Feb. 1 (NBD) -- Leshi Internet Information & Technology Corp., Beijing released its 2017 annual report on Tuesday, announcing a net loss of 11.6 billion yuan (1.8 billion U.S. dollars) which incorporates 4.4 billion yuan (687.9 million U.S. dollars) used as provision for bad debts for associated parties' receivables and 3.5 billion yuan (555.2 million U.S. dollars) as provision for impairment for intangible assets including TV & film copyright.

The big authorized movie copyright content library was regarded by Leshi as a proud competitive advantage and the large amount of copyright widely made Le.com one of the major video platforms in China.

Last year, the company still continued to buy the copyright of films and TV series despite its financial strain.

According to the latest report, as of 30 June 2017, the book value of Leshi's intangible assets reached 8.6 billion yuan (1.4 billion U.S. dollars), accounting for around 24 percent of its total assets. The large proportion intangible assets was piled up at the high cost of copyright purchase.

At the end of 2016, Leshi's original book value of copyright has increased from about 6.1 billion yuan to 8 billion yuan (967.6 million U.S. dollars to 1.3 billion U.S. dollars), and the metric continued to rise to 10.478 billion yuan (1.7 billion U.S. dollars) by the end of June last year.

However, it is noted that the book value of copyright has fallen 4.1 billion yuan (650.3 million U.S. dollars) to 6.37 billion yuan (1.0 billion U.S. dollars) up to June 2017.

Given the forecasted reduction of the value in 2017, the impairment of Leshi's copyright assets will continue in the coming years, become a landmine for the company's performance. 

The effect factors for the asset impairment include future advertisements, subscriber number, copyright distribution and copyright term.

In the internet visual-audio industry, shooting TV series independently as well as purchasing copyright elsewhere has become the must-have option for video platforms. Creation of Leshi's own drama series is also a crucial strategy for the company. In the financial report of 2015 and 2016, Leshi posted outstanding achievements in producing its own drama series which, however, was seldom mentioned in 2017.

A practitioner in the video industry told NBD that, though Leshi indeed had high quality self-created TV series before, yet with increasing competition from other video websites in this sector and its own financial distress, the company has lost its advantages in self-made drama.

Email: zhanglingxiao@nbd.com.cn