The “millet economy” relies on IP monetization such as games and animation. The industrial chain focuses on competing for IP and channels. The more IPs obtained, the better, and the larger the distribution channel, the stronger the core competitiveness. The agency expects the scale of the two-dimensional industry to grow from 221.9 billion yuan to 590 billion yuan in 2023-2029, with a compound growth rate of 18%, accelerating the development of the “millet economy”.
In the past, there were trendy bubble marts to “kill Sifang” overseas, and later, two-dimensional “millet” frantically harvest young people.
In the A-share intraday market on Tuesday, November 26, the Juzi Economic Concept Index rose more than 10%. Individual stocks in the sector, Deyi Culture and Innovation, and Huali Technology rose and stopped 20%, while many stocks such as Aofei Entertainment, Hengdian Film and Television, and Shifeng Culture both won 5 consecutive shares.
With the rapid development of “two-dimensional” and its derivative economy, the emerging market created by its peripheral product “millet” has rapidly risen and is becoming a new outlet for the investment market. Since September of this year, a number of brokerage firms, including Haitong Securities, CITIC Construction Investment, Huachuang Securities, and Debon Securities, have published research reports on concepts related to the “millet economy.”
According to data from the Forward-looking Industry Research Institute, in 2016-2023, the scale of China's quadratic industry grew from 18.9 billion yuan to 221.9 billion yuan, with a compound growth rate of 42%. Among them, the scale of the peripheral derivatives industry soared from 5.3 billion yuan to 102.3 billion yuan, with a compound growth rate of 53%.
What exactly is the “millet economy” that is running amok with A-shares?
The term “millet” in two-dimensional culture is a transliteration of “goods (goods)”. In a broad sense, it refers to IP-related products such as comics, animations, and games, including badges, cards, and pendants.
There is an essential difference from trendy games through aesthetic monetization. Millet products carry two-dimensional IP, which is an important expression of the two-dimensional peripheral and derivative industries. The consumer group is also concentrated on younger two-dimensional users, which clearly shows the consumer mentality of “paying for content.”
On November 22, analysts Ma Yuanfang and Ma Li of Zheshang Securities stated in the research report “Millet Economy” Is Thriving, and the Rise of the 100 Billion Market - Special Report on the IP Cultural and Creative Industry, that generally speaking, millet refers to “soft peripherals”, such as stationery, clothing, key chains, etc., which are generally both practical and ornamental, are relatively inexpensive, and have a wider range of consumers.
On the 24th, analysts of Shen Wan Hongyuan, Lin Qixian, Yuan Weijia, Ren Mengni and others analyzed in the research report “The Rise of Millet Economy, Bubble Mart's New High, Focus on Happy Consumption — IP Derivatives Industry Review” that the millet industry began to rise in '22 and entered an explosive period in '23 — the social zero growth structure reflects the boom of the “millet” economy from the side:
The growth rate of sports and entertainment products in '22 is not clearly leading the overall growth rate of Social Zero. Since March '23, the growth rate of sports and entertainment products has outperformed the overall social zero growth rate for most of the time (with the exception of August '23 and June '24).
On an annual basis, the growth rate of sports and entertainment products was 1.2%/11.2%/11.5% for the full year of 22/the full year of 23/January-October of '24, respectively, while the overall growth rate for the same period was -0.2%/7.2%/3.5%.
Looking forward to the future, according to data from the Forward-looking Industry Research Institute, the scale of the two-dimensional industry is expected to grow from 221.9 billion yuan to 590 billion yuan in 2023-2029, with a compound growth rate of 18%. It is expected that the growth momentum of the “millet economy” will continue to increase.
Millet industry chain: focusing on IP and channel competition
As a pan-entertainment product, the millet industry chain can be divided into IP, product development and design, and channel links, of which IP and channel links are the core.
Looking at the overall industrial chain layout, there are few companies with a complete layout of the entire industrial chain in the Trendy Game industry (Bubble Mart has its own IP+ product design and development+self-operated stores).
As leading companies in the current industry, Card Game and Guangbo Co., Ltd. mainly focus on product design, development and distribution in the middle of the industrial chain, and then obtain IP licensing upstream, build their own supply chain to provide product production capacity+ open up downstream distribution channels to complete monetization, but the revenue contribution of self-operated stores is still low.
As the core selling point of millet, IP licensing is a top priority for upstream efforts. Zheshang Securities believes that for upstream and midstream operating companies, they can stand out from the fierce competition by closely integrating with the IP industry chain, becoming an important participant in IP derivative development, and providing consumers with more differentiated IP experiences.
Simply put, the higher the quality and quantity of IP obtained by the operating company, the stronger its core competitiveness.
Looking at the middle and downstream of the industrial chain, the midstream mainly involves product development and production, while the downstream mainly refers to agent distribution stores, including millet stores, miscellaneous goods, stationery and gift stores, Japanese retail stores, card stores, “two-dimensional + traditional stores”, etc.
Shen Wan Hongyuan pointed out that currently only a few companies in the industry have production lines and mostly use OEM cooperation. Since millet materials and production costs are low, while production lines have fixed investment and IP guarantees, gross margin depends on scale effects.
Zheshang Securities believes that the millet economy is currently in the channel competition stage, and companies or brands with extensive retail channels are expected to enjoy the industry beta in the early stages. In the medium to long term, core competitiveness will return to product development and product selection capabilities, and ultimately to differentiated product supply.
Zheshang Securities also added that in addition to opening more stores and selling channels, having upstream IP resources is also a major competitive advantage for retailers.
For example, the famous millet store March Beast has introduced many leading Japanese anime such as One Piece, Shinigami, and Naruto. It has cooperated with domestic and foreign IP parties for more than ten years, can obtain many exclusive IPs and products, and also has the ability to negotiate with Japanese manufacturers to resell popular products. In a public interview, the founder of March Beast said that nearly 90% of the genuine Hitani market is represented by March Beast.
