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Songcheng Performance must adapt after madly copying 13 projects.

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2025-01-20

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Author | Gao Linglang

Editor-in-chief | Yang Ming

Editor | Liu Kaiye

Come Source | Weiran Xiansheng

Recently, Songcheng Performance announced that it will build Qingdao's first large-scale performing arts park project in the Qingdao SCO Demonstration Zone. Unlike previous projects, this approximately 120-mu "Silk Road Millennium Love" will adopt a light asset operation model.

It is reported that Qingdao's state-owned enterprises are responsible for the investment, financing, and construction of the project, while Songcheng Performance provides brand authorization, creative design, and other services and is responsible for post-operation management, with a total service fee of 260 million yuan.

In fact, Songcheng Performance has announced that from January 2025, it will significantly reduce the entrusted operation and management fees for light asset projects from the original 20% to 8%. This move reflects the transformation attempts of this "China's No. 1 Performing Arts Stock" after being affected by the epidemic.

Data from the Ministry of Culture and Tourism shows that in the third quarter of 2024, the number of domestic tourists reached 1.512 billion, with a total expenditure of 1.62 trillion yuan, an increase of over 15% year-on-year.

However, against this backdrop, according to Guotai Junan Securities statistics, the performance of some mature projects of Songcheng Performance has not met expectations. In the third quarter of 2024, the average daily number of performances of major heavy-asset projects generally declined, with Hangzhou projects falling by 23%, Zhangjiajie projects falling by 31%, and Sanya projects falling by 4%.

Over the past 30 years, Songcheng Performance has established 13 projects nationwide through the business model of "theme park + cultural performance," including 9 self-operated scenic areas and 4 managed scenic areas.

Songcheng Performance's expansion mainly concentrated in two periods: around 2014, projects were opened in Sanya, Lijiang, Jiuzhaigou, etc.; and between 2018 and 2021, projects were laid out in Guilin, Zhangjiajie, Xi'an, Shanghai, etc. Most of these projects adopted a heavy-asset investment model, laying the foundation for the company's rapid expansion.

However, in recent years, the progress of some heavy-asset projects has not been smooth. The planned Zhuhai Songcheng Performing Arts Resort and Xitang Songcheng Performing Arts Valley projects have not seen significant progress.

In January 2024, the company confirmed that the Zhuhai project has been taken over by the parent company, Songcheng Group, and will not consider repurchasing it. This performing arts cluster and cultural tourism complex, once considered the company's "flagship project" in the Guangdong-Hong Kong-Macao Greater Bay Area, has been stalled since its commencement in April 2020.

Financial data shows that in the first three quarters of 2024, Songcheng Performance achieved total operating revenue of 2.013 billion yuan and net profit attributable to the parent company of 1.008 billion yuan. Although this exceeds the full-year level of 2023, it still lags behind the annual revenue exceeding 3 billion yuan in 2017.

In 2023, the company incurred losses due to an impairment provision of 861 million yuan for its long-term equity investment in Huafang Group, which also triggered inquiries from the Shenzhen Stock Exchange. In response, the company explained in its annual report that if the income and impairment from this investment were not considered, the net profit attributable to the parent company in 2023 would be estimated at 829 million yuan.

In the face of market changes, Songcheng Performance has begun to cautiously adjust its expansion strategy.

The Hubei Yidu Three Gorges Millennium Love project, which opened in July 2024, was the first to try a light asset model, with local government and enterprise departments responsible for investment, financing, and construction. This model has been continued in the current Qingdao project, showing that the company is shifting towards a more flexible expansion method.

In the current cultural and tourism market, Songcheng Performance faces a significant change in tourists' consumption habits—as sightseeing tourism transforms into leisure and vacation tourism, tourists are more inclined towards independent travel and personalized experiences, and the number of traditional group tourists continues to decline.

To cope with this trend, Songcheng Performance has begun to try to transform from tourism performance to urban performance.

In April 2021, Songcheng Performance opened a performing arts park in Shanghai World Expo Qian Tan, benchmarking against New York's Broadway to create an urban cultural space. However, the project was temporarily closed shortly after its opening due to factors such as the epidemic. Later financial reports showed that after reopening on July 1, 2023, the project achieved revenue of 97.8034 million yuan that year.

We believe that although Songcheng Performance's core product "Millennium Love" has achieved standardized replication, the main problem currently facing the transformation to urban performance is the growth bottleneck in performance.

On the one hand, the number of high-quality tourist cities and regions nationwide is limited; on the other hand, with the advent of the era of independent travel for tourists, traditional performance models will be restricted.

In addition, for urban cultural and tourism departments, combining multiple performing arts projects can extend tourists' stay time and increase consumption. However, most existing cultural and tourism projects have not yet fully understood tourists' consumption habits and needs.

Furthermore, there are many performing arts projects in popular "check-in" scenic spots, but there is serious homogeneity among high-quality projects, resulting in low tourist conversion rates and low project profitability.

Currently, mainstream urban performing arts projects mainly focus on concerts, operas, ballet, dramas, immersive performances, etc., with higher prices and a relatively niche audience. In other words, under the transformation of consumption trends, there is still considerable room for growth in this market.

Currently, the cultural tourism and performing arts market will enter a normalized development stage, and consumers' requirements for the price and quality of tourism products are constantly increasing.

For Songcheng Performance, the main risk of the light asset operation model lies in the control of service quality. If management is not proper and the tourist experience declines, it will endanger the brand value of the company's projects from point to surface.

In our view, the cooperation between Songcheng Performance and Qingdao's state-owned assets indicates that Songcheng Performance has noticed the "northward" trend of the urban tourism boom and hopes to further accelerate its transformation to urban performance.

In the short term, this cooperation will enable Songcheng Performance and its "Millennium Love" series brand to gain wider dissemination and recognition; in the long term, the light asset model can reduce expansion risks and replicate project experience quickly with the help of local government resources.

In any case, under the general trend of consumption downgrading, Songcheng Performance does not have much time left for self-rescue.

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