NetEase Cloud Music revenues rose 22.5% to $331 million in the third quarter

NetEase Cloud Music, China’s second-largest music streaming provider, reported a 22.5% year-over-year increase in revenue in the third quarter, which it attributed to continued growth in the company’s paid user base.

Revenue for the three months ended September 30 was RMB 2.36 billion (about US$331 million), up from RMB 1.92 billion in the previous period and RMB 2.19 billion in the second quarter of the year.

The figures were released by Cloud Music’s parent company NetEase last week (November 17) as it released its third quarter overall (unaudited) results. Cloud Music accounted for 9.7% of the parent company’s total revenue of RMB 24.43 billion for the quarter.

NetEase Chief Financial Officer Charles Young told analysts on the earnings call that Cloud Music’s revenue grew as it continued to expand its single-paying user base and optimize its pricing strategy.

During the quarter, Cloud Music further developed its “music-focused community and content ecosystem” and continued to accelerate monetization efforts and “achieve meaningful operating leverage,” according to the executive.

“Our paying user ratio was also stable during the quarter.”

Yang revealed on the call that Cloud Music’s MAU remained stable, while the ratio of DAU over MAU remained well above 30%.

“Our paid user ratio was also stable quarter-on-quarter,” Yang said.

Actual figures for Cloud Music’s end-of-quarter subscriber numbers have not been released.

In the second quarter, Cloud Music added 872,000 paid music users and ended the period with 37.6 million monthly online music paid users. By comparison, rival Tencent Music Entertainment (TME), which operates multiple streaming services including QQ Music, Kugou Music and Kuwo Music, added 2.5 million new paid users and ended the first half with 82.7 million paid subscribers.

More recently, TME reported last week that it added another 2.6 million paid music users in the third quarter, bringing its total number of paying subscribers to 85.3 million.

Cloud Music’s gross profit margin increased to 14.2% in Q3 2021 from 13% in Q2 2021 and 2.2% in Q3 2021. Its gross profit rose nearly 8-fold to RMB 333.6 million from RMB 42.8 million a year ago.

NetEase attributed the improvement to “increased net revenues from social entertainment services as well as continuously improved cost control measures.”

During the earnings call, Yang noted that Cloud Music has seen a gradual recovery in advertising, while the unit’s net loss narrowed further both year-over-year and quarter-over-quarter.

Cloud Music’s net loss decreased significantly to RMB 270.8 million from RMB 3.81 billion a year ago due to strong sales in the first half and a 39% reduction in general and administrative expenses, as well as an increase in government grants and value-added tax subsidies. , as well as net foreign exchange earnings and others.

Yang later revealed during the earnings call that Cloud Music continues to expand and diversify its copyright library.

Increased regulatory scrutiny in China has forced the likes of Cloud Music and TME to drop exclusive deals with global labels in China. Tighter Beijing controls forced Cloud Music to shelve its initial public offering in Hong Kong last year, but it managed to go ahead with its plan, launching a HK$3.28 billion ($420 million) IPO in December 2021.

“NetEase Cloud Music is in active discussions with label companies to provide the best content for our music fans.”

Charles Yang, NetEase

Since then, “NetEase Cloud Music has been in active discussions with label companies to provide the best content for our music fans. So far, we have sold most of the major label content, including Modern Sky, Emperor Entertainment Group, China Record Group, Feng Hua Qiu Shi, Yuehua Entertainment, Linfair Records, SM Entertainment, TF Entertainment, YG Entertainment and KAO!INC,” Yang said in the company’s earnings call. said.

In addition to getting more licensed music on the music streaming platform, Cloud Music has also increased its focus on nurturing aspiring musicians. Yang, the company now serves more than 570,000 artists.

To attract new users and retain existing paid subscribers, Cloud Music introduced new offerings in Q3, including a “starred comment section” to display high-quality user comments, and launched a “Fan Space” to connect and encourage. interaction between artists and their fans.

Cloud Music has also begun offering Dolby Atmos on its platform, allowing users to experience more immersive ways to listen to music, Yang said.

In Hong Kong, shares of Cloud Music fell 11% on Tuesday amid a broad sell-off in Hong Kong stocks as fears of another lockdown in China were renewed.Music business in the world