Some interesting news from China: The region’s two largest music streaming providers, Tencent Music Entertainment (TME) and NetEase Cloud Music (NCM), saw significant growth in paid online music users in the first three months of 2022.
That is “Paying Online Music Users” rather than ‘subscribers’ because this specifically formulated key figure – particularly relevant for TME – is adopted by both companies in their financial data.
- TME – Owner of QQ music, Kugou musicand Kuwo music – offers music streaming subscriptions in addition to paid downloads;
- NCMmeanwhile, offers two tiers of paid streaming subscriptions: (i) A standard tier at 8 RMB (approx. 1.26 USD) per month that limited offline downloads; and (ii) a “Vinyl VIP” tier, at 18 RMB ($2.84) per month. This actually has nothing to do with vinyl (!), but offers streaming music in “vinyl quality” and unlimited offline “downloads”.
According to newly released financial results analyzed by MBW, Tencent Music added 4.0 million paying music users quarterly in the first quarter of 2022 and added 19.3 million compared to the same quarter of the previous year.
TME’s official user base for “Online Paid Music” is now at 80.2 million Customers.
NetEase Cloud Music, meanwhile, added an impressive one 7.8 million Paying online music users to its platform in the first quarter of 2022 quarter-on-quarter, and 12.4 million compared to the same quarter of the previous year.
NCM’s official user base for “Paid Online Music” is now at 36.7 million Customers.
Where these numbers become particularly intriguing is when we compare them Spotify’s Performance in the same period (Q1 2022).
Remember, Spotify owns a minority stake in TME, and TME — along with Tencent Holdings — owns a minority stake in Spotify.
Also Spotify not work as a service in China.
As MBW has already reported, Spotify has not added anything 2 million paying customers for its service in the first quarter of 2022, although that number was suppressed by the fact that SPOT stopped billing 1.5 million Subscribers in Russia during the quarter.
Still, this result means that both Tencent Music and NetEase Cloud Music have been added more paying online music users in Q1 2022 (+4 million and +7.8 million) as Spotify (+2 million).
(See chart below. As NetEase Cloud Music only went public in Hong Kong in the fourth quarter of last year, not all relevant figures are available at NCM for each quarter referenced.)
As of the end of March 2022, Tencent Music and NetEase Cloud Music counted together 116.9 million paying online music customers in China alone.
Spotify, on the other hand, was one of them 182 million Premium subscribers outside of China with estimated 68% of these submarines are located in either North America or Europe.
The amount is paid However, the competition between SPOT’s “online music users” and its competitors in China is not as close.
- Corresponding Spotify’s First quarter 2022 results driven by premium subscription business €2.379 billion (US$2.67 billion) up in the quarter 23% YoY;
- Spotify is the average paying premium customer (ARPU) this quarter €4.38 ($4.91) per month;
- Corresponding Tencent music recent results, its “online music services” sales fell 4.8% YoY in Q1 to $413 million. Within that number some $314 million came straight out of streaming subscriptions, up 17.8% YoY;
- Tencent Music’s average monthly revenue per paying music user (ARPPMU) for the quarter was 8.3 RMB (approx. 1.31 USD);
- Corresponding NetEase Cloud Music latest results, its “online music services” generated RMB884.8 million (US$140 million) in Q1, up 16.5% YoY. Inside this figure RMB710.2 million (US$112 million) came specifically from a music streaming subscription;
- The average NetEase Cloud Music streaming subscriber paid 6.4RMB (US$1.01) per month in Q1, says NetEase.
Another interesting nugget from NetEase Cloud Music’s Q1 results announcement: The company informed its investors that regarding its recent record label licensing deals, “[We] are excited about favorable industry trends with cheaper copyright fees and cost structures giving us the flexibility to optimize our content investments with a more disciplined approach.”
Below, we dive deeper into Tencent Music’s Q1 results (announced last week) and NetEase’s Q1 results (announced today, May 24).
Tencent music entertainment
Tencent Music Entertainment saw declining quarterly earnings 15.1% YoY to RMB6.64 billion (US$1.05 billion) in the first quarter of 2022.
However, there was better news for the music business here than the percentage decline would initially suggest.
TME is divided into two areas: “Online Music Services” (QQ Music, Kugou and Kuwo) plus “social entertainment services” (mainly for live streaming and online karaoke).
In the first quarter of 2022, TME a 20.6% YoY lost sales too 4.03 billion RMB (USD $635 million).
As previously mentioned, the company’s online music services division saw a smaller decline 4.8% YoY to RMB2.62 billion (US$413 million).
TME’s total monthly active users (MAU) for its three music streaming services was 604 million end of March 2022.
That was actually a larger audience than Spotify’s entire global MAUs (422m) at the same time – but Tencent’s MAU figure (see above) was lower 1.8% YoY.
Part of the reason for this drop was TME’s strategic focus on upselling its existing users into paid music subscriptions. (TME paid music subscription revenue increased 17.8% YoY to USD $314 million in the quarter.)
Earnings from music subscriptions (USD $314 million) invented 76.0% of total online music revenue from TME (USD $413 million) in the first quarter of 2022.
This percentage was higher than the corresponding number (61.4%) in the same quarter of 2021.
NetEase Cloud Music
NetEase Cloud Music sales soared 38.6% YoY in the 1st quarter of 2022, to 2.1 billion RMB (approx. 331 million USD).
Like TME, NCM operates two separate businesses: “Online Music Services” and “social entertainment services”.
- Sales of online music services increased 16.5% YoY to RMB884.8 million (US$140 million) for the three months ended March 2022. NCM said this growth was “primarily due to significant growth in revenue from membership subscription sales”;
- NCM’s revenue from music streaming subscription sales soared RMB710.2 million (US$112 million) in the 1st quarter of 2022, from from 514.4 million RMB in the prior-year quarter;
- This was a direct result of NCM’s monthly paying users of online music services expanding 24.3 million in the 1st quarter of 2021 to 36.7 million in the 1st quarter of 2022.
NCM’s “social entertainment services” (and other) revenue soared 61.6% YoY to 731.7 million RMB ($115 million) in the district.
Overall, the monthly active users (MAUs) of NCM’s online music services were included 181.7 million in the first quarter of 2022, slightly down from 183.1 million in the prior-year quarter.
That meant NCM’s pay Online music users (36.7m) taken into account 20.2% of all its online music MAUs in the quarter.
This percentage increased from 13.4% in the corresponding quarter of 2021.
NetEase Cloud Music informed investors that its first-quarter results were boosted by the performance of its user-generated content (UGC) efforts during the quarter.
The company said in a media release: “During the first quarter of 2022, we continued to nurture our music-centric community and UGC ecosystem through constant product improvements across multiple content formats.
“Meanwhile, we have continued to develop several support tools to facilitate further UGC creation on our platform, which will also enhance our vibrant UGC-centric community and user engagement.
“Our UGC ecosystem is unparalleled in the market, backed by our strong and supportive community culture. By the end of Q1 2022, we had accumulated 3.25 billion UGC playlists on our platform.”
Tencent Music and NetEase Cloud Music: Direct collaborations with independent artists
Due to relatively recent regulation in the Chinese market, one of Tencent Music’s previous advantages in the territory — exclusive sub-licensing of major record label content to NetEase — is no longer allowed.
As a result, both TME and NetEase Cloud Music are in a race to attract independent artists to their respective suites of tools and content.
In its Q1 announcement last week, TME referenced its own indie artist platform – Tencent Musician platform – which was allegedly paid out 200 million yuan to musicians in the last 12 months.
“By the end of March 2022, we were serving more than 450,000 registered independent artists on our platformwhich represents an approximately 70% YoY Growth.”
NetEase Cloud Music
In addition, it was said that the Tencent Musician Platform has seen more than 100,000 Creator will join its ranks in the first quarter of 2022. These creators will benefit from perks, including a new online music production service involving “more than 50 well-known industry professionals.”
NetEase Cloud Music’s corresponding program is now over 450,000 artists Registered.
NCM said in its Q1 2022 financial announcement, “Alongside music labels, we have become a natural incubator for music talent looking for an audience empowered by our vast community and large cohort of young users with diverse and personalized tastes.
“By the end of March 2022, we were serving more than 450,000 registered independent artists on our platformwhich represents an approximately 70% YoY Growth.
“Meanwhile, in our content library are about 2.0 million Music tracks were from our registered independent artists.”
All currency conversions from RMB to USD in this analysis are at Tencent Music Entertainment’s current quarterly ratemusic business worldwide
