Star CM Holdings Ltd. (06698.HK) stock price plummeted on Friday, leading to the company"s market value shrinkinbg by more than HK$11 billion from Thursday.

As of the time of press, Star CM "s stock price was HK$95.2, a decrease of 23.23%. The current total market value of the company was about HK$37.941 billion, while the total market value of the company"s previous day"s closing price was about HK$49.476 billion.

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The reason for the plummeting of Star CM "s stock price may be related to a recording involving the late HOng Kong singer Li Wen.

On the evening of August 17, a 9-minute recording was split into three parts and publicly released by an unknown netizen, involving Li Wen and the "China"s Good Voice" ("Good Voice") program group, which subsequently attracted widespread attention and discussion.

The recording that was circulated on the internet indicated that Li Wen had already contracted breast cancer when she participated in "Good Voice" and had repeatedly raised concerns about the competition system to the program group.

"Because of Good Voice, I like this show. I think these young people are full of love for music. Our common language is music. I don"t care about sacrificing myself. I didn"t expect that they are all a bunch of bad people who want to harm me just because I told the truth. I don"t care about my life. I just want to help these children. I said the competition system is unfair, but the program group said that"s just how the competition system is and no mentor can change it."

At the same time, in the recording, Li Wen described how she was physically attacked by a director"s assistant after questioning the competition system. The assistant demanded that Li Wen "must leave this stage" and threatened "if you don"t leave, we will call security" and "in my 28 years in the industry, I have never heard anyone talk to me like this."

In the recording, Li Min mentioned her fall on the stage of The Voice of China and said that at that time, she couldn"t stand due to an old leg injury, but she chose to wear 7 cm high heels for the stage. She had already discussed with the contestant, "I asked him to stand beside me and support me." She also communicated with the director group about lighting adjustments, but in the end, the director group called the contestant to the other side of the stage, and she fell on the stage.

After the above recording was exposed, many of Li Min"s fans "attacked" The Voice of China"s official Weibo account, demanding an explanation from the production team. At the same time, it also triggered some netizens" doubts about Li Min"s work team, believing that Li Min"s work team did not protect the artist well.

Later, the production team of "The Voice of China" responded on Weibo, stating that the recording spread on the Internet was "maliciously edited by a self-media account" and mentioned that there had been misunderstandings during the cooperation with Li Min, but they had already communicated and resolved the misunderstandings at that time. "Out of respect for the deceased, we will no longer explain this matter too much and will always remember her sincere dedication to the show."

Public information shows that Star China is the production company of "The Voice of China", backed by Shanghai Canxing Culture Media Co., Ltd., abbreviated as "Canxing Culture". On December 29, 2022, Star China was listed on the Hong Kong Stock Exchange with an issue price of HKD 26.5, and then the stock price began to soar, achieving a cumulative increase of nearly 240% in early February this year.

According to Canxing Culture"s official website, Canxing Culture has produced more than 20 cultural variety shows, including "The Voice of China", "Sing! China", "Amazing Chinese", "Masked Singer Guessing Game", etc. The company"s business scope includes performance agency, radio and television program production and operation, value-added telecommunications services of the second category, cultural and artistic exchange planning, design, production, agency, and release of various advertisements, etc.

According to a report by Frost Sullivan, after ten seasons of airing, "The Voice of China" has set a record for the longest-running variety show in China.

Despite having popular variety shows such as "The Voice of China," "Amazing! Dance Society," and "This! Is Street Dance," the performance of Star CM , which went public, was not outstanding. At the end of April this year, Star CM disclosed its 2022 performance report, with a revenue of approximately 871 million yuan, a year-on-year decrease of 22.5%; a net profit of 84.6 million yuan, turning a loss into a profit year-on-year; and a gross profit margin of 32.18%, an increase of 7.84 percentage points.

The decline in revenue from the core business caused the overall revenue of Star CM to decline. The annual report shows that Star CM "s revenue mainly comes from four parts, including the production, operation, and licensing of variety show IP; the operation and licensing of music IP; the operation and licensing of movies and dramas IP; and other IP-related businesses.

In 2022, the operating revenue of the production, operation, and licensing of variety show IP was approximately 702 million yuan, a year-on-year decrease of 22%, due to the decline in the popularity of major shows such as "The Voice of China." TiPost App noticed that the revenue from this business accounted for approximately 80.6% of the company"s total revenue and had a direct impact on the company"s income fluctuations.

In fact, the decline in the popularity of "The Voice of China" is not new. Star CM "s prospectus disclosed that from 2019 to 2021, "The Voice of China" contributed revenues of 491 million yuan, 325 million yuan, and 252 million yuan, accounting for 36.6%, 29.8%, and 28.6% of the total revenue, respectively, showing a continuous downward trend.

In terms of profitability, the gross profit margin of "The Voice of China" decreased from 46.6% in 2019 to 2.2% in 2021, with a staggering decline. Star CM stated that this was mainly due to the impact of the pandemic, the reduction in advertising placements by companies, and the decrease in licensing income from online media platforms.

Entering 2023, the company"s operating situation is still not ideal.

On August 2nd, Star CM issued a profit warning announcement, expecting to achieve revenue between approximately 141.6 million yuan and approximately 151.6 million yuan as of the end of June 2023, a decrease of approximately 31 million yuan to 41 million yuan compared to the same period last year, and a net adjusted loss between approximately 18.3 million yuan and approximately 14.6 million yuan, compared to a net adjusted loss of approximately 6.3 million yuan in the same period last year. The company continued to incur losses in the first half of this year, and the loss expanded further.

Regarding the reason for the projected loss, Star Media stated that it is due to the negative impact brought by COVID-19 at the end of 2022, which led to a decrease in the number of variety shows aired for the first time at the end of the year and continued into the next year compared to the same period last year.

Nevertheless, the board of directors emphasizes that based on past experience, many variety shows are usually aired between May and October each year, so the development, production, and distribution of variety shows are usually affected by seasonality. Due to these factors, the board of directors believes that the activity level is expected to increase in the second half of the year as in previous years.

In addition, as the largest creator and operator of variety show intellectual property in China, Star Media is also involved in related businesses such as concerts. As of the end of 2022, the company has a total of 148 contracted artists. (This article was first published on the TiPost App, author: Chen Weina)

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