A song can cost hundreds of thousands at most, but online music may still not be a good business.
Recently, the music app on the Xinhua News Agency named the market to induce repeated consumption. After the same user purchases a digital music piece, the page shows that the piece can still be purchased multiple times. As for the upper limit of the number of music works purchased, different platforms vary.
For example, some netizens found that on Apple mobile phones, NetEase Cloud Music can buy up to 433 copies of the same digital music album, Kugou up to 9,999 copies, QQ Music has almost no cap, and the maximum amount can reach more than 2.6 LeCoins (virtual currency, 1 Le currency = 0.1 yuan). The limit on the number of Android phones is different. For example, NetEase Cloud Music has changed from 433 to almost unlimited.
It’s an exaggeration that the download frequency of some music works by the same user varies from a dozen times to hundreds of thousands of times. This means that if a digital music work is worth two yuan, some users will spend dozens of them on a piece of digital music. Ten thousand yuan.
In other words, fans’ desire to collect films, tapes, and CDs in the past has become a “topping list” and “topping list” for fans in the mobile Internet era.
Charges for digital music, safeguards the copyright of music, allows music creators to earn money, and protects their vital interests. But on the other hand, even if the digital music platform catches individual fanatical fan groups repeatedly “sweeping the wool” to induce users to repeat purchases, then, the digital music platform must be very profitable, right? In fact, the opposite is true.
List of Tencent Music Group’s Products|Tencent How do domestic streaming music platforms make money?
Take Tencent Music, the largest domestic music platform, as an example.
From 2017 to 2020, the net profit of Tencent Music attributable to the owners of the parent company is positive, which are 1.326 billion yuan (RMB, the same below), 1.833 billion, 3.982 billion, and 4.155 billion. At first glance, the revenue and profits are considerable, but a careful disassembly will reveal that this is not the case.
Tencent Music’s revenue comes from three major businesses, online music services, mainly user-paid subscription and advertising businesses; social entertainment services and other businesses. Among them, social entertainment services and other business revenues accounted for 70.8%, 71.9%, and 67.9% of total revenue in the three years from 2018 to 2020.
In other words, the bulk of Tencent Music’s revenue comes from social entertainment services and other businesses. Tencent Music’s financial report explains the business that it mainly sells virtual gifts and premium membership fees (voice singing tutorials, different application themes or high-quality accompaniment, recording and other value-added services). This income mainly comes from the National K song application, not from Kugou Live and Kuwo Juxing.
User payment and advertising business account for a relatively small proportion. In Q4 2020, user payment subscription revenue and advertising business revenue will be almost five-fifths. In addition, in the past three years, Douyin and Kuaishou short video platforms have grabbed the attention of users, and online music users have entered the stage of stock competition. The number of active users and the growth rate have declined, which has affected online music platforms accordingly. Revenue and gross profit growth rate.
Looking back at the development history of Tencent Music, Apple launched the iTunes music store in 2003. Almost at the same time, Tencent launched the QQ online music service. In the following years, Kuwo, Kugou, Xiami, Baidu MP3, and NetEase Cloud Music appeared on the market. In 2016, QQ Music merged with Kuwo and Kugou to form Tencent Music Group (TME).
At the same time, Tencent Music has reached an exclusive distribution partner with major major record companies in China and the world, becoming the largest digital music distributor in China. Other streaming media platforms, such as playing songs from certain record companies, need to be authorized by Tencent Music. Tencent Music also reversely acquired some shares of record companies Universal Music and Warner Music.
In 2018, under the promotion of the National Copyright Administration, Tencent Music and NetEase Cloud Music reached a copyright cooperation; in 2020, music copyright owners no longer “choose one of two”; in 2021, Xiami officially ceased serving. The era of relying on copyright “exclusive segregation” of the online music market has passed. There are two remaining oligarchs in the domestic online music market, Tencent Music and NetEase Cloud Music.
Compared with Tencent Music, NetEase Cloud Music does not disclose specific revenue separately, but classifies it as the overall disclosure of NetEase Innovation and other businesses. According to Ding Lei, NetEase Cloud Music revenue mainly comes from membership, advertising, and live broadcast value-added services. In particular, membership fees are the most important development direction.
“NetEase Cloud Music does not make money. NetEase Cloud Music members are basically half sold and half free. If you purchase Taobao 88VIP members, you can get a NetEase Cloud Music member. In general, the NetEase Cloud Music membership mechanism is relatively loose. In addition, NetEase Cloud Music in the first two years I have always wanted to do social networking, but the effect is mediocre.” An online music industry person told Geek Park.
Therefore, it is difficult to have a considerable profit scale only relying on user subscriptions. Listening to music doesn’t make money, it’s the karaoke singing business that makes money.
This is the case for domestic online music platforms. Will the business models of foreign platforms be better? After all, from Napster, Apple’s iTunes Store to Pandora, etc., the starting point for the evolution of foreign streaming music, users have been educated in digital payment earlier, and foreign users have higher willingness to pay and the rate of payment.
Unfortunately, the answer is no. Overseas online music platforms are not yet profitable, and they are trying to make money through other businesses.
The moon in foreign countries is not round
In February 2021, music streaming giant Spotify released its 2020 financial report. As of the end of 2020, Spotify had 345 million monthly active users, an increase of 27% over the same period last year. The main source of revenue for the platform was paid users, with the number of 155 million, an increase over the same period twenty four%.
Although the total user base and the number of paying users are growing, Spotify’s net loss has expanded from US$218 million in 2019 to US$698 million. Due to the increase in operating expenses, Spotify’s net loss was three times that of the same period last year, and it is expected that Spotify will continue to lose money in 2021. Spotify, the world’s largest music streaming platform, has not escaped the quagmire of losses.
Similar to Apple Music, Apple Music has a larger user base in the Asia Pacific, Middle East, and Africa than Spotify, but Apple Music’s contribution to Apple’s overall revenue is limited. Apple Music is more importantly positioned as an important part of Apple’s software and hardware integration and service ecosystem. One ring.
Relevant data shows that, whether it is Spotify or Apple Music, about 70% of its revenue is used to pay for the use of music copyright owners and original singers.
In particular, compared with the domestic online music platform business model and revenue sources, Spotify is more unitary and has different directions.
Spotify’s revenue sources mainly rely on user payments and advertising. In addition, Spotify is extremely interested in podcasts and audiobooks. Spotify has invested heavily in podcasts and purchased Megaphone, an American blogging tool platform, for approximately $235 million. It also reached a cooperation with blog celebrities.
On the other hand, domestic online music platforms have moved towards socialization, community-based operations, and recommended algorithms, focusing not only on listening to songs, but also on scene elements such as singing, performing, and socializing. Therefore, user subscription fees are only auxiliary revenue, and the main revenue segment is functional monetization transactions generated in social and community scenarios.
For example, Quanmin K Song has always been the cash cow business of Tencent Music, and the age range of Quanmin K Song users is relatively large, with young users as well as middle-aged and elderly users. By opening up the WeChat and QQ social relationship chains, users will reward transactions when participating in live broadcasts and short video interactions.
Of course, whether it is domestic or foreign, the main cost of online music platforms is music copyright.
In 2019, Spotify bypassed some record companies and digital music distributors and directly signed cooperation agreements with musicians to reduce distribution costs. NetEase Cloud Music explores the resources of independent musicians and uses content differentiation to build a music platform ecology. Tencent relies on its advantage in music copyright to reduce costs through straight-line amortization.
Although the copyright of music is much cheaper than the copyright of the video and film industry, relevant figures show that 92% to 95% of the expenditures of music streaming platforms go to only about 2.5% of music creators. The exclusivity and head effect of music make online music platforms It is difficult to get rid of homogeneity between.
The online music platform has gone through elimination and shuffling, and has entered the stage of integration. The vast majority of musicians cannot make a living through online music platforms. Similarly, online music platforms do not make money under operating costs and other expenditures, and music platforms all over the world do not make money. They have to make extra money.
Editor in charge: Jing Yu
Image source: Tencent, Pixabay
This article was originally published by GeekPark, please add geekparker on WeChat
You must log in to post a comment.