Douyu International Holdings Ltd (DOYU) 2022 Q1 法說會逐字稿

Good morning and good evening, ladies and gentlemen. Thank you, and welcome to DouYu International Holdings Limited's First Quarter 2022 Earnings Conference Call. (Operator Instructions) Please note, today's event is being recorded.

I would now like to turn the call over to your first speaker today, Ms. Lingling Kong, IR Director at DouYu. Please go ahead, ma'am.

Thank you. Hello, everyone. Welcome to our first quarter 2022 earnings call. Joining us today are Mr. Shaojie Chen, Chairman and Chief Executive Officer; Mr. Mingming Su, Chief Strategy Officer; and Mr. Hao Cao, Vice President of Finance. You can refer to our first quarter 2022 financial results on our IR website at ir.douyu.com. You can also check a replay of this call when it becomes available in a few hours on our IR website.

Before we start, please note that this call may contain forward-looking statements made pursuant to the safe harbor provision for the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and observations that involve known and unknown risks, uncertainties and other factors not under the company's control, which may cause actual results, performance or achievements of the company to be materially different from the results, performance or expectations implied by these forward-looking statements.

All forward-looking statements are expressly qualified in their entirety by the cautionary statements, risk factors and details of the company's filings with the SEC. The company undertakes no duty to revise or update any forward-looking statements for selected events or circumstances after the date of this conference call.

I will now speak on behalf of our Chairman and CEO, Mr. Shaojie Chen.

[Interpreted] During the first quarter, we continued the steady development of our overall business while adjusting our business operations and executing on our selective copyright procurement strategy.

Mobile MAUs for the quarter were 55.1 million. Total net revenues were RMB 1.8 billion and quarterly average paying user count reached 6.4 million. Gross margin increased to 13.6%, demonstrating the effectiveness of our selective copyright procurement strategy. In addition, our successful implementation of a series of cost control measures has increased our operating efficiencies, driving our adjusted net loss down to RMB 52.5 million.

During the quarter, our average MAUs decreased by 6.8% year-over-year to 55.1 million, a change that's within our expectation. We believe that there are 2 factors at work. First, as we try to improve operating efficiencies by executing on our selective copyright procurement strategy, we have since acquiring overpriced content rights for eSports tournaments, which has negatively affected our MAU. However, the level of the decrease was in fact better than our expectation, and MAU has stabilized and stayed within a narrow band.

Additionally, our data analysis shows that high-quality content from streamers and self-produced tournaments in different game segments successfully attracted new users regardless of the absence of content from selected eSports tournaments.

Second, the new games that were launched in our platform in 2021 enabled us to continuously increase our MAU, partially offsetting the impact of terminating content rights for selected eSports tournaments. Despite the slow pace of the launch of new games last year, we were able to attract and retain new users by offering them high-quality gaming content, beginning our collaboration with game developers and refining our customized operations for each game.

Turning to our content update. In the first quarter, we maintained our effective execution on our strategy of building a game-centric comprehensive content platform. We further refined our content offering, integrating live streaming, videos, graphics and interactive communities for both eSports and non-eSports categories, while enhancing collaboration and investment in self-produced content. Furthermore we extended our collaboration with game developers and distributors to secure our advantage in high-quality content and gaming operations by enhancing the customized and refined operations of different game segments.

During the quarter we increased investment in self-produced content and produced close to 160 eSports tournaments. We consistently strive to enhance the value of our self-produced tournaments by developing a standardized production and management process and establishing a diversified tournament content system. By hosting LoL (inaudible) an official collaboration tournaments with Tencent, we have discovered many new gaming talents who eventually became professional players. Among all the major new games launched last year, our self-produced tournament for NARAKA: BLADEPOINT was selected by NetEase as one of its official tournament. DouYu's LoL Wild Rift Master Legends series was also incorporating into Tencent official professional tournament system.

Meanwhile, our self-produced tournaments enabled us to support and correlate our streamers by providing them with elevated levels of exposure and engagement. As we improved our recruitment and training system for streamers, we are able to not only offer our streamers greater career development opportunities on our platform, but also refer our high potential streamers to professional eSports teams. In addition to our advanced system for in-house tournaments, we enriched our content variety through producing customized entertaining tournaments and shows based on the features of individual game segments and streaming (inaudible) during holidays, major events and new game version launches.

For example, we self-produced an all-star tournament for LoL inviting top streamers and all commerce recruitment tournaments in different game segments, which encouraged gamers and users to participate. Our differentiated offerings of professional tournaments and entertaining game content for fees with a diversified innings of both hardcore and mid-core gamers.

Importantly we also maintained and grow our production of engaging and novel video content. For example, we produced an innovative variety show called All About Games that evaluate new games during their promotional period. The show's content includes fresh coverage of new games, discussion of streaming topics, game reviews and other exclusive features. In addition, we also invited famous streamers and other gaming industry-related guests to participate in the show.

Production of this type of content enhance the community experience as we develop high-quality content to enrich our game segment and boost the user engagement. Moreover, we found that game developers were willing to cover some of the production cost of these shows as a new channel of promotion. As a result we not only built a brand new collaboration model with game developers, but also optimized ROI for those game segments.

Turning to our cooperation with game developers and distributors. We continued to deepen our cooperation on monetization front with game developers and distributors. For instance, we launched a variety of promotional activities with both Tencent and NetEase to bolster user activity and encourage users to make in-game purchase by offering task-based rewards of in-game entrants. Moreover, we are consistently devising and exploring new methods of cooperation with game developers.

Using Dota 2 as an example, we cooperated with game developers to share partial gaming data, and then employed this data to develop a number of practical functions. These functions include real-time display of streamers' performance, gaming data analysis and multi (inaudible) broadcasting to allow to streamers performance in the same game to be build simultaneously, enhancing the display function for analyzing streamers game strategies allowed us to provide an optimized user experience. Looking ahead, we will further improve our operating efficiency by launching attractive distribution algorithms, which directs appropriate levels of exposure to individual streamers based on historical data.

As a game-centric platform, we deliver value to our users through consistent production of high-quality content and our exceptional operational capabilities. Building on our advantage in high-quality content and refined operations, we increased ROI by reducing production costs and operating expenses through self-produced content, utilization of partners' resources, joint operations and more. Going forward, we will continue to evaluate and execute on potential optimization while improving our platform's overall operating efficiency by enhancing each game's ROI.

Now turning to monetization. Our total number of paying users in the first quarter was 6.4 million, with an average quarterly ARPU of RMB 270. The year-over-year decrease in both the number of paying users and quarterly ARPU one result of our in advanced operational adjustment and future updates in anticipation of a tightening regulatory environment. As we continue to develop the playing behavior of our core users and enhanced engagement with more casual and new core gamers through sustainable offering strategies and promotional campaigns that are customized based on the preference of different groups of paying users, we are able to sustain a stable paying user base and a healthy range for our ARPU.

Meanwhile, we persisted in our exploration and development of new revenue streams. For example, following our in-depth analysis of the engagement between streamers and users, we upgraded our membership system called [Diamond Fans], offering members with more customized privileges and additional functionalities to interact with streamers. Utilizing our self-produced content with such promotional campaigns, we are able to improve the subscription rate of our membership services in certain game segments. Going forward, we will continue to cultivate and expand our membership program as we leverage game's unique features and our individual streamers distinctive characteristics.

In terms of products and technology, we are continuously developing our game-centric community on the product front. To meet our users' growing demand for guarantees, guide and walk through, we have recently launched an innovative function called [streamers' QA and demonstration]. For this function, we count our big data analysis to gain hot-topics from our chat and discussion forum (inaudible) in package as the topic as a series of the demonstration task for streamers. Streamers then takes the task and record themselves answering your questions and demonstrating the game tactics as they stream.

Finally, this good quarterly content can be additive into show reviews that are available for users to view on demand. By leveraging natural language processing technology, we are able to understand and extract relevant content from chats. This then allows us to push related show reviews to users who are asking similar questions. This extremely produced show reviews further utilized streamer generated content and enhance the engagement between streamers and users.

To summarize, we have executed a robust and sustainable offering strategy while maintaining our leading position in the traditional live streaming industry. Leveraging our outstanding content management team, comprehensive live streaming resources in our extensive game operating experience, we are able to consistently upgrade our content offerings and optimize our operational innovation. At the same time, we have deepened our collaboration with game developers in multiple dimensions to provide users with content that seamlessly integrates live streaming, videos, graphics and interacting communities. In addition, we continued to augment our user engagement and consumption capabilities while exploring diversified monetization models and improving our financial performance.

With that, I will now turn the call over to our Vice President of Finance, Mr. Hao Cao, to go through the details of our financial performance in the quarter.

Thank you, Lingling. Hello, everyone. During the first quarter, we have been focusing on improving our operating efficiency through ROI enhancement and cost controls and achieved encouraging results. The company's gross margin improved and adjusted net loss narrowed significantly on a year-over-year basis.

Total net revenues in the first quarter of 2022 decreased by 16.6% year-over-year to RMB 1.8 billion. Live streaming revenues were RMB 1.73 billion, a decrease of 13.6% from RMB 2 billion in the same period of 2021. The decrease was due to the implementation of prudent operating strategies, such as adjustments to certain interactive features and the related operational efforts.

Considering the tightening regulatory environment, we have been making operational adjustments and feature updates in advance to comply with regulatory requirements for the long-term development of our platform. As a result of these adjustments, virtual gifting interactions were partially impaired, which caused decreases in both the number of paying users with lower ARPU and quarterly ARPU. Our quarterly ARPU was RMB 270, a 5.5% decrease from RMB 286 in the same period last year. Based on analysis, the size of our core paying users largely remained stable, and we continue to stabilize the paying habit of our core users and cultivate the paying willingness of mid to long-tail paying users.

Advertising and other revenues were RMB 68.4 million compared with RMB 154.1 million in the same period of 2021. The year-over-year decrease was primarily attributable to the continued exploration of new commercialization models by using a portion of advertising traffic that could have been directly monetized, as well as the soft demand for advertising caused by macro challenges and regulations aimed at the gaming industry.

Cost of revenues in the first quarter of 2022 was RMB 1.55 billion, a decrease of 18% compared with RMB 1.89 billion in the same period of 2021. Revenue sharing fees and content costs decreased 19.2% to RMB 1.34 billion from RMB 1.66 billion in the same period of 2021. The decrease was mainly due to the decrease in revenue sharing fees, which is in line with the decreased live streaming revenues and a significant decrease in the cost of broadcasting rights as we ceased acquiring overpriced content rights for eSports tournaments and our selective copyright procurement strategy. Other content costs also show a year-over-year decline as we continue to optimize in-house content production efficiency.

Bandwidth costs in the first quarter of 2022 decreased by 11.8% to RMB 151.9 million from RMB 172.1 million in the same period of 2021. The decrease was mainly due to the year-over-year reduction in peak bandwidth usage in absence of purchased eSports tournament copyright, given our bandwidth costs are generally built based on peak bandwidth usage. Meanwhile the lower per unit bandwidth costs which benefited from our improved procurement efficiency with major suppliers also contributed to the decrease in bandwidth costs.

Gross profit in the first quarter of 2022 was RMB 243.8 million compared with RMB 260.2 million in the same period of 2021. Gross margin in the first quarter of 2022 improved to 13.6% from 12.1% in the same period of 2021. This margin improvement was primarily due to the significant decrease in the cost of broadcasting rights as a percentage of revenues as we ceased acquiring overpriced content rights for eSports tournaments.

Sales and marketing expenses in the first quarter of 2022 were RMB 186.4 million, a decrease of 11.2% from RMB 209.9 million in the same period of 2021, which was mainly attributable to the decreased personnel-related expenses and branding expenses.

Research and development expenses in the first quarter of 2022 were RMB 116.3 million, representing an increase of 4.5% from RMB 111.3 million in the same period of 2021. The increase was primarily attributable to additional investment in technical personnel as the company continues to invest in product upgrades to support its game-centric content strategy. General and administrative expenses in the first quarter of 2022 were RMB 90.1 million, increasing by 2.3% from RMB 88.1 million in the same period of 2021.

Adjusted operating loss in the first quarter of 2022, which adds back share-based compensation expenses, was RMB 68 million compared with RMB 91.8 million in the same period of 2021. Net loss in the first quarter of 2022 was RMB 86.9 million compared with RMB 101.8 million in the same period of 2021. Adjusted net loss in the first quarter of 2022, which excludes share-based compensation expenses, share of loss in equity method investments and impairment loss of investments, was RMB 52.5 million compared with RMB 70.7 million in the same period of 2021.

For the first quarter of 2022, basic and diluted net loss per ADS were RMB 0.27 and RMB 0.27, respectively, while adjusted basic and diluted net loss per ADS were RMB 0.16 and RMB 0.16, respectively.

As of March 31, 2022, the company had cash and cash equivalents, restricted cash, short-term and long-term bank deposits of RMB 6,315 million compared with RMB 6,643 million as of December 31, 2021.

We would also like to provide an update on execution of our share repurchase program announced on August 30, 2021, in which the company may repurchase up to US$ 100 million of its shares until August 2022. As of March 31, 2022, the company had repurchased an aggregate of US$ 33.9 million worth of its ADS under this program.

Going forward, we will continue to increase operating efficiency as our top priority in order to reach non-GAAP driven by narrowing losses through cost optimization and improvement of monetization efficiency. Along with the continued improvement of our overall ROIs, we will continue enhancing our monetization capabilities to explore sustainable development of our platform.

This concludes our prepared remarks for today. Operator, we are now ready to take questions.

(Operator Instructions) Today's first question comes from Lei Zhang with Bank of America Merrill Lynch.

(foreign language) My question is mainly regarding recent regulations (inaudible) regarding the keeping cap and the regulator also launched the restrictions in ranking and the PK activities. So could you please share with us your view on overall regulatory enrollment in China? And how should we look at the impact of our own business?

Let me answer your question. There is the ongoing development of regulatory guidelines for the live streaming industry, encouraging players to properly implement network and the refined operations to comply with regulatory requirements. As of today, there is no specific (inaudible) mentioned in the recently announced regulatory notice. Despite this, we have been making operational adjustments and better updates. This year we are adopting a more prudent operational (inaudible) and stricter internal review policies to improve our platform, community building and to (inaudible) the long-term development of our platform.

In addition, in late April and early May, we implemented a series of merits on our platform to promote rational consumption of our users. These merits include setting up keeping limited for a single transaction on virtual gifting and pop up requesting a second confirmation for each transaction. We have projected the financial impact of such adjustments in our 2022 forecast.

And the policy -- regarding the live streaming industry announced in March were a restatement of previous policies. The policies are related to online games, gaming content, laws that streamers need to follow and the protection of minors. We have been adjusting our operations accordingly on this front. Take online licensed games, for example. We have been gradually redirecting traffic and streamers to license games of similar genre since the third quarter of 2021. To ensure proper traffic allocation between different game segments and to maintain streamer in time levels and their wiliness to stream. The impact of this adjustment was reflected in our past quarter's performance.

Regarding appropriate rate contained and minor protection, we have a continued review system, streamer management system and a teenage mode that are ominously moving as an industry developed. We are carefully monitoring any regulatory changes and maintain close communications with regulatory departments. We will be able to react properly in the event of any changes.

Our next question today comes from Thomas Chong of Jefferies.

(foreign language)

(foreign language)

[Interpreted] I will first translate Thomas' questions. Thomas' question is regarding the changes in our corporate procurement strategy. What will happen after the change of procurement strategy in the absence of large-scale export tournament, how the company will adjust its operations to ensure the advantages in content as well as in the operations?

The second question is regarding, will the shift in the corporate procurement strategy put an impact on the sustainability of our platform streamers resources?

I will first address the first question for -- from Mr. Chen. First, we adjusted our strategy to selectively purchase corporates, not only because some of the content is overpriced, but also add an operational adjustment in reaction to the changes in the game live streaming industry. Our industry has already transitioned from competition in game live streaming to gaming content. While users face more and more viewing options, we believe, differentiated content and refine operations are a key to our platform healthy and sustainable growth.

On the accounting front, we extended our offerings from live streaming to user and communities, integrating various content to meet our users' diverse need. Although we decide not to obtain selected overpriced content rights, we continue to purchase cost-effective copyrights for certain tournaments.

For the purchase content, we are integrating official tournaments with our live streaming videos, graphics, operating activities and community discussion to increase user engagement and attract users. For example, we have launched multiple self-produced shows further purchased KPI tournament, and we are actively exploring more collaboration with game developers to enhance the ROI for this copyright. Meanwhile, we increased our investment in self-produced content. For traditional eSports games, we have been hosting tournament for professionals and amateurs and are able to ensure a consistent supply of high-quality content, while remains the stability of our platform traffic and increasing user retention rate. For new games, on one hand, we recruit and cultivate large quantities of new streamers to ensure content supply. On the other hand, we enrich our content offerings by producing more diverse PGC and UGC content. Leveraging our integration of live streaming video content and community interactions, we are able to attract more users with our diverse content offerings.

On the operations front, we are deepening our cooperation with game developers and distributors beyond content production. Our cooperation includes assisting game distributors to find corporate marketing strategy, discovering professional game players for both game developers and distributors, developing new sales models for in-game items, leveraging data sharing between games and our platform to improve our user live streaming experience and more. For example, for the upcoming game LoL eSports manager devised by (inaudible) games, we actually partner with game developers to promote the game pre-registration and lead to a high number of pre-registration before the game is officially released.

As to the second question about validation of the streamer resources, we have further stabilized and enhanced our streamer sources by signing long-term and exclusive collaboration agreements with our premium streamers, followed better support from game developers and distributors. These agreements bind top streamers to our platform and prevent them from switching between different platforms, helping us to build and maintain a competitive edge.

Second, the MA is impacted by our copyright strategy adjustment was generated by users who mainly view official tournaments other than streamers live streaming content. Therefore traffic generated by streamers was not significantly impacted by our selective copyright procurement strategy.

I'd like to emphasize that our relationship with streamers is not limited to cooperation agreements. We also deepened our collaboration with streamers and enhanced operations in the following ways. First of all, in terms of our overall operating strategies for streamers, we continue to offer high-quality content and opportunities for users to interact with streamers, while maintaining or improving both the level of engagement and streamers willingness to stream. For example, we collaborated with Tencent Video to hold the League of Legends. We invited top-tier streamers towards the (inaudible) and interact with users in our self-produced shows, thus creating a second layer of promotion on our platform. As a result, the level of engagement in the LoL game segment was boosted significantly as evidenced by the increases in the view hours of top streamers live streaming sessions and interactions on related topics in our community channel.

Meanwhile, we further explore streamer commercialization opportunities. For example, we recently upgraded our membership system, Diamond Fans, offering users with more customized privilege and additional functionalities to interact with streamers. As a result, interactions between streamers and the users increased and streamers gained more diverse source of income, further depending their bound to the platform.

Second, we leverage big data analysis to refine and enhance our operations. For example, we motivated mid-tier and long-tail streamers to remain active by directing appropriate traffic to them and increase their involvement and exposure on our platform by engaging them in our self-produced tournaments. Therefore, our mid-tier and long-tail streamers are able to earn a competitive income. We believe those streamers are highly sticky to our platform and expect to attract more talented and high potential streamers to live stream our platform.

All in all, our platform streamers are foundation of our high-quality content. We have a comprehensive streamer resources management system, which includes recruitment, training, management and collaborations. Our system increases streamers' willingness to stream and ensures that they receive a reasonable income. Meanwhile, as we have continued to refine our operations, we have deepened our relationships with our streamers.

And our next question today comes from Yiwen Zhang with China Renaissance.

(foreign language) So I have 2 questions. In prepared remarks, you mentioned that 2021 newly released title have successfully attracted and retained new users. Can you elaborate more on the upgrading efforts? And also meanwhile I want to check game license total assumption was an impact on our operations.

And secondly, you mentioned, we are exploring a more diversified monetization model. Can you discuss more about the direction we are exploring? What's the progress and our expectation for the future.

Let me answer your 2 questions. For your first question about the new games, it's well known that new games were released at a slow pace year, even with fewer blockbuster games such as All About Games and Peacekeeper, leading to limited new user growth on our platform. Again, through this backdrop, we created a rich content system that integrates live streaming, video content and graphics, which underpins our diversified game segment operations. We have also achieved promising results by implementing sophistic operating strategy and successfully building and developing new game segments.

Let me share some of the achievements of the new games launched in 2021, NARAKA: BLADEPOINT launched (inaudible). Our user engagement remained robust as a result of our efforts in recruiting and training new streamers and producing related tournaments and shows. Total viewing time for NARAKA: BLADEPOINT was ranked within the top 10 games on our platform for 3 consecutive quarters and as traffic ranking also steadily moved up on our platform. For LoL Mobile launched in November, the upgraded membership system, Diamond Fans, targeting our core user base was well received and contributed to a healthy quarter-over-quarter revenue increase in this game segment.

Looking into 2022, we will focus on bettering operating efficiency for each game segment as part of our KPI and evaluate the ROI on a real-time basis, especially for those new game segments to ensure the effective of improvement. At the same time, we were very pleased to see that approvals for new games resumed. We consider this to be a signal that is not the quantity of games released that is imposing, it is the quality. This also shows that the gaming industry is trending in the direction of severing diversity and quality. We believe that this is beneficial for the gaming induction in the long run and of course, for us as well.

As a game-centric integrated content platform, high-quality games and real users are the most important resources for our content generation and user growth. Based on ongoing changes in the gaming industry, we upgraded our strategy to build our game-centric content platform and refine our operations. We also expanded our coverage of game genres to serve more varied user cohorts. At the same time, by leveraging our experience of new games operations, we expect to generate more traffic for our platform from more upcoming new game releases.

And for your second question about commercialization, we are always exploring new commercialization models. Let's take a look at some examples. In terms of advertising models, our previously mentioned smart distribution system is our innovation on traditional direct response advertising and display advertising. Our smart distribution system platform enables game developers to release promotional tasks while connecting streamers to choose their peripheral method for promoting games. Our primary aim is to improve the effectiveness of advertising by increasing the number of downloads and activations through this system. Due to the delay in new game approvals, this project is proceeding relatively slowly. However, we expect that our smart distribution system will augment our advertising efforts once the release of licenses for new games resumes.

Turning to virtual gifting. The traditional gifting model generates revenue from interactions between streamers and users. As part of our (inaudible) of new commercialization channels, we are currently optimizing our membership system to increase keeping revenue. For this purpose, we have enhanced our membership system and encouraged our users to subscribe to become 3-month Diamond Fans. Under this new system, users can receive more value-added service and gain more opportunities to interact with 3-month under diver gaming (inaudible). Streamers will provide exclusive in-game advice, service and rewards for Diamond Fans users. In LoL, (inaudible) crossfire, Peacekeeper and other game segment, our Diamond Fans membership service has already achieved promising results. By the end of March, the number of membership subscriptions in these game segments increased by more than 50% from the end of December last year. The revenue we generated from the new membership services also increased significantly quarter-over-quarter.

Our next question today comes from Alex Poon of Morgan Stanley.

(foreign language) My question is related to content repurchasing content, our strategy change. Can management explain the change, the impact on user scale and their behavior, the engagement so far? And then how should -- what should we expect for future.

(foreign language)

[Interpreted] As we mentioned previously, we executed our selective copyright procurement strategy and since acquiring overpriced content rights for certain eSports tournaments. We anticipate this increasing MAU under this strategy and devise a series of measures in advance, such as increasing investment in self-produced content in order to stabilize our traffic. These results were positive and reflected -- reflecting means of our corporation. MAU were, in fact, better than our projection. Also, we kept tracking data and analyze the impact of our strategy of ceasing acquisition of those overpriced content rights.

Our data show that most of the traffic we locked those who primarily view tournament on our platform. On the other hand, most of our retained traffic was contributed by users who watched our live streaming content in the long-term continuous and stable fashion. This large quality of high-quality users are characterized by their high retention rate, longer view own ours and stickiness to high-quality live streaming content. Having a study stream of resources has allowed us to stabilize user viewing time and interactions on our platform on a quarter-over-quarter basis.

Using our LoL segment as an example, despite the absence of LPL copyright MAU generated by streamer generated content and its total viewing hours still increased on a quarter-over-quarter basis. As we emphasized earlier, terminating our acquisition of overpriced copyrights does not imply that we will decrease our investment in content. We actually subsided close to 160 tournaments during the quarter. For those game segments where we did not purchase copyright of official tournaments, we continue to deliver high-quality self-produced and streamer content.

And our next question today comes from Ritchie Sun at HSBC.

(foreign language) I will translate it myself. So can management talk about the cost decline across the lines by refreshing content costs, sales and marketing these type of lines? And can management explain what will attribute to those declines? And how much of the decline comes from license content savings? And how should we assess the full year trend in terms of these costs.

The decrease in cost of revenues is mainly attributable to a 19.2% year-over-year decrease in revenue sharing fees and content costs. Our revenue sharing fees decreased in line with the decrease in live streaming revenues. Our overall revenue sharing ratio remained stable. The decrease in content costs mainly resulted from lower copyright fees, optimization of streamer payroll and a reduction in self-produced content cost. Production in copyright costs was mainly the result of us see the acquisition of selected large-scale tournament content rights, such as LPL. In terms of streamer payroll, we have optimized our streamer resources in certain game segments, leading to a significant year-over-year decrease in the first quarter.

On the self-produced content front, we have utilized a variety of measures to reduce our costs, such as utilization of partners' resources and joint operations. As a result, we were able to launch more self-produced tournaments while lowering production costs on a year-over-year basis. Looking ahead, we will prudently evaluate our procurement decisions for large-scale tournament, optimize our streamer payroll structure and increase our investment in self-produced tournaments and PGC content, for which we will control the related production costs. We expect a degree of decrease in our content costs this year. Overall, we expect our gross margin will improve at a modest pace for the year 2022.

That's all the time we have for questions. I will now turn the call back over to management for closing remarks.

Thank you for joining our call today. We look forward to speaking with everyone next quarter.

Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.

Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.