VTAC primes for EGM as 17LIVE puts focus on creator economy
As the Dec 1 extraordinary general meeting (EGM) for spac Vertex Technology Acquisition Corp (VTAC) draws near, its target company — pure-play live-streaming platform 17LIVE — has ramped up on showcasing its creator-focused business model. Besides webinars and online demos, it also organised its first offline event in Singapore on Nov 20 featuring some of its top live streamers and virtual performers.
There will be two possible outcomes following the EGM. If shareholders vote in favour of the proposed transactions and the business combination is approved, the resulting entity will trade under the new name “17LIVE Group” on the Singapore Exchange on Dec 8. Redeeming shareholders will receive a payment of no less than $5 per share.
If shareholders vote against the proposed transactions, the companies will not go through the business combination. All redemption requests will be cancelled and VTAC will be liquidated. Those who want to redeem their money put in at the time of the IPO two years ago need to submit their redemption form by Nov 28.
The proposed business combination entails a consideration of up to $922.9 million. This consists of $800.8 million worth of consideration shares and up to $122 million in earnout shares. Depending on the redemption amount by VTAC’s existing shareholders, the proposed business combination will value the enlarged group at a pro forma equity value of between $999.6 million and $1.16 billion.
The amount comprises the purchase consideration, the cash in VTAC’s escrow account of between $60 million and $208 million, proceeds from the private investment in public equity (pipe) financing of $10 million and the special bonus scheme amount of between $4 million to $18.8 million. The special bonus scheme refers to the allotment and issuance of 0.1 new shares to non-redeeming shareholders as well as pipe investors.
Trading of VTAC shares will be suspended from Nov 28 till Dec 4. Should all resolutions be approved at the EGM on Dec 1, Dec 8 is expected to be the completion date for the company to start trading as 17LIVE Group. On the same day, those who have submitted a redemption request will receive their payment while those who did not do so will receive their bonus shares.
Analyst recommendations
What will be the shareholders’ decision on Dec 1? While it is still unclear, PhillipCapital in its Nov 19 report recommends shareholders vote in favour of the proposed acquisition and fully redeem their shares at the redemption price range of $5–$5.02 per share.
Based on price-to-sales and EV/Ebitda multiple of listed peers, PhillipCapital derives a fair value of 17LIVE between US$581 million ($771.31 million) and US$700 million. Including sales and earnings plus balance sheet strength, the fair value is US$641 million. Assuming no redemption of shares, PhillipCapital’s fair value of VTAC post-acquisition is $5.08. Should the earnout shares be fully issued, the team’s fair value declines to $4.55.
“We believe the purchase cost of the shares issued to the vendors of 17LIVE, promote shares and earnouts shares are significantly lower than the redemption price range. Based on our current fair value, we view the
warrants as out of money and there is a risk it can expire at zero value,” adds PhillipCapital, one of the brokers appointed and paid by the investors’ watchdog Securities Investors Association Singapore (Sias) to provide independent research on VTAC’s de-spac.
Investment advisory firm Beansprout, which was appointed by Sias, is recommending shareholders redeem their VTAC shares and sell their warrants. The advisory firm is valuing the 100% equity stake in 17LIVE at US$460 million, below the purchase consideration of up to $922.9 million, says Beansprout’s founder and CEO Gerald Wong.
From Wong’s perspective, 17LIVE’s nearterm prospects appear to be muted — the platform’s monthly active user (MAU) has declined from 2HFY2021 following the lifting of pandemic restrictions. Additionally, the average revenue per spending user remains under pressure as users return to more offline entertainment.
“These headwinds have more than offset initiatives by management to drive higher user engagement. Other key risks include rising competitive threats, inability to retain streamers, and regulatory risks,” he adds.
Shareholders’ concerns
Aside from questions on the sustainability of live-streaming demand on the back of post-pandemic consumer shift, there are concerns regarding intense competition and post-transaction plans the company has. This is because the recently penetrated Southeast Asian market is generally unfamiliar with the live-streaming industry.
An independent market report prepared by Frost & Sullivan for 17LIVE addresses decreasing screen time and declining entertainment expenditure in the wake of the pandemic. In Japan, where 17LIVE is based, the pandemic created favourable conditions for the interactive video-streaming market’s rapid expansion with a market growth rate of 55% y-o-y on average between 2019 and 2022. However, Frost & Sullivan anticipates that the growth rate will “stabilise” although the market size would remain substantial.
In Taiwan, one of 17LIVE’s main markets, consumers are spending less time consuming digital content with the pandemic wearing out. Daily internet usage has decreased
from 2022 levels, presumably leading to a potential decline in live-streaming consumption. The notable decline in entertainment expenditure from 9.53% in 2019 to 6.43% in 2021 is a challenge to the revenue sustainability of interactive video-streaming platforms.
While interactive video streaming is gathering steam in Southeast Asia, Frost & Sullivan notes that the model of virtual gifting observed in Northeast Asian countries will not be sustained in the region. This is due to the lack of super-spending users willing to splurge on expensive virtual gifts for their favourite streamers. The researchers also believe that the influence of the pandemic on online viewership and spending in Southeast Asia will decrease as the region moves closer to a state of normalcy and gradually returns to pre-pandemic patterns.
Nonetheless, 17LIVE thinks it has a lot more room for growth. 17LIVE co-founder and group CTO Ng Jing Shen highlights that from 2023 to 2027, live-streaming in Japan is projected to grow at a CAGR of 22%. V-Liver — 17LIVE’s primary growth driver moving forward — is expected to grow at 41.2% during the forecast period, while live commerce is expected to have a growth rate of 43.6%. V-Liver refers to live streamers who choose to appear on screen as animated avatars with the help of motion capture technology.
“Beyond growing in Japan and Taiwan where we are market leaders, we also think there are many opportunities for market geographical expansion. The big reason why we are listing in Singapore is because we see it as a great launchpad for Southeast Asia where we see the live-streaming industry is forecast to grow by a CAGR of about 20% in the next five years. Beyond Asia, we see quite interesting global opportunities for V-Liver in the US as well,” says Ng.
According to Frost & Sullivan, the market size for live streaming in Southeast Asia is expected to increase from US$1 billion in 2023 to US$2.1 billion in 2027, representing a CAGR of approximately 19.2%. To tap what it expects to be a fast-growing live-streaming market, 17LIVE plans to expand by acquiring more live streamers and users in Southeast Asia as well as collaborating with media and entertainment companies in the region, among others.
17LIVE believes it has a different proposition from the competition in Japan and Taiwan. According to co-founder Joseph Phua, aside from providing creators with all the tools required to succeed, the platform also has contracts spanning between one and seven years with over 87,000 live streamers to create exclusive content.
Another competitive advantage is that 17LIVE has an in-house talent management team instead of working with external agencies, setting it apart from other popular platforms across Asia. “This is a very impenetrable moat and is why we have been able to grow leaps and bounds across the last five to six years. Working with agencies means having little bargaining power, heavily impacting margins. We can secure strong margins as we control and work directly with the creators,” says Phua.
Next growth driver
17LIVE’s financial performance is also at the top of mind for shareholders, especially as its operating revenue in 1HFY2023 ended June fell by 24.65% y-o-y to US$151 million. The company posted a loss of US$118.2 million compared to US$42 million a year ago. However, adjusted profit after including revaluation loss stood at US$9.4 million.
Phua highlights the company’s adjusted ebitda, which surged to US$15.8 million in 1HFY2023 compared to US$4.3 million in 1HFY2022. Against the challenging operating environment, Phua says the company has performed relatively well.
“I have also been reading the news recently on the quarterly earnings of many of our competitors and other players in the market, yet I have not come across similar stellar results that we have put forward. Given our size and the region we are operating in, I think 17LIVE is quite a strong-performing company,” says Phua.
He also stresses the boom of V-Livers, which the company has identified as its primary growth driver moving forward. 17LIVE introduced V-Liver content in 2018, eventually becoming a focus for the company’s business growth plans in 2022.
In April, 17LIVE officially integrated the Live2D functions into its broadcasting functionality. This allows users to use their smartphones to upload an avatar and conduct virtual streaming without additional hardware or software, thereby significantly lowering barriers to becoming a V-Liver.
Following the integration of Live2D functions, the marketing of its proprietary IP called Bushilive and offline V-Liver events, the company saw significant growth in its V-Liver business. In 2QFY2023, its V-Liver monthly active streamer grew 6.5 times y-o-y, while the average V-Liver MAU grew by 2.1 times. The average monthly V-Liver spend, on the other hand, grew by 2.7 times. Next, 17LIVE has enhanced its broadcasting functionalities, integrating more advanced 3D and hand gesture recognition features.
In their research, Frost & Sullivan expects V-Livers to achieve significant growth in the upcoming decade, particularly in China and Japan, with Taiwan likely to benefit from a spillover effect. This growth will likely generate new marketing and advertising opportunities as brands recognise V-Livers as valuable collaborators that offer improved access to the target demographic of 16 to 23-year-olds.
Reiterating the market size, Phua believes that the market has yet to value the V-Liver industry fully and is very optimistic about harnessing this creator economy.
platform. Short-form vertical content is difficult to monetise, says Ng. Most TikTok creators had earned their keep doing sponsorship content with brands, an avenue Ng found too unpredictable.
“I wanted to be content-first,” he says. “And I needed to find somewhere [a platform] where I can get constant revenue without having to worry whether I have a sponsored deal or not.”
Yet, when asked about his monthly revenue from advertisements through YouTube, Ng skirted around the question. He said his earnings differ from month to month, as advertising revenue is dependent on how many views a video chalks up.
According to Influencer Marketing Hub (IMH), Google pays out 68% of their AdSense revenue. This means for every US$100 an advertiser pays, Google pays US$68 to the publisher. With an average of 18 US cents per view and with about 15% of viewers on average watching the mandatory 30-second video ad content, a YouTube channel is estimated to receive $18 per 1,000 views.
IMH therefore estimates that a YouTube channel with a million subscribers would receive US$36,000 of advertising revenue per week if it were able to get its entire fanbase to watch two new videos per week.
Ng is also the founder of Boom Digital Media, which according to its online description, is a one-stop creative and media agency that helps brands optimise their presence on TikTok. In essence, Boom Digital Media creates videos for brands for a fee.
The idea was born at the inflexion of the explosion of short-form vertical content but because the industry had been slow to adapt to monetising the new format. Ng had to innovate by outsourcing his skills in creating content for brands who wanted to participate in this growing social media trend. “I saw that as an opportunity for me to go into it. Maybe there’s a gap in the industry so I’m trying to fill this gap,” says Ng.
Like any other creator, he spreads his content across a variety of platforms by tweaking a few details such as the music used or the ending of a video.
Diversifying streams of income is not a new concept — the multi-income career is widely popular among celebrities like the Kardashians. Having started out earning money from the streaming of their reality television programme Keeping Up With The Kardashians, each Kardashian family member has since ventured into new revenue streams.
Kim Kardashian herself made millions out of selling her likeness to games, emoji applications and her beauty venture KKW. Most recent are her forays into her clothing line Skims, which is the new underwear partner for the NBA, and lesser-known private equity firm SKKY Partners, which just signed its first deal this week.
Of course, the Kardashians may be an outlying example with their unfathomable wealth but the influencers and creators of today employ a similar mindset.
Singaporean influencer Bernice (not her real name), who started to earn money from sponsorship deals at the height of Meta-owned Instagram’s peak in the influencer economy back in 2018, says she has been afraid of jumping full-time into content creation because of the lack of a steady source of income.
To bolster her financial security, the 26-yearold holds a full-time job at a multinational technology company in cybersecurity.
With a small following of 20,000 followers on Instagram five years ago, she was able to begin charging anywhere between $500 and $1,000 for an Instagram post, accompanied by Instagram stories.
Today, she has multiplied her Instagram follower count by five times to 100,000 and now charges up to $2,500 for one Instagram shortform vertical video known as a reel. In comparison, Bernice’s TikTok account which she only created two years ago, has grown at a more speedy pace, with over 120,000 followers.
But 90% of her jobs still come from Instagram. It might be that Bernice’s audience on TikTok is less homogenous, comprising onethird from Malaysia, Singapore and Indonesia. But she admits that monetising her content through TikTok is “like a Pandora’s Box”, which she has yet to figure out.
The content creator says that her full-time job has taken away time and capacity from understanding how to optimise the new social video platform. While the many years spent on Instagram have allowed her to develop a tried and tested method in delivering results for the brands she works with, TikTok’s nascency means she needs to devote more time to experimenting with which formats work best.
On the other hand, Bernice has been picky about signing on with a talent agency, in fear of losing creative control and having to share a disproportionate cut of her earnings. She has heard that some agencies in Singapore take up to 50% of the earnings of the creators they sign on.
Like Ng, Bernice has ideas of starting her own small agency to manage content for other brands. This will serve to supplement her income as a full-time content creator.
Regardless, the future of the creator economy seems bright. Torring of Cube Asia has three predictions for how things will pan out. The first, and perhaps most relevant to Singaporean creators like Ng and Bernice, is that native advertising such as influencer marketing will become necessary to reach young consumer segments.
Torring says that the use of Adblockers and other factors like the rise of advertising-free subscriptions like YouTube Premium means that Southeast Asia’s young consumers are growing harder to reach through mainstream online advertising. This will require consumer brands to find new ways to reach consumers that they neither can nor want to suppress.
Torring’s next prediction is bolder. He thinks 2024 will be the year of the mega live seller in Southeast Asia, with million-dollar live-selling stars emerging in all markets. As mega live sellers were previously a China-only trend, it has begun to emerge in Indonesia and the Philippines, no less due to the rise of platforms like TikTok Shop. “This boom in live shopping — and more broadly in affiliate marketing — is very good news for e-commerce development,” he adds.
For creators like Bernice, she is making the good news for herself. At the time of this interview, Bernice has earned $36,000 this year alone. A figure already higher than the entirety of 2022, which is a signal to her that her creator journey is still growing. Soon, she intends to take the plunge into full-time content creation, something that she considers a dream job. “I don’t want to be stuck from nine to six at a desk, and still have to hustle beyond that,” she says. “I’ve made peace with the fact that I’m done with corporate life.”