Extra Buzz 005: China's Fan Economy, Taken to the Max
Dear Extra Buzzers,
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Rui & Ying-Ying
The Battle of Xiao (Sean) Zhan 肖站: China’s Fan Economy, Taken To the Max
The TL;DR: Chinese fans are much more likely to be attached to celebrities because of their personality (50%) versus their artistic output (29%). They are also willing to spend money (~40% at $850 or more a year) and see spending money as a way to support their idols. In 2018, $3Bn was spent on merchandise marketed by idols, triple the year before. Many have exploited the inherent business opportunities in this behavior, including print media (by featuring certain celebrities). Others have used their fans’ loyalty to become entrepreneurs (i.e. Smartisan). Tech solutions such as apps focused on allowing fans to organize, fundraise and spend in the name of their favorite celebrities have enabled this growth. However, last month, an overeager group of fans reported a website for hosting content they found offensive to their idol Xiao Zhan and got it banned, resulting in a huge wave of backlash and boycotts that made national headlines, all over a course of a few days. The rest of China is learning just how active and tech savvy the fan ecosystem is, and how quickly trends and idols can rise and fall, with everyone trying to figure out how to avoid becoming collateral damage in the process.
PS For background, you might want to listen to or review our Episode 54 on KOLs, Idols and Influencers.
2300 words, ~8 minutes.
The hoopla all started when fans of Xiao Zhan, a 29-year-old, were furious about an explicit, adult-themed fanfic that portrayed the male actor and singer as a girl (amongst other “unconventional” fictionalizations). They banded together to report the site that hosted the story, AO3, leading quickly to its ban in China. Several communities (LGBTQ, anime, other non-mainstream groups) retaliated against these fans, boycotting his commercial endorsements and dragging down his ratings, and it got so heated that the entire Chinese internet weighed in on the pros and cons of the fan economy.
As background, in China, aside from starring in commercials and becoming an official spokesperson, celebrities can “move goods” or induce purchases, in one of two major ways. The first is by endorsing the product through usage, without explicitly exhorting one’s fanbase to buy it. The subtlety of such messages can differ, but one Chinese actress who is famous for selling out clothing is Yang Mi, who is rumored to charge $30 to $40K per outfit she wears in public. She has consistently been the top-telling celebrity on Taobao, meaning that her name is a top keyword on the platform for customers interested in buying what she is seen wearing. As is common practice, she stages appearances, especially flight departures and arrivals, where she is welcomed by throngs of adoring fans and photographers. Obviously, this happens globally, but in China, the important thing to note is that the fans generally understand and support this behavior. It’s not considered being a sell-out or inauthentic; her commercial savvy and influence is often a point of pride with her fans.
Taobao publishes a list of the top celebrities who can “move product” every year. This is from 2018.
The second major reason Chinese fans buy product though, is not because they trust your taste or wish to mimic you, but purely because they want you to benefit, and most of it ends up revolving around making you more money. That’s right, your fans basically want you to get the big brand name endorsement deals, and so will buy the products you advertise, because that way everyone can see how marketable you are, and more people will hire you, and give you even more money. The intention is very explicit -- they feel that they’ve won when they help you win at life. I don’t want to bore readers with all the successful case studies of brands for whom exploiting this has worked out fantastically, but you can trust me that there have been many.
This mentality and behavior has been a long time in the making and was imported from Korea and Japan, as we covered in our podcast episode. In fact, while nowadays “celebrity” and “idol” are used fairly interchangeably, I always thought “idol” is the better word for people like Xiao Zhan.
“Idols are a subgroup within celebrities that originally referred to good-looking and personable celebrities from outside of China, most often Japan or Korea. By personable we actually mean that they have carefully manufactured appearances, personalities and personal narratives — 人设 — and these are meant to attract the most number of fans.” - Tech Buzz Episode 54
These fans are mostly self-organized, but don’t mistake that for disorganized. They are highly structured, and the leaders typically communicate directly with the idol’s management team, and often work full-time, which leads to the perception that the idol is either directly the source of fan-led campaigns, or tacitly endorses the activities. It varies from group to group, but the main point is, these organized groups seek to exploit the business world to their idol’s advantage, for the sole purpose of enriching or benefitting their idols.
Most activities are harmless, such as getting your idol to the top of the trending list on Weibo, and or are controversial but inane, such as when Kris Wu’s fans swamped US iTunes in advance of his birthday and had his new album sweep the charts. However, in the case of Xiao Zhan, this was not a “victimless” stunt. An Archive of Our Own, known by its abbreviation AO3, was a safe haven for many self-identified marginalized members of Chinese subcultures, especially the LGBTQ community, and those folks may have permanently lost access to a space where they felt cherished and welcomed. As a result, they told their friends and a rebellion ensued. Instead of protesting the official decision, however, they went after Xiao Zhan, the logic being that, to punish the rabid Xiao Zhan fans who brought about this injustice in the first place, you attack the one thing they care about -- their idol. Their movement had such momentum that it was given a name -- “the 227 Incident,” for February 27, 2020.
And this is where the story starts to intersect with tech and business and is not some isolated aberration in the entertainment industry. The tech part of it is: those behind the 227 Incident used entirely 21st century methods to destroy their target. They got the equivalent of “Cancel Xiao Zhan” to be trending on social media. They lowered the ratings of all the content that features him. The business part of it is -- they boycotted and harassed the brands who had been using him as spokesperson to drop him, stat. By the looks of it, they have succeeded, at least temporarily. Xiao Zhan’s team issued an apology for “taking up social and public resources,” his brand partners distanced themselves from him and ended contracts, and the star himself has completely disappeared from public view.
This isn’t exactly unique to China. “Cancel culture” (boycotting someone because of problematic behavior) was the phrase of last year here in the US. Also referred to as call-out culture in the West, collective outrage mobilized by social media has, rightly or wrongly, ruined and even taken some people’s lives. Perhaps a bit more China-specific is “reporting” culture, which refers to alerting the authorities. But where I’ve personally encountered it, it has less been used as a tool by fans to uphold their idol’s good image, and much more used by businesses to smear their competitors, as the post above also admits. What is different is the motivations behind this kind of fan behavior, and the business opportunities this can support.
In the eyes of the devoted Western fan, the transaction is a simple one -- the artist produces, you consume. The goal, for the most part, is to support the artist’s art, in whichever form it takes. Sure, you may also happen to adore them as individuals, but the end goal is rarely to benefit them directly as individuals without any connection to their art. In China, however, artistic output is secondary to the fans’ connection with their idol. Their idol’s welfare -- which can be measured by wealth, accolades, popularity, anything really -- is the fan’s most important duty and input, and how they feel most engaged. Put another way, the Chinese fan economy is driven by folks who do not care as much about their idol as artist, and much more as idol. The transaction in this case can often seem unilateral -- the fans give, and the idols receive. In exchange, the idols just have to be -- by which I mean, continue acting like whatever persona that got their fans hooked in the first place. In other words, the persona is the artistic “output,” and what fans are willing to pay money for. I am not just making this up -- 50% of fans surveyed said that their devotion stems from their idol’s charisma … in comparison, only 29% were fans because of their work.
To bring it back to tech even more, I want to tell one story, then make a few quick observations.
The one story is something we’ve already told on Tech Buzz in Episode 21, which was on Bullet Messenger, a short-lived attempt to dethrone WeChat and spearheaded by a guy named Luo Yonghao, former star English teacher of New Oriental and smartphone entrepreneur. Luo had amassed so many fans in his time as English teacher through his exuberant, sage-like persona that when he decided to make a smartphone, many people handed over their money willingly to him. That is already a bit weird, since he really had no qualifications to make advanced consumer hardware, but what is much weirder is how long these fans stuck with him despite him shipping one overpriced inferior product after another, and how much of it was self-organized out of love for his person and his ideals. In 2018, long after it was obvious Smartisan (his phone company, now sold to Bytedance) was not going to be successful, 37,000 of his diehard fans still congregated in the Beijing Bird’s Nest Olympic Stadium for what was in their minds a historic product unveiling. Luo fans have been interviewed many times over the years for their cult-like devotion to him, and their continued willingness to shell out money to, in their words, “help Luo win.” Note the similarity between the cult of Luo and the cult of Xiao. A good portion of them are seeking to benefit Luo directly -- the smartphone is simply what they buy to help him realize his dream. It would be as if people bought Teslas because they want Elon Musk to live even better than he already does, and not the other way around -- they are fans of Elon because they like the Teslas he makes, which would be the much more sensible conclusion.
A fan crowdsourced billboard by Luo's fans advertising his product launch.
As we now know, though, at least for Luo, that love from fans was not enough to float a startup in a very capex-heavy and ultra-competitive space. However, this doesn’t mean it doesn’t work in other sectors. Will it work in livestreaming, for example, where we already see top sellers like Austin Li have fan communities with strong affiliations for his persona alone (his personality and espoused values) as well as his “talent” (he’s entertaining, works hard, picks good products)? Will those fans feel so strongly about him that they consume simply to benefit him, as we have seen Xiao Zhan’s fans do?
They might. I’ll stick with examples with Xiao Zhan, but we’ve already seen this in action with many idols. When a famous Chinese magazine decided to feature him on their February 2020 cover and have a “limited edition” drop with autographed full-sized posters and other goodies, they sold the first 100K copies in 3 seconds and the next 100K in 15 minutes, ending at nearly 250K copies sold in the hour-long sale, a record. If you were to guess these records were broken with the assistance of the self-organized fan groups, you’d be correct. Many pooled together money for group purchases with the explicit wish of breaking records and sending their beloved idol to the top of Weibo trending topics. In fact, these tactics are so common now that various print media have caught on; they are not only targeting the wallets of these celebrities with diehard fan groups for paper editions, a bunch have also rolled out e-zines specifically for this purpose, which are cheaper to distribute. This has led to various Chinese media to speculate how the fan economy might “revitalize the struggling print media industry.” The Business of Fashion was a bit more skeptical about their scalability, but realistically, with almost 40% of fans spending at least $850 per year on their idols and 3% spending $10000 or more per year, there might be a lot more upside than they think. Idol-directed commerce (meaning, non-artistic content) was estimated at just $3Bn a year as of 2018, but it tripled from the year before, and was expected to grow at nearly 50% after that.
The February 2020 magazine cover that got everyone in China excited about “saving print media.”
Where is all the growth coming from? The internet. In China, everything is run through apps, online. US celebrities tried to launch their own apps, but even megastars like Taylor Swift have found it difficult to keep going. In China, fan apps tend to be utility apps for organizing campaigns and fundraising, with social media being the battleground where the victories are declared. Although these apps also have social aspects, such as leaderboards within the app itself for most active fanclubs, they are not the highlight. And as I’ve said, pretty much all campaigns are internet-based in some way -- even the buying of magazines, as we’ve seen, is a matter of smashing online sales records. The internet is where trends are made, and the internet is where the fans spend all of their time and money. It is actually a wonder that Xiao Zhan had not taken over frontpage non-entertainment news earlier than this. The organized fashion by which fans are exploiting social media algorithms and the increasing number of software tools built for them to do so means that we’re likely to see much more of this in the future, unless the government steps in with steep curbs (which is always a risk, in China). And as fans and idols become more ambitious and look into global expansion, we’ll also probably see more spillover of this activity in the West. When you combine a large, tech savvy fanbase with an altruistic desire to see their idol succeed at all costs, you can get some odd consequences.
One of the star-chasing fan economy apps that supports fundraising.
The fan economy has been a divisive discussion in China for the last few years. There are many who feel it is a social ill, a waste of time and money for youth. The only thing that the Xiao Zhan controversy has done is reveal this world to the rest of the population who weren’t paying attention. It has also highlighted a potential problem: as technology has enabled fans to self-organize, fundraise, and act in unison for or against a cause all in the space of a few hours, things can spiral out of control quickly. The very fans that push you to the top, in their fervor to help you, can also inadvertently drag you to the bottom. Sure, new censorship laws were on their side, but social opinion was not. Is the idol in control of the fans? Or is it the other way around? And how does everyone else avoid becoming collateral damage? As an investor, how can you tell when something is fan-organized behavior versus real consumer demand? Is the former too ephemeral and entirely worthless, or does it have some lasting value? I think that when we decide the success of a celebrity is based on how much money they make and how much attention they receive, those are the metrics fans are going to game, and we are asking for a lot more Xiao Zhans and 227 Incidents in the future, not just in China either.
What do you think? Reply and let us know!