Although the development of the online audio industry is still in the development stage, there are not many players in the domestic audio industry track, often mentioned are lychee, Himalaya, lazy people listening to books, etc. Behind these players, you can also see the figure of Internet giants such as Tencent and NetEase Cloud. Audio platforms have to deal with competitive pressures from all sides and prove their profitability to secondary market investors.
Source | Manager Media's Manager magazine
Reporter / Shi Yi
The rise of the audio industry has liberated the hands and eyes of product experiencers and brought a huge "sound" meaning.
After 2017, thanks to the popularity of knowledge payment and the user's demand for audiobooks, radio dramas and other forms of cultural and entertainment content, the online audio market has burst into vitality. According to the China Business Industry Research Institute, the revenue of China's online audio market increased from 2.5 billion yuan in 2017 to 13.1 billion yuan in 2020, with a compound annual growth rate of 73.69%, and is expected to reach 34.9 billion yuan in 2022. The penetration rate of online audio user activity across the network has continued to rise since the beginning of 2021, and the monthly active number of online audio markets in China from January to November 2021 exceeded 800 million (1).
Undoubtedly this is a thriving market, but is there a "money scene" in the audio industry? How did it develop to the present?
The marketization process of the audio industry
Let's take a look at what exactly is consumer content in the audio industry?
Online audio refers to all kinds of audio content that users disseminate and listen to through the network, excluding digital music, and its forms are rich and diverse, including audiobooks, knowledge sharing, podcasts, audio live entertainment activities, etc. Among them, audiobooks occupy the main business section of each audio platform, and the platform adapts existing publications into audio books in audio forms such as audio books and radio dramas through cooperation with third-party IP partners who own the copyright of authors or publishers; knowledge sharing business cooperates with well-known experts in various fields to open free or paid public courses; podcasts and audio live broadcasts cover a wider range of audio content types, including commercial, artistic, educational, etc., of which the popular channels are live music and dubbing performances.
Audio content can be produced by professional teams, or users can produce and upload, which is what we often call UGC (User Generated Content) and PCC (Prodessional Generated Content) two categories, on the UGC platform, users are both the audience of the content and the producer of the content. The PGC platform invests capital in producing high-quality content to acquire users, and then pays for itself in the form of advertising and content payment.
China's online audio industry started in 1997, but has been tepid, which is related to the backwardness of the entire hardware equipment and Internet environment. It was not until 2011, when the mobile Internet became popular, that online audio really began to develop in the market. It is also from this stage that audio platforms such as Himalaya and Dragonfly FM have been continuously launched, and the prototype of the mainland long audio market has begun to be built. After 2017, Internet technology and smart phone devices have further developed, the audio industry has gained attention, and new formats such as live broadcasting and knowledge payment have emerged. Since 2019, it is a booming period for the development of the domestic audio market, during which the competition between platforms has intensified, and the two-eight effect has been highlighted.
The process of marketization is the result of the superposition of multiple factors. Technically, the technological changes brought about by Internet technologies such as 5G and big data are acted on the production, dissemination and output of the audio industry chain at all stages; in the economic environment, per capita disposable income increases, and users' willingness to pay for online works is strengthened; in the hardware playback environment, the rise in the number of private cars and the popularity of wireless headphones have further stimulated users' demand for audio entertainment; in terms of policy, the online audio industry is highly valued by governments at all levels and the key support of national industrial policies. The state has successively issued policies such as the Guiding Opinions on Strengthening the Standardized Management of Online Live Broadcasting and the Interim Provisions on the Administration of Internet Culture, which provide a good production and operation environment for relevant enterprises.
However, the above are all external factors, and we pay attention to the strong accompaniment and high penetration characteristics of audio itself that are obviously different from other media forms, and this unique attribute has a high degree of compatibility with the social life form after accelerated change. On the one hand, the number of people living alone continues to rise, the "lonely economy" came into being, and the young people gathered in first- and second-tier cities are subject to economic conditions and geographical location, and show "apathetic" social performance in fast-paced urban life. In the long commute period, "no one loves the headphones" has become the real face of many people on public transportation. On the other hand, in the era of mobile Internet, the fragmented characteristics of media use habits are perfectly matched with the flexibility characteristics of mobile audio, and audio, as the only closed-screen media in the "rich media era", liberates both hands and eyes. In addition to the above commuting scenes, driving, housework, sports, bedtime, etc. are all audio use scenarios, and cannot be replaced by other media forms in some occasions.
The increasingly hot audio market scale capital attention, industry financing news continues. Is sound really a business that can make money? Take a look at the monetization channels of the audio market. The To C terminal focuses on column subscriptions, membership fees, advertising revenue, social income and derivative peripheral sales on the audio platform; to B-side advertising revenue, operating income, copyright sales, etc.
Combined with the analysis of the industrial chain of the audio industry, the upstream is the content resource, involving the audio book copyright party (including Chinese online, palm reading, reading and listening to books, etc.), the content producer (including personal UGC, PGC team, iFLYTEK dubbing, etc.), technology research and development parties (including iFLYTEK, Yunzhisheng, etc.) three major entities; Platform types cover comprehensive audio platforms (such as Lychee, Himalaya, Dragonfly FM, etc.), social audio platforms (such as TIYA), vertical audio platforms (such as Lazy Listening, Jin Yong), and platform-derived audio content (such as Kugou, NetEase Cloud, Douyu). At present, the more mainstream online audio content distribution channels in the midstream link include mobile application stores, smart home manufacturers, vehicle terminal manufacturers, etc.; the downstream of the industry is advertisers and users, and advertising revenue and user payment are the main profit channels of audio platforms.
Compared with other Internet platforms, the advertisements placed on the audio platform can cover both sight and hearing, with a wide range of coverage, and the development of AI technology has greatly reduced the cost of mobile audio advertising, which is the reason why it is favored by advertisers. In terms of users, subscription membership is the mainstream form of consumption for audio online users, more than 80% of users choose to pay for subscription members, and it is also common to pay for individual content. Mobile audio platforms have a rare group of high-value users in online entertainment platforms.
User portrait analysis shows that the gender ratio of mobile audio platforms is relatively balanced, male users account for 59%, female users account for 41%; at the age level, users aged 24 to 30 account for 46.2%; at the city level, the proportion of users in super-first-tier and first-tier cities is nearly 60%; in terms of spending power, the proportion of people with medium spending power is as high as 64.5%, higher than the average spending power of overall mobile netizens, showing an elite trend. Up to 60.8% of users have paid experience. The average annual expenditure of 50 to 500 yuan of users is 45.10%, and up to 22% of users spend an average of more than 1,000 yuan per year on audio content. In addition to the strong willingness to pay, audio users also present the characteristics of high frequency of audio content use and high user stickiness. More than 80% of users have the habit of listening to audio every week, and more than 70% of users have more than 3 software at the same time (2).
Music and audiobooks are the most favored paid content types of users, and with the popularity of live broadcasting, live tips and products recommended by anchors when watching audio content have also caused some fans to consume.
Platform content ecology is different
With the further escalation of the audio market boom, the pattern differentiation between platforms is also more obvious. The head platform represented by Lychee and Himalayas preemptively built the initial audio content ecology, and continuously promoted the further capitalization and development of the domestic audio market, and the road to commercialization began to be on the right track.
Then the head Internet company settled in the spoon, acquired a small and medium-sized audio platform, and laid out the long audio industry. The industry's waist platform and new entrants continue to exert efforts under the blessing of Internet giants, looking for growth points in new formats of audio content, focusing on the establishment of mature business models. Compared with the pioneers who have explored themselves, the biggest advantage of this part of the platform is to make full use of the resources of the parent platform. This kind of resource is either a rich IP copyright, or a huge traffic, or a community operation with high book viscosity.
On January 17, 2020, Litchi officially landed on nasdaq, becoming the first online audio share in China. In the prospectus, Litchi FM defines it as the largest UGC online audio platform and the largest audio entertainment interactive platform in China. Since its establishment in 2013, Lychee has encouraged users to upload audio content under the slogan of "everyone is the anchor", and its UGC-based content production model has gained a highly sticky user group, which is the biggest advantage of Lychee. However, the success is also UGC, the failure is also UGC, the content quality is uneven, and most of them are free to listen, which directly leads to less than 2% of the revenue from content payment and advertising, and the value of the Litchi FM platform that relies on the influence of the anchor is not large. Then Lychee FM sought a way of transformation, launched the live broadcast function in 2016, opened a "sound lover" dating column, although the sound dating track to find another way, but also once focused on the audio quality of the mainstream audio users pushed farther and farther.
Different from Lychee, the industry leader Himalaya has established a content ecosystem by using the unique "PGC+PUGC+UGC" strategy, achieving all-round coverage of audio content, and its business segment covers audio content, education, live broadcasting, intelligent hardware, new retail and so on. Himalaya's biggest advantage is that it is in the industry first in terms of mobile audio content listening time and total revenue, according to Himalaya prospectus data, it has now occupied more than 60% of the domestic audio market share, which provides sufficient confidence for Himalaya's follow-up development strategy.
Although the content ecology is perfect, the number of users is large. However, Himalaya still faces the dilemma of IPO bumps and unoptimistic earnings, and the company submitted its form to the US Securities and Exchange Commission (SEC) on April 30, 2021, but withdrew its application in September 2021. On September 13 of the same year, Himalaya publicly submitted its form in Hong Kong and sprinted to list on the main board of the Hong Kong Stock Exchange. Himalaya's financing efforts were staggering, with 4 billion yuan of funds led by Primavera Capital in the 2018 Series E financing alone. However, its profitability is still quite unoptimistic, with the three financial years of 2018, 2019 and 2020 and the first half of 2021, Himalaya's operating income of 1.481 billion yuan, 2.698 billion yuan, 4.076 billion yuan and 2.514 billion yuan, and net losses of 3.142 billion yuan, 1.925 billion yuan, 2.882 billion yuan and 6.866 billion yuan, respectively.
Let's look at the wave that Internet companies have stirred up for the audio industry. In April 2020, Tencent Music Release Group (hereinafter referred to as "TME") launched the long audio product "Cool Me Listen", officially entering the online audio industry, and in 2021, "TME" acquired 100% of the equity of "Lazy Listening Book". After Joining TME, Lazy Listening Books will remain independently operational as an important part of its overall long audio strategy. Its advantage is that TME will also fully open its complete ecology and resources to lazy people listening to books, and reading group, which is also a subsidiary of Tencent Entertainment, provides tME with a steady stream of copyright resources.
In September 2020, NetEase Cloud Music announced the launch of a new content section "Sound Theater", which focuses on radio dramas and audio books adapted by young IP, and pioneers the "sound and picture same frequency" mode that can be heard and watched. In September 2020, NetEase officially launched paid commercial radio dramas, such as "Cross-species Blind Date" produced by Photosynthetic Building Blocks Studio, and the well-known IP adaptation radio drama "Jiangdong Shuangbi". The advantage of NetEase Cloud Music's audio development section is that as a diversified community, its own user stickiness is high, and many well-known CVs (Character Voice, that is, character voice actors) have personal NetEase Cloud accounts, and leading music section users to the "Sound Theater" is the current means for NetEase Cloud to promote its online audio business.
At the end of 2020, WeChat launched WeChat Listening Books, based on WeChat reading, pushing free listening to audio novels, books and various audio programs and other services; Kuaishou also launched a podcast product Kuaishou "Kayak", based on short video traffic, aiming at the podcast market; ByteDance's Tomato Novel launched Tomato Listening, making efforts to audiobooks.
In the frequent actions of the entertainment industry giants, we pay attention to the acquisition of Mao'er FM by Bilibili (hereinafter referred to as "B Station") for 1 billion yuan in 2018, which chose to make a distinction in content by relying on the young platform where secondary enthusiasts are concentrated. Cat Ear caters to voice control, two-dimensional enthusiasts, and original fans, and builds a vertical community focusing on ACGN-related content (3). The biggest difference between Cat Ear FM is that it positions its main business section in commercial radio dramas, and it cooperates with well-known dubbing studios such as Zhixing Tianxia and Photosynthetic Building Blocks to record popular IP radio dramas, such as radio dramas "Magic Road Ancestor" and "Will Enter the Wine", etc., and has obtained more than 100 million plays.
It should be noted that Mao'er FM has no advertising sponsors, and the main revenue generation of its platform is user payment. In order to improve user activity and sell peripherals, Mao'er will hold offline meetings from time to time, develop offline theme stores, and sell radio drama peripherals. In 2019, Mao'er held a large-scale "voice actor festival" event, and the price of one ticket almost caught up with the price of the concert.
The road to audio monetization is long and difficult
Although differentiated competition has greatly increased the attention of the audio industry, it has also exposed many industry pain points.
Such as the copyright dispute, Lychee FM once lost the copyright lawsuit for the unauthorized launch of the audio version of "Ordinary World", and compensated the original author Lu Yao's daughter Lu Mingming for economic losses of more than 500,000 yuan. Although the tightening of copyright policy is conducive to the standardized development of the audio industry, it has invisibly squeezed the living space of the UCG section, a large number of resources have been handed over to the commercial formula, and the price of the platform drama has also risen accordingly, dissuading a considerable number of new users and users with low consumption levels. For entertainment platforms, the traffic vitality and economic prospects brought by UCG are huge, and it is difficult for communities without active user participation to truly break the circle.
In addition, the issue of industry profitability has also been criticized. In addition to Himalaya, Lychee's latest financial report data shows that its annual loss in 2021 is 127 million, and Dragonfly FM, which is also the top three in the industry, has also been in the stage of financing everywhere. After the disappearance of the Internet dividend, the high cost of customer acquisition with the help of third-party traffic will also further inhibit the profitability of the platform.
How will online audio be monetized in the future? Here are a few suggestions.
The first is to find new user growth. In recent years, the "silver hair economy" with the elderly as the main audience has shown an upward trend, compared with other online entertainment activities with more complicated operations and certain requirements for vision, audio content such as storytelling, opera, radio and other audio content in the audio content not only meets the accompanying needs of the elderly group, but also retains the entertainment habits of the elderly generation when they are young and carry the radio, and the group has a large space for development.
The second is to improve the business model. Online users have a high degree of enthusiasm for joint operations with brands. Analysys data shows that nearly 60% of users show a strong love for operational activities, and will pay attention to each new activity, 47.2% of users are very interested in brand custom operation activities, 20% of users are willing to browse when they see the promotional page, so the audio platform should invest more energy and attention in operational activities; innovative service business, such as selling in-house developed Internet of Things devices, cultural and creative intellectual property derivatives, customized audition services, E-commerce and audio-to-text publishing. when control of the Product is passed to the User; In addition, the e-commerce model of "sound with goods" may open up the second curve of revenue growth of audio platforms.
The third is to broaden the boundaries of the industry. The entertainment market in the digital economy is actively transforming to explore more possibilities. The audio industry can be integrated with the publishing industry, and the audio resources can be promoted synchronously as an extension of paper books or digital reading; with the integration of the film and television industry, the linkage between large film and television IP and the audio industry can play a warm-up role in the promotion of film and television dramas, gathering and releasing the long tail effect. The high popularity of film and television IP can further feed back audio works, and the film and television industry is more concentrated in the entertainment industry, which can inject vitality into the development of the audio market; integration with the game industry, the use of games adapted into audio stories, compared with other IP forms, game IP has a thicker fan base, can expand the audience radiation range of the audio market, and the game industry's paid conversion rate is higher.
The fourth is to enrich content consumption scenarios. In recent years, the number of smart home-related enterprise registrations has continued to increase. From January to May 2021, the number of smart home-related in-industry/existing enterprises reached 112,000, and in the future, the penetration rate of smart homes will continue to increase, and smart cars will be further popularized. The audio platform can consider increasing the layout of hardware terminals for smart homes, internet of vehicles, and smart wearable devices, and extend the industrial chain.
Overall, although the audio industry seems to be caught in a strange circle of losing money at this stage, there is still a huge market space. How far can this "sound" of the ear go? We will continue to pay attention.
(1) (2) Data source: Analysys
(3) Quadratic element: refers to virtual space such as animation and games. Voice control: Refers to people who like sound. Yuan: that is, the original Tanmei novel; 楊美: 楧美: Is now mostly used to express the love between men and men. ACGN: A merged abbreviation for Animation, Comic, Game, and Novel.