Tencent stepped on to give up the exclusive music rights NetEase Cloud can buy "Jay Chou"?
On the evening of August 31, Tencent Holdings (00700.HK) and Tencent Music Entertainment Group (TME.US) jointly dropped a blockbuster—abandoning the exclusive rights of music copyright.
"Hey Da Pu Ben, you no longer need to download countless music apps on your mobile phone!" Some netizens sighed from the bottom of their hearts.
The Red Star Capital Board noticed that although Tencent is only announcing its abandonment, this is regarded by netizens as a new start in the online music industry. Netizens seem to acquiesce that every song will appear on every music platform in the future.
But is it really that simple?
After the blockbuster is dropped, how will the pattern of the online music industry be rewritten?
Behind the benefits
According to a set of incomplete statistics quoted by the media, in 2018, NetEase Cloud Music removed Jay Chou’s music due to copyright reasons, causing some users to transfer to QQ Music. Jay Chou’s exclusive copyright alone caused NetEase Cloud Music to lose about 15% of its users.
The Red Star Capital Bureau noted that Jay Chou’s fans on the QQ music platform are about 27.82 million. A conservative estimate is that even if only 30% of the fans have recharged for Jay Chou’s members for a month, the membership fee is 15 yuan/month. Then give Tencent every month. The income from music is also 125 million yuan.
According to industry insiders, NetEase Cloud Music should have already acted and negotiated with various copyrighted record companies.
But because of the huge amount of money involved, the negotiation process should be relatively long.
It is understood that well-known singers, including Jay Chou, have an exclusive copyright fee of at least tens of millions.
Now even if it is not exclusive, it must be a very high amount.
The State Administration of Market Supervision takes action
Tencent waives exclusive rights to music copyright
Tencent is willing to cut this piece of meat because of the "heavy hammer" of the State Administration for Market Regulation.
In July 2016, Tencent Holdings invested its business including QQ Music into China Music Group, obtaining 61.64% equity and obtaining sole control.
In December of the same year, China Music Group was renamed Tencent Music Entertainment Group after the integration, and then went public in the United States.
On January 24 this year, the State Administration for Market Regulation initiated an investigation into this acquisition for suspected violation of the "Anti-Monopoly Law" and the implementation of operator concentration.
On July 24, the State Administration for Market Regulation announced the "Administrative Penalty Decision."
In addition to a fine of 500,000 yuan, Tencent and its affiliates were also ordered to take relevant measures to restore the state of competition in the relevant market.
How to restore the state of market competition?
Three requirements are given in the "Administrative Punishment Decision":
It is not allowed to reach an exclusive copyright agreement with the upstream copyright party or in disguise. If it has been reached, it must be cancelled within 30 days from the date of publication of this decision, except for exclusive cooperation with independent musicians or new song debuts.
Without legitimate reasons, the upstream copyright party shall not be required or in disguised form to grant conditions superior to other competitors.
If it has been reached, it shall be cancelled within 30 days from the date of the issuance of this decision.
Quotations are made to upstream copyright parties based on the actual use of copyright and other factors, and the cost of competitors must not be increased in disguised form by means of high prepayments, etc.
It is 30 days from the release date of the "Administrative Punishment Decision", which happens to be August 23, which is why Tencent uses this date as the key time node in the announcement.
"As of August 23, our company has sent relevant letters to all upstream copyright parties that have reached exclusive agreements, informing them that they need to terminate the contract on time. Among them, most of the exclusive agreements have been terminated on time." Tencent said that those who failed to terminate the contract on time , Which waives the exclusive right to authorize music copyright.
In other words, theoretically speaking, other music platforms can purchase relevant copyrights from upstream copyright parties.
Tencent Music Entertainment Group:
Expected to have a certain impact on business operations
In mid-August, Tencent Music Entertainment Group (hereinafter referred to as "TME") released an unaudited financial report for the second quarter.
In the second quarter, TME's revenue increased by 15.5% year-on-year to 8.01 billion yuan, and the net profit attributable to the company's shareholders was approximately 827 million yuan.
Among them, music subscription revenue was 1.79 billion yuan, a year-on-year increase of 36.3%.
As of June 30, its online music business had paid 66.2 million subscribers, a year-on-year increase of 40.6%.
From a month-on-month point of view, this number has increased by 5.3 million, which is the largest quarterly net growth of TME since 2016.
Red Star Capital Bureau noted that in the second quarter, TME’s revenue cost was approximately 5.57 billion yuan, a year-on-year increase of 17%.
This is mainly due to the increase in content costs related to royalties and revenue sharing fees.
In 2020, TME's revenue cost is approximately 19.85 billion yuan, an increase of 18.4% year-on-year.
This is mainly due to increased investment in new products and content, increased revenue sharing fees, and increased royalties related to variety shows.
It is worth mentioning that, compared to 7.2% in the same period last year, TME’s payment rate in the second quarter increased to 10.6%, and the ARPPU (average revenue per user) of the online music business was about 9 yuan.
Regarding the penalties from the State Administration of Market Supervision, when the second quarter financial report was released, Peng Jiaxin, the executive chairman of TME, responded that TME fully and sincerely accepts it and will complete rectification on schedule in strict accordance with regulatory requirements without compromise.
At the same time, Peng Jiaxin also said that this is expected to have a certain impact on business operations.
In fact, since the disclosure of the "Administrative Punishment Decision", TME's stock price has continued to fall, once as low as $7.03 per share.
On August 31, local time, TME's closing price was $8.84 per share, an increase of 3.88%.
On September 1, the closing price of Tencent Holdings was at 488.4 Hong Kong dollars per share, an increase of 1.50%.
In-depth analysis
What can the "exclusive copyright" bring?
For a long time in the past, the competitiveness of the online music industry lies in music copyright.
Whoever owns more music copyrights will get more users.
Until February 2018, under the coordination and promotion of the National Copyright Administration, Tencent Music, NetEase Cloud Music and Ali Music reached a copyright cooperation. Each platform mutually authorized more than 99% of the music copyright, and the remaining 1% was used as the core content of each platform's competition. .
In other words, the competition is reduced to 1% of the head music copyright, but this does not mean that the competition is not fierce.
Take Tencent as an example. Tencent Music Entertainment has platforms such as QQ Music, Kugou Music, Kuwo Music, and Nationwide K Songs. At the same time, it owns the exclusive music rights of singers (combinations) such as Jay Chou and SHE.
According to a set of incomplete statistics quoted by the media, in 2018, NetEase Cloud Music removed Jay Chou’s music due to copyright reasons, causing some users to transfer to QQ Music. Jay Chou’s exclusive copyright alone caused NetEase Cloud Music to lose about 15% of its users.
According to incomplete statistics from the Red Star Capital Bureau, the sales of Jay Chou's digital albums have already exceeded 15 million on QQ Music alone.
As of 14:00 on September 1, the digital albums of "Say Good Don't Cry" had sold 8,925,200 copies, "Mojito" had sold 6,681,100 copies, and "Jay Chou's Bedside Story" had sold 1,153,900 copies.
The first two are priced at 3 yuan/piece, and the latter is priced at 20 yuan/piece.
Based on this calculation, Jay Chou has already attracted about 69.9 million yuan for Tencent for the digital album alone.
In addition, some of Jay Chou's songs require a top-up member (green diamond) to listen to it.
A Jay Chou fan told the Red Star Capital Bureau that he is usually used to using the NetEase Cloud Music App, but in order to listen to Jay Chou's songs, the QQ Music App also exists on his mobile phone for a long time, and he has recharged to become a Green Diamond member.
The Red Star Capital Bureau noted that Jay Chou’s fans on the QQ music platform are about 27.82 million. A conservative estimate is that even if only 30% of the fans have recharged for Jay Chou’s members for a month, the membership fee is 15 yuan/month. Then give Tencent every month. The income from music is also 125 million yuan.
In the future, if NetEase Cloud Music also buys the music rights of singers such as Jay Chou, can Tencent's music platforms still retain users?
Who will be the beneficiary from now on?
After the announcement of Tencent Holdings and Tencent Music Entertainment Group, the first to respond was Ding Lei, the founder and CEO of NetEase (09999.HK).
"We have seen the announcement of Tencent Music's abandonment of the exclusive copyright of music. We very much look forward to it being a sincere decision that does not contain any illegality." Ding Lei said in a conference call that night.
In fact, after the “Administrative Penalty Letter” issued by the State Administration for Market Regulation was disclosed earlier, there was news in the market that NetEase Cloud Music is stepping up discussions with a number of record companies in order to launch songs that were previously removed due to copyright as soon as possible. It involves singers such as Jay Chou.
It should be noted that some netizens misunderstood the issue of Tencent's abandonment of the exclusive right to license music copyright.
Even if Tencent gave up, if you want a certain song to appear on a certain platform, the platform still needs to spend money to buy the copyright.
In other words, the same song can appear on both the A platform and the B platform.
This does not mean that netizens can listen to them for free, because platforms A and B may sell certain songs or activate members to listen to them.
In the conference call, Ding Lei shouted to the major record companies: "Please open the authorization, we have enough funds."
Industry insiders said that Tencent's removal of the exclusive agreement only means that they do not monopolize the music copyright.
"The'upstream related copyright owners' in the statement, as far as I know, include Believe Music, Huayan International, Fumao Records, and Jwell are all upstream related copyright owners. If you want to hear Zhou Dong's songs on NetEase Cloud Music, NetEase Cloud can now negotiate the purchase of copyright with Jewell. NetEase Cloud users can only hear Dong Chou’s songs after purchasing the copyright." According to industry insiders, NetEase Cloud Music should have acted long ago with all copyrighted record companies. In negotiations.
But because of the huge amount of money involved, the negotiation process should be relatively long.
"As far as I know, well-known singers, including Jay Chou, have an exclusive copyright fee of at least tens of millions. Now even if it is not exclusive, it must be a very high amount." Insiders told reporters.
What's interesting is that after Ding Lei shouted, Weibo CEO Wang Gaofei asked: "If the market is for two companies, for example, Jay Chou used to sell A company for 100 million yuan, and now non-exclusive A and B are at the same price, who is the most beneficial in the end? Who is the most disadvantaged?"
In response to this doubt, some netizens replied that it is the most beneficial for Jay Chou (musician) and the most unfavorable for B.
Because B does not buy the copyright in this case, this will become B's shortcoming.
Chengdu Commercial Daily-Red Star News reporter Yang Peiwen serves as Hongwei intern Wang Zuxi