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)
Six months ended 30 June, |
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2023 |
2022 |
||||
(Unaudited) |
(Unaudited) |
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Financial Metrics |
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Revenue |
3,908,380 |
4,258,716 |
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Gross profit |
965,147 |
537,113 |
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Profit/(loss) before income tax |
331,961 |
(266,790) |
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Profit/(loss) for the period |
293,750 |
(270,810) |
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Non-IFRS measure: |
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Adjusted net profit/(loss)[1] |
331,893 |
(217,000) |
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Operating Metrics |
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Online music services |
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-MAUs (million) |
206.7 |
181.9 |
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-Monthly paying users (thousand) |
41,750.9 |
37,613.0 |
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-Monthly ARPPU (RMB) |
6.8 |
6.5 |
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Social entertainment services |
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-Monthly paying users (thousand) |
1,525.1 |
1,235.4 |
|||
-Monthly ARPPU (RMB) |
199.3 |
329.8 |
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First Half 2023 Key Financial and Operating Highlights
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:
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
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.
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.
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.
– 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.
– 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: |
400-120-9216 |
Hong Kong: |
800-930-639 |
United States: |
1-855-883-1031 |
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