How the Second Ladder of Tencent Music Comes on the Market: Expanding Multiple Revenues, Video Contents as Copyright Opportunities
Every reporter Zhang Chunnan is edited by Du Yu.
Recently, Tencent Music Entertainment Group (hereinafter referred to as Tencent Music) for the first time in the United States public prospectus. In the second quarter of this year, Tencent reached 800 million monthly live music, approaching Weixin 1 billion monthly live, and QQ's 800 million monthly live.
At present, Tencent Music has four kinds of APP: QQ music, cool dog music, cool me music and national K songs. In the first half of this year, net profit of Tencent music adjusted exceeded 2 billion yuan, an increase of nearly 200% over the same period last year.
With Tencent's pioneering profitability and the exclusive copyright of most popular music, the "three kingdoms killing" of mobile music came to an end, ushering in the era of "one super many strong". At the time of the IPO, investors gave a valuation of nearly $30 billion, and Tencent Music was well ahead of Netease Yun and Ali Music.
For the second echelon, it is not easy to catch up with Tencent music which has formed a complete ecology. On the one hand, mobile music APP's monthly growth rate slows down from the overall data, demographic dividends are disappearing, and there is still a lot of room for the growth of user fee ratio. It needs to maintain existing resources and users through fine-tuned operations, and expand new revenue channels; on the other hand, after the completion of copyright mutual teaching, music variety and other videos. Content becomes the "curve" of competition, which is expected to become the key to overtaking.
Music social contribution 70% revenue, Tencent music first to achieve profitability
According to the prospectus, Tencent Music's QQ, Cool Dog, Cool Me and National K-Song were the top four music APPs in China Mobile's monthly life, totaling 800 million in the second quarter of this year.
From the revenue data, Tencent music rose rapidly in recent years. Tencent's music revenue in the first half of this year was 8.619 billion yuan, up 92% from 4.485 billion yuan in the same period in 2017, and nearly twice the total revenue in 2016. However, the rapid growth has also been the reason why the Chinese Music Group (CMC) started in July 2016.
China Music Group owns Cool Dog Music and Cool Me Music. With the merger of QQ Music and China Music Group in January 2017, Tencent Music Entertainment Group was formally established. The three mergers also accounted for most of the market. Through mergers and acquisitions, Tencent music library is enriched, user loyalty improves, and marginal cost decreases. As of June 30 this year, Tencent Music has more than 20 million audio songs, including Sony, Universal, Warner Music and more than 200 domestic and international music labels.
In this burning industry, Tencent music also took the lead in making profits. Tencent's adjusted net profit in the first half of 2018 was 2.112 billion yuan, compared with 732 million yuan in the first half of 2017, an increase of 189% year on year.
By contrast, Spotify, an overseas music streaming media company that shares with Tencent and is also listed in the US, has yet to make a profit. "Although foreign users pay better than domestic, but the overseas user base is not as high as domestic, the investment in copyright can not support the number of users to pay, in addition, such as live music broadcast, because the number of users is not high enough to not develop." AI media consulting CEO Zhang Yi told the daily economic news reporter.
Tencent's online music services, including paid subscriptions and digital album sales, and its music social entertainment services, including live broadcasting, make up about 3:7 of its revenue, but social entertainment accounts for only about a third of its monthly live online music.
"Ordinary live shows can lead to a rapid loss of users due to lack of content, but live music such as Cool Dog can combine supporting musicians with live shows." Zhang Yi told every reporter.
The difference between War Within Three Kingdoms's valuation is obvious.
"Tencent music business model is recognized by the capital market, the development of the industry has a positive role in promoting." NetEase cloud music related personage accepts each reporter's interview.
Previously, Tencent Music was valued at $28 billion to $30 billion, based on news from The Information that US investors recently agreed to buy private shares of Tencent Music from early shareholders. And according to the Ministry of Science and Technology Torch Center issued by the "2017 China Unicorn Enterprise Development Report" shows that the value of Ali Music $3 billion. In April last year, NetEase cloud music completed a 750 million yuan A round of financing, the company valued at 8 billion yuan. In contrast, the valuation of Tencent music is far ahead of Ali music and NetEase cloud music.
"If user resources and content resources are'options'for investors, Tencent Music has made a profit and has a clearer business model." Zhang Yi told reporters every time.
According to reporters, mobile music is currently the main source of revenue is user fees and advertising, but this does not support a stable profit model. Even if the library is as rich as Tencent Music, the pay-to-pay conversion rate for online music services was only 3.6% in the second quarter of this year, while the growth in the pay-to-pay ratio was still very slow due to the large user base.
This is also a common bottleneck for other mobile music APP. Take Netease Cloud Music as an example. "At present, Netease Cloud Music has not formed a stable business model, the key is to lock up high-quality users first." Zhang Yi told reporters every time.
In addition, Ali music's shrimp music has been "catching up" trend. Easy to watch data show that China Mobile's Migu music has surpassed shrimp music in monthly life. "In January 2017, compared with July this year, the monthly number of shrimp music decreased by 20%." Yi Guan music analyst Yin Shi told reporters in every interview that "shrimp music momentum is declining, Migu music is on the rise."
"We learn from Tencent and Netease in Internet operations, but our development model may be more three-dimensional." Yuan Min, deputy general manager of Migu Music, told reporters in September this year, "In addition to digital music distribution, we will also do offline collaborative interaction, so that musicians can communicate with live music close to each other, and then return online through 4K live broadcast."
Explore new models of music variety or catch up with the "bend"
In March this year, under the impetus of the State Copyright Office, Netease Yun Music and Ali Music reached a mutual copyright agreement. At this point, Tencent music, Ali music, NetEase cloud music have been mutual copyright mutual grant. The copyright dispute seems to have come to an end.
After the copyright circulation of 99% tracks, the remaining 1% of the essence become the "kill" of the digital music platform. "Although the number of curricula is huge, but the market is generally popular in the hundreds, so to some extent, the circulation of copyright is a pseudo proposition." Zhang Yi told reporters every time.
On the eve of the listing, Tencent Music also accepted Warner China LLC and Sony Music Entertainment as strategic investors, holding about 68 million common shares of Tencent Music, totaling about $200 million. Tencent Music said such deals would help deepen strategic cooperation with major music brand partners and better align their interests.
"The content side has its own vertical areas, such as audio, rock, folk, and so on, and each music platform operates in a different direction. Record companies will choose different distribution channels with different attributes according to different music types." "Platform is more about content than copyright," one industry insider told reporters.
"Because the iteration of music works as a whole is still relatively obvious, so the support of new music works, the absorption of copyright should be sustained and unremitting." Zhang Yi said. Tencent, Ali, Netease Cloud Music has also launched a "stone program," the "light-seeking program" to support independent musicians program.
It is worth noting that video traffic is leveraging the audio traffic. "Big IP movies and TV soundtrack, music variety shows, network synthesis and so on occupy most of the user's time, IP is replacing big-name singers to decide what to listen to." Liang Siceng, director of the content center of Mickey music, told reporters every time.
Netease's first A round of financing for Yunyun Music introduced the Shanghai Broadcasting and Television Station, the Shanghai Cultural Broadcasting and Television Group, and the Mango Foundation of Hunan Radio and Television. At the end of last year, Netease reached a strategic partnership with Aichi Art, and won the copyright of various arts such as "Idol Practitioners".
"Music variety show may become the second echelon of Netease cloud business copyright resources competition opportunities, but in the last half of the year Tencent music or rely on their strong capital strength to basically monopolize the new music variety show copyright resources, so in conclusion, the copyright dispute is basically over. The Tencent has the exclusive copyright of most of the popular music in the market. Analysys music analyst said.
In addition, the overall data show that mobile music APP monthly growth is slow, demographic dividends are disappearing, user fees and advertising revenue is easy to see the ceiling. On the one hand, the digital music platform maintains the existing resources and users through fine operation, on the other hand, it expands new revenue channels.
"Electronics is a relatively easy entry point for offline music scenes, so Netease has also set up a new brand of electronics"thorn"to try to introduce foreign"immersion experience"audio activities into China. The industry insiders said.
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