The phenomenon of Intellectual Property (IP) consumption has seen a meteoric rise, particularly this year, signaling a burgeoning intersection of entertainment and commerce in the global marketAmong the myriad of IPs that have captivated audiences, none stands out quite like Nezha, the legendary figure from Chinese mythologyNezha's film has not only shattered box office records within China, grossing over 10 billion yuan, but it has also catapulted into the top ten of all time globally, outranking many Hollywood blockbustersIts success has spurred a wave of merchandising that has enveloped fans and consumers alike, demonstrating the potency of IP-driven markets.

As audiences left theaters buzzing with excitement, the demand for Nezha-themed merchandise surgedCompanies like Pop Mart, a key player in the IP merchandise sector, anticipated this fervor and simultaneously launched a series of blind boxes themed around NezhaThese products, ranging from collectibles and figurines to plush toys and card games, are collectively referred to as IP derivativesEach item resonates with consumers’ emotional attachments to the characters and stories, transcending their practical uses and production costs.

Such is the appeal of IP derivatives that even limited edition blind boxes, originally priced at 69 yuan, can be flipped for ten times that amount on second-hand platformsAdditionally, rare collectibles, such as signed cards from the film’s director, have been marked with exorbitant price tags—each fetching upwards of 100,000 yuanThis phenomenon underscores a crucial aspect of the IP economy: emotional investment often outweighs rational purchasing considerations.

The potential for growth in the IP derivative market in China seems vastWhile established markets in the West show that a significant portion of revenue can stem from merchandise sales—60-70% as opposed to merely 30-40% from box office receipts—Chinese consumers have yet to demonstrate the same level of enthusiasm for consuming IP beyond ticket purchases

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Currently, over 90% of revenue from IP films in China comes from ticket sales alone, suggesting a developing market ripe for exploration and expansion.

Investor interest in this sector is keen, and companies are taking noteNotably, Pop Mart's stock performance has outshone other Chinese enterprises on the Hong Kong exchange, boasting a market capitalization exceeding 100 billion HKDOther organizations, including 52toys, Blokus, and Kawaii, are also moving toward public offerings, looking to carve their own niches within this lucrative emerging market.

A hallmark of a healthy industry is not just the profitability of its top players, but the financial viability of those lower down the rankingsThe IP derivative industry is characterized by a multitude of stakeholders successfully reaping profits, illustrating its overarching potentialEven Miniso, a retail business originally focused on everyday goods at low prices, has pivoted towards including a variety of IP derivatives in its product offerings, subsequently rebranding itself as an IP-oriented companyIts Top Toy line directly competes with Pop Mart’s offerings, highlighting the shift in focus toward IP-based merchandise.

The resilience of the IP derivative sector becomes increasingly evident against the backdrop of economic uncertainty and pressures on consumer spendingDespite the economic climate, this industry continues to flourish, even as it brings forth products that may seem pricey to manyDuring a visit to a Pop Mart store, I was surprised to find that the least expensive item priced at 39 yuan wasn’t exactly a budget-friendly option, with many items climbing into the hundreds.

Most products available in-store are not of the collectible or limited edition variety, as those items command an even higher premium in the secondary marketHowever, when stripped of their IP identities, these blind box toys emerge as standardized mass-produced goods lacking in technological innovation or functional utility

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Thus, while Pop Mart’s products carry a hefty price tag, the profit margins remain appealing.

Considering the purchasing power of younger generations in sinking markets, one could question the sustainability of such pricingPop Mart, however, has strategically positioned itself, focusing primarily on first and second-tier cities while eyeing expansion into foreign marketsData suggests that consumers in developed parts of Europe and America display a greater affinity for IP derivatives than their Chinese counterpartsConsequently, Pop Mart’s global strategy seems sound, with reports of rapid growth abroad.

Within the competitive landscape, Miniso remains a significant contender against Pop MartTheir operations have garnered better performance metrics in urban areas, while competition in lower-tier cities lags, suffering from reduced sales growthMany consumers for these IP products are school-aged individuals who do not yet earn an income, making their discretionary spending patterns reflective of an evolving consumer landscape.

Conversely, the dynamic in lower-tier markets is decidedly differentLower-priced products, such as cards priced at 9.9 yuan, evoke significant consumer interest, as evidenced during a recent trip to a small town in Guizhou, where young children were clustered around local shops, eagerly tearing open packets containing multiple cardsCompanies like Kawaii, positioned in the card industry, are also drawing attention for their impressive profitability, achieving high margins despite low retail prices.

Similar dynamics exist in the building block sector, where unit prices remain accessible, suggesting that card and block products are likely to find greater traction in lower-tier markets compared to blind boxesThe diversity of IP derivative forms underscores there is still much potential for growth, encompassing plush toys, cards, and other collectiblesAs this discourse unfolds, I encourage readers to share their insights on which IP derivative formats they find most promising beyond just blind boxes.

Alongside domestic consumption, the international arena offers expansive avenues for Chinese IP creators

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