Since 2020, the smell of gunpowder between music streaming platforms has become stronger.
Editor’s note: This article is from WeChat public account “bullet finance ” (ID: wwwhygc ), The author Yin Taibai, posted with permission.
Despite backing on WeChat and QQ, and holding massive copyrights, Tencent Music ’s life is not easy, and its latest financial report also revealed signs of a decline in the group ’s net profit.
Recently, Tencent Music released its financial report for the first quarter of 2020. During the reporting period, Tencent Music ’s revenue was 6.31 billion yuan, a year-on-year increase of 10.0%. Just from the literal point of view, Tencent Music has maintained a 10% revenue growth rate, but this result has significantly slowed down compared to last year.
Based on the financial data for the four quarters of 2019, Tencent Music ’s revenue from the first quarter to the fourth quarter was 5.74 billion yuan, 5.9 billion yuan, 6.51 billion yuan and 7.29 billion yuan, respectively, with a year-on-year growth rate of 39.4 %, 31%, 31% and 35.1%, and its year-on-year growth rate reached 50.5% in the fourth quarter of 2018. In contrast, Tencent Music ’s revenue growth rate in the first quarter of 2020 was much lower than the previous quarter ’s performance.
Net profit also fell into the same awkward position as revenue. The first quarter financial report showed that Tencent Music ’s net profit attributable to the company ’s shareholders was 887 million yuan, a year-on-year decrease of 10%. In the first quarter of 2019, the net profit attributable to the company’s shareholders was 987 million yuan, a year-on-year increase of 17.4%.
For the decline in net profit, Tencent Music responded that it was mainly due to the surge in operating costs. Reflected in the financial report, its operating costs increased from 3.70 billion yuan in the same period last year to 4.33 billion yuan, an increase of 17.0% year-on-year.
However, behind the growth of operating costs far exceeding revenue growth, two crises are gradually emerging.
1. The two crises behind the data
At present, Tencent Music ’s two crises: one is that the monthly active user growth peaks, and the other is that the copyright advantage becomes a burden.
Quarterly financial data for the first quarter showed that Tencent Music ’s online music service had 657 million mobile monthly active users, an increase of 0.5% compared to the 654 million in the same period last year. However, based on the previous quarter’s financial data, Tencent Music’s monthly active users have been hovering between 640 million and 660 million, with extremely weak growth.
Despite Tencent Music ’s 657 million monthly active users and its three major brands, QQ Music, Kugou Music and Kuwo Music, users ’willingness to pay is not strong, and this unwilling willingness can be used for data. The comparison is easy to show: As of March 31, 2020, Tencent Music ’s online music paying users were 42.7 million. Although it surged 50.4% year-on-year, it was unavoidable that its paying users only accounted for 6.49% of monthly active users.
Going forward, Tencent Music ’s paid users accounted for 6.19% of monthly active users in the fourth quarter of 2019, with little change.
But if we make a horizontal comparison, the crisis will become apparent.
In the first quarter earnings report of Spotify, a foreign music streaming platform, its monthly active users were 286 million, an increase of 31% year-on-year. However, it is surprising that although Spotify ’s monthly active users are only three-thirds of Tencent Music More than one, but it has 130 million paying users worldwide, the payment rate is as high as 45.5%, and the revenue contributed by paying users accounts for nearly 90%.
In contrast to Tencent Music, on the one hand, its monthly active users are facing a peak of growth, on the other hand, domestic users are generally accustomed to using free Internet services, and from the “would rather spend hundreds of cigarettes to drink alcohol for dinner Judging by the consumer mind of spending dozens of dollars to buy members, it is not easy for Tencent Music to make money on the online music service business. Even if the domestic online music payment environment continues to improve, it is still difficult to see explosive growth in the short term.
But this does not stop Tencent Music’s efforts to fight for copyright.
The influential recording companies such as Jewell Music, Fumao Records, Emperor Entertainment, and many music variety shows in the Chinese music industry have granted Tencent Music Copyright, SM, YG and JYP, three major Korean entertainment head companies They have also reached strategic cooperation with Tencent Music.
In January 2020, Tencent Music announced to join a consortium led by Tencent to participate in the acquisition of a 10% stake in Universal Music Group, involving a capital of approximately 26.52 billion yuan. Universal Music is the world’s largest record company, with well-known musicians such as Jacky Cheung, Eason Chan, Taylor Swift and Lady GaGa.
On the one hand, the crazy purchase of copyrights has led to a continuous increase in operating costs. On the other hand, the money earned by the online music service business is difficult to spread the cost of copyright purchases, which undoubtedly put Tencent Music in a second crisis.
According to the first quarter financial report data, Tencent Music ’s online music service business achieved revenue of 2.044 billion yuan, accounting for 32.39% of the total revenue, while the social entertainment service business including live show live broadcast and online K song contributed 4.267 billion yuan , Accounting for 67.62%, which means that the main revenue of Tencent Music still comes from live rewards and karaoke. The original copyright advantage has not returned enough returns for it.
2. The “World War II” that is triggered at once
After entering 2020, the smell of gunpowder between music streaming platforms has gradually increased.
On the same day that Tencent Music released its first quarter earnings report, NetEase Cloud Music announced a strategic cooperation with Warner Copyright. The two parties will cooperate in all aspects of the music industry, including music library content, online karaoke and music IP development. Among them, NetEase Cloud Music will also be authorized to use the copyright of the music works of Warner Copyright.
On May 20, NetEase announced its first quarter earnings report for 2020. The financial report shows that NetEase Cloud Music’s net income has maintained a significant year-on-year growth, and the number of paying users has continued to increase, thereby driving the net income of innovation and other businesses to increase by 28% year-on-year to 3 billion yuan.
It is worth mentioning that NetEase Cloud Music has also made many breakthroughs in copyright cooperation.
After obtaining $ 700 million in financing led by Ali, NetEase Cloud Music won the copyright cooperation of Studio Ghibli, Rolling Stone Records and Shaocheng Times in less than three months. In addition, NetEase Cloud Music has also included copyrights of many popular domestic variety musical works such as “Singer · Year of Fight”, “Our Band”, “Singing and Turning” and “Sound to the Circumstance”.
“Copyright is still the core competitiveness of the music streaming platform, copyright must be contested,” an industry insider who did not wish to be named told “Bullet Finance” Said, “But Tencent Music, NetEase Cloud Music and ShrimpThe three platforms of Mi Music don’t want to rely on copyright completely, so they work hard on differentiation. “
NetEase Cloud Music was the first to differentiate.
In April 2013, when NetEase Cloud Music was launched, Ding Lei clearly defined NetEase Cloud Music as a “music community.”
The development model of “Music + Social” has attracted a large number of users for the early NetEase Cloud Music. In October 2014, TalkingData, a mobile big data service platform, released a survey report. The data shows that NetEase Cloud Music ’s monthly user growth rate reached 36.5%, ranking first in music apps.
In just three years, NetEase Cloud Music users easily exceeded 200 million.
Under the community atmosphere, NetEase Cloud Music has gathered fans and musicians from many circles such as rock, folk, Europe and the United States, and so it has attracted many original musicians and young users who are passionate and passionate about music.
In 2016, NetEase Cloud Music launched a support program for musicians by supporting independent musicians to cultivate original musicians and enrich the music content of the platform.
Since then, NetEase Cloud Music has always insisted on UGC content as the core of its operation. The functions of music review, song list, Mlog, Yuncun and live broadcast of musicians have enriched its community attributes.
In September 2017, under the intervention of the National Copyright Administration, the three-year “World War I” between music streaming platforms ended. Due to the lack of copyright, NetEase cloud music users were eventually lost.
Under the severe circumstances of lack of copyright, Netease Cloud Music continues to capture users through functions such as deep cultivation of music evaluation areas and personalized recommendations, and on the other hand, it continues to extend upstream in the industrial chain, including vigorously supporting original musicians and copyright ownership As of April 2020, NetEase Cloud Music has introduced 160,000 musicians and supported more than 1.5 million original works.
With the differentiated strategy of “Music + Social + Support Program”, NetEase Cloud Music has surpassed many competing products along the way, and has become the only opponent in many music streaming platforms that can resist the Tencent Music Chamber.
At the same time, Xiami Music is also launching a new round of copyright offensive.
An insider of Xiami Music revealed to “Bullet Finance” that currently, Xiami Music has reached cooperation with 300+ labels, studios or agents such as Rolling Stone Records, and Believe, a French digital music distributor, earlier this year Digital reached a copyright cooperation agreement for 7 million songs.
Relying on Ali, Xiami Music is also extremely generous.
In March 2020, Alibaba and Taihe Music Group reached a cooperation in digital music content. The works of well-known musicians such as Xue Zhiqian, Xu Song and Xu Jiaying were successively put on the shelves of Xiami Music.
Different from Tencent Music and NetEase Cloud Music, the differentiation strategy of Xiami Music is “Music + Technology + Professional”.
In cooperation with Taihe Music Group, products such as Tmall Genie, Whaling App and Singing Duck App under the Ali Innovation Group have obtained their AI intelligent music library, song list customization and scene soundtrack, etc. Customized service, Xiami Music tried to use technology to achieve deep interaction between music content resources and users.
“Professional” is also an important breakthrough direction for Xiami Music. “In 2019, Xiami Music was the first to launch MQA sound quality music in China. This high-quality audio-visual technology can provide more professional content services to many music enthusiasts.” The insider said.
Today, although NetEase Cloud Music and Xiami Music are still inferior to Tencent Music in copyright, the first two of them have created a local threat to Tencent Music. Of course, Tencent Music will not allow this. Occurred, and the “World War II” between music platforms was also triggered.
3. Is it feasible to change long audio?
The financial report shows that Tencent Music ’s revenue structure is mainly divided into online music service business and social entertainment service business. Among these two business segments, social entertainment service business is the most important and the most difficult to sustain.
“Important” is because the social entertainment service business contributes 67.62% of Tencent Music’s revenue at this stage, which is its lifeblood business. The “most unsustainable” is because the social entertainment service business based on live show and online karaoke has shaken the cakes of short video platforms such as Douyin and Kuaishou.
In just a few years, Douyin and Kuaishou have grown into forces that cannot be ignored. Under their crazy offense, Tencent Music’s show live broadcast was the first to bear the brunt.
An undisputed fact is that the popularity of the short video platform has already threatened Tencent Music-for Tencent Music, the greater the stickiness of the user of the short video platform, it means the commercial value of the live broadcast of the show The smaller.
In fact, this situation has been reflected in the first quarter earnings report.
The financial report for the first quarter showed that Tencent Music ’s social entertainment service business revenue was 4.267 billion yuan, a year-on-year increase of only 3.3%, and this data was usually around 40% in the previous quarters.
Tencent Music also early realized the fact that the social entertainment service business was growing weak, so it was determined to seek change and extend its strategic layout to the long audio field.
On April 23, Tencent Music held a strategic press conference, announcing that the long audio field will be the future direction.
Actually, Tencent Music started to lay out long audio as early as December 2019. At that time TencentCool Music, a music company, was the first to release the “10 Billion Sound Machine” full-range long audio fundraising plan to support the creation of long audio content in the form of “resources + funds”.
In the field of long audio, Tencent Music does have natural advantages.
Tencent Music explained this advantage in its first quarter earnings report: Through strategic cooperation with Reading Group and other leading online literary platforms in China, Tencent Music added thousands of audiobooks, including some Chinese online literature Kaishan’s exclusive audiobook works, and has the right to adapt the audio works of most of the top 100 lists of the reading group’s most popular works. In addition to online literary works, it also began to cooperate with popular TV series and domestic comic IP for audio adaptation.
However, is it a good way to lay out long audio on the music streaming platform?
An example you can refer to is Litchi FM. In January 2020, Litchi FM successfully landed on Nasdaq, but as China ’s first audio listed company, Litchi fell below the issue price the day after listing, according to its full-year financial report released in March, 2019 The company’s net loss expanded to 1.073 billion yuan.
This may mean that the long audio mode is not as easy to get through as expected.
While Tencent Music and Reading Group can obtain new incremental space, it is very likely that it only solves the traffic problem, but it still cannot solve the profit problem-the profit model of Long Audio and Tencent Music ’s online music service business There is no essential difference, both are to achieve profit through user payment. To enter the long audio field, to a certain extent, actually makes Tencent Music once again face the problem of “users are unwilling to pay”.
“Long audio will be a strategic area where Tencent Music will continue to exert its strength in the future.” said Peng Jiaxin, CEO of Tencent Music Entertainment Group. “Tencent Music will help the development of long audio business through the collaboration of online music and social entertainment services. And accelerate the integration of music and audio. “
It is undeniable that long audio does have room for imagination, but it also makes Tencent Music have to fight on three fronts at the same time.
In the field of online music, Tencent Music pays close attention to the trends of Netease Cloud Music and Xiami Music; in the field of live broadcast of the show, Tencent Music must prevent the cake from being shaken and fast hands; in the field of long audio, we must find ways to extract from the audio Giants Himalayan and Litchi FM took the food.
It is foreseeable that the weak growth of the main business and the uncertainty of entering the long audio will be the unsolved problems of Tencent Music in the future, and which of the three different paths of differentiation can be the first to pass. , Will also become the ultimate test for music streaming platforms.
* The title picture and the rest of the pictures in the article come from: Photograph Network, based on the VRF protocol.