Alibaba invests $700m in NetEase Cloud Music
Alibaba has announced on Friday two deals with NetEase. It has acquired NetEase’s e-commerce business Kaola for $2 billion and it has committed a $700 million investment in NetEase’s online music Platform – NetEase Cloud Music.
According to AVCJ Research, NetEase Cloud Music has received a Series B funding round of $600 million from Baidu, Boyu Capital and General Atlantic in 2018; Its RMB750 million ($105 million) Series A funding round was backed by China International Capital and two strategic investors – Shanghai Media Group and Hunan Broadcasting System-owned Mango Media.
The new round of investment from Alibaba is changing the dynamics of China's online music market – from a trio competition to a dual battle. On one side is the dominant Tencent Music Entertainment Group (TME) which owns QQ music plus Kugou and Kuwo – the two platforms that Tencent acquired in 2016 from China Music Corporation at a valuation of $ 2.7 billion.
On the other side is Alibaba's Xiami music, now joined by NetEase Cloud Music.
Tencent runs the largest library of music broadcasting rights in the country. An intensifying crackdown on piracy in 2015 in the music industry pushed Tencent's QQ music to become the number one player. Kugou and Kuwo, after acquired, can share the library, which creates a synergy.
Launched in 2013, NetEase Cloud Music has been popular among young audience. According to the local BigData-Research for the first quarter of 2019, 69% of NetEase Cloud Music users were under 30 years old, compared to QQ's 58%; It also win out in the category of average time spent per-user per day with 26 minutes, while Kugou, kuwo, and QQ music respectively recorded 23 mins,15 mins and 9 mins; For the sound quality, NetEase Cloud Music defeated all competitors.
However, regarding monthly active users, Tencent's three Apps Kugou, Kuwo and QQ were top three. NetEase Cloud Music and Alibaba's Xiami respectively took the fourth and fifth place. Netease Cloud Music recorded a monthly active user of 140 million, half of Kugou's 294 million.
NetEase Cloud Music is still looking for a profit-making model, while TME already made profit before it went listed in U.S. last year. For the first half year of 2019, TME recorded a revenue of RMB11.6 billion ($1.6 billion), 35% higher than the same period of 2018; the net profit also grew 10% year-on-year to RMB 1.9billion.
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