HANGZHOU, China, Aug. 24,
2023 /PRNewswire/ -- Cloud Music Inc. (HKEX: 9899,
"NetEase Cloud Music" or the "Company"), a well-known online music
platform featuring a vibrant content community, today announced its
financial results for the first half of 2023 ended June 30, 2023.
Summary of Key Financial and Operating
Metrics
(RMB in thousands, unless otherwise
stated)
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Six months ended 30
June,
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2023
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2022
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(Unaudited)
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(Unaudited)
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Financial
Metrics
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Revenue
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3,908,380
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4,258,716
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Gross profit
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965,147
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537,113
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Profit/(loss) before
income tax
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331,961
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(266,790)
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Profit/(loss) for the
period
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293,750
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(270,810)
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Non-IFRS
measure:
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Adjusted net
profit/(loss)[1]
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331,893
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(217,000)
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Operating
Metrics
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Online music
services
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-MAUs
(million)
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206.7
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181.9
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-Monthly paying users
(thousand)
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41,750.9
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37,613.0
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-Monthly ARPPU
(RMB)
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6.8
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6.5
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Social entertainment
services
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-Monthly paying users
(thousand)
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1,525.1
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1,235.4
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-Monthly ARPPU
(RMB)
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199.3
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329.8
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First Half 2023 Key Financial and Operating
Highlights
- Revenue was RMB3.9
billion, compared with RMB4.3
billion for the same period of 2022.
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- Online music services:
-Revenue from online music
services was RMB2.0 billion, an
increase of 13.3% compared with RMB1.8
billion for the same period of 2022. The increase was
primarily due to the significant growth in revenue from the sales
of membership subscriptions.
-MAUs of online music services climbed to 206.7 million, up
13.7% year-over-year.
-Monthly paying users of online music services expanded to
41.8 million from 37.6 million for the same period of 2022,
primarily attributed to the expanding offerings of
personalised and diversified music and music-inspired content, and
broadening consumption scenarios, as well as the enhanced user
experience.
-Monthly ARPPU (average revenue per paying user) of online music
services increased to RMB6.8 from
RMB6.5 for the same period of 2022 as
a result of optimised promotions.
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- Social entertainment services and others:
-Revenue
from social entertainment services and others was RMB1.9 billion, compared
with RMB2.5 billion for the same
period of 2022.
-Monthly paying users of social entertainment services
expanded to 1.5 million from 1.2 million for the same period of
2022.
-Monthly ARPPU of social entertainment services was
RMB199.3 compared with RMB329.8 for the same period of 2022.
- Gross profit was RMB965.1
million, a significant increase of 79.7% compared with
RMB537.1 million for the same period
of 2022, primarily due to improved cost control. Gross
margin improved to 24.7% from 12.6% for the same period of
2022, owing to our increased business scale, copyright cost
structure optimisation, and an improved revenue sharing ratio.
- Net profit was RMB293.8
million, compared with net loss of RMB270.8 million for the same period of
2022.
- Adjusted net profit was RMB331.9 million, compared with adjusted net loss
of RMB217.0 million for the same
period of 2022.
Note:
[1] Adjusted net profit/(loss) is defined as
profit/(loss) for the period adjusted by adding back equity-settled
share-based payments as appropriate.
Business Overview
Starting in 2023, we enhanced our music-inspired offerings,
driving our music-centric monetisation capabilities and meaningful
margin expansion. We brought innovative features and expansive
content to our users, grew our differentiated community, and
elevated our content ecosystem. These helped us deliver notable
growth of subscription-based memberships. Backed by our optimised
operating efficiency and cost structure, we recorded positive
performance across both operating profit and adjusted net profit
for the first time during the first half of 2023.
Despite the industry-wide slowdown, our MAUs of online music
services for the first half of 2023 steadily climbed to 206.7
million, up 13.7% year-over-year. The growth in our MAUs of online
music services was supported by our continued effort to create a
better user experience and broader music-listening scenarios, along
with our active initiatives to bolster our branding outreach, which
aided in better new user attraction. Meanwhile, our
DAU/MAU ratio (daily active user/monthly active user
ratio) stayed well above 30%, demonstrating our ability to foster
continued growth across our leading music-inspired
community. During the Reporting Period, we continually enhanced
our user experience and community features through product
innovation.
We also secured more high-quality content in the first half of
2023, with a focus on better cost efficiency. Paired with our
stronghold in fostering a leading independent artist ecosystem and
enhancements to our in-house music production, we have developed a
comprehensive and differentiated content ecosystem that
encourages user stickiness and users' willingness to subscribe to
our premium offerings. We will further explore cooperations with
record labels to round out our content offerings, focusing on our
advantageous music genres; meanwhile, we are exploring potential
copyright collaborations with diverse downstream channels for
enlarging music content exposure and commercialisation
potentials.
We have worked diligently to strengthen our music-centric
monetisation capabilities throughout the first half of 2023.
Our online music business has continued to show solid growth
momentum on a year-over-year basis. Our subscription-based
memberships revenue continued its solid upward trend and grew by
16.7% year-over-year, driven by subscriber scale-up and ARPPU
improvement. Our ongoing content enhancements and innovative
features, along with broadened membership privileges, supported the
increase of our subscriber base, which was up 11.0% on a
year-over-year basis. ARPPU also continued to improve, aided by our
pricing optimisation initiatives.
For our social entertainment arm, revenue has declined 23.8%
year-over-year, as we are refining our operating strategy for
social entertainment services. We introduced multiple measures
in the social entertainment services to enhance the listening
experience of more dedicated music fans and improve profitability.
These include reducing the in-app exposure of certain live
streaming functions and lowering broadcasters' and agencies'
revenue sharing ratio. Moreover, we are further reinforcing our
internal controls mechanism, such as adopting stricter monitoring
over irregular user activities, and recently taking additional
measures to optimise live streaming functions.
We improved our profitability considerably in the first
half of 2023, mainly attributable to our increased scale and cost
optimisation. Gross Margin soared to 24.7% in the first half
of 2023, compared with 12.6% in the same period of 2022, owing to
our increased business scale, copyright cost structure
optimisation, and an improved revenue sharing ratio. As a result,
we recorded Adjusted Net Profit of RMB331.9 million in the first half of 2023,
compared with Adjusted Net Loss of RMB217.0
million in the first half of 2022.
Going forward, we will remain committed to cultivating our
community, bringing more high-quality music to our users, further
strengthening our operating capabilities, and improving
profitability. Our plans call to:
- cultivate our users' willingness to pay for and subscribe to
premium offerings by improving user experience, deepening user
engagement, and broadening consumption scenarios;
- continue the initiatives to safeguard our social entertainment
services with reinforced controls, ensuring and promoting our
social entertainment services' sound and sustained development,
pursuing better integration with our core online music
ecosystem;
- foster our music-oriented community ecosystem and explore
innovation in social networking via enhancements to our
comprehensive product offerings, including embedding our products
with more interactive features and broadening the communicative
ecology;
- further diversify and enhance our content offerings with better
efficiency. We plan to deepen our collaboration with copyright
holders, as well as strengthen our capabilities in independent
artist incubation and in-house music production;
- improve profitability through continued content cost
optimisation, enhanced operating efficiency and disciplined cost
control; and
- look to IoT layouts and game-inspired initiatives to further
expand music listening scenarios and explore commercialisation
opportunities.
Comprehensive and differentiated content ecosystem
We continue to incorporate a wider variety of copyrighted
content to our library, strengthen our leading original music
ecosystem and develop unique in-house music content. These actions
further amplify our comprehensive and differentiated content
ecosystem to meet our young users' ever-changing needs. By the end
of June 2023, we had amassed about
136 million music tracks. Benefiting from the industry-wide trend
of optimised content costs, we are driving a meaningful improvement
in our gross margin profile, further aided by our adept acquisition
and management of copyrighted content.
Enhancing copyrighted content library
- Deepened partnerships with copyright holders, continued
amplifying our music genres (including popular, rap, folk and
K-POP) and increased our appeal to audiences. We have
partnered with more top-tier C-pop labels and further extended
collaboration with more renowned Korean record labels, expanding
our content matrix with more popular music tracks from influential
musicians, singers and groups, such as MAYDAY,
Sodagreen/Oaeen(鱼丁糸), Jackson Wang,
Shinhwa, as well as a library of OST from JTBC. Meanwhile, we
continued promoting on our advantageous music genres and styles.
Hit songs, including folk song "Wo Ji De (《我记得》)" by Lei Zhao (赵雷)
and hip-hop song "Snow Distance (《雪 Distance》)" by Capper
& Yan Luo, have seen a surge in
popularity and user interaction on our platform, demonstrating the
positive momentum and unique community engagement we have built
across these genres.
- Recorded impressive album sales performances from top
artists. During the Reporting Period, our platform saw
impressive sales of several premium digital albums, including the
latest mini-album from the South Korean girl group (G)I-DLE. Titled
"I FEEL," the mini-album quickly gained over RMB10 million in total sales after its release in
May. Our first co-published physical album, C-Pop artist
Chenyu Hua's new album
"希忘(Xiwang) Hope" recorded
approximately RMB20 million in total
gross sales.
- Expanded copyright partnership with downstream channels
and music consumption scenarios and provided more value-added
services along the music industry value chain. We
upgraded our one-stop copyright service platform "Cloud Village
Exchange" (云村交易所) to better meet increasing demands in downstream
commercial use of copyright music licensing. We also expanded
partnerships with more downstream channels to facilitate orderly
usage of copyright content, including the additions of Tmall
Genie's voice-based interactive system, Hangzhou International
Digital Exchange Center and China's largest bar chain network Helen's
(海伦司).
Strengthening our leading independent artists
ecosystem
We continue to enhance our support system for independent
artists, offering comprehensive assistance for their encounters in
the limelight and backstage, from the creation process to financial
support, and nurturing a new generation of pioneering original
force for the Chinese music industry. As of the end of June 2023, our platform was home to more than
646,000 registered independent artists, who had collectively
contributed about 2.8 million music tracks to our content library.
Also, we are proud to have discovered and nurtured early-stage
musicians, such as Runze Zheng (郑润泽), who is being more
popular.
- Supporting music creation efficiency. We are
dedicated to leveraging cutting-edge technologies, providing
musicians with efficient tools covering the entire composition
process to maximize their productivity. Among them, our music
creation auxiliary tool, provides reliable assistance to musicians
in their content creation endeavours; X Studio, our intelligent
voice synthesis software in partnership with Xiaoice, provides 12
natural singing voices (covering styles such as pop and folk) for
musicians to automatically select the appropriate voice; and
BeatSoul, our one-stop Beat transaction platform also effectively
makes music co-creation more accessible.
- Exploring and improving musician
exposure. We continued to discover and nurture
musical talent through a range of approaches, including special
events, targeted operations and location-based initiatives. For
instance, we launched multiple initiatives, such as the New Voice
Power Project (新声势力计划), "Take in and Rap out" (街头招式) and the "City
Tour Guide" (城市云游指南) special planning series, to provide
comprehensive training and development opportunities both online
and offline for emerging rappers and producers, as well as
regionally representative talent from the industry. As the offline
entertainment industry is gradually recovering, we are actively
leveraging the momentum of the music community on our platform, as
well as utilising our extensive promotion channels such as music
festivals, offline tours and variety shows, to help emerging
musicians (such as Runze Zheng 郑润泽) kickstart their music journey
and gain widespread recognition.
- Helping musicians improve their commercial
value. We upgraded our renowned musicians'
support project and launched "Project Cloud Ladder 2023"
(云梯计划2023第一期). This update offers independent musicians better
financial incentives that support independent musicians and
high-quality original content. These efforts have in turn helped us
promote original music ecosystem. In addition, the update also
provides musicians with access to more services, such as worldwide
distribution of their music and automated copyright
protection.
Developing differentiated in-house music
We continue to invest in expanding our in-house music production
teams and strengthening music creation capabilities. Our multiple
in-house studios are continuing to focus on creating unique music
content and are further driving commercial value through deeper
collaboration with NetEase portfolio and external commercial
brands.
- Crafting high-quality music content tailored to a variety
of needs. Our in-house studios have
successfully popularised multiple hit songs, including
"Xiang Yun Duan" (《向云端》) and
"Jing Wei" (《精卫》). In particular,
our co-produced song "Xiang Yun
Duan" (《向云端》) quickly demonstrated remarkable popularity
across multiple platforms after its release in May.
In addition, our in-house music works have been featured on many
prominent galas in China and have
served large-scale sports events and influential public events.
This has further demonstrated our capacity to create and customize
top-notch music.
- Deepening collaboration with NetEase and commercial
brands. By leveraging our in-house music
capabilities, we have deepened our collaboration with NetEase's
portfolio such as rolling out customised songs for their
blockbuster game IPs such as Fantasy Westward Journey
(梦幻西游), Onmyoji (阴阳师) and
Eggy Party
(蛋仔派对). We also collaborated with mainstream
commercial brands, such as SAIC Volkswagen and Yili, which further
enhances our value to the industry. In particular, one of the
customised game promotion songs "Look, it's Eggy" (《注意看,是蛋仔》) for
Eggy Party
(蛋仔派对) has been widely praised by game
players.
Community ecosystem and product innovation
In the first half of 2023, we further promoted product
innovation and the build-up of a music community that brings
excitement to users. We actively incorporated new interactive
features, enhanced user listening experiences and broadened music
consumption and communication scenarios, to continually reinforce
our differentiated community ecology and user stickiness.
- Adding interactive functions and cultivating community
resonance. On top of our iconic comments section, we
rolled out new scenario "Comment Square" (乐评广场), allowing
users, musicians and content creators to use music as a medium to
express their emotions and interact with each other. Comment Square
is a hub where users can browse and explore song comments, share
their thoughts on music and respond to the sentiments of other
users. We are confident that this will help sharpen their
perception on comments and create a more robust community
atmosphere.
- Expanding music consumption and communicative
scenarios. We continue looking to IoT layouts and
game-inspired initiatives to expand music consumption to more
aspects of gaming and everyday living.
– Partnership with NetEase Games. We have
created an immersive gaming experience by connecting users with
various listening options, such as popular casual game
Eggy Party
(蛋仔派对) and Sky
(光遇) . In partnership with
Eggy Party
(蛋仔派对) , we have embedded our player within
the core gaming scenes, expanding the high-quality music
consumption experience to more gaming scenarios. Recently, we
launched a cooperative gift package, including customised in-game
skins that integrate NetEase Cloud Music IP attributes, as well as
a bundled vinyl VIP membership. This collaborative project has
gained notable popularity among the gaming community, resulting in
effective user reactivation and users' increased willingness to
pay. As part of the package, users are also entitled with an
Eggy Party-themed player
interface within our NetEase Cloud Music app, boosting user
engagement and stickiness for enthusiasts of both game and
music.
– IoT layouts. We expanded our coverage and
content pool to the IoT market, encompassing smart devices that
touch on various aspects of people's lives. Recently, we expanded
our coverage to more automakers and their in-car systems, including
Geely, SAIC Audi.
- Optimising users' listening experience. We
are dedicated to providing users with the best listening experience
possible and better fulfilling personalised user demands by
continuously leveraging sound enhancement technology and optimising
listening features.
– Sound enhancement technology. We rolled out
new premium offerings such as "ultra-clear master tape" (超清母带) and
"surround sound" (沉浸环绕声). The former is designed to restore the
original sound of the mastering and recording, while the latter
creates an immersive listening experience.
– Upgraded vinyl player interface. We have
unveiled a major upgrade to our iconic vinyl player interface.
Making breakthroughs in classic style, we are further upgrading the
experience with and providing users with up to nine new player
styles.
Conference Call
The Company's management will host an earnings conference call
at 7:00 p.m. Beijing/Hong Kong Time on Thursday, August 24, 2023 (7:00 a.m. U.S. Eastern Time on the same day).
Details for the conference call are as follows:
Event Title: Cloud Music Inc. First Half 2023 Earnings
Conference Call
Registration Link:
https://s1.c-conf.com/diamondpass/10032403-ofq178.html
All participants must use the link provided above to complete
the online registration process in advance of the conference call.
Upon registering, each participant will receive a set of dial-in
numbers, an event passcode, and a personal access PIN, which will
be used to join the conference call.
A replay of the call will be accessible by phone at the
following numbers and entering PIN: 10032403. The replay will be
available through August 31,
2023.
Chinese
Mainland:
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400-120-9216
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Hong Kong:
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800-930-639
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United
States:
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1-855-883-1031
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Additionally, a live and archived webcast of the conference call
will be available on the Company's investor relations website
at http://ir.music.163.com.
About Cloud Music Inc.
Launched in 2013 by NetEase, Inc. (NASDAQ: NTES; HKEX: 9999),
Cloud Music Inc. (HKEX: 9899) is a well-known online music platform
featuring a vibrant content community. Dedicated to providing an
elevated user experience, Cloud Music Inc. provides precise,
personalised recommendations, promotes user interaction and creates
a strong social community. Its focus on discovering and promoting
emerging musicians has made Cloud Music Inc. a destination of
choice for exploring new and independent music among music
enthusiasts in China. The platform
has been recognised as the most popular entertainment app among
China's vibrant Generation Z
community.
Please see http://ir.music.163.com/ for more
information.
Forward Looking Statements
This press release contains forward-looking statements relating
to the business outlook, estimates of financial performance,
forecast business plans and growth strategies of the Company. These
forward-looking statements are based on information currently
available to the Company and are stated herein on the basis of the
outlook at the time of this press release. They are based on
certain expectations, assumptions and premises, some of which are
subjective or beyond our control. These forward-looking statements
may prove to be incorrect and may not be realised in the future.
Underlying these forward-looking statements are a lot of risks and
uncertainties. In light of the risks and uncertainties, the
inclusion of forward-looking statements in this press release
should not be regarded as representations by the Board or the
Company that the plans and objectives will be achieved, and
investors should not place undue reliance on such
statements.
Non-IFRS Measure
To supplement our consolidated results, which are prepared and
presented in accordance with International Financial Reporting
Standards ("IFRSs"), the Company uses adjusted net loss as an
additional financial measure, which is not required by, or
presented in accordance with, IFRSs. We believe that this measure
facilitates comparisons of operating performance from period to
period and company to company by eliminating the potential impact
of items that our management does not consider to be indicative of
our group's operating performance, such as certain non-cash items.
The use of this non-IFRS measure has limitations as an analytical
tool, and shareholders and potential investors of our company
should not consider them in isolation from, as a substitute for,
analysis of, or superior to, our group's results of operations or
financial condition as reported under IFRSs. In addition, this
non-IFRS financial measure may be defined differently from similar
terms used by other companies, and may not be comparable to other
similarly titled measures used by other companies. The presentation
of this non-IFRS measure should not be construed as an implication
that our future results will be unaffected by unusual or
non-recurring items.
Investor Enquiries:
Angela Xu
Cloud Music Inc.
music.ir@service.netease.com
Media Enquiries:
Li Ruohan
NetEase, Inc.
globalpr@service.netease.com
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SOURCE NetEase Cloud Music