text | Yiguan Finance, author | Xuan Ye Baixue
With the popularization of the Internet and the rapid development of digital technology, music streaming platforms have become an indispensable part of people's daily lives. From the international giant Spotify to the domestic leading Tencent Music, NetEase Cloud Music, etc., these platforms have not only changed the way of music consumption, but also reshaped the pattern of the music industry.
However, as the market gradually becomes saturated and competition intensifies, while music streaming platforms are experiencing rapid growth, they are also facing the challenge of slowing revenue growth. This article will combine the latest financial report data of platforms such as Spotify and Tencent Music to conduct an in-depth analysis of the future development trend of music streaming platforms.
mau, paid members increase, but revenue growth slows down
The music streaming industry has experienced rapid development in recent years, and the industry pattern has been initially determined. From a global perspective, Spotify has become the world's largest music streaming platform, but Apple, Amazon and YouTube The existence of other strong competitors continues to eat away at spotify’s market share. Domestically, Tencent Music has become the dominant player in the domestic music streaming industry, and Tencent’s ecosystem is inseparable from it.
Comparing the two, domestic Tencent Music is ahead of Spotify in terms of profitability. Tencent Music has achieved profitability as early as 2019, while Spotify is in a state of loss in most cases. This has a certain difference in business between the two. related. Tencent Music can achieve profitability earlier, mainly due to social entertainment services. Before the second quarter of 2023, more than half of Tencent Music's revenue and profits will be contributed by social entertainment services. With the tightening of domestic social supervision, risk control and security Considering that Tencent Music has consciously reduced its social entertainment service revenue, it will enter an adjustment period after the second quarter of 2023 and gradually return to the music itself. The
music streaming platform mainly makes money through copyright licensing, subscription services, advertising revenue, and concerts and events. In the first quarter of this year, both Spotify and Tencent Music achieved good growth in monthly active users and paid users. In the first quarter of 2024, the total number of monthly active users (mau) of Spotify increased by 19% year-on-year to 615 million. In addition, the number of premium subscribers increased 14% year-on-year to 239 million, driven by growth in family and two-person packages, compared with 210 million in the same period last year.
In the first quarter of 2024, the number of Tencent Music online music paying users increased by 20.2% year-on-year to 113.5 million, with a net increase of 6.8 million in a single quarter, setting a record high. The music subscription payment penetration rate reached 20%. However, compared with the spot subscription payment rate, Tencent Music is still online, but the payment rate for online music still has a certain distance to catch up with.
In recent years, with the improvement of users’ awareness of paying and the increase in advertising revenue, the revenue of these platforms is still growing, but the growth rate has slowed down significantly.
Internationally, spotify's revenue in the first quarter of 2024 increased by 20% year-on-year. Since 2020, the growth rate has been in a historically high range. In the past six years, the company's highest quarterly revenue year-on-year growth rate was in 2019 q1. At 33%, this growth rate is likely to become the company's growth ceiling.
Domestic Tencent Music’s total quarterly revenue has declined for 10 consecutive quarters. In the first quarter of 2024, Tencent Music Entertainment Group's (tme) total revenue was 6.77 billion yuan, a year-on-year decrease of 3.4%. The main reason for the decline in total revenue is that social entertainment such as Tencent Music Live Broadcast has been in the adjustment stage. The decline in revenue related to social entertainment business directly led to the decline in total revenue.
How can the good days of making huge profits from music streaming last?
Comprehensive financial reports of Spotify and Tencent Music, it is not difficult to find that in sharp contrast with the slowdown in revenue growth, both net profits have achieved substantial growth. According to
data, in the first quarter of 2024, Spotify's net profit turned around year-on-year, achieving a net profit of US$197 million, compared with a loss of US$225 million in the same period last year. In the first quarter of 2024, Tencent Music’s adjusted net profit was 1.81 billion yuan, a year-on-year increase of 23.9%.
Whether it is Spotify or Tencent Music, if you want to continue to make profits, on the one hand, you need to improve operational efficiency by controlling fees, and on the other hand, you need to pay more attention to user experience and content innovation to attract more users to pay, maintain user stickiness, and increase paying user ARPU .
Taking Tencent Music as an example, the current online music business, as the core driving business of Tencent Music Group, has maintained relatively strong growth since Q3 in 2022. In the first quarter of 2024, Tencent Music's online music service revenue increased by 43% year-on-year to 5.007 billion yuan, of which online music subscription revenue increased by 39.2% year-on-year to 3.62 billion yuan.
However, the online music arppu is much lower than the social entertainment arppu.
In the future, as the market gradually becomes saturated and competition intensifies, these platforms need to pay more attention to user experience and content innovation in order to attract more users and maintain user stickiness. Faced with the challenge of slowing revenue growth, music streaming platforms need to actively explore new profit models and growth drivers. The following are several possible development directions:
1. Data analysis and personalized recommendations
In the future, music streaming platforms will pay more attention to data analysis and personalized recommendations. Through in-depth analysis of users' playback records, preferences and behavioral habits, the platform can more accurately understand users' needs and preferences, thereby providing music recommendations that are more in line with users' tastes. This personalized recommendation method can not only improve user satisfaction and stickiness, but also bring more advertising revenue and subscription revenue to the platform.
2. Diversification of user needs
With the rise of music streaming platforms, users' needs for music have become more diverse. Traditional music sales models are often limited by physical storage media, while music streaming platforms allow users to choose and play their favorite music anytime and anywhere. In the future, music streaming platforms need to pay more attention to meeting the diverse needs of users and launch more innovative and personalized music content and services. For example, the platform can launch exclusive music channels or music programs for different user groups, or implement intelligent music recommendation and creation by introducing AI technology.
3. Scenario enrichment
With the development of technology and the continuous expansion of application scenarios, music streaming platforms also need to pay more attention to scenario-based services. For example, in the field of smart cars, music streaming platforms can cooperate with car manufacturers to embed music services into in-car systems to provide users with a more convenient and comfortable music experience. In addition, the platform can also explore cooperation with other fields such as smart homes and wearable devices to integrate music services into users' daily lives.
4. Business split
With the continuous development of the online audio industry, podcast content has gradually become a new growth point. Some music streaming platforms have begun trying to spin off their podcast businesses and operate them independently to attract more users and advertisers. This way of business split can not only bring more revenue sources to the platform, but also promote the commercial development of the podcast field.
spotify has long announced that they are not a music platform, but an audio platform, and they will attract new players and increase revenue by investing more in podcast content.
Tencent Music has already had a layout in the long audio field. By expanding its presence in the long audio field, it has fully entered the sound industry. With Tencent's backing, it can open up social traffic on QQ and WeChat and obtain more IP resources through China Literature Group. However, the "sound economy" Business does not seem to be that easy. Himalaya's several IPO attempts to no avail also confirm this from the side.
5. Industrial Integration
The music streaming platform can also expand new business areas through integration with other industries. For example, the platform can cooperate with the publishing, film, television and game industries to launch new products such as audio books, audio dramas and audio stories adapted from game IPs. These products can not only enrich the content ecology of the platform, but also bring more users and revenue to the platform.
6. International Development Trend
With the acceleration of globalization and the popularization of Internet technology, music streaming platforms also need to pay more attention to international development. The platform can strengthen cooperation and exchanges with international music resources and introduce more outstanding international music works and artists. At the same time, the platform can also provide multi-lingual music services to meet the needs of users in different countries and regions.This international development method can not only expand the market size of the platform, but also improve the brand influence and competitiveness of the platform. From a strategic perspective,
spotify is an international company that develops globally. In contrast, Tencent Music's focus is still on the domestic market. If it can develop its efforts in the international market in the future, there may be more possibilities for growth.
7. Expansion of music education and training
The music streaming platform can also expand the field of music education and training. The platform can provide a wealth of music learning resources and tools to help users learn and appreciate music better. For example, the platform can launch music teaching videos, music theory knowledge, instrument playing skills and other contents to provide users with a comprehensive music learning experience. This expansion method can not only improve users' musical literacy and appreciation ability, but also bring more user stickiness and income to the platform.
In summary, although music streaming platforms are facing the challenge of slowing revenue growth, these platforms still have broad development prospects by actively exploring new profit models and growth drivers. In the future, music streaming platforms need to pay more attention to user experience and content innovation to meet the diverse needs of users and expand new business areas. At the same time, the platform also needs to strengthen cooperation and exchanges with international music resources to promote the global development of the music industry.
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