What China’s Tightening Grip on Livestreaming Could Mean for Luxury

What Happened: China is cracking down on livestreaming in an effort to ramp up Internet censorship and rein in tech giants. The announcement on November 23 comes after a surge of spending on platforms run by Alibaba and Kuaishou, sparked by the COVID-19 pandemic. Under the new regulations, hosts and gift givers will be required to register their real names and social credit codes. Platforms must submit regular reports to local authorities, noting when celebrities and foreigners livestream and giving a two-week notice before any big, livestreamed e-commerce events. Most drastically, the rules also limit the total spending by any single user and bans teenagers from gifting altogether, curbing a major revenue source for the industry.

The Jing Take: Livestreaming is a booming business in China — and luxury brands know this. According to the research firm iiMedia, the industry tripled its gross merchandise value to $62 billion last year and is expected to double that value again in 2020, with the number of users set to reach 526 million by the year end. These new rules, however, could hamper this growth, spelling trouble for luxury brands who rely on livestreaming as a key sales tactic.

On the one hand, increasing regulation of content could lead to more professional platforms that better suit the standards of luxury brands. Requiring livestreaming sites to report users who illegally advertise and falsify page views will not only protect consumers, but also help brands make better marketing decisions based on a more accurate viewership and sales numbers.

On the other hand, the proposed spending caps could have disastrous effects on platforms like Kuaishou. The Chinese video streaming platform reported $2.64 billion in revenue from the first half of 2020 — largely from virtual gift income — which represents more than half of the company’s total revenue. Stricter rules on e-commerce and livestreaming spending could affect the ability of Kuaishou and other platforms to maintain or increase their userbase, ultimately affecting financial results for both the livestreaming and luxury industries.

The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.

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