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“We hope to return to a reasonable and reasonable copyright fee in the future.”
During the NetEase earnings call yesterday, Ding Lei suddenly started bombarding the music copyright market. He directly expressed his dissatisfaction with the exclusive sales model of the three major record companies led by Warner, Sony, and Universal, which caused companies including NetEase Cloud Music and other companies that needed to purchase copyrights to pay more than reasonable prices.
“Not only NetEase, but also companies such as Huawei, Xiaomi, OPPO, vivo that need to purchase music copyrights, It has cost more than 2 to 3 times the reasonable price, which is unfair and unreasonable. “
The background of Ding Lei’s remarks is the rapid development of NetEase Cloud Music in Q4 2019. After getting Ali’s $ 700 million investment, NetEase Cloud Music seems to be back on the track of “investment for development”, has successively won a series of copyrights such as “Singer”, and passed a series of digital albums, cloud village, live music and other Means to improve liquidity.
In December’s APP Annie China paid list, Netease Cloud made the list for the first time, ranking 10th.
On February 27, Netease announced that in the fourth quarter of 2019 and the annual financial report, Netease Cloud Music’s innovative business and other business revenues were 3.72 billion yuan, a year-on-year increase of 17.9%; in contrast, online games Service operating income was 11.6043 billion yuan, a large volume, but the growth rate was only 5.3%.
The follow-up earnings call revealed that NetEase ’s innovative business growth was mainly due to the doubling of member revenue in the fourth quarter from the same period last year, as well as from digital albums and live broadcasts.Income has also grown rapidly.
Behind Ding Lei’s “bombing”, what is the new intention of Netease Cloud Music?
Where does NetEase cloud traffic come from in the post-copyright era?
According to the data from the iResearch Index, as of January 2020, the domestic music platform market still presents a situation of “one super and one strong”. Kugou Music, QQ Music, and Kuo Music ranked top three with monthly independent devices of 320 million, 310 million, and 190 million, respectively, followed by NetEase Cloud Month with 165 million independent devices.
One of the main reasons for user differences between platforms is copyright. It is undeniable that copyright is still the core competitiveness of major music platforms today.
This is mainly reflected in the fact that TME has previously obtained exclusive copyrights in China including the three major record companies of Universal, Sony and Warner, as well as Jewell. Although under the interference of the Copyright Bureau, at present, different music platforms have achieved more than 99% of copyright sharing through sublicenses, but TME and NetEase Cloud still have 1% core resource differences, and this 1% covers most people’s listening habit.
Ding Lei said in this earnings call that the exclusive sales model of the three major record companies has caused companies including NetEase Cloud Music and other companies that need to purchase copyright to pay more than a reasonable price. “We hope to In the future, we can return to a reasonable and reasonable copyright fee. “
In the past traditional impressions, due to the volume and monetization path, NetEase Cloud was not actively purchasing copyrights, which also caused many classic popular tracks on the NetEase Cloud platform to be grayed out, which caused some users to migrate. To other platforms.
netAn employee of Yi once expressed the corresponding confusion to the owner, “In fact, our number of music libraries is not small. People who listen to European, American, Japanese, Korean, or niche music have never talked about our copyright. Songs can be pushed daily, and there are many high-quality reviews. Around 90 years ago, people who listen to Chinese more often may feel that there is less copyright, because many classic pops (songs) are gray. “
The exclusivity of music copyright mentioned by Ding Lei on the phone is one of the reasons for NetEase ’s “gray”.
Under the exclusive copyright model, many music platforms have started a price war in order to grab copyright. With the joint promotion of music platforms and record companies, copyright fees have risen. At the same time, because the copyright license agreement is usually re-signed once every two to three years, under the seller’s market, in order to avoid losing users to other platforms, music platforms often choose to accept higher premium copyright fees.
Several or even dozens of times of music copyrights abound, which also made record companies make a lot of money in this wave, which is to make up for the deficits of domestic piracy in previous years. And those platforms that won the copyright at a high price can also rely on the “exclusive” advantage to attract users and resell profits.
In the previous TME earnings conference call, the management of Tencent Music Entertainment Group also stated that due to the strengthening of cooperation with copyright parties, its copyright resale revenue will increase steadily. The cost of copyright has increased in a second-hand channel, which has gradually made other platforms unable to afford it.
As a result, Netease Cloud has been labeled with a small and beautiful label. But for music products, only a high enough influx of traffic can support the subsequent development space and imagination. Simply small and beautiful is useless.
In fact, after entering 2020, Netease Cloud has invested heavily in copyright. It has successively won exclusive copyrights for programs such as “Singer”, “Sound Promise 3” and “Hi Singing and Turning Up”, which also brought a large amount of traffic.
One of Hua Chenyu’s “You Don’t Believe It’s Not the Last Day” in the show went online from the 21st, and the number of comments so far has been close to 40W.
Before, the copyright of the “Singer” series was not held by Netease Cloud, and the price of the audio rights of the “Singer” to the platform was even higher. I didn’t know that it was under the NetEase cloud income that had been too cautious about copyright investment. According to speculation, this cost was not a decimal.
It seems that NetEase Cloud also realizes the importance of “big copyright” for the platform, but now the big copyright has almost been occupied by TME, so Ding Lei called for “cancel the exclusive license model in China” on the earnings call, This also seems to mean that NetEase Cloud has reached the stage of investing in growth.
A favorable condition for NetEase Cloud was also mentioned in the NetEase earnings call: the Big Three may cancel the exclusive agreement in these two years. This may also mean that NetEase Cloud, which has just received financing, can be targeted, and a new round of copyright war is about to come.
But from the perspective of the master, it is still difficult for NetEase Cloud to become the top three.
There has been a deep capital bond between TME and the three majors in the distribution of music copyright for many years. First of all, this year, TME joined a consortium led by Tencent and participated in the acquisition of a 10% stake in Universal Music Group (UMG); Tencent Music and Spotify each own 9% of each other. The other two major record companies, Sony Music and Warner Music, collectively own about 4% of Tencent Music. Universal Music and Sony Music each own about 3% and 4% of Spotify.
Under this premise, another self-rescue measure of Netease Cloud comes from creating an original singer / song matrix, relying on short video bonuses to get traffic.
In the past, the master of the movie “Behind the explosion of works, how do short video musicians” out of the circle “? “Was also mentioned in the article. In the current era of short video, music content has begun to shift to the UGC model. The influence of short video platforms in the publicity process has been raised, while music platforms are facing a crisis of “pipelining” and instrumentation.
At that time, some people in the industry believed that due to the layout of original music artist and community attribute of Netease Cloud in the past, it has a certain advantage over other platforms. “Because NetEase Cloud has done this early, you can see that many singers who have made a circle by short videos now still sign on to NetEase Cloud. For example, singers such as Chen Xuening, Hua Porridge, and Lao Fan next door settled in Netease Cloud. And the traffic of short videos with fire will also be transferred to these musicians.Resident platform. “
In fact, Netease Cloud itself is constantly adding weight to short videos. In addition to putting short videos into the first-level entrance in their own products, they are also helping some original songs / singers to become short video explosions.
Take “Is this love” popular on short video platforms as an example? With the help of NetEase Cloud, the “Ten Doudou” version of “Is this Love?” became popular on major short video platforms, Bring huge traffic to NetEase cloud music-the number of broadcasts has exceeded 200 million, the collections have exceeded 9 million, and the music reviews have exceeded 69,000.
Netease’s fourth quarter financial report shows that as of December 2019, the total number of original musicians in the NetEase cloud music platform has exceeded 100,000, and the total number of original works uploaded by musicians has exceeded 1.5 million. Among them, “I have”, “The Beauty in the World is Intertwined with You”, “Good Night” and many other original works are broadcasted more than 1 billion times a year, and next door Lao Fan’s works are broadcasted more than 9.6 billion times.
How should NetEase Cloud make money in the post-copyright era
In August 2019, at the NetEase Q2 conference call, NetEase CEO Ding Lei had a clear explanation of NetEase Cloud’s profitability. “How to be profitable, in general, the first is the membership, the number of members has been continuously developing, the second is advertising, the third is our live audio broadcast, is a new UGC (user original content) platform model, the fourth We will tap into the deeper social functions of cloud music, and the community will socialize. We are more confident and confident in the profitability of these four aspects.
To sum up, membership, advertising and live broadcast are currently the main business revenue methods of NetEase Cloud. Socialization measures are used to increase user stickiness and stay time, stimulate other business growth, and avoid instrumental attributes.
Although it was mentioned in Q2 and Q3 financial reports that NetEase Cloud ’s revenue growth was driven by the number of paid active members, the growth of NetEase Cloud ’s Q2 paid subscriptions was actually inseparable from the compulsory payment of music by platforms in the general environment promote. In addition, the pure member income model in the industry is not enough to support copyright and operational investment has been verified. The best example is Spotify.
Where did the money come from? The TME landing on Nasdaq based on social entertainment business has long pointed the way for NetEase Cloud. From the perspective of NetEase Cloud’s product in 2019, the social and live broadcast services have been given high priority.
Especially in the music playback interface. NetEase Cloud will find the song that the user likes to listen to according to the data algorithm. When the anchor sings this song live, it will be on the top right