NetEase just raised a dollar for each of their 600 million listeners

NetEase have a LOT of listeners streaming music on their services and they’ve just gained a LOT of funding to help to expand and grow their user-base.

NetEase Cloud Music is the Chinese music streaming service of NetEase, a publishing and games mega company. That status has just gotten even more ‘mega’ with a whopping $600 million of investment from investors like Baidu, Boyu Capital and General Atlantic but NetEase remain the controlling shareholder.

It comes at a great time as digital music in China sees some of the most considerable growth in the world, and considering their population of 1.4 billion there is a large audience. That is evidenced already by NetEase Cloud Music who claim that more than 600 million users are now registered with them. With just 400 million users last November, 200 million new users in a year shows that digital music is being adopted at a wild rate in China. What makes this statistic even more incredible is the fact that NetEase Cloud Music has only been operating for 5 years.

NetEase’s chief executive officer and director, William Ding said: “Content creation and user experience differentiation is embedded in our corporate DNA. A focus on quality and craftmanship is prevalent in all our product offerings, including online games and e-commerce, among others. NetEase Cloud Music is no different. Music is particularly region-specific and we strive to create the largest interactive community for music lovers in China by providing users with convenient access to both mainstream and independent artists. We remain relentlessly focused on continuous improvement, and we are confident we can further unlock the value of this important asset in China’s thriving online music services market.”

Eric Zhang, the managing director and head of China for General Atlantic, said: “Pay-for-content is a growing trend, especially among Generation Z users, driven by increasing affordability and improving protection of intellectual property. We are deeply impressed with the NetEase Cloud Music team’s understanding of the music industry and their commitment to the user experience. We are excited to partner with NetEase Cloud Music and its strategic partners as the platform delivers one of the best online music streaming services and supports independent artists for content creation in the China online music market.”

Boyu Capital’s managing director, Joey Chen said: “China’s online music market is attractive with huge growth potential. We believe that NetEase Cloud Music commands unique value in the market as a clear leader in incubating independent musicians and enjoys proven popularity among a young generation of users in China who have formed an active community on the platform. We are confident that NetEase Cloud Music is well-positioned to capture the rising opportunities and achieve sustained high growth.”

Finally, speaking for Baidu their vice president Wang Lu said: “Baidu has always been committed to creating the most powerful content ecosystem. We have found that Chinese users still have a lot of room for online music. NetEase Cloud Music has made a name for itself in terms of its differentiated user offering, together with Baidu’s leadership in feed business, search content distribution capabilities in China, we look forward to working together to provide users with enhanced service through the strongest content distribution, and the highest quality content ecosystem.”

As an artist you can take advantage of NetEase’s massive number of listeners. We partnered with Kanjian to get your music on the biggest music services around Asia – including NetEase Cloud Music. Sign up for free at RouteNote and put your music in front of 600 million listeners, and all the rest.

Global music royalties show massive growth to €8.34 billion

Digital music has changed how we release and consume music and though many worried it was to a detriment the music industry is showing incredible growth, and streaming is powering it.

The 2018 Global Collections Report is here and represents a booming year for the music industry. Published by CISAC (International Confederation of Societies of Authors and Composers) who represent 239 authors’ societies across 121 countries their report accumulates music data from all around the world for a comprehensive account of the industry today. Spoiler – It’s looking good.

Music publishing collections have grown by 6% in 2017 to €8.336 billion ($9.4 billion) from €7.863 billion ($8.87 billion) in 2016. It’s empowering news that the music industry is thriving in the new digital age where streaming music is the go-to platform for listeners, especially younger listeners. Whilst radio is still thriving physical music sales are dwindling but the incredible surge in streaming revenues is ensuring that music isn’t losing it’s value.

CISAC’s director general, Gadi Oron said: “This impressive performance proves that authors’ societies are delivering value to the millions of creators they represent around the world. They have responded to rapidly changing technology, licensing digital services in new flexible ways and handling trillions of data transactions. And they are fighting for the best licensing in terms and the highest royalties possible in a world where powerful users are determined to avoid, or minimise, paying a fair return for their work.”

Digital music collections are up 166% in the last 5 years and reached €1.27 billion all in all last year. Royalties from digital music increased by 24% for the year and surpassed $1 billion for the first time in 2017. Whilst digital is growing massively there is still more that needs to be done to balance out the use of digital music and the revenues it produces if it’s going to replace physical sales in the long-term.

In 2013 CISAC elected electronic music pioneer Jean-Michel Jarre as president, who said alongside the report: “CISAC is at the heart of the battle for the future of over 4 million creators worldwide. I am passionately involved in this struggle. Europe has now recognised that it is time for change: it is not acceptable for the law to shield large tech monopolies and sustain a systemic injustice for creators. There is now a message to get to the rest of the world: it is time for other governments to sit up and follow.”

Almost 1m new subscribers made Pandora’s Q3 a success

Pandora have transformed from their free radio roots in recent years and their premium options are giving them a whole new lease of life with booming revenues.

Pandora have released their earnings report for Q3 and shows the music streaming company growing steadily whilst they continue their journey into premium streaming. Their ad-supported services showed a decent 6% growth from the same period last year with $291.9 million in ad-revenue but the real success story is in Pandora Plus and Premium.

It’s been over a year-and-a-half since they launched Premium, offering an on-demand streaming service like Spotify on their platform which had up until then run on a radio-like stream based on artists or tracks you chose. Pandora’s free streaming is still their most popular offering but Plus and Premium is where their growth is really taking off. Their two paid offerings made $125.8 million in Pandora’s Q3, which is a 49% increase on the same period in 2017.

Revenues for the quarter came in at a total of $417.6 million, a 16% increase year-on-year and higher than their estimate of $401.29 million. Like Spotify and many other streaming startups, Pandora are yet to make a profit and their non-GAAP net loss for the period was $15.5 million – $0.06 per share. It’s an improvement on 2017’s Q3 when the company made a net loss of $15.9 million, however slight.

Pandora premium plus paid music streaming radio free on demand
Pandora have offered Premium streaming options since last March

Pandora’s paid tiers saw great growth for the quarter with 784,000 new subscribers in the 3 month period. Their total number of subscribers now equals around 6.8 million across both Plus and Premium. Overall, including their incredibly popular free streaming platform, their total active users reached 68.8 million by the 30th September.

Pandora’s CEO, Roger Lynch said in a release: “I’m proud of the progress we’ve made over the past year to reinvigorate Pandora. A year ago, we committed to drive listener engagement through product innovation, expand our content, and increase distribution partnerships. We also prioritised making our ad tech capabilities a strategic advantage. And we executed. We launched new products like Premium Access, delivering on-demand functionality and improved listener engagement in our ad-supported tier; forged partnerships with leading brands such as T-Mobile, AT&T, Comcast, and Snap; and solidified our global leadership in digital audio advertising with the acquisition of AdsWizz and the launch of our programmatic audio marketplace.”

Pandora Sirius XM satellite digital online radio streaming music services paid premium free freemium ad supported
Sirius XM agreed to purchase Pandora in September

This earnings report marks the first financial release by the music streaming company since they agreed to be purchased by Sirius XM Holdings in September for $3.5 billion in an “all-stock transaction”. The satellite and digital radio company look to close the deal for sure in the first quarter of 2019 bringing exclusive content to Pandora, extra revenue streams to Sirius XM Holdings, and co-marketing opportunities for the both of them.

Lynch continued: “Looking ahead, I couldn’t be more excited about Pandora joining forces with Sirius XM. A combined Pandora-Sirius XM will create the world’s largest audio entertainment company, bringing Pandora additional resources to accelerate growth and building on Sirius XM’s leadership in the car, subscription expertise, and unique content.”

Spotify edge ever closer to making a profit with a great Q3

Spotify have been in the game a long time now, over 10 years, but the worldwide startup taking the world by storm with music streaming is still on it’s journey to profitability. 

As Spotify approach the milestone of 200 million total users worldwide their revenues are slowly rising and whilst they are still yet to make a profit this year is their closest yet. In their report for their third quarter Spotify reported that their total revenue was €1,352 million, a significant 31% rise on the same period last year which would have been even higher if not for foreign exchange rate growth.

Q3 saw Spotify’s Gross Margin grow by 25.3%, an increase from 22.3% in Q3 2017. However their Gross Margin is slightly lower than the previous quarter, Q2 2018. Spotify are expectant of this saying: “Gross Margins are seasonally lower in Q1 and Q3 resulting from the costs of the major seasonal promotional campaigns we typically run in Q2 and Q4 each year. A majority of the expense of these promotional subscribers is absorbed following the quarter of intake onto the platform. As long as we maintain this promotional campaign cycle we would expect this seasonal pattern to continue.”

Spotify explain that whilst ad-supported Gross Margins are strong in their top 5 markets, it’s a much weaker tier in their 60 other markets. They reckon that their margins will grow as these markets, many of them still new to Spotify, grow in user-ship. Ad-supported Gross Margin’s however rose from Q2 by 2.3% as Spotify say these revenues are much less affected by seasonality.

For their third quarter overall Spotify reported that Operating Expenses cost €348 million with a total Operating Loss of €6 million. This means an Operating Margin of 0.5%, an improvement of over 650 bps year on year. Spotify expect less Operating Margin improvement as they look to invest more in Research and Development with many of their next hires planned to be utilised in R&D – which makes up over 40% of their 4,040 (as of September 30th) person strong team.

Despite protests Europe just approved Sony’s full EMI acquisition

The EU have just approved Sony Music’s takeover of EMI Music Publishing despite indie music organisations across Europe warning that it gives them too much influence.

Sony Music now own a 100% stake in EMI Music Publishing following the European Union’s regulators approving the takeover. The acquisition takes the Japanese business giant from 30% ownership in EMI to 100% complete ownership. It began in May when Sony acquired Mudabala’s 60% majority stake for $2.3 billion giving them a massive 90% stake in EMI. They then acquired the final 10% from The Michael Jackson estate for $287.5 million.

The European Union’s regulators had to approve the acquisition to ensure it wasn’t giving Sony too much influence over the music industry, but according to their decision they don’t feel it does. They stated: “The commission concluded that the transaction would raise no competition concerns in any of the affected markets and cleared the case unconditionally.” However indie organisations were quick to criticise the unconditional approval, despite strong opposition to it leading up to the decision.

Indie music trade group IMPALA’s executive chair, Helen Smith said in a statement: “This goes against the regulator’s own precedents. In 2012, it ruled that divestments were required for Sony to become a minority shareholder. Now that Sony is acquiring 100% control of EMI, it is being given unconditional approval. This is inconsistent and simply doesn’t stack up. It is a poor advert for European merger control and sends an alarming message to independent businesses in all sectors, not just music.”

Universal Music Group are generally considered to be the most powerful of the three major labels in the world but the EMI acquisition puts Sony firmly in the lead, at least for Europe. They now own over 4.2 million compositions and have the power to combine both recordings and publishing of music using their label powers and new publishing powers. In some of Europe’s key countries Sony now owns over 70% of their national charts, like; Italy – 77%, France – 73%, Spain – 82%, and the Netherlands – 72%.

Smith continues: “This is bad news for the music sector and the digital single market. Sony will have a near monopoly over the charts and the whole music value chain will lose out as a result. Songwriters, composers, independent labels and publishers, digital services, and of course music fans, will all be worse off. This decision has dealt a significant blow to innovation and cultural diversity in Europe.”

Japan is starting to adopt music streaming at last

Country by country the world is taking up music streaming as their platform of choice and the CD-loving Japanese are starting to pick up on the trends too.

Over the past 10 years, and in particular the past 5 years, music streaming has gone from an exciting new way to find music to one of the primary ways people listen to music. Offering the world’s music library for unlimited consumption its opened up the music tastes of people around the world and help new and underground artists get discovered like never before. The Western world haven’t hesitated in adopting streaming and the rest of the world is definitely picking it up, but Japan have been slow to recognise it.

Whilst music streaming services have launched in Japan they haven’t received the same traction as they have in other territories. A lot of this is down to how they value music in Japan. They have always been a very physical music-based country with CDs still vastly more popular than digital music. It’s interesting that they haven’t adopted the vastly cheaper alternative of streaming music considering CDs are so much more expensive in Japan, which is why many artists used to release bonus tracks on the Japanese version of their albums.

In 2017 the Recording Industry Association of Japan (RIAJ) found that 80% of the music sold in Japan is still in physical form. Their reluctance to adopt streaming seems to be simply a cultural issue, as the country is renowned for brilliant internet and enjoying music. When surveyed last year only 15.5% were aware of streaming services and then 44.5% of those who were aware of them said they wouldn’t use them. Only 11.2% of those who knew about music streaming said they would pay for it.

Despite this cultural opposition to streaming it is finally picking up some steam. Last year the RIAJ started tracking data for music streaming in the country for the first time and found that streaming music made up 46% of digital music sales. Digital music downloads only made up 47% percent, showing that as Japan adopts digital services it is also adopting music streaming with it.

CEO of Japanese independent music label Danger Crue, Masahiro “Jack” Oishi said: “Comparative to other major music markets, streaming services came to Japan quite late. We are yet to reach critical mass, although the signs ahead look positive.”

Live music expected to be worth over $30 billion in 4 years

Live music is massive right now and it’s only going to get bigger as music streaming creates the perfect environment for live concerts to thrive and grow.

Live music has been booming more than ever in the past 10 years and it’s only going to keep getting bigger. The annual entertainment review by PricewaterhouseCoopers (PwC) shows that with the current growth trends of live music will see the industry surpass $30 billion worldwide for the first time ever by the year 2022. That’s 3.3% of steady growth from now for 4 years.

Live music is finding itself in symbiosis with the boom of music streaming as music quickly becomes primarily a digital platform – except for the vinyl revival. As music streaming becomes the format of choice for listeners around the world, listeners are discovering more music than ever and investing in artists they may have never heard without the unlimited availability of streaming services. Music streaming is predicted to gain even more significant growth over the next four years with the same report predicting 18% of growth from now to 2022.

The collective power of live music and music streaming services makes for an important partnership as the physical music industry sees it’s sales dwindle. CD sales and digital downloads have plummeted in recent years as consumers move to streaming services for their audio fix.

Music ownership is becoming less valuable as availability becomes priority, but with that comes smaller revenue sales for artists and labels. But this shift in the industry isn’t a bad thing as live music becomes more valuable and concerts become much more profitable for artists, especially with new listeners discovering their music all the time thanks to the openness of streaming services.

As well music is becoming more independent, as the necessity for labels and publishers who can print and publish records/CDs is no longer crucial and the opportunities for artists to release their music worldwide on their own terms become better and better. For example at RouteNote we offer free music distribution to all of the world’s top streaming services and download stores. Artists maintain complete control over their music and get to send their music out for the world to hear.

It’s an exciting time and a very transformative time for the music industry and artists in particular. PwC US’ global advisory leader for entertainment and media, Christopher Vollmer says of the report’s findings: “To succeed in the future that’s taking shape, companies must revisit every aspect of what they do and how they do it. This means going above and beyond in how they envision their business, generate revenues, create and organise their capabilities, and build and retain trust. And, given the pace and scale of change under way, speed is vital.”

The most successful startup in the world runs karaoke apps

When you think startups, you think pioneering design and revolutionary tech. so would it surprise you to find out that the most valuable startup in the world is the owner of a karaoke app?

TikTok is a massively popular karaoke app where users from around the world can come and share short videos with music, stickers and other fun extras to liven them up. TikTok is owned by Bytedance, a Chinese startup that have just been crowned the most valuable startup in the world with a new $75 billion valuation putting them $3 billion ahead of Uber who are now second place in the startup value line-up.

A new investment round led by Softbank saw $3 billion put into Bytedance which led to their new position on top. TikTok isn’t their only asset, you’d imagine there would be more to a company than online karaoke to be worth more than the world’s new global taxi rank. Bytedance are also responsible for a massive news aggregator in China, Toutiao. Toutiao gets hundreds-of-millions of readers coming in daily and is likely their most valuable asset thanks to their gigantic audience.

TikTok’s value shouldn’t be underrepresented however as it’s massively popular with younger smartphone users, particularly in the west. It became even more popular in August when the ridiculously popular lip syncing app, which Bytedance acquired last November, was integrated into TikTok for one complete music/video experience.

Bytedance are doing incredibly well but as with most startups are still working towards making a profit despite earning $2.5 billion in revenue last year – according to Bloomberg. The company also isn’t without their controversy, having clashed with the Chinese government last year due to their strict censorship on media. Their Toutiao app was temporarily removed from app stores earlier this year, prompting Bytedance founder and CEO Zhang Yiming to apologise for “publishing a product that collided with core socialist values.”

Sing your heart out as Smule gets bigger with $20m investment

Smule’s founder once said that “music was the original social network” and with major new funding they’re making music more social around the world.

Smule started with a humble mission, to draw people in with fun and engaging apps that got them involved with music before they even knew they were doing anything musical. It’s since expanded into a massively popular app with 52 million users around the world every month coming together to sing and make music social again.

The company has just revealed another $20 million raised in funding following a £54 million round last May led by Tencent. Smule’s newest funds come primarily from Times Bridge, a subsidiary of Indian media conglomerate The Times Group. Their funding has been named a “strategic investment” and will see Smule strengthening and expanding their operations in India, which is currently the app’s second largest market internationally.

Speaking to TechCrunch, Smule CEO and co-founder, Jeffrey Smith said: “Building the Smule brand in India is a long term process, but a critical facet of realising our vision to connect the world through music. We are therefore thrilled to expand our reach in India through this significant partnership with Times Bridge.”

The CEO of The Time’s Group’s VC wing, Times Bridge CEO Rishi Jaitly, said: “Times Bridge’s mission is to bring the world’s best ideas to India and share India’s best insights with the world. Smule is a deeply original bold idea with a mission of changing the way the world experiences music. Our investment will advance Smule’s music mission across the Indian subcontinent and unlock the creativity of many millions along the way. We are delighted to be working with a partner who approaches India with the empathy, conviction and optimism that the Indian market warrants.”

The partnership will see connections created with local artists in India by Times Bridge for Smule’s international app.

Radio is losing out to Pandora and Spotify

Radio has survived the digital age of music so far with listeners still coming to terrestrial stations first, but it’s the brands who are abandoning ship.

A study earlier this month found that Americans are listening to more than 2 hours of music a day on average. What was most interesting was that, despite the massive rise in music streaming and other digital music services, radio is still the number one destination for listening to tunes.

Whilst traditional radio might still be the source of choice for the American public, it looks as though brands are moving away from the medium and looking to digital. New figures from Standard Media Index show that Pandora’s advertising revenue in the US grew by 45% year-on-year in the first 8 months of 2018. Spotify also saw 36% of growth in advertising revenue for the same period, but for terrestrial radio their revenues dropped by 1% as advertisers look elsewhere to push their products.

It may only be a small dip for radio but considering streaming services’ immense upward projection there is clearly a shift in the industry. The trends will also be changing as the study earlier in the month showed that whilst radio is still very popular, the younger generations are adopting streaming far more than they are listening to radio. Whilst only 8% of those surveyed above 65 listen to streaming services, a massive 60% of those aged 16-19 get the majority of their music listening from services like Spotify and Pandora.

Spotify’s CFO, Barry McCarthy, spoke on how he feels streaming will eventually take over radio at the recent Communacopia conference. McCarthy said: “The 20-year trend here is linear dies, everything on-demand wins. Instead of free / paid, it’s paid plus free, and free eats broadcast radio. I don’t know what happens to news and I don’t know what happens to sports, but for sure, the combination of your phone plus a voice-activated interface enables the car, and the car is the principal user experience for broadcast radio. Broadcast radio, SiriusXM are extremely threatened by the growth and evolution of streaming services.”

Funnily enough, only earlier this week SiriusXM announced their acquisition of Pandora and its streaming services. Digital music is definitely taking over the industry and surpassing traditional methods but radio still has life in it left. We will have to see how long that life lasts.