Himalaya wants to learn Tencent Music, NetEase Cloud Music, and make money by going live, can it work?

According to CNNIC, as of June 2021, the number of Chinese netizens reached 1.011 billion, and nearly 20% of them had a university degree or above. However, behind such a high-quality and huge user structure, there are extremely few people willing to pay for content.

According to the Q3 quarterly financial report of 2021, the average number of monthly active users (MAUs) reached 101.2 million, and the average monthly paid users were 5.5 million, with a payment rate of only 5.4%. The situation of digital music and online video is slightly better than that of Zhihu, but the payment rate is still low compared with foreign companies of the same type.

There are many reasons why users are reluctant to pay for content, among them, the "free" thinking in the early days of the Internet is the main root cause, and Internet companies use the free model to nourish generations of users, resulting in users' willingness to pay today.

Even to this day, there are still Internet companies with free models to attract users, for example, free reading of online novels, the online literature industry is not easy to establish a paid reading model, instantly defeated by free novels, behind this is actually the ruthless oppression of fiction authors, but the platform does not care too much about the value of authors, either accept advertising rebates, or go to other platforms.

The free mode is an "invisible sword", which harms others and benefits itself, and the number of users on the free fiction platform has soared in the short term, but once the free mode is too much, it will eventually hurt itself. According to Guo Jing's Internet circle observation, a free online novel platform has recently launched a paid reading app with the trend, is this a plan to let its right hand compete with its left hand?

It is difficult for the content industry to make money, and Luo Ji thinking is the only exception. According to the prospectus of Beijing Thinking Creation Information Technology Co., Ltd., the parent company of "Luoji Thinking", in the first three months of 2017, 2018, 2019 and 2020, the net profit of Thinking Creation was 61.3196 million yuan, 47.6441 million yuan, 115.054 million yuan and 13.2782 million yuan, respectively.

Considering the scale of Revenue of Luo Ji Thinking, its representation is limited.

Is there any other way for the content industry to make money? Digital music platforms have forged a path by relying on pan-entertainment live streaming. Tencent Music's financial report for the first three quarters of 2021 shows that the revenue from social entertainment services and other businesses has accumulated 15.06 billion yuan, the monthly ARPPU (average per paying user income) of online music services is only 8.9 yuan, and the monthly ARPPU of social entertainment services is as high as 163.9 yuan, which is 18.4 times that of the former. According to the NetEase Cloud Music Prospectus, the revenue from social entertainment and other sectors in the first three quarters of 2021 was 2.67 billion yuan.

Ordinary users do not love deep/valuable content, but they have a special love for pan-entertainment live broadcasting and are willing to pay for it, which surprises many people. On the one hand, there is no shortage of users on the Internet to criticize a large number of inferior content and pirated content; on the other hand, online live broadcasting is "not on the table" in the eyes of some people, where will there be so many people watching people singing and dancing on the Internet every day, and also tipping the anchor, where do they get so much money?

However, human nature is like this, users would rather spend money to tip the host than pay for deep/valuable content. From the perspective of the path of Tencent Music and NetEase Cloud Music, it may be a good model for the content industry to take pan-entertainment live broadcasting.

Himalayas want to learn Tencent Music and NetEase Cloud Music

After being robbed of the title of "online audio first share" by Lychee FM, the pressure once came to Himalayas, in various marketing and publicity processes, Himalayas suffered slight losses, fortunately, the prospectus data submitted by Himalaya won back a round for it, whether it is revenue or monthly active, Himalaya has surpassed Lychee.

However, the problem of himalaya losses remains serious. According to the prospectus, in 2018, 2019, 2020 and the first half of 2021, Himalaya lost 755 million yuan, 747 million yuan, 539 million yuan and 324 million yuan respectively, with a total loss of nearly 2.4 billion yuan in three and a half years.

Himalayas urgently needs to solve the profit dilemma.

Himalaya's revenue is mainly divided into four segments: subscriptions (membership subscriptions, pay-per-view services), advertising, live broadcasting, and other innovative products and services. In 2020, the revenue of these four businesses accounted for 49.2%, 26.3%, 17.6%, and 6.9% respectively.

In terms of live broadcasting business, Himalaya's revenue in 2018, 2019 and 2020 was 316 million yuan, 618 million yuan and 717.5 million yuan, respectively. Live broadcasting is not the main profit point of Himalayas, but for Himalaya, the live broadcasting business obviously has a lot of room for improvement.

According to the prospectus, in the six months ended June 30, 2020, the proportion of live broadcast revenue even exceeded that of advertising revenue. For the whole of 2019, live streaming revenue also exceeded advertising revenue.

As far as Tencent Music and NetEase Cloud Music are concerned, pan-entertainment live broadcasting is obviously promising, and Himalaya obviously also looks at pan-entertainment live broadcasting.

According to Guo Jing's Internet circle observation, on January 10, Himalaya launched a "Himalaya Live" App, the product's slogan is "voice actor dating radio", and its product description mentions that Himalaya Live is a software that focuses on national live broadcasting and audio chat under Himalaya.

In fact, "Himalaya Live" is exactly the same as the content of the "Live" channel in the main Himalaya App, which shows that "Himalaya Live" is spun off from himalayas. Similar operations are very common in the Internet industry, for example, Kugou Music split the K song function and launched "Kugou Singing"; NetEase Cloud Music split the live broadcast function separately and launched the "LOOK Live Broadcast".

The advantage of splitting a certain business section is very obvious, that is, the business can have more room for development, after all, the main App can carry limited functions, and unlimited loading of new functional items will compress the space of a certain business.

Himalaya split the live broadcast business, obviously also hopes that the business can have better development, which also means that Himalaya also wants to use content as the basic disk like Tencent Music and NetEase Cloud Music, and then borrow pan-entertainment live broadcasting to make money.

Can pan-entertainment live broadcasting work?

According to Guo Jing's Internet circle observation, in recent years, the pan-entertainment live broadcast industry has shown a trend of catching up, and some companies have entered the live broadcast industry earlier, and soon caught up with the first wave of live broadcasting and ate dividends, such as Tencent Music and Momo, but these companies have declined after entering the peak.

Tencent Music's Q3 2021 quarterly financial report shows that revenue from social entertainment services and other businesses fell by 6.4% year-on-year, and the average revenue per paid user and the number of paid users fell by 1.7% and 4.8%, respectively.

Momo's 2021 Q3 quarterly financial report shows that the revenue of live broadcast services was 2.1667 billion yuan, down 8.76% year-on-year. In the third quarter of 2021, the total number of paid users of Momo live broadcast services and value-added services was 12.2 million, a decrease of 900,000 year-on-year.

NetEase Cloud Music entered the live broadcast industry late, but its growth is relatively rapid. According to the prospectus, in the first three quarters of 2021, the NetEase Cloud music social entertainment service MAU was 21.1 million; the number of paid users reached 580,000, an increase of 93% year-on-year; and the monthly ARPPU of the social entertainment service was 504.1 yuan.

In 2019, netease cloud music social entertainment service revenue was only 541 million yuan, and in 2020, it increased significantly by 319.8% to 2.273 billion yuan. Affected by the live broadcasting business, netease cloud music's gross loss in 2020 decreased by 43.7% from 1.1 billion yuan in 2019 to 595 million yuan, and the gross loss ratio narrowed from 45.6% in 2019 to 12.2%.

As far as Himalaya's live broadcast business is concerned, compared with Tencent Music and NetEase Cloud Music, the gap is not small, but it also means that there is a lot of room for improvement.

Himalayan competitor lychees have long since begun to transform. According to Lychee's 2021 Q3 quarterly financial report, Lychee audio entertainment business revenue was 501 million yuan, an increase of 40.7% year-on-year; broadcast, advertising and other business revenue was only 4.05 million yuan. In Lychee's revenue structure, the audio entertainment business has accounted for 99.2% of Lychee's total revenue.

Obviously, Lychee also provides a good "model" for Himalaya, that is, online audio can make money by voice live broadcast + dating business, and Tencent Music's Q3 2021 quarterly financial report also mentioned that "the revenue of audio live broadcasting has grown strongly".

The ideal is very full, the reality is very bone, and the himalayas' live broadcast business is also facing certain pressure.

First of all, competition from larger platforms such as Douyin and Kuaishou. Audio in the face of short video is not dominant, vibrato daily active more than 600 million, Kuaishou daily active more than 300 million, most of the users willing to do entertainment live broadcast, its preferred platform is vibrato, Kuaishou, which invisibly squeeze the living space of Himalayan live broadcast.

Secondly, voice anchors also need huge investment in the early stage, for Himalaya, which is currently in a state of loss, is it willing to invest in new business?

According to the prospectus previously released by Lychee, the share of Lychee to anchors in 2019 accounted for 72.8% of the total revenue. According to the prospectus previously released by Yingke, its anchor fee accounted for 56.1% of revenue in 2017. Tencent Music's Q3 2021 quarterly financial report shows that Tencent Music's third-quarter revenue cost was 5.5 billion yuan, an increase of 7.4% year-on-year, mainly due to the increase in revenue sharing fees and other royalty-related content costs.

According to the prospectus, Himalaya's operating costs include content sharing fees, copyright authorization, payment processing fees, Internet equipment procurement, bandwidth, etc., and the operating costs in the first quarter of 2018, 2019, 2020 and 2021 were 462 million yuan, 898 million yuan, 1.293 billion yuan and 664 million yuan, accounting for 31.2%, 33.3%, 31.7% and 26.4% of its total revenue, respectively.

For Himalayas, in order to make the voice live broadcast business bigger, labor costs, anchor sharing and other expenses will rise, and whether they are willing to invest in this regard will be a big test.

To some extent, pan-entertainment live broadcasting has pulled the Himalayas towards broader competition, such as Douyin and Kuaishou. In terms of audio business, Himalaya is also facing the impact of giants, such as tomato listening, lazy people listening to books, etc.

For Himalayas, the good news is that the audio market has finally been verified by the market, and the worry is that more and more people are coming to "grab the cake".