On August 24, NetEase Cloud Music disclosed the 2023 H1 results announcement. According to the financial report, NetEase Cloud Music's net income in the first half of 2023 was 3.91 billion yuan, and the adjusted net profit was 332 million yuan, and both operating profit and adjusted net profit were positive for the first time. In the first half of 2023, NetEase Cloud Music continued to improve its music-centric monetization capabilities and effective profit margins, benefiting from significant growth in subscription members, as well as optimization of operational efficiency and cost structure, and gross profit margin soared to 24.7% in the first half of 2023, compared to 12.6% in the same period of 2022.
In the first half of the year, monthly active users grew steadily to 206.7 million, and the number of users and paid income increased. Despite the slowdown in industry growth, the number of monthly active users of NetEase Cloud Music online music service still grew steadily to 206.7 million in the first half of 2023, a year-on-year increase of 13.7%. In the first half of 2023, the ratio of daily active users to monthly active users remained stable at more than 30%, and the stickiness of platform users continued to remain at a high level. The number of monthly paying users of online music services reached 41.75 million, an increase of 11% year-on-year. Thanks to the expansion of membership scale and the growth of revenue per paying user, membership subscription revenue increased by 16.7% in the first half of the year, and the monthly revenue per paying user of online music services increased to 6.8 yuan.
Profitability continued to improve, with gross margin increasing to 24.7% in the first half of the year and adjusted net profit of 332 million yuan. In the first half of 2023, the revenue of online music services reached 2.021 billion yuan, a year-on-year increase of 13.3%; Revenue from social entertainment services and other services increased to RMB1.89 billion, and the number of monthly paying users of social entertainment services increased to 1.5 million. Profitability improved significantly in the first half of 2023, as gross margin soared from 12.6% in the first half of 2022 to 24.7% in the first half of 2023 thanks to the expansion of platform scale, cost optimization and revenue share adjustment. In the first half of 2023, it recorded an adjusted net profit of RMB332 million, compared to a loss of RMB217 million in the same period last year.
Strengthen the music-oriented product experience and improve the ability to monetize music-centric. In the first half of 2023, NetEase Cloud Music continued to strengthen its music-oriented content products to improve its music-centric monetization capabilities and profit margins. Among them, the scale of online music subscription users and monthly revenue per user of online music increased in the first half of the year. In order to improve the core music user experience and enhance profitability, the platform adjusted the operation strategy of social entertainment business, including reducing the exposure of some live broadcast functions on the site, reducing the revenue sharing ratio of anchors and guilds, and strengthening internal risk control.
Copyright and originality have grown together, and the multi-category music ecology has further prospered. In 2023, NetEase Cloud Music has established in-depth cooperation with a number of well-known label companies and head artists, including leading Chinese-language labels such as Believe Music and Yu Ding Ito, DREAMUS represented by mythology, and well-known Korean labels such as JTBC with a huge OST song library, popular music variety show copyrights such as "Endless Treasure Island Season", "Chinese Rap Peak Showdown 2023", "The Voice of God Season 4", "Drama Beautiful Songs" and "Summer of the Band 3".
In the first half of 2023, NetEase Cloud Music continued to support excellent original music, and self-made songs were frequently released, with significant advantages in youth and localization. The platform's self-made songs "Jingwei" and "To the Clouds" have exploded on the Internet many times and have been widely praised. As of the first half of 2023, NetEase Cloud Music's content library contains 136 million music tracks, including music from well-known labels and original musicians. By June 2023, the number of original musicians on the platform exceeded 646,000, and a total of about 2.8 million music tracks were created. Through the continuous development and support of advantageous music categories, NetEase Cloud Music continues to increase its user appeal in pop, rap, folk, K-POP and other categories.
Launched a series of creative efficiency tools, broadened the whole process of content co-creation, and explored the new generation of human-computer co-creation of music. NetEase Cloud Music has launched a series of music creation efficiency auxiliary tools, actively exploring the application of cutting-edge technology in the music field, covering the whole process of musicians' creation, such as inspiration charging station, BEATSOUL, NetEase Tianyin, NetEase Cloud Music· X Studio, etc. Among them, in June, the AI singer music creation tool "NetEase Cloud Music · X Studio", a virtual singer label WOWAIDO! The first batch of 12 members debuted, all of whom were launched on X Studio, exploring a new generation of man-machine co-creation of musical works with NetEase musicians.
Explore diversified music consumption scenarios, improve content distribution efficiency, and deepen copyright value. Cooperate with NetEase series games such as "Fantasy Westward Journey" and "Egg Boy Party" to expand diversified music consumption scenarios. Its copyright distribution platform, Cloud Village Exchange, distributed more than 1 million songs in the first half of 2023. Recently, the platform launched the intelligent song recommendation and explanation function "Private DJ". Subsequently, NetEase Cloud Music continued to improve the efficiency of song distribution on the platform, help the dissemination of high-quality works, and increase the value of music copyright.
The results for the first half of 2023 show that NetEase Cloud Music continues to maintain healthy growth and profitability continues to improve. Recently, a number of securities companies such as CMBI and Guosen Securities have given cloud music a buy rating, and CMBI Research Report pointed out that the focus of cloud music has shifted from revenue growth to sustainable profit growth. In 2023, the NetEase cloud music content ecology will further prosper, and the profitability of the platform will steadily increase, which will also promote the continuous positive cycle of the cloud village ecology.