Year-end inventory| online music "one super and one strong" pattern is stable, copyright anti-monopoly reshapes the market, and platform defense is difficult

In 2021, the online music industry can be described as a high-profile event, with three hot events running through the whole year. In February, Shrimp Music announced its closure; in July, the national anti-monopoly hammer smashed into Tencent Music, demanding that it cancel the exclusive copyright of online music; in December, NetEase Cloud Music went public in Hong Kong.

Since then, the online music industry, led by Tencent Music and NetEase Cloud Music, has become more and more stable. Market participants believe that whether it is the entry of other Internet giants or the "resurrection" of Shrimp Music, it is only in the existing market pattern, bringing more fierce competition to the industry.

"With the disappearance of the biggest constraint on the content side of the music industry, the expansion of the business side will undoubtedly become an inevitable direction in the case of content differentiation or will become smaller and smaller on various platforms." In the future, each platform will usher in rapid development, or more to explore new business lines, will become the biggest attraction. The above-mentioned market participant said.

Antitrust of music copyright is reshaping the online music market

As the domestic antitrust wave intensifies, the antitrust hammer has also hit the online music industry. In July 2021, the State Administration for Market Regulation ordered Tencent to remove the exclusive copyright of online music and impose a fine of 500,000 yuan.

It is understood that Tencent Music includes four products: QQ Music, Kugou Music, Kuwo Music, and National K Song, because it is backed by the Internet giant Tencent, and has been spending huge sums of money to purchase music copyrights to seize users.

Before the listing, Tencent Music's copyright library accounted for 90% of China's total music library, and at the same time, it gathered the exclusive rights of universal, Warner and Sony global record companies and high-quality music copyright resources such as YG Entertainment and Jewell Music.

With the advantages of product matrix and exclusive music copyright, Tencent Music quickly became the industry leader and successfully listed. According to the data, Tencent Music's market share was once the highest at more than 80%.

According to the State Administration for Market Regulation, this gives Tencent the ability to induce upstream copyright owners to reach more exclusive copyright agreements with them, or to require them to be given trading conditions that are superior to competitors, or to raise market entry barriers through copyright payment models such as paying high advances, which may have or may have the effect of eliminating or restricting competition in the relevant markets.

In accordance with the Anti-Monopoly Law and the Interim Provisions on the Review of Concentration of Undertakings, the State Administration for Market Regulation (SAMR) made an administrative penalty decision in accordance with the law, ordering Tencent and its affiliates to take measures to restore the state of market competition by revoking exclusive music copyrights within 30 days, stopping the payment of copyright fees such as high advance payments, and not requiring upstream copyright owners to give them conditions that are superior to competitors without legitimate reasons.

The landing of the anti-monopoly penalty of the State Administration of Market Regulation means the end of the era of Exclusive Copyright of Tencent Music.

In the eyes of industry insiders, after this incident, the competition in the online music industry will intensify. Tencent Music's solid traffic disk, which was originally formed by copyright advantages, needs to spend a lot of energy to maintain. NetEase Cloud Music, Douyin, and Kuaishou are eyeing the tiger, making Tencent Music need to increase the marketing expenditure of "buying volume" in the future.

"The end of the era of Tencent Music's exclusive copyright is a good thing for the industry, and the double burden reduction of the platform and the industry has allowed the domestic music industry to cross the bottleneck of development and enter a new stage of development." An analyst, who did not want to be named, noted.

The suspension of Shrimp Music and the listing of NetEase Cloud Music have made the pattern of "one super and one strong" more and more stable

With the official closure of Shrimp Music in February 2021, only Tencent Music and NetEase Cloud Music are left on the domestic leading online music platform. In the face of Tencent Music, the "fierce enemy" that has been listed, NetEase Cloud Music has also put the listing plan on the agenda.

In May 2021, NetEase announced that it intends to spin off Cloud Village (the main company of Netizen Cloud) to be listed independently on the main board of the Hong Kong Stock Exchange; in August, the listing process of NetEase Cloud pressed the pause button due to market environment factors such as national anti-monopoly, until December, it was officially listed on the Hong Kong Stock Exchange at a price of 205 Hong Kong dollars per share.

Since then, the "one super and one strong" pattern of the online music industry has become more and more stable. However, whether it is performance or user scale, NetEase Cloud Music is far from Tencent Music.

According to the prospectus released by NetEase Cloud, from 2018 to 2020, its revenue was 1.1 billion yuan, 2.3 billion yuan and 4.9 billion yuan, respectively; net losses were 2 billion yuan, 2 billion yuan and 3 billion yuan, respectively. In three years, NetEase Cloud had revenue of 8.3 billion yuan and a loss of 7 billion yuan.

Compared with Tencent Music, in the same period, Tencent Music's revenue was 19 billion yuan, 25.43 billion yuan and 29.15 billion yuan, and the net profit was 1.83 billion, 3.98 billion and 4.155 billion yuan, respectively. In three years, Tencent Music's revenue exceeded 73.5 billion yuan and its net profit was nearly 10 billion yuan.

In terms of the number of users, as of the third quarter of 2021, Tencent Music Mobile MAU (monthly active users) was 636 million, while NetEase Cloud Music's MAU was only 184 million, less than one-third of the former.

However, although NetEase Cloud Music is at a disadvantage in terms of performance and user scale, it has an advantage in original music and community operation.

As of the first half of 2021, netease cloud music has more than 300,000 independent musicians, ranking first in the industry; the average daily listening time of daily active listening users is 76.9 minutes, which is higher than the 70-minute daily active use time of Tencent Music in the same period.

Market participants believe that with the successful listing of NetEase Cloud Music, it will also make the market pattern of "one super and one strong" in the online music industry very likely to continue for a long time in the future. Whether it is the entry of other Internet giants or the "resurrection" of Shrimp Music, it is only in the existing market pattern, bringing more fierce competition to the industry.

The post-copyright era: music platforms are easy to beat and difficult to defend

"For the online music industry, the cancellation of exclusive copyright does not mean that many of the obstacles surrounding music copyright in the past can be solved in an instant, and the copyright gap between platforms still needs some time to be smoothed." said the above-mentioned person.

The reason for this is that when each platform increases copyright content, in addition to being limited by the wishes of the copyright owner, it often has a corresponding focus on its own strategy of purchasing copyright to ensure that it is in line with the characteristics of the platform and the differentiation of the content side. And it is not uncommon for platforms to have money and cannot buy music copyrights.

Music copyright experts once told reporters that in the future competition between online music platforms, in addition to the difference in product design caused by different user experiences, external content has no difference for users, only by going deep upstream and creating self-made content can stand out. The most direct way is to sign an independent musician + self-built label company.

In this regard, it happens to be the focus of the layout of NetEase Cloud Music, and many company executives, including NetEase CEO Ding Lei, have repeatedly emphasized its importance. In recent years, NetEase Cloud has continued to increase its original content by cultivating original musicians, signing exclusive musicians, and cooperating with many independent labels.

In the previous financial report, Tencent Music also highlighted the expansion of self-made, co-creation and introduction of music content, including strengthening cooperation with musicians, core partners in the music industry and music labels, deepening the vertical music field, and introducing diversified and high-quality music content.

In addition to the competition between various platforms in the industry, external impacts cannot be ignored. Short video platforms Douyin and Kuaishou are testing the waters of music players, and audio platforms such as Himalaya and Lychee have also joined the user scramble, which makes the entire online music industry face many challenges.

At the same time, the demographic dividend of the online music industry has peaked, and it is no longer in the stage of large-scale user growth, entering the era of stock competition, and each platform needs to use new growth points to stimulate user payment and retention.

"With the disappearance of the biggest constraint on the content side of the music industry, the expansion of the business side will undoubtedly become an inevitable direction in the case of content differentiation or will become smaller and smaller on various platforms." In the future, each platform will usher in rapid development, or more to explore new business lines, will become the biggest attraction. The market participant said.