Chinanews Client Beijing, November 26 (Reporter Zhang Xu) Nearly three years after Tencent Music landed on the New York Stock Exchange, NetEase Cloud Music has also caught up and will soon land on the capital market.
Affected by the new regulations and increased competition from pan-entertainment platforms, Tencent Music’s share price has fallen by more than 60% this year.
As the two major online music platforms are "one super and one strong" in this field, who can make the last laugh from the brutal competition?
The picture comes from the prospectus of NetEase Cloud Music.
NetEase Cloud Music, valued at HK$40 billion
On November 23, NetEase Cloud Music announced that it would publicly issue 16 million common shares around the world at an offer price range of 190 Hong Kong dollars to 220 Hong Kong dollars per share, and plans to raise 3.04 billion to 3.52 billion Hong Kong dollars.
Calculated by the distribution interval, the market value of NetEase Cloud Music after listing will be between 39.47 billion Hong Kong dollars and 45.71 billion Hong Kong dollars (about 32.37 billion-37.48 billion yuan).
According to the plan, NetEase Cloud Music intends to announce the final pricing and placement status on December 1, 2021, and will be listed on the Hong Kong Stock Exchange at 9 a.m. on December 2.
In this listing, NetEase Cloud Music and three cornerstone investors signed a subscription agreement for a total of 350 million US dollars (about 2.234 billion Hong Kong dollars), which accounted for the bulk of the fundraising.
The picture comes from the prospectus of NetEase Cloud Music.
However, it is an indisputable fact that NetEase Cloud Music has suffered long-term losses.
From 2018 to 2020, the losses attributable to holders of NetEase Cloud Music rights for the year were 2.006 billion yuan, 2.016 billion yuan, and 2.951 billion yuan, respectively, representing a loss of nearly 7 billion yuan.
In the first half of 2021, NetEase Cloud Music's loss further expanded to 3.809 billion yuan.
NetEase Cloud Music said that it will continue to lose money.
Its prospectus stated, “Our monetization work is at a relatively early stage. Our future profitability is still uncertain and is affected by a variety of factors, including whether we can effectively monetize our products and services and pass Improve operational efficiency and continue to increase revenue in a cost-effective manner. It is expected that losses will continue for the years ending December 31, 2021, 2022 and 2023."
Although it has experienced huge losses, it will be injected with new ammunition on the market.
Some netizens joked: "Now that there is money to buy the copyright, the songs that have been removed are expected to be back on the shelves soon."
Screenshot of Weibo comment.
Tencent Music vs. Cloud Music, one super strong
Tencent Music and NetEase Cloud Music constitute the "one super and one strong" in the domestic music market.
After going public, can NetEase Cloud Music and Tencent Music break their hands?
On the whole, NetEase Cloud Music's performance growth rate is gratifying.
In the first three quarters of 2021, its gross profit margin turned positive to 0.4%.
As of the end of the reporting period, its monthly active users reached 184 million; the number of paid online music users was 27.52 million, an increase of over 93% year-on-year; the online music payment rate was 15%.
But NetEase Cloud Music is far behind Tencent Music, which has been on the market for many years.
In the third quarter of 2021, Tencent Music’s revenue reached RMB 7.81 billion, and it has achieved continuous profitability; the net profit attributable to shareholders of the company was 740 million yuan, and the net profit attributable to shareholders under non-IFRS was 1.02 billion yuan; Online music subscription revenue was 1.90 billion yuan, and online music paid users reached 71.2 million, with a payment rate of 11.2%; mobile MAU (monthly active) was 636 million, and paid users were 71 million.
In comparison, NetEase Cloud Music's revenue data is about one-fifth of Tencent Music, and its cumulative monthly activity is about one-fourth.
As of the close on November 24, Tencent Music had a market value of US$12.58 billion.
Data comes from a straight flush
In terms of valuation, Tencent Music’s closing market value on November 24 reached US$12.58 billion.
In contrast, NetEase Cloud Music's valuation is less than half of Tencent Music.
Moreover, many investors are worried that the listing will break: in the case that many indicators are not as good as Tencent Music, can NetEase Cloud Music support a valuation of nearly 40 billion Hong Kong dollars?
After all, in terms of market share, Tencent’s music platform accounts for 72.8%, and Netease Cloud Music only accounts for 20.5%.
Copyright, copyright, or copyright
"No need to switch, one APP listens to songs" has always been a user's dream, and copyright has become a battleground for strategists, and it is also a sore spot for NetEase Cloud Music.
Backed by a tree, Tencent Music has always been good at making money.
Signed to Warner in November 2014, Sony in September 2016, and Universal in May 2018, taking over the exclusive rights of the world's three major record companies in mainland China.
In the face of exclusive authorization, NetEase Cloud Music is difficult to parry.
This has caused many users to complain: "Songs that could have been listened to, need membership in a few days. After opening a membership, there is no copyright." "When I woke up, my playlist was grayed out."
Fortunately, the phenomenon of excessively high copyright fees has ushered in a turning point.
On July 24, 2021, Tencent issued an announcement stating that Tencent received the "Administrative Penalty Decision" from the State Administration of Market Supervision and Administration on the illegal implementation of the concentration of undertakings by Tencent Holdings in acquiring equity of China Music Group, and ordered Tencent and its affiliates to take 30 Measures to restore the state of market competition, such as the removal of exclusive music rights within days, the suspension of payment methods for copyright fees such as high prepayments, and the prohibition of asking upstream copyright parties to give them conditions superior to their competitors without justifiable reasons.
On August 31, Tencent issued the "Statement on Relinquishing the Exclusive License Rights of Music Copyrights" and pointed out that the company has sought to the maximum extent possible to terminate the exclusive agreement with the relevant upstream copyright parties as soon as possible.
The screenshot is from the official account of the Goose Factory Blackboard Newspaper.
Soon after the announcement of Tencent Music, Netease CEO Ding Lei said at the earnings call: NetEase Cloud Music has prepared sufficient funds and is willing to carry out fair and open cooperation with copyright owners with the utmost sincerity.
NetEase Cloud Music successfully seized the opportunity and has reached direct signing agreements with the world's three major record companies.
Western Securities believes that under the premise of gradual elimination of copyright monopoly in the music industry, the core competition of online music platforms will focus more on ecological construction and user operation experience. NetEase Cloud Music has advantages in these aspects.
However, Tencent is not only dominant in copyright, it is also a shareholder of record companies.
A consortium led by Tencent has successively acquired 20% of Universal Music and 10.4% of Warner Music.
At the same time, Tencent Music also cross-shares with Spotify, the largest online music service provider in the United States.
Therefore, through cross-shareholding by Tencent Music with record companies, the more NetEase Cloud Music spends on copyrights, the more revenue Tencent Music can get.
It’s hard to make money in the community
NetEase Cloud Music also has its own unique secret-incubating independent musicians.
As of June 2021, more than 300,000 independent musicians have settled in NetEase Cloud Music.
By the first half of 2021, the number of tracks created by registered independent musicians in NetEase Cloud Music has reached 1.4 million.
The data comes from the prospectus of NetEase Cloud Music.
There are many independent musicians who have become popular in NetEase Cloud Music, such as Jude, the landlord’s cat, Yan Renzhong and so on.
Yan Renzhong was originally an amateur singer who auditioned samples. He was discovered by the platform and has accumulated more than 3 million fans on NetEase Cloud Music.
Jude was also discovered because of participating in NetEase Cloud Music's "Project Stone" and was later nominated for the Golden Melody Award.
NetEase Cloud Music is essentially more like a content community in the vertical field of music with player functions. Users are "villagers". The content includes not only copyrighted music, original music, but also user UGC content, with more than 2.8 billion playlists and Uncountable comment content, the monthly active users who actively create UGC account for about 27%.
However, like Xiaohongshu, Station B and other platforms, the platform needs new users, and new users will impact the original atmosphere. How to resolve the contradictions will be a barrier for Cloud Music.
(over)