Wen | Deep burning trainee author Wan Qi
Editor | Li Qiuhan
Netease Cloud Music’s road to listing is a bit difficult.
Recently, Netease Cloud Music responded to the outside world. Based on the consideration of the overall market environment and other comprehensive factors, the management of the company decided to suspend the IPO, and will choose a better opportunity to promote IPO-related matters as soon as possible.
The first consideration of capital is the market, and the second is the return on investment.
In the opinion of an analyst, Netease Cloud Music’s move is first related to the big environment. With the tightening of supervision, listing at this time will face uncertainty. Then, on August 16th, news came out that Tencent Music would also shelve its listing plan in Hong Kong.
Some people in the industry have analyzed that the bad market is only one of the reasons. The huge losses of Netease Cloud Music have made investors lack confidence in Netease Cloud Music IPO. According to the prospectus, from 2018 to 2020, the adjusted net losses of Netease Cloud Music were 1.8 billion yuan, 1.6 billion yuan and 1.6 billion yuan respectively, totaling as high as 5 billion yuan, and it is expected that the losses will continue. At the same time, its biggest competitor Tencent Music has achieved net profits of 1.8 billion yuan, 3.9 billion yuan and 4.1 billion yuan respectively.
Netease Cloud Music, established in 2013, has gone through seven years. Due to the constraints of music copyright, it has been difficult for its paying users to grow at a high speed. However, the prospect of using high-viscosity community culture to find the second revenue growth is not clear. In the big environment, in addition to Tencent Music, the short video platforms such as Tik Tok and Aauto Quicker also pose a threat to the traffic.
Netease Cloud Music, which was listed "almost in one breath", has been "besieged on all sides".
Can Netease Cloud Music break through by lifting the exclusive copyright?
Judging from the prospectus, in Netease cloud music revenue, the proportion of membership fees in 2020 is as high as 53.6%, and letting users spend money to listen to music is the main source of profit.
On July 24th this year, according to the anti-monopoly law, the State Administration of Market Supervision ordered Tencent and its affiliated companies to cancel the exclusive music copyright within 30 days, which made the online music market explode.
Si Si, an associate professor at China Conservatory of Music, believes that the company with the most exclusive copyright will undoubtedly be greatly affected after the exclusive copyright is lifted. In other words, this has a greater impact on Tencent Music. Wang Chao, the founder of Yuan Wen think tank, also thinks that this is good for Netease Cloud Music, which has the opportunity to buy some exclusive copyrights that originally belonged to Tencent at a lower price.
"Cancellation of exclusive copyright" is regarded as the lifeline of Netease Cloud Music, but is this really the case?
In 2018, under the impetus of the National Copyright Administration, Tencent Music and Netease Cloud Music transferred their authorized music works to each other, and the two companies only retained 1% of the exclusive music copyright. But this 1% directly affects Jay Chou and Mayday, and many national singers’ songs are controlled by Tencent Music. "Without Jay Chou’s Netease cloud music, there is no soul." A netizen lamented that losing the copyright of some core singers really frustrated Netease Cloud Music.
But in fact, for it, it is not easy to re-light the user’s grayed song list. After all, money still needs to be spent. A record company executive expressed a similar idea about Deep Burning. He guessed that without exclusivity, the copyright fee would be reduced, but their company was unwilling to lower the price. He prefers new forms of binding, such as going deep upstream for content cooperation. This is exactly what Tencent Music is accelerating. In other words, exclusivity has been cancelled, but the threshold of cooperation with music production companies has not disappeared.
At present, the problem of Netease Cloud Music in the music field is not only copyright, but also liquidity efficiency.
The revenue model of online music has not been fully developed. Basically, the platform buys copyright at a high price, and then sells it to users in the form of payment, so as to earn the difference, with a single form.
How much does the copyright price bother Netease Cloud Music? In the earnings conference call of Netease in the first quarter of last year, Ding Lei directly criticized that Netease Cloud Music paid more than 2 to 3 times the reasonable price under the exclusive sales mode of copyright. In the prospectus, from 2018 to 2020, its content service costs were 1.97 billion yuan, 2.85 billion yuan and 4.79 billion yuan respectively, accounting for 171.7%, 123.1% and 97.8% of its revenue respectively.
With such investment, Netease Cloud Music’s "harvest" is that the prospectus shows that in Q1, 2021, the number of monthly users of Netease Cloud Music’s online music service has reached 183 million, but the number of monthly paid users of online music service is only 24 million, which is about one-third of the 60.9 million paid users of Tencent Music in Q1, 2021.
In fact, in 2020, the payment rate of Netease Cloud Music is 8.8%, which is higher than that of Tencent Music’s 7.7%, but compared with the foreign music market, the gap is still very obvious. According to the report data of Guoyuan International Securities in July 2020, the subscription payment rate of Spotify, an overseas music streaming platform, has reached about 50%.
The promotion of the willingness to pay cannot be achieved overnight, and it is worth noting that the premise of its promotion is that the platform needs enough funds to bet on high-quality and even scarce copyright content, so as to attract users to pay. It is not easy for Netease Cloud Music, which has suffered a long-term loss, to spend more money to supplement copyright ammunition.
According to industry-related sources, from 2019 to 2020, Netease Cloud Music was included in the service of paying users of Taobao VIP88 in 88 yuan, and the number of paying users increased from 8.63 million to 16 million. He predicted that Tencent Music would also be connected after Tencent and Ali Eco opened in August. In other words, after Netease Cloud Music Drainage Barrier is broken, its advantages will be further weakened.

Source/Analysys Qian Fan Data
From the product level, according to Analysys Qian Fan data, the online user duration of Netease Cloud Music continues to decline, and the coincidence rate with QQ Music and Cool Dog Music is relatively high, and the exclusive user rate is also the least among the three. The advantage of Netease Cloud Music is not obvious.
In the context of a single profit model and low willingness to pay, "music itself does not make money" is not a ridicule.
Listing is not easy, can social entertainment solve the problem?
Netease Cloud Music is clearly aware that it needs to find a new way out under the pressure that paying users are difficult to break through.
Tencent Music, which achieved profitability earlier, once accounted for more than 70% of the total revenue from social entertainment, relying on the high-margin "online karaoke+live reward" business. Netease Cloud Music is also using social entertainment to "save the country by curve".
Wang Chao explained this realization logic. In terms of consumption power, the member-paid business model is to attract users with low prices, and the business can be at a loss, but it can be realized after the users are introduced. At present, live broadcast realization is a highly efficient business. Since Netease Cloud Music Live Broadcasting Service was launched in the second half of 2018, its revenue has increased from 500 million yuan in 2019 to 2.3 billion yuan in 2020 in just one year.
Doing social entertainment is not difficult for Netease Cloud Music. From the product level, Netease Cloud Music has always been differentiated by song list culture, accurate recommendation mechanism and product tonality. The users account for 89% of the post-90 s young group, which has cultivated a highly sticky community culture.
In recent years, Netease Cloud Music has launched LOOK live broadcast, listening, anchor and other columns around the live broadcast business, which are arranged on various pages. The song room service includes Yuncun KTV, Yuncun singers, parties, etc. At the same time, podcasts are opened to introduce high-quality audio content, and the action is constant. In terms of commercial realization, it includes live broadcast service, virtual goods sales and music-related products sales, among which live broadcast service is the main revenue source of social entertainment.
The effect is obvious. In 2018, the revenue of online music services and social entertainment services accounted for 89.4% and 10.6% respectively. By 2020, the revenue of the two major businesses will become 53.6% and 46.4%, and the revenue of the latter will also increase from 120 million to 2.27 billion. The number of paying users of social entertainment services has also increased rapidly, from 0.58 million in 2018 to 91,700 in 2019, and then to 327,000 in 2020. The monthly income of paying users has also increased from 477.6 yuan in 2019 to 5.73.8 yuan in 2020.
The realization channel of Netease Cloud Music is tilting towards "social entertainment", and there is a trend of overweight this year.
Taking advantage of the unique community atmosphere, the latest version of Netease Cloud Music upgrades "attention" to a first-class entrance, so that users can view the trends of friends and musicians more quickly, and the "cloud circle" adds group chat to find the same hobby. The "cloud village" section also integrates Mlog, song room and chat room. The prospectus also shows that in this year’s strategic adjustment, the user group and participation of the "Yuncun" community will be expanded.
But this doesn’t mean that this business can always make great strides.

According to the statistics of Analysys Qian Fan, since September, 2020, the usage time of Netease Cloud Music has shown a downward trend as a whole, and the rich entertainment and social functions are not as good as expected for retaining users.
Whether the appearance of these new functions will affect the original community tonality is not discussed for the time being. An industry insider believes that online music platforms, social media and short video platforms are accessing related content in the market. From a technical point of view, live broadcast rewards such business segments are highly competitive and reproducible, and there are no industry barriers.
In his view, at the same time, the ceiling of such income will not be high. Based on the consumption scene of music socialization, the extended value-added services, the most important of which is to reward the anchor by ordering songs and giving virtual gifts live, which is not much different from other platforms. Tencent Music, Huya and other platforms have occupied most of the market share, and it is very difficult for Netease Cloud Music to "grab food".
And in Wang Chao’s view, at present, around the realization of live broadcast business, it will become rivals with Tik Tok and Aauto Quicker. When Netease Cloud Music attacks the market share of these two platforms, it will not move.
What is the value of original musicians?
Netease Cloud Music also has a trump card-the original music plan.
Netease Cloud Music was previously restricted by copyright, playing independent musicians, with the purpose of differentiating operations and attracting users. More than one person in the industry mentioned that although the platform has a certain traffic tilt to the musicians in the head, after the exclusive copyright is lifted, it will be beneficial to the original musicians at the waist and even at the tail. After all, the deep binding between the platform and the original musicians is equivalent to having scarce content.
The prospectus also mentioned that by December 2020, the number of registered original music of Netease Cloud Music reached 230,000, and the music tracks of registered independent musicians accounted for more than 45% of all music streaming media. Lao Fan, an original musician who has now entered the mainstream vision, became popular in Netease Cloud Music in his early days.
However, from the perspective of revenue, it is difficult to generalize the contribution of original musicians to the platform. Earlier, an independent musician told Deep Burning that Netease Cloud Music had collected a large number of independent musicians’ works for some time, which was a bit like venture capital. "But it’s worth it to hit one." Wang Chao explained that the industry still follows the "28 Law", and only a small number of people can earn money after they become big names. It is very difficult for most original musicians to count on this to earn money, but it is difficult for the platform to cultivate original musicians to make direct profits, and its greater role is to enrich the sound sources.
And now, after the era of exclusive copyright has passed, all platforms are aware of the importance of supporting independent musicians and are increasing their support.

Source /Pexels
In June this year, according to the news of LatePost, Tencent Music will set up an open platform department for musicians, a group of content studios, a music cloud business center, a promotion market center and a list and data product center on the basis of the original content cooperation department after setting up a content business line. Its main business direction includes, mining and introducing high-quality musicians; Cooperate with the music industry in content co-creation and live performance; Provide distribution and promotion services for music.
In addition, the short video platform is also eyeing. In June this year, Tik Tok APP has launched a music player and began to test the "K song" function; Also launched the "See Music" program. On the other hand, in March this year, Aauto Quicker held the Music Copyright Ecology Conference, which launched the industry’s first music copyright settlement standard. In June, the "Aauto Quicker Double-click Music Plan" was launched to support original musicians through traffic support and copyright settlement.
At present, the advantage of Netease Cloud Music in creating original musicians is weakening. According to the Q2 financial report of Tencent Music in 2021, the number of original musicians has also exceeded 230,000, and Tencent Music is connected with Tencent Video, which can build more music consumption scenes with music programs, and the resources are more attractive for independent musicians.
More importantly, the impact of short video platforms.
According to "Tik Tok Music Ecological Data Report 2020", in the second half of last year, the number of musicians in Tik Tok increased by over 300 million, 6 musicians increased by over 10 million, and 23 musicians increased by over 5 million.
While seizing the resources of musicians, the song-making ability of short video platform is also being verified. For example, the early "Imitating Cats" produced a series of Tik Tok Divine Comedy. This year, in the program "Praise for Songs" produced by Tik Tok and Zhejiang Satellite TV, Phoenix Legend’s adaptation of "Underwater" was also circled. Some people in the industry have analyzed that the short video platform is more suitable to be an incubator for explosive songs and musicians.
A business that needs investment but does not necessarily guarantee to make money is also facing strong new competitors. The advantages of Netease Cloud Music in the original musician sector are gradually being diluted.
Suspension of listing is an active choice, but it is also a wake-up call.
Netease cloud music has been frequently circled by marketing, and it is regarded as a dark horse of online music platform. It is not easy to break the three mountains of online copyright, social entertainment and original musicians.
* The title map comes from Pexels.