article | Qingcheng Finance, author丨Fang Shiyi, editor丨Liuzi
html On March 19, Tencent Music Entertainment Group (hereinafter referred to as "Tencent Music") officially disclosed its 2023 full-year financial results.As of the end of 2023, Tencent Music has achieved total revenue of 27.75 billion yuan during the year, a year-on-year decrease of 2.1%; net profit is 5.22 billion yuan, a year-on-year increase of 36.0%; net profit attributable to shareholders of the parent company is 4.92 billion yuan, a year-on-year increase of 33.8%; non- IFRS net profit was 6.22 billion yuan, a year-on-year increase of 26.8%.
For a long time, social entertainment services have been the most important business of Tencent Music. However, with the profound changes in the industry ecology, users' minds and needs have gradually migrated from to the short video track, and the remaining living space has to be used. Online music services make up for it. As Peng Jiaxin, executive chairman of Tencent Music Entertainment Group, said, "2023 is a key year for Tencent Music's transformation. Looking to the future, driven by the one-two-wing strategy of content and platform, as well as the relatively strong anti-cyclical nature of the online music business, attributes, we are confident to seize more diversified development opportunities."
As music copyright enters the "non-exclusive" era , the industry may fall into a more chaotic situation. Has Tencent Music found new advantages and uniqueness? Sex, and whether it can weave vivid stories with new ideas remains to be seen.
01 Social entertainment is in decline
Profits continue to rise, but revenue is facing a decline. Tencent Music "It is difficult to increase revenue" 's situation is largely related to the phenomenon of 's "cash cow" in the social entertainment business disappearing. The annual report of
shows that Tencent Music’s social entertainment service revenue in 2023 was 10.427 billion yuan, a year-on-year decrease of 34.2%, accounting for 37.6% of revenue. The company attributed the main reason for business development setbacks to ’s “adjustment of some live broadcast interactive functions” and implemented stricter compliance procedures."
* Source Tencent Music 2023 Fourth Quarter and Full Year Performance Report
In fact, before the copyright “moat” has been cleared, the profit margins of online music services are more squeezed by high copyright fees, coupled with users’ willingness to pay Not enough, so in desperation, "quick money" social entertainment services including live broadcasts, shows, etc. have become the backbone of Tencent Music.
In its brightest moments, social entertainment services were Tencent Music’s undisputed revenue driver, and even contributed more than 67% of its revenue to at one time. Once its main product "National K-Song" was launched in 2014, it quickly developed into a national-level music entertainment social platform covering people of all ages; its core products "Kugou Music" and "Kuwo Music" rely on live show, Pan-entertainment live broadcast and other methods provide more immersive music companionship. Based on reward sharing and other models, Tencent Music has achieved relatively stable cash flow and a relatively active number of users. However, as short videos have become rampant in recent years, various pan-entertainment platforms have faced traffic overflow to a greater or lesser extent, and Tencent Music is naturally unable to survive alone.
Since 2020, Tencent Music’s social entertainment sector has shown a clear downward trend. Its revenue data within three years has dropped from 19.804 billion yuan (2020) and 19.777 billion yuan (2021) to 15.86 billion yuan (2022), accounting for 15.86 billion yuan (2022). The proportion of revenue has also gradually dropped from 67.9% to 56%. The company has emphasized more than once that the decline in performance of the social entertainment services segment is the result of multiple factors such as the macro environment and intensified competition from other platforms.
In addition, the live broadcast business is sudden and interactive, and risk management is relatively difficult. In the long-term lack of strict supervision and the high cost of live broadcast review, various pornographic, violent, gambling and other illegal contents are rampant, and various types of Illegal accounts are flying all over the place. Although Tencent Music is also actively embracing changes in the regulatory environment and using proactive adjustments to reduce exposure and strengthen internal controls, the pain of business development is obviously obvious.
However, the decline in social entertainment business is not a problem for Tencent Music alone. The entire live broadcast track is in the process of turmoil, and many veteran players have even disappeared.Therefore, returning to a long-lasting business model is a top priority. Tencent Music should think about whether should be a live broadcast company or a music company . After all, only the correct logic can produce twice the result with half the effort.
02 Online music is controversial
The annual report shows that Tencent Music’s online music service revenue in 2023 was 17.33 billion yuan, a year-on-year increase of 38.8%, accounting for 62.4% of revenue. Judging from the data of the last three years, 9.349 billion yuan (2020), 11.467 billion yuan (2021) and 12.48 billion yuan (2022) further confirmed the continuity and stability of its growth. The online music service has become Tencent’s A new engine for music development.
We can't help but ask, how did Tencent Music unlock the new engine password when the original core business was frustrated? What did it capture?
It is understood that the "inflection point" in the growth of Tencent Music's two core businesses will come exactly in 2023. In the second quarter of last year, Tencent Music’s online music service revenue reached 4.249 billion yuan, overtaking social entertainment services’ 3.037 billion yuan for the first time, and expanded its lead to 2.537 billion yuan in the following three quarters.
* Source Tencent Music 2023 Second Quarter and Full Year Performance Report
Behind the rise and fall of business is often reflected in the migration of user behavior. Although a wave of quasi-college students flocks to major Internet platforms every summer, and the natural growth of this part should be considerable, what is surprising is that the number of users of Tencent Music’s online music business has not shown as strong a momentum as imagined. . The annual report of
shows that the number of paying users of Tencent Music’s online music service in 2023 will be 100.9 million . Judging from the situation in the fourth quarter, the number of monthly active users was 576 million, a year-on-year decrease of 4.2%.
* Source Tencent Music 2023 Fourth Quarter and Annual Performance Report
Is it a problem with the content and model that leads to unsatisfactory reach, or is the platform already reaching the ceiling of the number of users? We cannot answer this question, but Tencent Music’s user growth The slowdown is a fact of life. In this case, maximizing the value of existing users becomes the shortcut.
For example, QQ Music, the core product of Tencent Music, has launched , free listening mode for watching ads, and . Users can listen to songs for free for 30 minutes by watching 15-second ads, and enjoy full versions of songs that were previously only open to members. Some users even bluntly said, "When I wake up every day, I watch 4 ads first to maximize the battery life."
For ordinary users, free listening to songs can indeed meet their basic needs. This model is not original to Tencent. Spotify has attracted many users by relying on free listening to songs and advertisements. But for users who pursue higher content quality, free listening to songs is only available in standard quality. If you want to get hq high quality and sq lossless quality, you can obviously only experience it by purchasing a paid membership.
The key thing is, will the platform really be keen on doing such "public welfare" ? Obviously not. The annual report shows that the average monthly income of a single paying user of Tencent Music's online music business continues to rise in 2023, rising from less than 9 yuan in 2022 to 10.0 yuan, and music subscription revenue has also risen from 8.7 billion yuan in 2022 to 12.1 billion yuan.
* Source Tencent Music’s 2023 fourth quarter and full-year performance report
In fact, QQ Music changed its renewal service twice in 2023. One time was in June, the prices for automatically renewed Green Diamond Deluxe Edition and Regular Edition members were raised. The continuous monthly subscription price increased from 13 yuan to 15 yuan, and the continuous seasonal and annual subscription prices also increased by 10-20 yuan; the other time was Launched at the end of 2023, for users who previously had preferential prices, the automatic renewal price of the Green Diamond Deluxe Edition will be raised from 11.4 yuan/month to 15 yuan/month. Comparing major competing products, Apple Music’s individual membership only costs 11 yuan per month. NetEase Cloud Music’s current membership price is in the 8-15 yuan range. At the end of last year, a student area was launched for only 5 yuan per month. QQ Music’s The price/performance advantage is not obvious.
It is not difficult to find that the pursuit of ultimate value for existing users has become a new battlefield for the competition. On the platform, free services awaken some "low-value users", which in turn drives the expansion of product scale to , but in the final analysis they are all based on payment in exchange for more space.It's just that "the routine has won people's hearts since ancient times", and price fluctuations will always cause sensitivity. When Tencent Music temporarily put away its edge, it has already thrown the "harvest" anchor to a wider sea.
03 Post-copyright era choice
For a long time, copyright has been a sharp sword that has loomed over the online music industry.
Especially during that period of intense competition for copyright, some established platforms were forced to shut down and transfer. In 2016, Tencent acquired China Music Group (which owns more than half of the exclusive copyrights on the market). After all the hardships in the online music market, only one was left. A big ship and a small one, with other institutions struggling to survive on what little market remains.
Although major platforms agreed to mutually authorize more than 99% of music copyrights in 2018 to prevent the emergence of monopolies, the remaining 1% is still enough for to allow Tencent to establish a music library advantage . NetEase CEO Ding Lei once said, "When it comes to acquiring copyrights, our attitude has always been to be willing to spend money, but the problem is that individual domestic manufacturers are currently unwilling to sell."
After 2021, this situation has quietly changed. In July of that year, the State Administration for Market Regulation issued a penalty decision to Tencent, requiring it to give up its exclusive authorization of music copyright. Soon after, the National Copyright Administration further required all parties in the digital music industry to prohibit signing exclusive copyright agreements. As a result, Tencent Music had to give up the pillars that had supported it for many years and instead look for new development space.
Since then, NetEase Cloud Music has successively reached cooperation with Rolling Stone Records, Warner, etc.; at the same time, it has made great efforts to explore the original music ecosystem, and has established in-depth cooperation with many well-known labels and leading artists. In 2023 alone, NetEase Cloud has obtained the copyright of many popular music variety shows such as "China Rap Peak Showdown 2023" and "Godsend Voice Season 4". At the same time, it also focuses on a variety of music categories and continues to provide outstanding original music support and launches online. Multiple special music planning projects. It can be said that the end of the era of exclusive copyrights for music also means the beginning of the era of exclusive release of content.
Judging from performance performance, NetEase Cloud Music will also gain a lot in 2023. 20 days before Tencent Music disclosed its annual report, NetEase Cloud Music had already handed over its 2023 report card to the market on February 29. After operating profit and adjusted net profit recorded positive values in the first half of the year, NetEase Cloud Music turned a profit for the first time for the whole year, with a net profit of 734 million yuan, reversing a loss of more than 220 million yuan in 2022; net income was 7.87 billion Yuan, of which online music service revenue accounted for 55.3%.
* Source NetEase Cloud Music 2023 Annual Performance Feed
After horizontal comparison, it can be seen that NetEase Cloud Music still has a certain gap with Tencent Music in terms of volume and share, but in terms of profitability, user activity, and especially willingness to pay , NetEase Cloud Music obviously has stronger impact, which greatly increases the possibility of pushing the competition between the two to a new climax; and in terms of community construction, NetEase Cloud Music launched the "Cloud Village Ten" in April 2023. Anniversary" series of activities, the app revision was also announced in January this year. The new version will continue to explore music reviews, playlists, etc. The transition from a music service platform to a music social platform, NetEase Cloud Music is undoubtedly the first shot of to cater to the "tagging" needs of young users, and this does not seem to be Tencent Music's strength.
In addition, the dimensional wall of the online music track is also being broken. Platforms such as Douyin, Kuaishou, and Video Accounts are all entering the music track across borders, which undoubtedly brings new pressure to Tencent Music. Especially the soda music officially produced by Douyin. Once the application was launched in 2022, it attracted a large number of early adopters with its minimalist style and Internet celebrity tracks. As of March 2024, it has been downloaded more than 30 million times on iOS alone. It can be described as menacing.
Under the constant impact of old rivals, new genres, and short videos, Tencent Music is not easy to be the big brother in the industry. However, in this era where content decentralization is king, it is difficult for online music to gain critical acclaim. How come the pressure from “big brother” is not the epitome of the industry as a whole?
We cannot define whether an app or a platform is good or bad, just like we cannot make a choice between short videos and online music. This is about the individual perception of user experience.But since they have chosen to return to their original intention of making music, Tencent Music must have anticipated all this. After all, loyal fans are still paying for their feelings and investing in the future of the platform with real money.
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