The cost structure for WeSoccer is separated into 3 major areas: the application development cost, the maintenance cost and the promotional cost. The total estimated cost will be 117 million Yuan. For details of the breakdown, please refer to Appendix 2.
The maintenance aspect would contribute 98% of the total estimation which includes the broadcasting license fee and the daily operation/maintenance cost. The digital broadcasting license which TenCent Sports acquired at 115 million Yuan for the 2015 -2016 season will be absorbed by WeSoccer. Furthermore, to deliver extensive data analytic of the football match, soccer expert and celebrities will be hired for blogging and editorial writing.
To develop the MVP, WeSoccer will integrate the WeChat platform and the TenCent Sports application in order to deliver high quality live streaming of the Premier League with social interaction. The development cost refers to the one-off interface development of the WeSoccer application and the Research and Development cost (“R&D”) for future enhancement. Due to the fierce competition in soccer live streaming, it is curial for WeSoccer to avoid user attrition and enhance user experience. To allocate the R&D resources effectively, the 80/20 rules will be applied. 80% of the R&D cost allocated annually will be used on existing feature enhancement such as the live streaming technology enhancement and the remaining will be used for customer feature request and the “nice to have” features.
For acquiring new users and enhance WeSoccer awareness, online ads and soccer event sponsorship will be budgeted annual under the promotional cost.
Revenue Structure
The major revenue income of WeSoccer will be the online subscription fee and the selling of peripheral products such as football clubs’ merchandise and the WeChat stickers.
According to the Pyramid research, there will be 28.3 million subscribers for video-on-demand service in China as exclusive deals are sealed for premium sports content like the English Premier League, which accounts for 6% of the overall pay TV revenue (R.Hawkes, 2015). LeTV, PPTV and TenCent, along with the Super Sports Media Group are the official digital broadcaster for the Premier League.
In order to be competitive in the market, we would use the following charging scheme for the live streaming subscription to provide more dynamic options for users.
By charging similar fee to the competitor, WeSoccer will have the competitive edge by including the add-on of social interaction. The user will be able to pay the same fee but enjoying better social experience by subscribing our service.
To further promote acquisition, we would utilize the social community network from WeChat. User will receive a rebate of 10% of the seasonal subscription fee per referral while referring their friends via WeChat. In other words, it would be free while the user has referred 10 friends for the seasonal option.
The break even point will be 587,940 seasonal subscribers which accounts only 2% of the 28.3 million subscribers from the Pyramid research.
Total Cost | Pay-per-season | Break even point (users) | ¥117,000,000 | ¥199 | 587,940 |
As for the selling of peripheral products such as football clubs’ or stars’ merchandise, it would promote another prospected income stream for WeSoccer. By integrating with the WeWallet, user will be one click away from buying their favorite team’s merchandise. According to dacueconsulting 2015, there are around 10 million football fans would like to buy the jersey, shoes and goods endorsed by the stars and club they supported (dacueconsulting, 2015). The online shop will further attract football clubs to promote their official products in China.
