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 market. Among the myriad of IPs that have captivated audiences, none stands out quite like Nezha, the legendary figure from Chinese mythology. Nezha'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 blockbusters. Its 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 surged. Companies like Pop Mart, a key player in the IP merchandise sector, anticipated this fervor and simultaneously launched a series of blind boxes themed around Nezha. These products, ranging from collectibles and figurines to plush toys and card games, are collectively referred to as IP derivatives. Each 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 platforms. Additionally, rare collectibles, such as signed cards from the film’s director, have been marked with exorbitant price tags—each fetching upwards of 100,000 yuan. This 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 vast. While 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. 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 note. Notably, Pop Mart's stock performance has outshone other Chinese enterprises on the Hong Kong exchange, boasting a market capitalization exceeding 100 billion HKD. Other 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 rankings. The IP derivative industry is characterized by a multitude of stakeholders successfully reaping profits, illustrating its overarching potential. Even 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 company. Its 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 spending. Despite the economic climate, this industry continues to flourish, even as it brings forth products that may seem pricey to many. During 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 market. However, when stripped of their IP identities, these blind box toys emerge as standardized mass-produced goods lacking in technological innovation or functional utility. 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 pricing. Pop Mart, however, has strategically positioned itself, focusing primarily on first and second-tier cities while eyeing expansion into foreign markets. Data suggests that consumers in developed parts of Europe and America display a greater affinity for IP derivatives than their Chinese counterparts. Consequently, Pop Mart’s global strategy seems sound, with reports of rapid growth abroad.
Within the competitive landscape, Miniso remains a significant contender against Pop Mart. Their operations have garnered better performance metrics in urban areas, while competition in lower-tier cities lags, suffering from reduced sales growth. Many 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 different. Lower-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 cards. Companies 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 boxes. The diversity of IP derivative forms underscores there is still much potential for growth, encompassing plush toys, cards, and other collectibles. As 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. My travels to Japan allowed me to engage with local experts in the field. Historically, Japan has had its own IP consumer boom, particularly during periods of stagnant economic growth, paralleling the current Chinese experience. This cross-cultural exchange is indicative of broader global trends.
While visiting Tokyo last year, Pop Mart had already established stores in high-end retail spaces despite initial reservations regarding its acceptance among Japanese consumers, traditionally steeped in their own anime culture. However, financial reports reflect an encouraging trajectory for international growth. By 2024, it is projected that 30% of Pop Mart's revenues will come from overseas markets, with forecasts for even further acceleration in the subsequent year.
Ultimately, leading players like Pop Mart and Miniso are at the forefront of what appears to be a burgeoning global market for IP derivatives. Concepts that resonate on an emotional level can indeed transcend geographical boundaries. Icons such as Hello Kitty illustrate the longevity and cross-border appeal of successful IPs—having generated approximately 100 billion dollars in licensing revenues over 50 years, it is likely to continue thriving for decades to come.
In reflection, the IP phenomenon—while still firmly rooted in cultural contexts—presents opportunities for crossover success. The emergence of Nezha as a modern IP contender showcases the potential for a traditional figure to find its place on the world stage, raising intriguing questions about its future travels in global markets. Furthermore, because the manufacturing of derivatives is rooted in light industry, it is less encumbered by the complexities that plague other sectors, such as food and service industries, facilitating a smooth transition to international markets.