Image source @Visual China
Text | Connect Insight, Author | Li Xin, Editor | Midnight
At the beginning of 2021, domestic online music platforms have each ushered in different changes.
Recently, according to the Nikkei News, Tencent Music Entertainment Group (hereinafter referred to as Tencent Music) is considering a second listing in Hong Kong. Tencent Music plans to raise $3.5 billion, according to people familiar with the matter.
In response to this, Tencent Music responded to First Financial Daily that the news about the company's second listing has been "passed for several rounds", and everything is subject to the final news.
At the same time, Xiami Music has officially stopped its service on February 5.
After experiencing the copyright dispute, Tencent Music obtained most of the music copyrights, thus establishing a solid moat.
However, the challenges faced by the largest online music platform in China may not come from the online music market, but from the short video industry.
According to the analysis of the Insight, in recent years, , Douyin and Kuaishou have frequently taken action on music copyrights. They not only cooperated with Tencent Music, but also signed copyright agreements with several upstream record companies.
and Tencent Music is also looking for more growth points, and its focus is on the field of long audio.
Independent Kuwo Changting, acquiring lazy sloganshu, and jointly developing IP with China Literature Group . Tencent Music has already placed a heavy bet on long audio, but in this field, there are companies such as Himalaya that have been deeply involved in the industry for many years. If Tencent Music wants to make a breakthrough, it not only needs to cultivate high-quality and exclusive resources, but also needs to establish a good business model.
Previously, the long-term capital investment in copyright has made Tencent Music a little difficult. If it still adopts capital strategy in the long audio field, it may not be a good choice.
While Tencent Music is being challenged, it also needs to give new stories to the capital market. How much share can it gain in the long audio market? Can the new expansion take its market value to a higher level?
Tencent Music
Currently, in the online music field, Tencent Music already has strong control.
According to Tencent Music's Q3 financial report for 2020, 's revenue in the quarter was RMB 7.58 billion, a year-on-year increase of 16%, surpassing the single-quarter revenue before the epidemic for the first time. Online music mobile MAU (monthly active users) also reached 646 million, and online music paid users 51.7 million , a month-on-month increase of 9.8% and a year-on-year increase of 46%.
Tencent Music’s key operating indicators, source Tencent Music’s official website
Tencent Music is the absolute leader in terms of revenue, monthly active users, and with the closure of Xiami Music, Tencent Music’s opponents are almost the only ones left in NetEase Cloud Music.
However, the current challenges facing Tencent Music may not be the same type of music platform, but the invasion of two short video platforms, Douyin and Kuaishou.
, as the social entertainment business of Tencent Music's revenue pillar, 's revenue in Q3 2020 was 5.25 billion yuan, accounting for 69.3% of the total revenue in the quarter. However, its monthly active users and paid users showed a downward trend, of which 235 million monthly active users were 235 million, 256 million and 236 million in Q1 and Q2 respectively. Paid users also fell by 14.6% year-on-year to 10.5 million .
It is worth noting that Tencent Music’s social entertainment business is mainly represented by Tiantian Ka Song and live broadcast business, which is also an important part of short video platforms such as Douyin and Kuaishou.
Tencent Music also realized this problem. On the Tencent Music Q2 earnings call last year, an analyst asked: "Is the management worried about the industry growth saturation of the social entertainment business?"
"We have more than 200 million online karaoke MAUs, and the number of users is considerable, so we do not think there will be more growth... However, with the launch of more product enhancements such as online singing rooms, virtual gifts and advertising, the platform will bring us additional profit opportunities." Tencent Music answered this.
While Tencent Music is exploring other revenue channels, Douyin and Kuaishou have invaded Tencent Music's hinterland.
According to Tech Planet, ByteDance is trying to develop a music community APP called "Fele", and is trying to create a music distribution platform called "BeatDynamic", trying to manage music copyright and subsequent releases.
Kuaishou is not to be outdone. It is currently developing an APP called "Xiaosen Music" and has completed the filing of the "xiaosenmusic.cn" website.
At the same time, Douyin and Kuaishou are strengthening the accumulation of music copyrights. In mid-last year, the two sides staged a fierce battle to compete for " Jay Chou ".
Jay Chou Kuaishou account, picture source, screenshot of Kuaishou APP
On May 29, 2020, Jay Chou entered Kuaishou with his ID "Classmate Zhou". A day later, Kuaishou officially announced that it had reached a copyright authorization cooperation with Jay Chou's music company, Jay Chou, and Kuaishou obtained the copyright authorization of all songs and song MVs of Jay Chou, a singer under Jay Chou Music.
html On June 12, Jay Chou's new song "Mojito" was released, and Kuaishou and QQ Music were launched simultaneously. Almost at the same time, Douyin also announced that it had reached a copyright cooperation with Jerwei Music and obtained the copyright authorization cooperation on all song clips and song MV clips of Jerwei Music.This means that in addition to obtaining Jay Chou's song copyright, Douyin also acquired the music copyright of other singers under Jay Weir.
In fact, as early as 2018, Douyin began to contact many record companies. In January this year, TikTok, the overseas version of Douyin, also announced that it had signed a music license agreement with Warner Music Group. As of now, TikTok has reached copyright cooperation with well-known domestic music brands such as Sony, Warner, Taihe, Jerwell, Modern Sky. What’s more important is that according to Tech Planet, Douyin has also internally tested the “listen to the full song” function, which allows users to play complete music in Douyin through the form of a simple version player.
In other words, when Douyin officially launches the player function, this may help it further retain users, especially those who love music, but this may also steal some users of online music APPs, and Tencent Music will be the most affected.
Last year, Douyin also launched the "2020 Douyin See Music Plan" and the "TikTok Musicians 100 million yuan subsidy plan" to directly assist musicians in solving their development difficulties. Kuaishou also launched the "Kuaishou Musicians Plan" as early as 2018.
Douyin musician, the picture source of Douyin Music official website
can be seen that Douyin and Kuaishou are competing for musicians to cultivate their own platform singers, so as to consolidate barriers in the music field.
From the current perspective, although Douyin and Kuaishou cannot leverage the basic platform of Tencent Music, with the development of short video platforms, the mastery of music content will be further strengthened, and it is not easy for Tencent Music to defend its moat.
Tencent Music wants to grab the long video cake
Tencent Music realizes that user growth is limited, and has begun to look for a new user growth curve, and its focus is long audio.
On January 15 this year, Tencent Music Entertainment Group will acquire 100% of Lazy Tingshu's equity from shareholders such as China Literature Group, Lazy Tingshu's management team and other financial investors for a price of 2.7 billion yuan. The transaction is expected to be completed in the first half of 2021.
After joining Tencent Music, Lazy Listening will remain independent operation, and Tencent Music will fully open up the ecosystem and resources for Lazy Listening.
"This strategic acquisition will further consolidate our important position in the ever-changing long audio industry in China." said Peng Jiaxin, CEO of Tencent Music Entertainment Group.
In fact, as early as 2019, Tencent Music was in the field of long audio. At that time, Ye Zhuodong, chief strategy officer of Tencent Music Entertainment Group, said, "In addition to adding thousands of new audio works adapted from popular IPs, we have also attracted many well-known long audio creative talents to produce more high-quality UGC content."
By 2020, Tencent Music not only announced a strategic cooperation with China Literature Group to jointly incubate IP derivatives of a large number of original online literary content under China Literature Group, but also released a long audio strategy in April, and independent Kuwo Music Radio as Kuwo Changting, and increased the launch of self-made programs to cultivate IP.The series of actions of
shows how much Tencent Music attaches importance to long audio, and behind this is the explosion of domestic long audio.
According to the "2020 China Internet Audio Industry Research Report" released by iResearch Consulting, the market size of in China's Internet Audio Industry in 2019 was 17.58 billion yuan, and this scale may reach 27.24 billion yuan in 2020, with a growth rate of 54.9%. It is estimated that by 2022, the domestic long audio market size will reach 54.31 billion yuan.
015-2022 China's online audio industry market size, image source iResearch Consulting However, it is not easy for Tencent Music to grab the long audio cake.
has basically formed a stable competitive landscape among the three giants, Himalaya, Lizhi , and Dragonfly FM.
At the beginning of last year, Litchi landed on the Nasdaq in the United States and became the first online audio stock. According to its Q3 2020 financial report, its average monthly active users reached 56.2 million, a year-on-year increase of 21%; the average monthly paid users increased by 17% year-on-year.
According to public data from Himalaya and Dragonfly FM in 2019, the number of Himalaya users reached 600 million, the platform anchors exceeded 7 million, the industry share reached 75%, and the average daily listening time for active users reached 170 minutes.
Dragonfly FM full-scene ecosystem has 130 million monthly active users, and the total number of smart devices listening to each day reaches 25 million hours.
Faced with the stable pattern in the domestic long audio field, if Tencent Music wants to make a breakthrough, it is only possible to attract users and obtain continuous growth in revenue and monthly active users.
In this regard, Tencent Music takes advantage of its own advantages, and introduces original IP audio novels such as "Qing Yu Nian" and "Grave Robbers' Chronicles". On the other hand, it has used real money to poach high-quality bloggers from other platforms, and vigorously supports mid-level anchors to inspire them to create high-quality works.
is connected to Insight to sort out public information. Tencent Music has poached hundreds of high-quality anchors such as Tuoxianren Storytelling, Mr. Donkey Egg, and Beijing Renwenjun from Himalaya to quickly fill in the platform's missing high-quality content.
It can be seen that Tencent Music has followed the money-spending model in the previous copyright war, quickly collecting high-quality content through capital, forming an exclusive advantage, and then charging users later.
However, not only Tencent Music is interested in long audio, but also players such as ByteDance and NetEase Cloud Music are also making arrangements.
In June last year, ByteDance launched "Tomato Listen", which allows users to listen to long audio content such as online literature and novels for free; in September, NetEase Cloud Music launched the new content section "Sound Theater", focusing on radio dramas and audio books adapted from young IPs.
Tomato Changting page, picture source Tomato Changting official website
In the face of invasion of large and large giants, the three audio giants are also increasing their efforts to consolidate their own advantages. Himalaya invested a lot of money to develop the science fiction work "Three-Body Problem" radio drama, and asked celebrities to endorse and produce audio interactive suspense dramas; Lizhi and Dragonfly FM launched celebrity radio stations and celebrity live broadcast rooms respectively.
In this case, although Tencent Music can still use capital to quickly gain an advantage, it also needs to consider the copyright fees it spends every year in the music field, and it will be quite difficult to copy this methodology to the long audio field.
Tencent Music needs a new story
After five years of copyright dispute, Tencent Music has no rivals.
With the news of its second listing in Hong Kong many times, Tencent Music needs a new story and new data to support a higher valuation.
According to Tencent Music's 2020 quarterly financial report, although its monthly active users reached 646 million in March, this data is behind it for two consecutive quarters. The reason for the decline in
may be that users go to other platforms to listen to music, or that the audience of music platform has become saturated and does not have much room for growth.
Judging from the current situation, Tencent Music is more likely to face limited growth space, which may be an important reason for its layout in the long audio field.
At the same time, in order to stabilize its market position, Tencent Music has been purchasing music copyrights at all costs, resulting in high operating costs.
According to its Q3 financial report, the operating cost in the quarter reached 5.117 billion yuan, an increase of 19.1% year-on-year, mainly for the increase in investment in new products (used to develop long audio, online concerts, etc.) and content products (music copyright procurement), as well as other content costs related to patent usage fees. What’s more important is that even though Tencent Music is already the largest online music company in China and spends a lot of capital to purchase copyrights every year, the user payment rate is only 8%, which not only brings very limited revenue, but also is very different from the 50% payment rate of overseas platforms such as Spotify.
Even if Spotify has a 50% payment rate, its overall net loss in Q3 2020 reached 101 million euros, which may indicate that a single profit model cannot support the long-term development of the streaming media platform.
For this reason, Tencent Music’s main revenue segment is not paid by users, but is the social entertainment business. However, short video platforms such as Douyin and Kuaishou are at their peak, which has more or less affected Tencent Music's main revenue sectors. Its Q3 financial report shows that monthly active users and paid users have shown a downward trend.
When its original business cannot bring more users and higher growth, Tencent Music naturally needs to consider expanding its revenue channels.
In addition to promoting long audio, Tencent Music has also held an online concert and launched a TME Live super live performance.
On the last day of May 2020, Mayday and TME Live jointly held an online concert, and broadcast it live on Tencent Music’s QQ Music, Kugou Music, Kuwo Music and National K Song platforms.
online concert in May, picture source TME Live official Weibo
According to Tencent Music data, the total number of viewers on each online platform (including four music platforms and Tencent Video, etc.) exceeds 35 million. Since last year, TME Live has also brought online performances from many musicians such as Eason Chan, Rene Liu, Xu Jiaying and other musicians.
However, online concerts are more of a helpless move under the epidemic and cannot be used as a long-term business development.
"We don't want to replace offline, it's impossible." Pan Caijun, vice president of Tencent Music Entertainment Group and head of the content cooperation department, said in an interview with The Paper.
Under this circumstance, the long audio industry is still in a period of growth and there is still a certain market space. Moreover, the three domestic audio giants have not yet established enough moats, so Tencent Music still has the opportunity to enter.
At the same time, after years of development, the long audio industry has built ecology such as knowledge payment, audio books, podcasts, etc., and has cultivated certain user groups and payment habits.
At this time, Tencent Music entered the market and no longer had to spend time and money to educate users. What it needs to do is to seize the market share of other platforms.
According to Tencent Music's quarterly report last year, its long audio penetration rate has been steadily growing, from 9.7% in Q1 2020 to 11% in Q3, which was only 4.7% in the same period last year, and the number of IP authorizations has also increased by 6 times year-on-year.
develops in this way. In the era of long audio, Tencent Music can occupy a certain market share, but this new story is not easy to support a market value of 10 billion US dollars like online music.
