In the post-copyright competition era, can the listing of Netease Cloud Music bring new online music stories？
On May 26th, Netease Cloud Music officially submitted a prospectus to the Hong Kong Stock Exchange, which disclosed the core operating data of Netease Cloud Music for the first time. Among them, in 2020, the platform revenue was 4.896 billion yuan (RMB, the same below), the average monthly activity of online music service was 181 million, and the online music payment rate was 8.8%.
Netease Cloud Music was officially launched in April 2013, focusing on music discovery and sharing. Netease is the controlling shareholder of Netease Cloud Music. According to the prospectus, the revenues of Netease Cloud Music from 2018 to 2020 were 1.148 billion yuan, 2.318 billion yuan and 4.896 billion yuan respectively, with year-on-year growth of 101.9% and 111.2% respectively in the past two years. Online music service, community entertainment service and others are the two major revenues of Netease Cloud Music. With the growth of community entertainment service and other business income, its revenue is gradually diversified. In 2019, they accounted for 76.6% and 23.4% respectively, and in 2020 they accounted for 53.6% and 46.4% respectively.
The so-called online music service can be simply understood as paying for members. From 2018 to 2020, the monthly accounts of online music services of Netease Cloud Music were 105 million, 147 million and 181 million respectively, among which the number of paid members was about 4.2 million, 8.63 million and 16 million respectively. From 2018 to 2020, online music service achieved revenue of 1.026 billion yuan, 1.777 billion yuan and 2.623 billion yuan respectively, and the average monthly income per paying user was 8.9 yuan, 9.3 yuan and 8.4 yuan respectively.
The so-called social entertainment services and other income can be simply understood as live broadcast, value-added services and advertising. From 2018 to 2020, the number of monthly paid accounts for social entertainment services of Netease Cloud Music was about 5800, 91700 and 327100 respectively. From 2018 to 2020, community entertainment services and others achieved revenues of 122 million yuan, 541 million yuan and 2.273 billion yuan respectively, and the average monthly income per paying user increased from 477.6 yuan in 2019 to 573.8 yuan in 2020.
It is worth noting that Netease Cloud Music has not yet achieved profitability, and its net losses from 2018 to 2020 are 2.006 billion yuan, 2.016 billion yuan and 2.951 billion yuan respectively; Its adjusted net losses from 2018 to 2020 were 1.814 billion yuan, 1.580 billion yuan and 1.568 billion yuan respectively.
According to the prospectus, Netease Cloud Music’s fundraising will be mainly used to cultivate the music community, enrich diverse music content, and continue to innovate and improve technical capabilities. At the same time, deepen cooperation with various partners and further expand the diversified business model of the platform. The sponsors are BofASecurities, CICC and Credit Suisse.
Copyright war in the first half, refined operation in the second half
In fact, Internet companies such as Tencent, Baidu, Ali and Netease have all laid out in the music field, forming the whole industrial chain layout of online music, online karaoke, offline performances and digital albums. However, with Baidu Music being managed by Taihe Music and Xiami Music shut down, Cool Dog Music, QQ Music and Cool Me Music under Tencent Music Entertainment and Netease Cloud Music under Netease Company have become one of the few players in the online field.
The last round of stories in the online music market originated from copyright. Due to historical reasons such as "free download", Baidu Music did not buy more music copyrights, and QQ Music, Xiami Music Music and Cool Dog Music took the opportunity to rise. Although the market did not form an absolute advantage at that time, the copyrights in their hands were enough for them to gather a group of audiences.
The advantage of copyright has also become a key turning point in the history of Tencent’s music entertainment. In 2016, Tencent merged its QQ music business with China Music Group. Tencent replaced its equity with resources and became the largest shareholder of the newly established Tencent Music Entertainment Group. It includes three online music platforms: QQ Music, Cool Me Music and Cool Dog Music, two live broadcast platforms: Cool Dog Live and Cool Me Live, and a national karaoke platform.
Since then, most domestic online music platforms have a certain amount of exclusive copyright, forming a situation of "one super and many strong". There are also offensive and defensive issues in copyright resale, among which Tencent Music Entertainment, which has the most exclusive copyright, and Netease Cloud Music, the "upstart", are the most fiercely contested. Tencent Music Entertainment has asked Netease Cloud Music to remove songs on the grounds of copyright three times. In 2017, when the copyright issue was the most serious, Ding Lei, CEO and director of Netease, also made a speech.
Finally, under the mediation of the National Copyright Administration, Tencent Music Entertainment and Netease Cloud Music reached an agreement on the cooperation of online music copyright, and the two parties will authorize each other more than 99% of their exclusive music works, and agree to carry out long-term cooperation in music copyright. Earlier, Tencent Music Entertainment had reached a copyright transfer cooperation with Ali Music. In other words, with the "entry" of the National Copyright Administration, domestic mainstream music platforms have carried out several rounds of mutual authorization, and finally the copyright libraries are basically similar.
In recent years, Netease Cloud Music has also actively reached a direct authorization with record companies. On the day when Netease released its financial report this year (May 18th), Netease Cloud Music and Sony Music reached a copyright agreement. So far, Netease Cloud Music has collected the copyrights of the three major record companies. In this regard, Ding Lei, CEO and director of Netease, said that we are very active in cooperating with various upstream content providers to help them publish high-quality music content. This has always been our goal, and we will actively cooperate with more upstream content providers in the future. In terms of IoT, whether it is a car or a smart home, it is a music playback scene that Netease Cloud cooperates very closely.
After the copyright war died down, refined operation became the consensus of all families. There are also differences in the ways of choice. Tencent Music Entertainment has made great efforts in the fields of live broadcast, karaoke and long audio. Netease Cloud Music tried short video, live broadcast and knowledge payment, and finally found the community positioning.
After 90% of active users are 90, change the form of traditional music products.
According to the prospectus, in 2020, the average daily listening time of Netease Cloud Music users is 76 minutes. Users who actively create UGC account for 25%. By the end of 2020, the total number of song lists created by Netease Cloud Music users exceeded 2 billion, ranking first in China, with the highest user participation. Netease Cloud Music also keeps leading the industry in the data of per capita daily usage frequency, new user retention rate and active user retention rate.
Relying on the positioning of music community and music discovery and sharing, Netease Cloud Music has changed the form of traditional online music products. Users’ habit of listening to songs has changed from "search mode" to "recommendation mode". According to the data in the prospectus, at present, Netease Cloud Music users have 2.8 artificial intelligence recommendations from the platform for every 10 songs they listen to on average. Innovative functions such as music criticism fully release the value of music connecting people’s emotions. 48% users of Netease Cloud Music will watch music reviews.
According to the consulting data, Netease Cloud Music is the most popular online music platform among young users born in 1990s in China. The unique community atmosphere makes the platform popular with a large number of young users and creators, who nicknamed Netease Cloud Music "Cloud Village". According to Mob Research Institute’s "Picture Book of Generation Z College Students", Netease Cloud Music has become the most popular entertainment APP for Generation Z college students with high active users and high TGI (preference). According to the prospectus, about 90% of Netease Cloud Music’s active users are post-90 s.
According to QuestMobile2020“Z Insight Report on "Generation Z", the online consumption ability and willingness of Generation Z (post-95 s and post-00 s) are much higher than those of the whole network users; At the same time, Generation Z is also a heavy user of mobile Internet, and its depth and breadth of use are higher than the average level of the whole network. The famous "adolescent effect" in the music market shows that the songs you listen to when you are young will affect your musical taste all your life. The music community where young users gather has more profound emotional value, which also means that the platform itself will have longer vitality.
In addition, Netease Cloud Music also actively supports original musicians. According to the data in the prospectus, as of 2020, Netease Cloud Music has more than 230,000 original musicians, and the original musicians’ works account for 45% of the number of songs played on the platform.
According to reports, Netease Cloud Music is the first music platform supported by original music in China. On the day of its launch in 2013, Netease Cloud Music announced that it would "create the best communication channel and space for thousands of musicians in Qian Qian, China". Since then, the platform has successively launched the industry’s first systematic musician support plan "Stone Plan", the "Ladder Plan", which pioneered many music revenue models, and the first large-scale original musician’s annual festival in China, "Hard-ground Furnace Night" and many other initiatives, which helped the original music market to keep pace with mainstream commercial music from being neglected.
The rapid development of original music in mainland China, on the one hand, has promoted the vitality of the music market in China. The landlord’s cat, Yan Renzhong, Vicky Genie Chen and many other new generation musicians became popular from Netease Cloud Music; Various music types, such as national wind, folk songs and electronic music, have also moved from Yuncun to the whole network, from the small crowd to the public. On the other hand, as an important part of the national tide, the rising original music has also become an important carrier of cultural communication in China.
Beijing News Shell Finance Reporter Bai Jinlei Editor Xu Chaoproofread Lin Zhao