NetEase Cloud Music’s profits mainly come from 1) advertising 2) user payments 3) copyright operations. Since the platform itself has limited advertising display formats, mainly open screens and banners, advertising revenue has grown slowly in recent years. User payment mainly includes content payment models such as digital album sales, membership value-added services, and selected radio stations. The sales of music peripheral products in the Cloud Music Mall and ticket agency sales are currently the main source of revenue for NetEase Cloud Music. Copyright operation is the sub-licensing of music copyrights by digital music platforms to third-party organizations, actively utilizing and developing the value of music copyrights, and establishing a complete Internet music entertainment ecosystem by participating in the distribution of music copyrights, the incubation of music IP and other aspects of the entire industry chain. In recent years, Revenue from this segment has increased in recent years.
Comparison between QQ Music and NetEase Cloud Music: QQ Music is one of China’s leading digital music platforms and is affiliated with Tencent Music Entertainment Group; Tencent Music was listed on the New York Stock Exchange in December 2018, becoming the country’s first digital music platform. A publicly traded and only profitable music entertainment company.
As digital music platforms, the biggest similarity between QQ Music and NetEase Cloud Music is that they both rely on Internet giants to have huge traffic entrances and highly sticky user pools, and they focus on high-quality content. Continuously enhance product operation and distribution capabilities. However, unlike NetEase Cloud Music, which mainly produces and distributes "music" content, QQ Music relies on its rich copyright resource library and Tencent Music Entertainment Group's cross-module production capabilities in the pan-entertainment industry to expand music consumption scenarios and create "listening, watching and ", play" three-dimensional entertainment ecology. Especially in terms of idol packaging, compared to NetEase Cloud Music's "Independent Musician" project that focuses on original music, QQ Music can not only obtain exclusive music resources through linkage with Tencent's variety shows "Produce 101", but also through the launch of related self-made music Variety shows, interaction with idols in the comment area, and ranking of singers based on the number of likes on a song have attracted a large number of fans and users, making them comfortable in the fan economy and creating more monetization models.
1) Precisely distributed personalized recommendations satisfy users’ music preferences: Listening to music is a fragmented scene with high frequency and low immersion, and users expect to obtain music that suits their tastes at a low search cost. Based on the industry's leading big data recommendation algorithm, NetEase Cloud Music continuously pushes high-quality and unpopular songs of similar styles to users based on users' behavioral habits and style preferences. This functional module includes daily recommendations, recommended playlists, and private FM. According to DICC's research, NetEase Cloud Music's song recommendation accuracy ranks first in the industry. Its personalized recommendation usage rate reaches 75%, and the recommendation accuracy rate reaches more than 50%. It is called the music product that "understands you best" by users.
2) High-quality music UGC community enhances the social activity of the product: NetEase Cloud Music forms a benign UGC chain through "music reviews + playlists" to meet users' participation needs in sharing and creation. And by exploring the emotional connections behind music, we build social networks to increase user stickiness and platform belonging. On NetEase Cloud Music, more than 50% of users read reviews while listening to songs (the industry average is less than 10%). Currently, more than 900 million music reviews have been generated, and the number of playlists created by users has exceeded 600 million.
3) Rich and diverse segmented music content expands the platform’s commercial space: NetEase Cloud Music continues to deepen its efforts in music content. In addition to successively partnering with more than 200 music companies including avex and Huayan International In addition to reaching copyright cooperation, the company also launched the "Stone Project", a support project for original musicians: more than 70,000 original musicians have settled on the platform, and more than 1.2 million original music works have been uploaded. NetEase Cloud Music has obvious music library and author advantages in vertical music subdivisions such as two-dimensional music, electronic music, Chinese style, and nuclear rock; these niche circles have independent circle cultures and high loyalty within the circle. The platform plays an important role in attracting new users and retaining it and forming its tone.
In general, NetEase Cloud Music has established a unique brand impression with its diverse and inclusive music content, strong social atmosphere and personalized recommendation algorithm, and has accumulated a large number of loyal users; and NetEase Cloud Music Most of the users are young people from first- and second-tier cities. This group has good discernment ability in content production and strong and sustained consumption power. Therefore, we remain optimistic about the mid- to long-term development.
However, NetEase Cloud Music's disadvantages in music copyright, as well as the live broadcast, socializing with strangers and other functions that conflict with the platform's "literary sentiments" in order to increase user activity and increase monetization models, may lead to the risk of users switching platforms. Increase.
NetEase Cloud Music was launched in 2013 and completed Series B+ financing in September 2019, with a post-investment valuation of US$4.2 billion. According to the company's financial report, the number of registered users of NetEase Cloud Music exceeded 800 million by the end of 2019. According to QuestMobile, as of January 2020, NetEase Cloud Music MAU has reached 150 million. According to the company’s financial report, NetEase Cloud Music’s 1Q20 revenue recorded triple-digit growth year-on-year. NetEase Cloud Music has made efforts in operation and content in recent years to launch differentiated competition. In terms of operations, NetEase Cloud Music builds music communities, creates a community atmosphere, strengthens users' interactive experience, and expands the layout of categories such as two-dimensional and Chinese styles that are in line with the attributes of community users. In terms of content, NetEase Cloud Music has always attached great importance to supporting original music, and has successively launched the "Stone Project", "Yunladder Project" and the NetEase Musician Project to support original musicians. According to company data, as of April 2020, NetEase Cloud Music has established On the occasion of its 7th anniversary, the number of original musicians on the platform has exceeded 160,000.
China’s digital music market is in a stage of rapid growth, with revenue CAGR reaching 77.8% year-on-year in 2018. % to 7.63 billion yuan. The number of users in the digital music market has reached 740 million in 2018, which is relatively large. However, the current payment rate of the entire industry is low. The payment rate in 2018 was only 5.3%, and there is still a lot of room for improvement. Therefore, it is crucial to operate existing users and increase their payment rates in the future.
NetEase Cloud Music uses community operations to create a music community platform for users to discover music, share music, and communicate emotionally through personalized recommendations. To accurately reach users, it has launched functions such as daily recommendations, private FM, and private radar. In August 2019, the "Cloud Village" section was launched. Users can create and publish Mlog music logs to meet users' creation and communication needs. By setting up the Yuncun hot review wall, users can browse the hot review content and start listening to the singles attracted by the hot reviews. The launch of Yuncun and the music review function of the platform can not only enhance the user's social experience, but also provide content for the platform. Certain high-quality UGC content will attract more users and form positive feedback.