NetEase Cloud Music, China’s second-largest provider of music streaming services, reported a 23.1% year-on-year jump in revenue from online music services in 2024, with all of its profitability metrics showing significant increases.
In its earnings report for calendar 2024, released on Thursday (February 20), NCM reported revenue of RMB 5.35 billion from music services, equating to USD $743.5 million at the average exchange rate for 2024.
Revenue from paid subscriptions jumped 22.2% YoY to RMB 4.46 billion ($619.8 million), which the company said was “fuelled by an increase in our subscriber base, though slightly offset by a dilution in monthly ARPPU (average revenue per paying user).”
The company didn’t disclose the total number of paying subscribers or monthly active users.
A year earlier, NetEase reported 44.12 million paying subscribers as of the end of 2023. That year, NetEase also reported its first full year of profit.
“By enriching our premium offerings, such as expanding our content library, refining personalized recommendations, introducing innovative features, and fostering a stronger sense of community, we further deepened user engagement,” NetEase said in the earnings report.
“Additionally, the rollout of enhanced membership benefits spurred rapid growth in our subscription-based memberships, further driving robust revenue growth in our core online music business and profitability.”
NetEase said it increased user-generated content (UGC) formats and put greater emphasis on music communities and user interaction last year, resulting in more engagement on its mobile app.
“We also continued to expand our music consumption scenarios by partnering with several NetEase games,” the company said.
The increase in music revenue was largely offset by a 26.2% YoY decrease in revenue from its social entertainment services division, which came in at RMB 2.59 billion ($359.9 million).
“By enriching our premium offerings, such as expanding our content library, refining personalized recommendations, introducing innovative features, and fostering a stronger sense of community, we further deepened user engagement.”
NetEase Cloud Music
Both NCM and its larger competitor, Tencent Music Entertainment, began recording steep declines in their revenue from social entertainment services several years ago, following the Chinese government’s crackdown on online gambling. NetEase’s latest earnings report indicated that the company is pivoting away from social entertainment and towards music services.
The decline in social entertainment “was primarily attributed to a more prudent operational approach for our social entertainment services, along with a focused emphasis on our core music business,” NetEase said.
NetEase’s overall revenue for the year rose 1.1% YoY to RMB 7.95 billion ($1.09 billion).
Thanks to “continued improvement in cost control measures,” NetEase increased its gross profit by 27.5% YoY to RMB 2.68 billion ($372.4 million) and gross margin rose to 33.7% in 2024, versus 26.7% in 2023.
The company’s cost control measures resulted in its selling and marketing expenses falling 19.3% YoY, while cost of revenue declined 8.6% YoY. General and administrative expenses fell by 11.8% YoY, while R&D costs fell 10.2% YoY.
Adjusted net profit jumped 107.7% YoY to RMB 1.70 billion ($236.3 million).
Looking ahead to 2025, NetEase said it plans to focus more on growing revenue through premium offerings – something other music streaming services, like Spotify, are also planning to do. The company said it’s planning to roll out “innovative interactive features and expanding opportunities for user communication and connection.”
And like other music streaming services, NetEase has placed increased emphasis on long-form audio content, namely podcasts and audiobooks. Listening time per user on long-form audio grew by 35.8% YoY in 2024, the company said in its earnings report.Music Business Worldwide
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