QQ Music and NetEase Cloud Music are actually the same, taking advantage of users

Xiami Music failed to survive the spring of online music industry's music library interconnection, which made tens of millions of Xiami Music users heartbroken. What would have happened if Xiami Music had continued to persist until now? No one knows, but when it announced its closure, I realized that Xiami Music had so many fans. Xiami Music had accompanied many people's youth.

The departure of Xiami Music means that the domestic online music market will only have two major competitors: Tencent Music (which owns QQ Music, Kugou Music, and Kuwo Music) and NetEase Cloud Music.

In the past, Tencent Music and NetEase Cloud Music have fought many battles, for example, competing for digital music copyrights, users, and markets. The two sides have sued each other several times. However, after the release of the rules for the mutual exchange of digital music copyrights, the two sides entered a period of cessation, and it is difficult for the outside world to see any fierce competition between the two.

Similar situations are gradually emerging in the Internet industry. For example, iQiyi, Tencent Video, and Youku in the video industry no longer compete with each other for the extremely expensive exclusive film and television copyright resources. In the mobile payment industry, WeChat Pay and Alipay rarely hold red envelope grabbing activities at the same time. In the live broadcast industry, Inke, Huajiao, Momo, etc. are no longer scrambling for anchor resources. The internal competition between platforms is becoming increasingly rare in the Internet industry. Instead, companies are looking for new ways out in the context of reducing costs and increasing efficiency.

Users' ideas are relatively simple. For example, on some question-and-answer websites, the topic "Which is better, QQ Music or NetEase Cloud Music?" is very popular. At the to C level, users are more concerned about content related to their own food, drink, and entertainment, such as video websites, online music, and online literature.

In fact, the question of "who is better" is never absolute. In terms of playlists, NetEase Cloud Music has an obvious advantage, but when it comes to copyright, NetEase Cloud Music immediately becomes timid. Although there is a copyright exchange clause, NetEase Cloud Music does not have the copyright of top-quality singers.

According to Guo Jing's observations in the Internet circle, there are some new changes in the copyright of top songs. For example, when searching for Jay Chou on NetEase Cloud Music before, the music library was gray. But now the copyright of Jay Chou's music library has been released, but it is limited to some unpopular songs. The copyrights of Jay Chou's albums such as "The Greatest Work", "Mojito", and "Jay Chou's Bedtime Stories" released in recent years are still not available, and the copyrights of Jay Chou's classic old songs such as "Qilixiang", "Nocturne", and "Rice Fragrance" are also not available.

It seems that everyone is strictly abiding by the rule of mutual sharing of 99% of the music libraries. The mutual sharing of music libraries has eliminated the competitive relationship between the two, but Tencent Music and NetEase Cloud Music are now facing a common enemy.

Short videos have a dimensionality-reducing impact on online music

The resurrection of Weishi failed to carry the banner of Tencent in the short video industry, and Tencent had to re-bet on video accounts. Ma Huateng once said at Tencent's online internal employee conference, "The most eye-catching business of WXG (WeChat Business Group) is video accounts, which is basically the hope of the whole audience (the whole company)."

Since then, Tencent has continued to increase its promotion of video accounts. Tencent's 2022 Q1 financial report shows that the usage time of video accounts in the fourth quarter of 2022 was three times that of the same period last year, exceeding the usage time of Moments. Liu Chih-ping further revealed in the conference call that the total user time of video accounts in the fourth quarter reached 1.2 times that of Moments, and the number of videos with more than 100,000 likes more than doubled year-on-year.

For Tencent, facing the powerful Douyin and Kuaishou, they must use short videos to increase user usage time, otherwise, it will be difficult to monetize in the future.

What is unexpected is that as the usage time of Douyin, Kuaishou and Video Account increases, it has invisibly squeezed the usage time of users of other apps, such as online music.

The 51st "Statistical Report on the Development of China's Internet" released by CNNIC shows that in December 2022, the scale of short video users in my country was 1.01 billion, and the usage rate of netizens reached 94.8%, an increase of 8.3% year-on-year. In December 2022, the scale of online music users in my country was only 680 million, and the usage rate of netizens was 64.1%, a year-on-year decrease of 6.2%. Online music is the application with the highest decline among many Internet applications.

Tencent Music's Q4 2022 financial report showed that the mobile MAU (monthly active users) of online music services was 567 million, a year-on-year decrease of 7.8%; the mobile MAU of social entertainment services was 146 million, a year-on-year decrease of 16.6%.

NetEase Cloud Music's 2022 financial report shows that the number of monthly active users of online music services in 2022 was 190 million, a year-on-year increase of 4%. The growth rate of the number of monthly active users of NetEase Cloud Music's online music services hit a new low in recent years.

The dimensionality reduction attack of short videos on online music lies in the fact that they are not products of the same type, but instead they reduce the number of monthly active users of online music by attacking users' attention and usage time. The embarrassing thing is that online music has no way to compete with Douyin, Kuaishou and Video Accounts. Their attacks on Douyin, Kuaishou and Video Accounts are like hitting a ball of cotton, with no place to bear the force.

How to solve the problem of declining monthly active users or slowing growth is the biggest problem facing Tencent Music and NetEase Cloud Music.

Taking advantage of users

The decline in the number of monthly active users will have a direct impact on the revenue of online music platforms.

The financial report shows that Tencent Music's revenue in the fourth quarter of 2022 was 7.425 billion yuan, a year-on-year decrease of 2.4%; the total revenue for the whole year of 2022 was 28.34 billion yuan, a year-on-year decrease of 9.3%. Tencent Music's revenue has declined year-on-year for five consecutive quarters.

NetEase Cloud Music has also encountered a growth ceiling. The financial report shows that in 2022, NetEase Cloud Music achieved revenue of 8.99 billion yuan during the reporting period, an increase of 29% year-on-year, and the growth rate was lower than in previous years; the company lost 220 million yuan in 2022.

The development path of video websites has provided a good development direction for online music platforms. In the past, video websites mainly relied on advertising to make money. At their peak, advertising accounted for 80% of the total revenue of video websites. Nowadays, membership fees are the revenue focus of video websites.

Online music platforms have also learned the tricks of video websites and are trying to squeeze the most out of their users. They must get more users to become paying members of the platforms.

Although Tencent Music's total revenue has declined, the number of paid members and ARPPU (average revenue per paying user) are increasing. The financial report shows that in the fourth quarter of 2022, the number of paying users of Tencent Music's online music service was 88.5 million, a year-on-year increase of 16.1%; the monthly ARPPU of online music services was 8.9 yuan, a year-on-year increase of 4.7%.

NetEase Cloud Music's 2022 financial report shows that the number of monthly paying users of online music services is 38.3 million, a year-on-year increase of 32%. The monthly revenue per paying user of online music services has dropped from 6.7 yuan in 2021 to 6.6 yuan in 2022.

Tencent Music’s main profit point in the past was social entertainment services, but this business is also facing the problem of declining growth.

In the fourth quarter of 2022, Tencent Music's revenue from social entertainment services and other businesses was 3.87 billion yuan, down 18.2% year-on-year. The number of paying users of social entertainment services was 7.6 million, down 15.6% from 9 million in the same period last year. The monthly ARPPU of social entertainment services was 169.6 yuan, down 3.1% from 175.1 yuan in the same period last year.

There are two ways that video sites force users to pay:

1. Extra-long pre-roll ads. Users want to watch videos for free, but the pre-roll ads are 120 to 150 seconds long. It is difficult for users to adapt to such long pre-roll ads.

2. Set more film and television resources as member-exclusive, such as popular movies and TV series, and set them all to paid. When users see that members can watch more dramas than ordinary users, they will easily be tempted to pay.

Online music platforms are also following suit. They can’t learn from the long opening ads, but isn’t it possible to reduce the rights of free users? According to Guo Jing’s observations in the Internet circle, more and more songs on online music platforms are set to be exclusive to paid members. Many of them are even old songs from many years ago. Users may have listened to them online for free for more than ten years. Now they are all set to be paid. So the question is, can the singers who were listened to for free back then receive relevant commissions after being made paid by online music platforms? So it is very likely that users will pay for old songs, but the money will be earned by the platform.

Finding a new way out

When platforms are no longer obsessed with competition and internal circulation, they will produce some good things, such as iQiyi's "Kuangbi" and Tencent Video's "The Three-Body Problem". The same is true for online music platforms. Of course, the resources and background of Tencent Music and NetEase Cloud Music are completely different, so the paths to finding new ways out are also different.

The advantage of Tencent Music lies in the "big tree" of Tencent. Its development path is to integrate with the Tencent system. For example, it jointly launched celebrity concert live broadcasts with Video Account, and launched the "Listen to Books" channel based on Yuewen's online novel IP resources.

NetEase Cloud Music's path is the music + social route. In 2022, NetEase Cloud Music successively launched two social apps "Miaoshi" and "Sound Domain".

For Tencent Music and NetEase Cloud Music, exploring new paths is not difficult in itself; the difficulty lies in how to ensure profit margins.

The poor monthly active user data of Tencent Music and NetEase Cloud Music is also closely related to their efforts to reduce revenue costs. Once they stop attracting new users, user data will naturally not increase.

Another point that users are dissatisfied with online music is that in the past, they could listen to music for as long as they wanted by buying a CD for a few dozen yuan, but after paying for a paid membership on QQ Music or NetEase Cloud Music, they need to keep paying. They can listen to music today, but it will be gone after a while. This user experience has also led some users to be unwilling to pay for it. In the final analysis, it is because users’ money is too easy to earn, and users’ youth and feelings have long been marked with a price by the platform.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.