China Literature Limited (772) Earnings Call Transcript & Summary

Good evening, ladies and gentlemen. Welcome to China Literature's 2021 Annual Results Call. A copy of the annual results announcement can be found and downloaded from its Investor Relations website, http://ir.yuewen.com. [Operator Instructions] I would now like to hand the conference over to your host today, Ms. Maggie Zhou, Head of Capital Markets and Investor Relations at China Literature. Maggie, please go ahead.

Thank you, operator. Ladies and gentlemen, welcome to our 2021 annual results conference call. Joining us today on the call are Mr. Edward Cheng, our CEO; Mr. Monkey Hou, our President; and Mr. William Sun, our VP of Finance. For today's call, Edward will discuss the company's strategies and business highlights. Monkey will provide more operational details, and William will go through the financials. We will then open up the call for questions. Before we begin, I'd also like to remind you that management's comments during the call will include forward-looking statements that are based on our current expectations. All statements other than statements of historical facts during the call are forward-looking statements, which are subject to a number of risks and uncertainties and may not be realized in the future for various reasons. Information about general market conditions is coming from a variety of sources outside of the company. This presentation also contains some unaudited non-IFRS financial measures that should be considered in addition to, but not as a substitute for measures of the company's financial performance prepared in accordance with IFRS. So please, do take a minute to read the risk factors and non-IFRS measures discussion in China Literature's 2021 Annual results earnings release. I will now turn the call over to our Chief Executive Officer, Edward.

Thank you, Maggie. Hello, everyone. Thank you for joining our earnings call today. Actually, not very long go, during the Chinese New Year holidays, the TV series A Lifelong Journey was hugely successful in China. As one of the Tencent Pictures Prime series jointly produced by China Literature and New Classics Media, A Lifelong Journey set an 8-year record in China Central Television Channel 1 prime time ratings. Topped all charts across the Internet and was acclaimed widely. The drama series tells the life story of an ordinary Chinese, Mr. Zhou and it spans several decades from his childhood 1970s to the present day of 2020s. He and his family witnessed drastic social changes in China over time, experienced ups and downs and made different choices in their lives. The extensive historical scope of the series resonated widely with the audience across -- all over China. The drama series was based on the story of the same name, written by famous author, Mr. Liang Xiaosheng. Actually, I first read the book 4 years ago and was deeply impressed. After acquiring the rights to put the novel on the big screen, I had the privilege of working closely with the whole team during the entire production process, during which I gradually developed a new perspective. Similar to Mr. Zhou, a person of the present day tends to believe that the current era is full of unique and distinctive challenges. But if we move along a time line that spans decades, we can see that what we thought was unique and challenging about the current era is a wrinkle in time, time is forever evolving forward. The most important decision any individual or business organization needs to make is to be on the right track, do the right thing and keep pace with the times. China Literature is keeping pace with the times. And this year, reading for all was included in the government work report for the ninth time. The work report highlighted promotion of press and publishing, broadcasting, film and television, literature and art industries and expansion of the supply of quality cultural products and services. The policy provides China Literature with very promising long-term development prospects for the sector in which it operates. Digital reading is a key pillar and a driver for a society built around reading for all. The entire industry chain around China literature will help to achieve this goal as an integral part of the process of building higher culture. This will ultimately generate both commercial and social value, even if it cannot be reflected immediately in short-term 6 months to 1 year financials. The creation of timeless stories and the creation of IP that can be passed on from generation to generation are key to our core value proposition. In 2021, we realized the total revenue of RMB 8.7 billion. Revenues from online business increased 10% year-over-year, and revenues from IP operations business increased over 30% year-over-year, excluding the revenue contribution from New Classics Media. Profit attributable to equity holders of the company under non-IFRS measures increased 34% year-over-year to RMB 1.23 billion. What was even more encouraging was the announcement of our IP metamorphosis strategy, which articulates the 3 stages we used to evaluate the value of our literary IP. These 3 stages are: first, we adapt our literary IPs to media-rich products or as we call it, the visualization of our IP. Second, we enhance the commercial value of our IP. And third, we created timeless IP that can be passed down from one generation to the next. We are of the view that this strategy will lay the foundation for the evolution of China Literature over the next decade and provide IP with opportunity to generate dividends over time. Now I will follow this strategic framework to explain how we will create IP and how we will enhance the value of IP over time. And first, IP creation. Our literature platform is the origin of our huge portfolio of IP content. On the supply side, the boundless creativity of our writers allows us to accumulate high-quality IP efficiently. In 2021, our platform added 700,000 writers and 1.2 million literary works. The increase in word count for the year was 36 billion Chinese characters. In addition to quantity, quality is constantly improving. Thanks to the healthy ecosystem we have developed, which helps writers to fulfill their accretive potential. Young writers will find it particularly attractive and their performance in 2021 was outstanding. Among all the newly added writers of China Literature, approximately 80% were born after 1995. Out of the top 12 rookies of the year, 5 are under age 27. On the user side, the monthly active user, MAU, of our online business in 2021 was 249 million, a historical high, positioning us as a major force executing the reading for all policy. We attribute this to our tireless effort to improve content, ecosystem, content incubation, community features and as well as to our recommendation efficiency. Now let's talk about how to convert text IP into visual IP. Visualization from font to image is crucial for text IP to tap into new audiences and extend its influence. By visualizing stories, we also create a mutually reinforcing environment where high-quality stories enjoy a higher chance of success during the visualization. And the visualized IP, once successful, can attract more audience to the original story. Currently, IP visualization is the focus of our work. In the TV and film segment, China Literature and the New Classics Media have rolled out numerous blockbusters. Following the success of my Heroic Husband, Soul Land, The Rebel and Hi, Mom, we have again released several highly rated and popular works. As previously mentioned, the drama series, A Lifelong Journey was adapted from the Mao Dun literature prize-winning fiction by contemporary writer, Mr. Liang Xiaosheng of the same name. It examines history through the lens of the life of an ordinary man and dedicates the life of ordinary people in peaceful, empathetic, in-depth and extensive manner. We also released the IP-adapted drama series, Sword Snow Stride, which demonstrates the modern Wuxia spirit. Actually, you can also kind of call it [ Kung Fu ] and the culture of Jianghu with contemporary characteristics. The drama series had nearly 7 billion video views and has extremely high popularity in the market. In film, we released Too Cool To Kill during the 2022 Spring Festival. The film stood out during this highly competitive period with total box office sales of RMB 2.6 billion, coming second in box office sales during the year's Spring Festival period. Our excellent story also reached international markets. For example, the overseas broadcasting rights of A Lifelong Journey have been licensed to Disney, and My Heroic Husband was licensed to a Watcha, a Korean streaming media platform for live-action adaptation. Looking ahead, we will continue to work on serial development of high-value IP dramas, such as Joy of Life, My Heroic Husband and Dafeng Guardian and others as well as producing realistic masterpieces that reflect our era. In the animation segment, we launched the 2 new seasons of Battle Through the Heavens, including Battle Through the Heavens Season 4 and the special episode, Three Year Promise, which had over 4 billion video views in aggregate. As of the present, the Battle Through the Heavens series has exceeded 10 billion video views. In addition to Battle Through the Heavens, Stellar Transformations emerged as a heavy weight to IP in China. With 4 seasons and total video views of over 3 billion, we also released several quality productions in 2021, including Da Wang Rao Ming and Cinderella Chef Season 2. Among the top 10 newly released animations on Tencent Video platform in 2021, 5 were adapted from China Literature IPs. In the comics segment, our production capacity increased rapidly last year. In late 2020, we and the Tencent Comics jointly announced a joint project to adapt to 300 online literary works into comics in 3 years. Right now, over 100 already adapted comic works have been released or launched on Tencent Comics' platform. Some titles have become blockbusters, such as Dafeng Guardian, which had 100,000 favorite views within 44 hours after launch. Converting literary works into comics before further adaptation into animations and the dramas has multiple benefits. It will help China Literature build a character universe at a lower cost, while systematically testing the response of a core audience group, which will improve the hit rate of subsequent adaptations into other media-rich formats. In the games segment, we continued to license our IPs to quality game R&D teams and companies to explore the potential and the value of our IP. And let me turn next to our progress with downstream commercialization of IP through same characters and merchandise. In 2021, we focused on building a foundation for the business, including IP planning, setting up an image database and building up design capacity of IP merchandise. We also selectively worked with partners in costume goods, fashion toys and the retail sectors to kick off pilot projects. As users increasing -- increasingly value copyright protection, have greater spending power and are more willing to spend on IP merchandise, we definitely will capture the trend to develop the IP derivatives and work closely with our partners to drive the growth of the business. This will create more headroom for China Literature's IP merchant business by transforming IP into physical products that are accessible everywhere. Last but not least, we would like to talk about our ultimate goal, building IPs that have staying power. Last June, we announced that our mission for the company was to create good stories that never end and this consists of 2 layers of meaning. The first meaning is to create, that is through incubation and cultivation of our literary ecosystem to help the best stories continue to emerge and become the source of quality IP. The second meaning is never end, that is through comics, animation, film and television, games, merchandise and other forms to pass on our best stories so that they become the shared memory of generations of people. Today, many of our IPs have lasted for more than a decade already. Soul Land was first created in 2008, 14 years ago. The King's Avatar is 11 years old. Their success was not an accident, but the result of 5 to 10 years of hard work. What we are doing now is providing support to cultivate the best content so that literary hits can turn into comics, animation, film and television hits as well as in other media and eventually become the hits of each generation with a staying power to last from one generation to the next. Currently, many classic IPs of China Literature are being adapted into new versions. We're also working with -- working on IP series development, for example, producing sequels for both TV series, Joy of Life and My Heroic Husband, and we will continue to launch new seasons for our animation and a comics series. At the same time, more products and IPs are being created and developed on our platform. We hope that in each era, there will be new interpretations of these IPs with each carrying the distinctive characteristics of the particular era. If this dream is realized, such IP will become the cornerstone assets of China Literature's long-term value. This will best reward all the efforts we have made today. In conclusion, China Literature focuses on seizing the historic opportunity offered by the present. We have created our own unique IP and have established a rich culture ecosystem that reflects the era. We will withstand the changing tides and become a pioneering voice of the times, do our part to create Chinese stories that will live forever. And this is a mission that we fight and we will fight to achieve. That concludes my session. Please join me to welcome Monkey, our President, to provide further information to our businesses. Thank you.

Thank you, Edward. Edward has just spoken about our strategies and some of our operating results. Next, I would like to add some details on our business performance in 2021. First, our online reading business. Last year, MAU increased 8.6% year-over-year to 249 million for our own platform products and Tencent channels. Average DAU for our free content increased 50% year-over-year to 15 million by last December. As our free content attracted users, MPU declined 15.7% (sic) [ 14.7% ] year-over-year to 8.7 million. However, monthly ARPU for paid content increased 15.7% (sic) [ 14.4% ] year-over-year to RMB 39.7, reflecting users increased willingness to pay for our quality content. This is a result of further improvements to our content operations, work titles, committee features and [indiscernible] diversity. In 2022, we will work to [ create user techniques ] and improve user experience and continuing to provide quality content products and services. We continued to expand in the global markets with our overseas reading platform, WebNovel. By the end of last year, WebNovel had about 2,100 works translated from Chinese and 370,000 original works created locally. We hope that we will be able to explore new possibilities for global cultural ecosystem and the cultural exchange through our online reading business and our continuing innovation and creativity. This ends my remarks. William will provide more company's performance results. Thank you all.

Thanks, Monkey. Hello, everyone. In 2021, our total revenues increased by 1.7% year-over-year to RMB 8.7 billion. Our online business revenues were RMB 5.3 billion, up 9.6% year-over-year. Higher advertising revenues from free-to-read business on our self-operated channels on Tencent products contributed to the growth as we continue to expand the user base for free reading. Revenues from third-party platforms also increased owning to the revenue increase from existing partners and the expansion of distribution channels. On the other hand, we saw a slight decline in revenues from self-owned platform products, primarily due to a higher base driven by a rise in online traffic during the COVID-19 pandemic period in the first half of 2020. Turning to IP operations and other businesses. In 2021, our IP operations and other revenues decreased by 8.7% year-over-year to RMB 3.4 billion. Excluding the revenues generated by New Classics Media, revenue from IP and other operations increased 30% year-over-year to RMB 2.1 billion. The decrease in revenues of New Classics Media on an annual basis was the result of a change in product mix with different revenues, cost structures and business models. Despite the decrease in revenues, net income for New Classics Media increased [ 24.3% ] year-over-year to RMB 534 million. Now let's look at costs and expenses. In 2021, our total cost of goods sold amounted to RMB 4.1 billion, down 5.2% year-over-year as a result of lower production costs partially offset by higher content costs and amortization of intangible assets, comprising of content copyrights during the expansion of our online reading businesses. In 2021, our gross profit increased by 8.6% to RMB 4.6 billion, representing a gross margin of 53.1%, up from 49.7% in 2020. We recorded net other gains of RMB 1.4 billion for 2021 compared with net other losses of RMB 5.3 billion in 2020. The net other gain for 2021 mainly generated from gains of RMB 1.3 billion related to the sale of our equity interest in investee companies and other miscellaneous gains. Our selling and marketing expenses increased by 8.1% year-over-year to RMB 2.7 billion in 2021. The increase was primarily due to greater marketing expenses to promote our online businesses and films and dramas businesses as well as an increase in employee benefits expenses and share-based compensation expenses. As a percentage of revenues, our selling and marketing expenses increased to 31.2% in 2021 from 29.3% in 2020. Our G&A expenses increased by 51.5% year-over-year to RMB 1.3 billion in 2021 mainly due to, one, the net increase in compensation cost of RMB 167 million, mainly driven by service expenses reversals of certain employees and former owners of NCM in the prior year relating to the modification of earnout mechanism for NCM in 2020; two, an increase in employee benefit expenses and share-based compensation expenses. And three, an increase in research and development expenses related to our self-operated online game as revenue increased. As a percentage of revenues, our G&A expenses increased to 15.3% in 2021 from 10.2% in 2020. As a result of factors mentioned above, our operating profit was RMB 2.17 billion in 2021 compared with an operating loss of RMB 4.47 billion in 2020. Non-IFRS operating profit, which excludes share-based compensation M&A-related impacts such as net gain or losses from investee companies, amortization of intangible assets and the impairment provisions increased 39.1% year-over-year to RMB 1.3 billion. Non-IFRS operating margin was 15%. Net profit was RMB 1.85 billion in 2021 compared with a net loss of RMB 4.48 billion in 2020. Non-IFRS net profit attributable to equity holders of the company increased 34.1% year-over-year to RMB 1.23 billion with non-IFRS net margin of 14.2%. In conclusion, we delivered promising growth in our user base and profitability. We will continue to strengthen our operating and financial performance by focusing on quality content, community experience and IP operations in the longer term. That concludes the financial-related part. Let's move to the Q&A session.

[Operator Instructions] And your first question comes from the line of Thomas Chong from Jefferies.

[Foreign Language] My first question is about the driver for different parts of the business. Can management share about the 2022 revenue and profitability outlook? And my second question is about the scheduling of our drama series. How should we think about the timetable as well as the revenue and profitability for NCM? And my third question is relating to free reading. Can management comment about the user growth as well as the trend for advertising in 2022? And my last question is about the approval for the drama series. How should we think about the impact on regulations to the approved proposal?

[Foreign Language]

[Interpreted] Okay. This is Monkey. And I would like to address your questions regarding our business plan for 2022 and your question about our free reading, and then Mr. Cao from New Classics Media will address the questions related to New Classics Media. So first of all, regarding your question about our business plan for this year, we are happy to share some of our thoughts. Our core business lies in our reading platform. And our literature platform gives rise to a huge portfolio of IP content. And last year, we formally proposed our vision, which is to make high-quality stories that live forever. So we will continue to constantly incubate high-quality writers and their literature work and keep improving writer experience with our platform, and these are our unchanged missions. So previously, Edward mentioned about the IP metamorphosis strategy, a 3-stage approach covering the visualization of IP, downstream commercialization of IP and passing on IP from generation to generation and creating stories that will live forever. So this approach has driven China Literature's strategic upgrade. Okay.

[Foreign Language]

[Interpreted] Okay. I will translate. So the first stage of IP metamorphosis is the visualization of IP. China Literature will continue to leverage the 3-way partnership consisting of Tencent Pictures, New Classics Media and China Literature Pictures and joint anime community consisting of China Literature Comics and Tencent Comics to unleash the synergies and at the same time, continue to work closely with external business partners and optimize the IP ecosystem in order to drive the text IPs to be adapted into a variety of content formats, including comics, animation, games, et cetera, and enhance the influence of IP. Okay.

[Foreign Language]

[Interpreted] So I would like to share with you our pipeline for drama series, films and animations in 2022. So in terms of New Classics Media drama series, in addition to A Lifelong Journey, we expect to further release more projects, including In Spite of the Strong Wind [Foreign Language], The Wind Blows from Longxi [Foreign Language], [ Master of My Own ] [Foreign Language], Battle Through the Heavens Season 2 [Foreign Language], [War of Rose], [ The Infiltrator ] [Foreign Language], [ My Special Policewoman ] [Foreign Language]. So in total, New Classics Media expects to release approximately 6 to 8 drama series altogether in 2022. Okay.

[Foreign Language]

[Interpreted] In terms of films, we released Too Cool to Kill [Foreign Language] during the 2022 Spring Festival and [ Another Me ] [Foreign Language] during the New Year holiday, both of which were comedy films. We expect to release a total of approximately 2 to 3 films this year.

[Foreign Language]

[Interpreted] In terms of animations, we will release more seasons for existing series such as Martial Universe [Foreign Language] and Battle Through the Heavens [Foreign Language] and some new titles such as Forty Millenniums of Cultivation [Foreign Language].

[Foreign Language]

[Interpreted] So the second stage of IP metamorphosis is the downstream commercialization of IP, we will constantly solidify our fundamental capabilities and prioritize areas, including consumer goods, fashion toys and off-line retail sectors as our pilot project for collaboration and interaction with our upstream and downstream partners. We are determined to engaging in in-depth participation and intensive development of IP derivatives and work with our partners to drive the development of this business, transform IP into physical products that can be accessible everywhere.

[Foreign Language]

[Interpreted] The third stage of IP metamorphosis is passing on IPs from generation to generation, as we call it, to create stories that will live forever. We are devoted to the long-term value creation for IP with a long-term framework. From a long-term perspective, the China Literature plus strategy based on Tencent's new culture creation ecosystem leverage our literature platform as the cornerstone in conjunction with the discovery and development of premium IP as a driving force to build an open and inclusive ecosystem that allows creative talent and business partners to collaborate seamlessly, unleashing the full power and the commercial value of the best IPs to realize our long-term vision, which is to create the world's best IP value chain for content creative and to become a world-leading cultural and creative platform.

[Foreign Language]

[Interpreted] Okay. So now let me share with you about the update on our free reading business. So the DAU for our free-to-read content in December 2021 reached 15 million with a 50% increase over December 2020. Going forward, we will continue to attract more users with our high-quality content, and this is also one of our competitive advantages.

[Foreign Language]

[Interpreted] From our perspective, our top priority is the incubation of high-quality content regardless of free reading or paid reading, and this is the strategy that we are always devoted to. We are quite open-minded towards different business models as they really can be much diversified. But in essence, it is the content quality that determines the scale of users and revenues we will be able to achieve and to what extent can we unleash the value of IP at the end of the day.

[Foreign Language]

[Interpreted] Currently our free-to-read business focuses on the establishment of the ecosystem, including the incubation of quality writers and works and the improvement in user experience and retention.

[Foreign Language]

[Interpreted] But currently, we pay much attention to the user experience and the [ ad load ] is relatively limited, and the monetization in general is still restrained. So in the future, the potential increase in monetization depends on the changes that may happen in the industry and the market as well as our judgment of user coverage, user stickiness and our content library establishment. If we think these factors are material, then we will gradually increase the [ ad load ] and also balance it with our user experience at the same time.

[Foreign Language]

[Interpreted] Okay. So I would like to share the updates on New Classics Media. So Monkey just now introduced the pipeline of New Classics Media for 2022. So you can see that we do have a very rich content pipeline this year. So, so far, we have already released several successful projects, including films [ Another Me ] [Foreign Language] and Too Cool to Kill [Foreign Language] and the blockbuster drama series, A Lifelong Journey [Foreign Language]. So we think it is possible that New Classics Media will be able to reach the high end or mid to the profit target of RMB 500 million this year. So as to your question about the content censorship. As we know that the time span of content review of drama series by authorities in China remain quite stable, the same as before. So in the current market environment, the industry is undergoing upgrade with higher standard in content review under which only the high-quality content producer can survive. And the focus is driven by -- is driven back to the quality content creation. The regulatory policies will help set up a better order of the industry and promote a healthy development of the market. We believe the premium media production will secure a more solid position in this content and quality-oriented market and this will eventually benefit those production houses who are able to produce high-quality content such as New Classics Media. So we will pay close attention to the market trends, complying with regulatory requirements, respect the content creation patterns, strictly control quality standards and engage industry talents. New Classics Media is confident to maintain its leading position with introducing more blockbuster work and achieving sustainable growth. So we will persistently execute on the strategy of producing high-quality, diversified and serialized content, we will also be more cautious in project initiation and cost control. So we will ensure product quality while pursuing better financial performance. Thank you.

[Foreign Language]

[Interpreted] Okay. Let me translate. So this is Edward. And I would like to add more points in addition to the comments from Mr. Cao. So as Mr. [indiscernible] mentioned, actually, the time spent for content censorship in China has remained quite stable. And actually, the industry is going through an upgrade and adjustment, which makes it more mature and New Classics Media has really demonstrated its excellent media production capability by presenting users with numerous blockbusters which actually validated New Classics Media's ability to constantly produce blockbusters. So China Literature is quite similar. We have been validated, our capabilities, in different media formats, production capacity and capability, including comic, animation, literature work as well as the broader media production capabilities. So I think compared with our peers with a single type of business model, I think we have a lot of competitive advantages. So as you know, our literature business is the starting point for our IP. So our reading platform is a creation platform that constantly incubates quality content in a low-cost and high efficient manner. Technology should drive the visualization of IP through the establishment of an IP ecosystem to further unleash the IP value based on the text IPs that we created from our literature platform. So in terms of the visualization of IP, actually, we have a lot of organizational structure designs to realize the visualization. For example, the joint project team of China Literature and Tencent Comics has quickly enhanced the production capacity of IP-adapted comics. In addition, our IP-adapted animations also achieved strong performance and represented a big portion in the top animation [indiscernible] list. And in terms of media production, the 3-way partnership of Tencent Pictures, New Classics Media and China Literature actually delivered many sought-after drama series and films in the past 2 years. And we can say that we are those -- one of those companies with the most number of high-quality blockbusters produced in the past 2 years, 2 to 3 years in the industry. So in general, even if the industry is going through an adjustment period. But as China Literature has a very unique business model and our unique competitive advantage. We continue to strengthen our own capabilities. And therefore, we enjoy a higher hit rate, and we can better manage the production risk than our peers, which do not own the value chain competitive advantages that China Literature has. So this is my sharing. Thank you.

Your next question comes from the line of Xueqing Zhang from CICC.

[Foreign Language] I have 2 questions. Firstly, it has been 2 years since we proposed the IP ecosystem strategy. Can management share more on the progress of the pilot building on IP development and operation? And what is our IP operation middle ground system? And my second question is that we saw that WebNovel have made some progress and some TV dramas have also been distributed overseas. Can management share more color on China Literature's overseas strategy?

[Foreign Language]

[Interpreted] This is Monkey, and I will take your questions. So yes, in the past 2 years, the company really has gone through a lot of changes. Previously, we heavily relied on IP licensing, but lacked a system to review and manage the licensing business, and we had very limited engagement in the downstream IP adaptation. As a result in the past, the adaptation by third-party partners due to various reasons such as lack of understanding of the original novel were not satisfying in terms of quality.

[Foreign Language]

[Interpreted] So in the recent 2 years, under the leadership of Edward, we made a series of adjustments in organizational structure and strategy for our IP business. Starting from reviewing the IP business and our operational tactics, we have gradually established a systematic working procedure for IP licensing and management and greatly enhanced the productivity and control in the downstream adaptation process and strengthened our engagement in self-production and self-operation in the downstream. First of all, IPs in our content library are quite diversified in genres and styles. We designed different paths to develop each of them. Taking into consideration various factors, including the novel's data points, market feedback, editors recommendation and IP promotional value, we come up with a comprehensive judgment of the IP based on which we determine a long-term path of development that matches the nature and features of the IP. After that, we work closely with both business partners across the industry to actually adapt the IPs into various content formats, including drama series, films, comics, animations, games and merchandise and present users with a series of quality media products. So just as Edward has mentioned, China Literature Comics and Tencent Comics has co-established a joint work to adapt IP-adapted literature to comic book, and we have enhanced through this joint working team, our production capability, capacity and efficiency for comics and animation through the joint anime committee consisting of China Literature Comics and Tencent Comics. We have produced more quality drama series and films through the 3-way partnership consisting of Tencent Pictures, New Classics Media and the China Literature Pictures. And we have collaborated with excellent game studios to adapt our IP into different types of quality games.

[Foreign Language]

[Interpreted] So far, we have established a relatively comprehensive IT business team, which mainly includes functions of IT planning, IP licensing and IP operation. So now the IP business team now has close to 200 headcount.

[Foreign Language]

[Interpreted] So as to your question regarding our overseas business. So in the past 2 years, under the leadership of Edward, we've paid much attention to our expansion to the overseas market. So as of December 31, 2021, WebNovel, our overseas reading platform offered approximately 2,100 works translated from Chinese and around 370,000 original content works created locally. We hope that we will be able to explore new possibilities for the global culture ecosystem and the cultural exchange through our online reading business and our continuing innovation and creativity.

[Foreign Language]

[Interpreted] In addition to our self-owned WebNovel platform, we have also made equity investments in top tier online reading platforms in the overseas markets such as Ookbee U in Thailand and in Munpia in South Korea. Also, we have established a joint venture with Tencent, a leading mobile phone manufacturer in Africa to tap into the African online literature market. In addition, we have entered into a strategic partnership with Singtel to expand the online reading business in Southeast Asia.

[Foreign Language]

[Interpreted] Also, the IP-adapted drama series are well received and enjoy great popularity in many overseas countries and have brought wider cultural influence to the overseas market. For example, IP-adapted drama series, such as Joy of Life [Foreign Language] and My Heroic Husband [Foreign Language] are available on the mainstream Europe and U.S. online video platforms as well as various TV channels in Southeast Asia. In the beginning of 2022, My Heroic Husband [Foreign Language] was licensed to Watcha, a Korean streaming media platform for a live-action adaptation and this is WeChat's first-ever adaptation work. Also, the overseas broadcasting rights of the A Lifelong Journey [Foreign Language] has been licensed to Disney.

[Foreign Language]

[Interpreted] In general, China Literature's overseas operation is well recognized by authorities. In 2021, China Literature was awarded key national culture export enterprise for year 2021 to 2022 by the National Review and Television Administration and other official authorities in China, and it was the fourth time that China Literature won the award. The overseas distribution and operation of Joy of Life [Foreign Language] was listed as a major culture export program for year 2021 to 2022.

Your next question comes from the line of [ Garrett ] from Citic.

[Foreign Language] The platform like iQIYI and Tencent Video has already cut their budget or take more caution on their investment on the drama or movie. So we know that the China Literature has a very -- had a cooperation with the iQIYI and the Tencent Video. So will this move from iQIYI and Tencent Video will affect China Literature? And the second question is that we know that the Chinese government has given some limitation to the actors. So were there any positive effect to China Literature's cost?

[Foreign Language]

[Interpreted] Okay. So currently, the industry is becoming more quality-focused, which is favorable to the positive, healthy and sustainable development of the industry. We believe the premium media production will secure a more solid position in this content and quality-oriented market. So the TV stations and online video platforms always have a strong demand for high-quality dramas. And for them, the ROI of these good quality dramas is much higher than that of those sub-quality ones. So New Classics Media is focused on producing only quality dramas, which are scarce, but highly demanded in the market with that, the sales of New Classics Media's drama series are guaranteed. So affected by policy and market changes, the purchase prices of drama series from TV stations and the video platforms have declined to a certain extent if compared with 3 years ago. However, NCM specializes in the production of high-quality content that is scarce and highly demanded in the market. With that, the sales of New Classics Media's drama series are guaranteed. At the same time, New Classics Media's [ project margin ] can also be guaranteed, thanks to its high quality. As to your question regarding the remuneration of actors. Actually, in recent years, the government has issued several policies to restrict the remunerations of actors and actress. We think this is a very favorable policy and measure to promote the healthy and sustainable development of the long-term growth of the industry, and it is very effective to control our production costs and allows us to put more of our efforts of finance resources, our other energy and time to other production assets like the content development. Thank you.

I would now like to hand back to Maggie Zhou for closing remarks.

Thank you, operator. Due to time constraints, we will have to conclude today's call. On behalf of the entire China Literature management team, I would like to thank you for your participation on today's earnings call. If you have further questions about the company, please feel free to contact us. Thank you, and goodbye.

That does conclude our conference for today. Thank you for participating. You may all disconnect.