NetEase Cloud Music Flips to Profitable As Active Users Top 200 Million, Earnings Report Shows

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A nighttime shot of Hangzhou, where NetEase Cloud Music is based. Photo Credit: Kana Toyama

Despite experiencing a year-over-year revenue decrease, NetEase Cloud Music (NCM) generated material profit and achieved a close to 14 percent monthly active user (MAU) hike during 2023’s opening half, according to a newly released earnings report.

The Tencent Music competitor NetEase Cloud Music (HKEX: 9899) posted its half-year financials today, pointing to CNY 3.91 billion (currently $537.25 million) in revenue across Q1 and Q2. As mentioned, this sum represents a roughly 8.22 percent year-over-year (YoY) falloff.

Nevertheless, the streaming company touted CNY 293.75 million ($40.36 million) in profit for the newer of the six-month stretches – against a CNY 270.81 million ($37.21 million) loss across Q1 and Q2 of 2022.

“We considerably improved our profitability in the first half of 2023 by increasing in scale of our core online music business, adopting a more optimised copyright cost structure, and improving the revenue-sharing ratio in our live streaming business,” execs said during their company’s corresponding earnings call.

Behind this H1 2023 profit, NetEase Cloud Music identified 206.7 million MAUs (up from 181.9 million), 41.75 million “monthly paying users” (an 11 percent YoY improvement), and heightened average monthly revenue per paid streaming user of CNY 6.8/$0.93 (up from CNY 6.5/$0.89 in H1 2022).

Overall, online music/streaming is said to have delivered CNY 2 billion ($274.81 million) to NCM during 2023’s first and second quarters (up 13.3 percent YoY), when fans could access about 136 million tracks on-platform.

For reference, the aforesaid Tencent Music, which operates QQ, Kugou, and Kuwo in China, disclosed average Q2 2023 revenue per paid streaming user of CNY 9.7/$1.33 for its 99.4 million subscribers. And as a whole, Tencent Music said that it had pulled in CNY 4.25 billion ($583.97 million) from online music during April, May, and June.

However, in keeping with Tencent Music’s indication of declining social entertainment revenue (including livestreaming) for Q2, NCM said that 2023’s initial half had seen its own paid users in the category grow to 1.53 million as average monthly revenue per paid user plummeted to CNY 199.3/$27.38 (down almost 40 percent YoY).

Consequently, NetEase Cloud Music’s total social entertainment revenue fell from CNY 2.5 billion ($343.51 million) to CNY 1.9 billion ($261.07 million) during the six-month period, per higher-ups. Elsewhere in the lengthy earnings report and call (an English-language transcript of which was published), NCM took the opportunity to draw attention to its efforts to attract and support certain acts.

Some 646,000 “registered independent artists,” with a cumulative 2.8 million tracks to their credit, are said to have been part of the streaming platform as of June 30th. A “musicians’ support project” called Project Cloud Ladder, the company elaborated, continues to provide “financial incentives that support independent musicians and high-quality original content.”

Finally, amid an ongoing industry focus on more effectively monetizing superfans, NetEase Cloud Music also touched upon the perceived long-term potential of the “Comment Square” feature that it launched during H1. Billed as “a hub where users can browse and explore song comments,” the offering affords both musicians and fans the chance “to express their emotions and interact with each other,” NCM relayed.