its online learning section and provided online learning materials. Douyu was reported to promote online games through the name of "free online courses" to students. The ads were removed and the section was closed after the criticism of the state media of China.

Douyu was reported to enable pornography that may affect underaged viewers. On the Douyu website, "ACGN" section, which included a lot of streamers showing exposing poses on stream, was next to the online education section. In that section, the streamers encourage viewers to gift them by offering "private content" to donors through other chat apps such as WeChat once the donors reach a certain amount of donations. Many donors were quickly seduced to the content and the donation amount started to cumulate, all for "more private" content. There are reports indicating that several junior and senior school students gifted more than 1,000 RMB to streamers. Knowing such pornography issues and their effects on underaged students, Douyu started to impose age restrictions and streaming monitoring. The platform randomly checks the streaming content and temporarily bans underperformed streaming rooms. Douyu also lets the users select "teenager mode" while using. However, there is no hard identification verification measure and the users can bypass the age restriction by selecting a fake age. That is to say, if a user's profile does not indicate "underaged", then the user is not underaged.

Content Censorship

The Douyu platform imposes restrictions on contents streamed on the platform and banned games considered not appropriate or unlicensed.

Ban of Animal Crossing: New Horizons

After its phenomenal global popularity, the platform banned the video game Animal Crossing: New Horizons. Users cannot search for videos or streaming content with the keyword "Animal Crossing" on the platform. A platform-signed streamer (传说中的林克) received a warning from Douyu about the complete ban on the game. The streamer also pointed out his disappointment about the regulation, saying that the authorities just cut off the game and did not provide space for public opinion. There were no official reasons for this ban, but it was speculated that it was related to some politically sensitive propaganda posted by pro-independent Hong Kong protestors in the game.

Ban of PlayerUnknown's Battlegrounds

Due to missing approval by the government, PlayerUnknown's Battlegrounds has been banned by the streaming platform. PUBG is always an unlicensed game in China. But backed by Tencent, the streaming of the game was allowed on Douyu and was one the most popular games to watch on the platform. Now things have changed.

As until Feb 10, 2023, the streaming of PUBG is still operated by the platform. However, the game name cannot be explicitly displayed and all streaming of PUBG has been moved to the "popular games" section instead of its own section.