Editor Li Wei
Photographer Xiao Bing
The listing is just around the corner, but Netease Cloud Music has stopped.
Recently, Netease Cloud Music confirmed to China Entrepreneur that due to comprehensive factors such as the overall market environment, the company's management decided to suspend the IPO of Netease Cloud Music. In the future, we will choose a better opportunity to promote IPO-related matters as soon as possible. Previously, in May of 20021year, Netease Cloud Music launched an impact on the Hong Kong Stock Exchange. On August 1, Netease Cloud Music was heard by the Hong Kong Stock Exchange.
The rise of Netease Cloud Music seems to be a commercial alternative story.
In 2000, after Netease went public in the United States, People's Daily interviewed its founder Ding Lei and asked him what he wanted to do most at that time. Ding Lei said he wanted to start a record company.
Following 13, Netease Cloud Music was officially launched on February 20 13. Netease Cloud Music, as a new product, is faced with all popular products that have been in business for 5~ 10 years: cool music, QQ music and so on. And each user has exceeded 100 million. However, Netease Cloud Music still stands out from the red sea.
By 20 18, Netease cloud music has exceeded 500 million users in just five years. On October 20 18, 1 1 year 10, Netease Cloud Music received more than 600 million US dollars in financing, with investors including Baidu, General Atlantic and Apollo Capital.
Looking through the prospectus of Netease Cloud Music, it seems that we can find the answer to Ding Lei's suspension of listing: in terms of products, Netease Cloud Music revenue has doubled for two consecutive years, with monthly users reaching 1.8 1 billion, and the proportion of paying users reaching 8.8%; However, in terms of business, Netease Cloud Music has been losing money and the range has been increasing. From 20 18 to 2020, it lost more than 7 billion. 202 1 The loss in the first three months reached1700 million yuan, compared with 500 million yuan in the same period last year.
In addition, the prospectus specifically pointed out: "We expect to continue to lose money in the years ending 202 1, 2022 and 2023, 12 and 3 1."
Behind the rapid rise of Netease Cloud Music in the past eight years is a beautiful past about Ding Lei's personal taste and product design. The commercial realization problem faced by Netease Cloud Music is another naked reality.
Netease owns many businesses that are strongly related to Ding Lei's personal interests, including Netease Cloud Music and Netease YEATION.
In addition, there is a tradition within Netease that if Ding Lei attaches great importance to a project for a period of time, the project team will "enjoy" the "preferential treatment" of sitting outside Ding Lei's office, which Netease Cloud Music once enjoyed.
With the rapid development of Netease Cloud Music, its importance within the company is constantly improving. On April 20 16, Netease Cloud Music was upgraded from the second-level department "Music Product Center" of Netease Hangzhou Research Institute to the first-level "Netease Music Division", and then began to operate independently.
Before Netease Cloud Music went online, Netease made a serious research on Internet music products. In their view, the products on the market are all music library products, just a tool. Users know this song in other places and come here to search.
"The competition of music library products is zero-sum competition, the competition between platforms is the competition of the number of music libraries, and Netease Cloud Music wants to emphasize the efficiency of discovering music." An early employee of Netease Cloud Music told China Entrepreneur.
In order to differentiate products and improve the efficiency of music discovery, the first thing Netease Cloud Music does is to mobilize users who like music, form a huge network among users, and let users spread spontaneously. Therefore, the earliest spread point after Netease Cloud Music went online was "music socialization". From the perspective of product experience and user reputation, Netease Cloud Music's social media presence far exceeds other music products.
However, this kind of design, which violates the user's previous usage habits, did not get the expected effect at first. When the user opened Netease Cloud Music, he was surprised to find that the playlist could not be found. There are only my favorite music and my favorite song list on the function list. "Bad review, unloading", the early product review area complained bitterly.
However, Netease Cloud Music still thinks that there is no problem with the design of the song list, but they have lowered the threshold for establishing the song list. Prior to this, song lists were mostly toys for minority people such as music enthusiasts. After the revision, the song list function can independently complete the cover design and other functions, greatly reducing the user threshold.
In the early days of Netease Cloud Music's launch, it launched an official song list and collected epic music, most of which were magnificent and inspiring, and became the gathering place for most college entrance examination parties and postgraduate entrance examination parties. After the fermentation of social networks such as Weibo, this song list alone helped Netease Cloud Music gain nearly 200,000 users. In the comment area of the song list, you can see that "the postgraduate entrance examination party is passing by,+1, and there is energy again!" And other inspirational comments.
Netease Cloud Music truly linked the song list with the user's life, catching up with the hottest time in Weibo. After 20 16 Kobe retired, many "Komi" spontaneously created song lists in Netease Cloud Music and spontaneously discussed them in the comment area. Some people expressed their love, others expressed their regret, and the user data even reached the discussion volume of Weibo topic.
In addition to the song list, the second biggest killer of Netease Cloud Music is personalized recommendation. After doing a lot of user research, the product design team summed up the characteristics of a China user listening to songs-he may often hear a song, but he doesn't know the title of the song and the name of the singer. These are just the common memories of everyone's growth.
At that time, the comment area of Netease Cloud Music was already very active. By setting keywords, the technical team captures user data such as "Finally Found", "Memories" and "Surprise" in the comment area, and then recommends songs that resonate with the public and are close to the content and style of songs that users have heard before.
Users feel that Netease Cloud Music "knows me very well". Through this extremely low-cost way, Netease Cloud Music has formed a reputation among users.
The above-mentioned early employees of Netease Cloud Music recalled to China Entrepreneur: "The previous market report said that only 5% of users would read reviews (of online music products), but it turns out that 50% of Netease Cloud Music users read reviews, and our products only have one review and one favorable comment."
20 17 Netease cloud music printed the contents of the comment area as publicity materials and spread them all over Hangzhou subway, which subsequently triggered numerous discussions on social media screens. "Good songs often bring countless personal stories. It is not so much listening to music as watching other people's moments, setting off the shock or clear picture of music. Music is life, which is vividly reflected here, not just a music playback software. " One user wrote.
If the previous Internet music products were all started by programmers, and more were stylized rationality of tools, Netease Cloud Music further explored the spiritual attribute and emotional value of music, and resonated with users by gaining insight into users' psychology and landing products.
Just when Netease Cloud Music was in full swing, it suddenly encountered a copyright crisis.
On July 20 15, the National Copyright Administration issued the Notice on Ordering Online Music Service Providers to Stop Unauthorized Dissemination of Music Works, which was called "the strictest copyright order in history". The notice required all online music service providers to remove all unauthorized music works, and more than 2.2 million unauthorized music works were removed from the shelves in the following month.
The original intention of copyright order is to crack down on piracy, protect copyright and standardize the authorization system of online music software, but objectively it also leads to the uneven distribution of copyright resources among online music service providers.
After Tencent's QQ music smelled the crisis, it began to seek more protection in copyright on the basis of building original music library resources. 2065438+July 2006, QQ Music merged with China Music Group (CMC), which owns two music platforms, Cool Me Music and Cool Dog Music, and the new Tencent Music Entertainment Group (TME) was born.
At that time, the market share of Cool Dog Music was 28%, that of QQ Music was 15%, and that of Kuwo was 13%, accounting for 56% in total. Coupled with Tencent's Kara APP "National Kara ok", Tencent's influence in China's music market has exceeded half.
After the establishment of Tencent Music Entertainment Group, Cussion Pang became the first CEO. During his tenure, he continued his previous copyright ideas, won the music library of Universal Music, the world's largest record company, and gained a decisive advantage in the copyright war, which finally promoted Tencent Music Entertainment Group to be listed on the New York Stock Exchange on 20 18 12.
Before IPO, Tencent Music Entertainment Group borrowed from overseas Spotify's business model and allowed record companies to hold shares. The three major record companies Universal Music, Warner Music and Sony Music all hold their shares. After IPO, Tencent Music Entertainment Group acquired a 0% stake in Universal Music19+02 and a part of Warner Music in June 2020, forming an inseparable integrated strategic pattern.
In terms of music copyright, Tencent's music platforms (QQ, Kuwo and Kugou) have 30 million copyrighted songs, and its copyright partners include Jewel, Warner Records, Emperor Entertainment, Chinese Records and Sony Music. Copyright co-artists include Jay Chou, Leslie Cheung, Eason Chan, Taylor Swift and Lady Gaga.
Netease Cloud Music owns 10 million copyright song resources, and the copyright partners are Tianyu Media, Huayan International and Fenghua Records. Artists include She, Yu, Yu, Mao Bu and so on.
Xiami Music platform also took refuge in Ali on 20 16, grabbing 20 million copyrighted song resources. Its partners include Rolling Stone Records and Universal Asia, and its artists include Rene Liu and Mayday. However, on February 5, 20021year, Xiami Music officially closed down. China Online Music Industry Report 2020 shows that the monthly data of Xiami Music is only 6.5438+million, less than one tenth of QQ music. 2065438+In September 2009, Ali became the lead investor of Netease Cloud Music's $700 million financing.
Contrary to the story of Tencent Music's successful listing in Lian Heng through capital integration, on April 18 and 1 day, 2065438, Netease Cloud Music lost the copyright authorization of Jay Chou songs because Tencent no longer resold some copyrights, and hundreds of thousands of users complained in the Rainbow Comment Area.
Exclusive copyright is something that Ding Lei hates very much, and he also denounced it many times in the financial report meeting. 20 19 in may, during Netease's first quarter earnings conference call, Ding Lei mentioned that some enterprises monopolized and hoarded copyright at high prices, which was not conducive to the sound development of music in China.
On Netease's earnings conference call in the first quarter of this year, Ding Lei once again mentioned the exclusive copyright. He said that in the past few years, the exclusive sales model adopted by the world's three major record companies in China made China music operators, including Netease, Huawei and Xiaomi, pay two to three times more than the reasonable price.
On July 24th, 20021year, the website of the State Administration of Markets published "The State Administration of Markets ordered Tencent to cancel the exclusive copyright of online music", saying that the State Administration of Markets had initiated an investigation into the acquisition of Zhongle Group by Tencent on July 24th, 20021year. In 20 16, the market share of Tencent and China Music Group was about 30% and 40% respectively. Tencent gained a higher market share through the merger with its main competitors, and the centralized entity occupied more than 80% of the exclusive music library resources.
According to Article 48 of the Anti-Monopoly Law and Article 57 of the Interim Provisions on Centralized Examination of Operators, the General Administration of Market Supervision made an administrative penalty decision according to law, and ordered Tencent and its affiliated companies to take measures such as canceling exclusive music copyright, stopping paying high advance payment and other copyright fees within 30 days, and not asking upstream copyright parties to give better conditions than competitors without justifiable reasons. TME's share price fell from $36 to 10 on the same day, and its market value shrank by 60%.
In fact, as early as 2065438+September 2007, the National Copyright Administration had interviewed the heads of Tencent Music, Ali Music, Netease Cloud Music and Baidu Taihe Music, and gave a practical solution-actively promoting the authorized transfer. In the end, the music copyright authorized by Tencent Music and Netease Cloud Music reached more than 99%, but even the copyright difference of 1% still kept Tencent Music's advantage.
An Internet music practitioner told China Entrepreneur, "After this supervision, Tencent Music may not easily let go of Jay Chou's copyright."
However, copyright is only one of the factors that hinder the development of Netease Cloud Music. The bigger problem is that Netease Cloud Music has not yet explored a better business model.
Throughout 2020, Tencent Music's annual net profit is 410.6 billion yuan, while Netease Cloud Music's annual net loss is 3 billion yuan. The key to the profitability of Tencent Music before listing is that the main source of income of Tencent Music is social entertainment services such as karaoke and live broadcast, rather than online music services.
In fact, as early as 20 18, Ding Lei also realized this, and Netease Cloud Music successively launched products such as LOOK Live and sting.
However, comparing the prospectuses of Tencent Music and Netease Cloud Music, we will find that the revenue sources of both parties are almost the same, which are divided into online music services and social entertainment services. The former includes membership fees, music licensing fees, advertising revenue, etc. And the latter is mainly the reward income of live broadcast.
The revenue proportion of the two companies in different companies is very different. Tencent Music's total revenue in 2020 was 2.9/kloc-0.50 billion yuan, of which online music service revenue was 9.35 billion yuan, accounting for 32%. The income from social entertainment services and other businesses was 65.438+0.98 billion yuan, accounting for 68%. Netease Cloud Music earned 4.9 billion yuan in 2020, of which online music service earned 2.6 billion yuan, accounting for 53%. Social entertainment services and other income was 2.3 billion yuan, accounting for 47%.
In addition, the user payment rates of Netease Cloud Music and Tencent Music are not much different. Tencent Music has 56 million paying users in the fourth quarter of 2020, with a payment rate of 9%; In 2020, the number of monthly paid users of Netease Cloud Music online music service is15.96 million, and the payment rate is 8.8%. However, due to the gap in user base, the number of paying users of Netease Cloud Music is nearly160,000 less than that of Tencent Music.
In the prospectus of Netease Cloud Music, it is said that its loss is mainly due to business expansion, which leads to an increase in market expenses and R&D expenses. At the same time, the prospectus also stated that the company's profitability is still uncertain. Due to the company's continuous investment in content, R&D and marketing activities, it is expected that it will continue to lose money in the next three years.
Ding Lei seems to be aware of the seriousness of the problem. Zhu Yiwen, the former CEO of Netease Cloud Music, was demoted from the end of 2020. However, we didn't see Ding Lei make any big moves in cloud music.
In April, 20021,the internal organization of Tencent Music Group began to change, which was the first management team adjustment after Tencent Music was listed on NYSE. Liang Zhu, former general manager of QQ Music, began to serve as CEO of Tencent Music.
Liang Zhu worked in Huawei in his early years and joined Tencent in 2003. He is the first executive with a doctorate in Tencent's history, and he had a lot of contacts with Tencent's entertainment business before. 2065 438+04-2065 438+06 General Manager of QQ Music, during which he won the copyright war and launched the national karaoke APP. This product also entered Tencent's Hall of Fame on 20 17, and it is still one of the important income sources of Tencent Music. Before returning to Tencent Music, Liang Zhu was the vice president of PCG platform and content business group and the head of QQ. During his tenure, he led the development direction of QQ rejuvenation.
Behind the coaching change between the two sides is still a fierce battle for Netease Cloud Music to seek commercial profits. More importantly, Wang Shimu, the former head of Netease Cloud Music products, and Li Yin, the vice president of marketing who led Netease Cloud Music to comment on subway advertisements, have both left their jobs.
The exclusive copyright of Tencent Music has been unable to continue, so it is time for Ding Lei to think about how Netease Cloud Music can make a profit.