Governance of livestreaming firms in spotlight

East Buy, a subsidiary of private tutoring giant New Oriental that successfully transitioned to a live-streaming e-commerce company, removed Sun Dongxu as its executive director and CEO, and named New Oriental's founder Yu Minhong as its chief executive.

The appointment, which was confirmed by the Hong Kong Stock Exchange late on Sunday, came after a dispute involving the company's most influential livestreamer, Dong Yuhui, intensified last week, leading the Hong Kong-listed company to suffer billion-yuan losses on the stock market within days.

Industry experts said it is time for companies to reevaluate their star-oriented business model and strengthen internal management, in order to drive the country's burgeoning livestreaming e-commerce sector to be more rational and healthier.

Dong, who was formerly an English teacher at New Oriental Group, went viral as a livestreamer in June last year thanks to his insightful and humorous hosting style. He soon amassed a huge number of followers, who bought products from East Buy just because of him. His followers on Chinese short-video platform Douyin hit a staggering 20 million as of Sunday.

The latest dispute started after the editorial team of East Buy said on Dec 6 that the script used by Dong during livestreaming was written by the team and not by the star alone. It quickly prompted a group of online shoppers and many of Dong's fans to question the company for taking credit for his work and longtime efforts.

On Tuesday, Sun Dongxu, then CEO of East Buy, said in a livestream that neither the editorial team nor Dong had behaved appropriately, adding that Dong is treated well by the company and draws a steep annual salary.

Sun also condemned the "fandom culture", noting that netizens often attack a company because of their idol. He triggered a wave of anger among netizens with his remarks and aggressive approach during the livestream, including hurling his cellphone onto a table.

Many netizens said they felt offended by Sun's behavior. They said they felt like employees being rebuked by their boss, instead of being respected as consumers.

Later, both Sun and Yu, the founder of New Oriental, as well as Dong, apologized for the incident and clarified that the script used for the livestream was written by both the editorial team and Dong.

However, this didn't stop the stock price of the Beijing-based company from plunging to HK$26.25 ($3.69) per share on Friday from HK$32.75 on Dec 6. The number of followers on Easy Buy's Douyin account was 28 million as of Sunday, a significant drop from over 31 million a week ago.

Zhang Yi, chief analyst at market consultancy iiMedia Research, said, "The incident is basically an internal strife over making a balanced profit distribution between leading live-streamers and companies or MCN (multichannel network) agencies that manage livestreamers."

The East Buy case is not a stray incident, Zhang said, adding that many livestreaming e-commerce companies are star-oriented and rely hugely on a top livestreamer to attract customers and make profits, as can be seen from the emergence of Li Jiaqi, a top beauty and cosmetics livestreamer well-known as "lipstick king".

Livestreaming has become deeply entrenched in people's lives in the country over the past years. Data from iiMedia Research showed that the market scale of China's live-streaming e-commerce sector reached 1.43 trillion yuan ($200 billion) last year, up 19.5 percent year-on-year.

On Saturday night, Yu and Dong appeared in a livestream in order to prevent the incident's impact from further spilling over. Yu admitted that East Buy had been plunged into "chaos", and removing Sun from his current position was due to a series of mistakes he made while performing his management duties.

"Sun will continue to work in other positions in New Oriental," Yu said, emphasizing that Dong had never been asked to leave.

There were rumors in the market that Dong was being courted by other livestreaming e-commerce companies and some tech giants.

Recalling the past week, Dong said the dispute was "painful" and hoped it would end soon. He added that he was staying with East Buy.

Pan Helin, co-director of the Digital Economy and Financial Innovation Research Center at Zhejiang University's International Business School, said that China's livestreaming e-commerce industry is a unique and emerging business, and that it is not surprising that the consumers' trust in a top livestreamer makes all the difference.

The Beijing Consumers Association conducted a survey, in which nearly half of the respondents said their "fondness" for a particular livestreamer was the main factor motivating them to watch the live online programs.

"On the one hand, we have to admit that the market value of such an engaged user traffic from a livestreamer is immeasurable. On the other hand, the country's livestreaming e-commerce sector needs adjustments, and fans need to be more rational to avoid extreme fandom culture," Pan said.

Zhang, from iiMedia Research, said: "Companies should also beef up management and avoid risks. Also, the sector can be more technology-driven with the rise of artificial intelligence-based virtual livestreamers."