The Chinese 618 Shopping Festival has long ended, but the disputes it generated have not stopped.
Recently, according to multiple media reports, Sichuan Lvsebencao Technology Development Co., Ltd. (referred to as “Lvsebencao”) spent 3 million yuan to invite the celebrity live streamer Mingdao from Hangzhou Joy Media Co., Ltd. (referred to as “Joy Media”) to host a live stream for product sales, but only managed to sell over 200,000 yuan worth of products. As a result, Lvsebencao requested a refund from Joy Media. However, Joy Media believes that “the company has fulfilled the contract and cannot issue a refund,” with both parties expressing intentions to “sue for rights protection.” What’s going on here?
A payment of 3 million yuan for celebrity live streaming resulted in sales of only 200,000 yuan, prompting the brand to request a refund.
During this year’s 618 promotion period, Lvsebencao contacted Joy Media through a third-party intermediary company, Anhui Yishiyiyou Cultural Media Co., Ltd. (referred to as “Yishiyiyou”), and on June 14, they arranged for a special live streaming by Joy Media’s artist Mingdao for Lvsebencao’s brand COLCX. The contract signed between Lvsebencao and Joy Media through Yishiyiyou amounted to 2.438 million yuan, covering the fees for the live streaming and commercialization costs. A spokesperson for Lvsebencao stated to the media that “they actually paid 3 million yuan to Yishiyiyou.”
On the day of the live streaming, Chinese celebrity Mingdao streamed from around 10 a.m. to 6 p.m., totaling 6 hours and 1 minute. The live stream had over 10,000 concurrent viewers and a total of 2.127 million viewers, with Lvsebencao preparing 50,000 units of products. However, despite the high viewership, the sales were disappointing, amounting to only 348,000 yuan during the broadcast, with a significant amount of returns in the following month. Lvsebencao reported that “the return rate was over half. Actual sales were only over 2,000 units, totaling over 200,000 yuan.” The company believed that the sales impact was very low and thus requested a refund from Joy Media, stating that “they do not rule out using legal means to resolve the issue with Joy Media.”
According to reports, Joy Media did not commit to a specific sales target in their contract. Joy Media responded to Lvsebencao’s demands, stating that they had offered solutions such as extending the use period of the live streaming clips and continuing to host live product endorsements. However, Lvsebencao’s sole demand was a refund, and they even employed “internet water armies” to attack Joy Media. Joy Media claimed that they had fulfilled the contract as agreed and were prepared to sue for their rights if the issue could not be resolved amicably.
Furthermore, Joy Media argued that, in a sense, this was not a typical product endorsement live stream but rather a promotional event focused on brand exposure. They mentioned that Mingdao was there to promote the brand, and if sales targets were a prerequisite from the start, they wouldn’t have engaged in the agreement. Joy Media’s representative also stated that the company had spent an additional 500,000 yuan on promotion during the live stream, which they considered as costs. They emphasized the value in Mingdao’s over six-hour brand promotion during the live stream and insisted that a refund should not be demanded simply because the results did not meet expectations.
The intermediary company, Yishiyiyou, stated that “there are no discrepancies in the contract between the two parties, and all the rights and obligations, including the duration of the live streaming and the promotional expenses, have been fulfilled. Therefore, there is no basis for a refund.”
As of now, all three parties maintain their positions. CHAILEEDO has attempted to contact the three companies for further details through public channels, but as of the time of reporting, no one has answered the phone.
Deng Gang, a lawyer from Guangdong Fazhi Shengbang Law Firm, commented, “In cases like this, whether a celebrity should refund the brand for not meeting expectations depends on the specific contract terms between the brand, intermediary (if any), and the celebrity. If the contract stipulates that the celebrity must refund based on the actual completion rate of sales targets, then the celebrity should refund. If the intermediary made false promises to the brand without the celebrity’s knowledge, the intermediary may be held legally responsible.”
Joy Media is hailed as the “top MCN agency of Douyin” and has 100,000 live streamers.
(MCN:Multi-Channel Network. In China, MCN equals to celebrity talent management companies )
In recent years, live-streaming e-commerce has been flourishing, but disputes arise when businesses pay live streamers for e-commerce promotion that yields poor returns. The current dispute has attracted significant attention mainly because Joy Media, involved in the conflict, is the premier MCN agency of Douyin, and Mingdao is a renowned actor.
Public information indicates that Joy Media was established in 2016 and is a professional internet-based brokerage company headquartered in Beijing with its live-streaming base in Hangzhou, operating with dual headquarters in Beijing and Hangzhou. Joy Media wields extensive influence in various fields such as live streaming, short videos, and e-commerce and is a standing member unit of the China Performance Industry Association.
It is understood that Joy Media entered the Douyin market in 2018 and intensified live-streaming e-commerce efforts in 2019. Presently, the company’s three major business models of “entertainment live streaming + e-commerce + short videos” are maturing. From the perspective of influencers, Joy Media has signed nearly 100,000 internet celebrities, with over 5,000 high-quality artists and a total fan base exceeding 2 billion across all platforms. Consequently, Joy Media is reputed in the industry with the saying, “There are millions of Douyin influencers, half of whom are with Joy Media.”
Public reports indicate that “in recent years, Joy Media has maintained an annual growth rate of 50% to 100%. From 2016 to 2024, the number of employees has grown to nearly 4,000, solidifying its position as the top MCN on Douyin.”
Mingdao, a star live streamer under Joy Media, belongs to the “top-tier influencers” on Douyin. Data from Feigua reveals that his e-commerce sales have exceeded 100 million yuan from January to August this year. Looking at June specifically, his daily e-commerce sales fluctuate, ranging from hundreds of thousands to tens of millions. Among these, sales of COLCX shampoo rank at the bottom.
On the Douyin platform, a search for “COLCX” by CHAILEEDO yields two stores: “COLCX Hair Care” and “COLCX Sichuan Green Herbal Technology Development Co., Ltd. Pengzhou Branch Hair Care Store.” The former has been operating for less than 120 days, while the latter has been in business for 329 days. Additionally, there are numerous promotional videos for this brand on Douyin.
Through Feigua data (Douyin version), CHAILEEDO learned that COLCX has collaborated with multiple influencers on Douyin. Since January, the brand has partnered with over 3,000 influencers for video endorsements and live-streaming e-commerce. The top-performing influencer is “Shanxuan,” with total sales for COLCX ranging from 10,000 to 25,000 units, achieving total sales of 750,000 to 1 million yuan this year. Mingdao ranks third, with data showing his total sales for COLCX ranging from 2,500 to 5,000 units, amounting to 250,000 to 500,000 yuan.
On the Tmall platform, the flagship store of COLCX has 15,000 fans, with the best-selling product being the COLCX Volumizing Shampoo priced at 99 yuan per unit, with over 1,000 units sold.
Industry experts suggest that for new or less-known brands, hiring a celebrity for a high price to host a live stream is a risky endeavor. Consumers do not solely purchase products due to the celebrity effect but also consider factors like product recognition, safety, discounts, and freebies. “Moreover, for regular brands, the cost-effectiveness of hosting dedicated live streaming events is not high.”
Some seasoned industry insiders believe that celebrities are not infallible, citing numerous instances where celebrity endorsements have faltered. Brands should not overestimate the allure of celebrity endorsements.
The bubble of the live-streaming economy has burst.
In fact, cases where businesses invest significant amounts in live-streaming sales but see minimal returns, as seen in the above disputes, are not uncommon in the industry. The resulting disputes and lawsuits are as numerous as hairs on an ox.
Just last month, a department store sales company signed a live-streaming agreement with an MCN company, agreeing to conduct a total of 5 live streams with the MCN company guaranteeing sales of 420,000 yuan. However, the MCN company only conducted three live streams, with total sales amounting to zero. As a result, the two parties ended up in court. Ultimately, the court ruled that the MCN company should terminate the agreement and refund the service fee.
For instance, during last year’s Singles’ Day shopping festival, a facial cleansing towel brand reached a live streaming promotion agreement with a top live streaming channel in the Taobao ecosystem, “Xianggu Came.” The brand stocked up 2 million units, but the final sales were only 130,000 yuan, resulting in zero profit for the brand after deducting slotting fees and commissions. This led to a dispute between the two parties.
Searching with keywords “live-streaming promotion” and “contract disputes” on the China Judgments Online website, CHAILEEDO discovered a total of 1,268 documents. From several publicly available civil judgments, many cases are related to live-streaming MCN agencies failing to fulfill contracts and not meeting sales targets. It can be said that in recent years, one after another, the “thunder” of the live-streaming sales industry has struck, with many businesses paying a heavy price for it.
It is worth noting that, on one hand, live-streaming sales have caused distress to many businesses, while on the other hand, well-known MCN agencies have not made profits either. For example, recent data disclosed by the leading MCN agency Yaowang Network shows an expected loss of 160 million to 210 million yuan in the first half of 2024.
Furthermore, Yaowang Network has not only predicted losses in the first half of this year but has been in a loss-making position from 2021 to 2023. The financial reports of Yaowang Network show losses of 700 million, 260 million, and 1.05 billion yuan in 2021, 2022, and 2023, respectively, totaling 2.01 billion yuan over three years. As the “first stock of live-streaming e-commerce,” the current situation of Yaowang Network to some extent reflects the operational conditions of the current live-streaming e-commerce landscape.
As it is widely known, live-streaming sales originated in 2016 and began to explode in 2019. After years of rapid growth, it seems that the bubble of the live-streaming sales economy has been punctured. However, as many industry professionals have said, “This is also the beginning of live-streaming sales moving towards standardized and healthy development.”
