"Worthless" Netease Cloud Music: Alibaba Assisted Listing With Loss

"I sincerely hope Netease cloud music will be listed."

This is the sentiment of a Tencent musician after the earnings season, because the music market is too difficult, and he is curious about Netease how to deal with it. make a pointed comment.

On the evening of May 26, Netease cloud music submitted a prospectus to the Hong Kong stock exchange for listing in Hong Kong, which became another listed subsidiary of Netease after Youdao.

According to the prospectus, the revenue of Netease cloud music in 2018, 2019 and 2020 will be 1.148 billion yuan, 2.318 billion yuan and 4.895 billion yuan respectively, with a net loss of 2 billion yuan, 2 billion yuan and 3 billion yuan respectively, and it will burn 7 billion yuan in three years.

As the largest competitor of Netease cloud music, Tencent music's revenue in 2020 is 29.15 billion yuan, with a year-on-year growth rate of 23.6%; The profit was 4.16 billion yuan, with a year-on-year growth of 4.3%.

In terms of business, the two companies are not in the same order of magnitude, but in the key first and second tier city users and post-90s users, both sides have their own victory and defeat.

With the completion of Netease cloud music listing plan, this is also announcing to the market that the direction of war has changed from expansion to realization.

7 billion in three years

The biggest advantage of Netease cloud music lies in the user group.

According to the prospectus, as of December 31, 2020, the monthly number of Netease cloud music has reached 181 million, with a compound annual growth rate of 31% over the three years; The number of online music users has reached 16 million, with a compound annual growth rate of 95% in three years. In addition, each active user of Netease cloud music spent 76 minutes listening to music every day, with 89% of the post-90s users; Among the active users, users in the first and second tier cities account for more than 60%.

This traffic structure derives the current business model of Netease cloud music, and its revenue mainly comes from online music services and social entertainment services. In 2020, the revenue of the former is 2.623 billion yuan, accounting for 53.6%; The income of the latter was 2.273 billion yuan, accounting for 46.4%. At present, the monthly revenue per paid user of online music service remains relatively stable, which is 8.9 yuan in 2018, 9.3 yuan in 2019 and 8.4 yuan in 2020. According to the prospectus, online music services include membership, advertising, digital album and single sales and sublicense.

Social entertainment services are mainly live income, which is the recent increment of Netease cloud music. According to the prospectus, the monthly number of users paying for social entertainment services has increased from 5800 in 2018 to 327100 in 2020, and the monthly revenue per paid user has increased from 477.6 yuan in 2019 to 573.8 yuan in 2020. Behind the rapid growth of live broadcasting business, the pressure of realization of Netease cloud music is highlighted.

Many Netease personages confirmed to the 21st century economic reporter that the main reason why Zhu Yiwen, then CEO of Netease cloud music, was marginalized was the weak performance growth. At present, Ding Lei, founder of Netease, is directly in charge of cloud music.

For the future direction, Netease cloud music points to community traffic. It expects that China's online music and entertainment platform market will reach 167 billion yuan in 2025, with an average annual compound growth rate of 32.2%. Netease cloud music said it will focus on expanding user groups and user participation by cultivating "cloud village" communities, paving the way for long-term profitability.

"What cloud village community carries is the difference of Netease cloud music in the future, or we used to have great difference, and now we want to enlarge the difference." In 2019, Zhu Yiwen told reporters of the 21st century economic report.

Tencent can shake?

Objectively, Netease cloud music does have advantages in market segmentation.

But in terms of valuation, the market doesn't seem to buy it. According to the prospectus, the cost per share of Netease cloud music in the first round of financing is $10.83, that of the second round is $18.37, and that of the third and fourth rounds is $22.56. Gains were limited.

"We can't see the long-term future of Netease cloud music, and innovation is limited." Many investors admitted to the 21st century economic reporter.

It is worth noting that Baidu entered the board in the second round of financing, accounting for 4.26%. Ali is Taobao China in the fourth round, accounting for 10.81%, Yunfeng fund accounting for 5.41%. Alibaba won a board seat in Netease cloud music, and Yu Feng, vice president of Taobao e-commerce content business department, served as a non-executive director. Netease shares 62.46% in cloud music.

Baidu entered the bureau with strategic intentions, but it seems that the response is not good“ The actual effect of diversion is quite limited. " Baidu music business director at that time disclosed to the 21st century economic reporter. Ali shares, is not willing to music flow side by side Tencent. Just before that, Ali shut down shrimp music.

When Netease cloud music goes to the community flow story, Tencent music is also planning Tencent ecological diversion. According to the financial report, Tencent music online music service Mau 615 million in the first quarter, a year-on-year decrease of 6.4%; Social entertainment service Mau was 224 million, with a year-on-year decrease of 14.2%; Social entertainment paid 11.3 million users, down 11.3% year-on-year, and 5.5% of the rate payable.

Tencent music does not deny that the decline of monthly life has been impacted by a variety of entertainment platforms.

In order to solve the traffic problem, Tencent music continues to move closer to Tencent ecology. In the financial report telephone conference, Tencent music executives revealed that the quality of acquaintance and stranger social contact will be the increase of traffic“ In the part of acquaintances' social contact, we will focus on providing some tools to enable users to consume music content on wechat and QQ, provide some music creation tools, or scenes where two friends can consume music with each other, so as to increase our own music playing volume on wechat and QQ. " Tencent music executives said.

Another big attempt is to point to video numbers“ In the future, some linkage with wechat video number may be considered. Musicians can open their own accounts on wechat, and the content can be easily distributed to the platform, so as to promote the interaction between musicians and fans based on short video content, and also increase the consumption time of the platform due to video content. " Tencent music executives said.

In fact, in the top-level architecture, Tencent music's grass-roots and grey lines have been buried thousands of miles away. On April 15, Tencent music announced a new round of management adjustment, with Liang Zhu as CEO, in charge of the work of TME's business lines; Peng Jiaxin, the former CEO, serves as the executive chairman and is responsible for the formulation of long-term strategy and the overall coordination between the board of directors and the company.

Liang Zhu was responsible for social platforms including QQ and QQ space. In addition, Liang Zhu was in charge of QQ music from 2014 to 2016, and founded the national karaoke as a member of the founding team.

For Netease cloud music, there is still a huge gap between Netease cloud music and Tencent, but there are also many advantages. With the promotion of anti-monopoly, Tencent has to let go of the core music copyright. Earlier, Sony Music Entertainment (SME) announced a digital distribution agreement with Netease cloud music and Tencent music. Sony and Netease cloud music department have reached a direct copyright agreement for the first time, which means that Tencent music's monopoly of Sony Music in mainland China has become history. In addition, the independent musicians brewing out of Netease cloud music ecology are also gradually carrying the flag of traffic.

The core music copyright was once Tencent's biggest competitive advantage over Netease cloud music.

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