Mar. 18 (NBD) -- Many use the word "anxious" to describe Ding Bo at work recently. "He seems to be a bit helpless," commented a person who recently met Ding, vice president of NetEase Cloud Music. 

The biggest issue facing the online music platform is that it hasn't yet found an appropriate profit model, several music producers said to the 21st Century Business Herald last Thursday. 

According to NetEase's financial report for the fourth quarter of 2018, the company's "innovative businesses and others" segment, into which the cloud music business is categorized, reported a gross profit margin of -5.2 percent for the quarter. 

"As the competition is pretty intense, it is inappropriate for NetEase Cloud Music to beef up advertising business. Meanwhile, users haven't developed a habit of paying for music," one famous music producer stated. 

Despite the difficulties, NetEase Cloud Music is actively exploring new ways to capitalize on music contents to improve business performance. The company said last Friday it has established a diversified business model consisting of paid music subscription, advertisements, data package sale, concert ticketing service, smart hardware, and music-related peripherals.  

In October 2018, the music app launched its music livestreaming product. But industry insiders took a doubtful attitude towards the new service. 

"It is difficult to image preponderant independent musicians on NetEase Cloud Music committing themselves to livestreaming, which is embarrassing and may not bring user flow," one stage music producer said. "Diving into the livestreaming sector means NetEase Cloud Music has run out of options."

Photo/Shetuwang

As a matter of fact, NetEase Cloud Music is doing well in terms of operational metrics alone. 

Data from market research firm iResearch Consulting Group shows the music platform ranked fourth among online music apps in January 2019 with 168 million monthly unique devices, a rise of 19.57 percent from the prior year. The top three were all backed by Tencent, namely, Kugou Music with 324 million monthly unique devices, QQ Music with 323 million, and Kuwo Music with 178 million. 

A questionnaire survey of 155 young people in first- and second-tier cities, conducted by the 21st Century Business Herald, reveals more than 80 percent of respondents choose NetEase Cloud Music first for listening to the music, and nearly 30 percent had spent money on the platform. This demonstrates NetEase Cloud Music is more popular among the youngsters. 

Despite this, the music app still has a gap with its rival Tencent Music in music library. As of the end of 2017, NetEase Cloud Music had 10 million songs in its library, whereas Tencent Music had 17 million. Though the amount of songs co-authorized to both platforms accounts for 99 percent of their exclusive songs under a copyright sharing agreement achieved in February last year, the remaining one percent forms Tencent Music's core advantages. 

According to 36kr, a Chinese technology news provider, the one percent of music copyrights exclusively held by Tencent Music are roughly 50,000 songs, primarily most popular ones. "I downloaded Tencent Music specially for Jay Chou's songs," one hardcore NetEase Cloud Music user told the 21st Century Business Herald. 

Besides the difficulty in making profits, there is a bigger challenge facing NetEase Cloud Music, namely, uncertainties in support from parent company NetEase in the future.  

As the gaming business was the biggest contributor to NetEase's growth, the Chinese regulator's enhanced supervision over game approvals would cast a shadow on the internet technology company's future development.  

In October last year, NetEase Cloud Music closed a fresh 600-million-U.S. dollar injection from a bevy of investors that include Baidu and General Atlantic. 

"Introducing Baidu as an investor is somehow NetEase's preparation for spinoff of the business that failed to monetize," a person close to Baidu told the 21st Century Business Herald.

In the eye of an internet company executive, NetEase Cloud Music has great market potentials, and it will easily find a buyer if NetEase gives it up. A music industry veteran, however, held a completely different viewpoint, arguing that "NetEase Cloud Music has got distracted at present and may eventually lose its core users."

Analyst Zhang Tao said for the music app, the foremost thing is to capitalize on its contents. 

A longtime user's statement might offer a clue to "how". "I will continue using NetEase Cloud Music despite its insufficiency in music copyrights. The absence of some popular songs doesn't actually bother me," the user said to the 21st Century Business Herald. "What I really treasure are the social relations, interface, and music recommendations on the platform."

 

Email: lansuying@nbd.com.cn

Editor: Lan Suying