Entertainment

NetEase Cloud Music Posts Double-Digit Q3 Revenue Increase As Gross Profit Cracks $46 Million

China Cloud Music

Photo Credit: NetEase

NetEase Cloud Music generated CNY 2.36 billion (currently $328.89 million) during Q3 2022, according to a newly released earnings report, representing a more than 22 percent year-over-year (YoY) increase.

The China-based music streaming platform’s Q3 2022 showing just recently came to light in an earnings report from the overarching NetEase (NASDAQ: NTES). For reference, NetEase’s music unit listed on the Hong Kong Stock Exchange (trading as 9899) about one year ago, with Sony Music Entertainment having taken a $100 million stake.

Additionally, Chinese regulators formally prohibited all domestic streaming services – having previously taken aim at Tencent Music in particular – from inking exclusive copyright deals in early 2022. (“We are still working very hard to get back more titles at a reasonable cost,” NetEase CFO Charles Yang indicated of Cloud Music’s licensing progress following the government order.) And April of 2022 brought with it the debut of TikTok owner ByteDance’s streaming offering, Qishui Yinyue.

Moving past these pertinent background details and returning to the performance of Cloud Music during the three months ending on September 30th, NetEase identified CNY 2.36 billion ($329.32 million) in revenue for the division, as mentioned, up 7.56 percent on a quarterly basis and 22.47 percent from Q3 2021.

Although Cloud Music’s cost of revenues swelled to CNY 2.02 billion ($281.88 million) during this year’s third quarter (an increase of 6.17 percent QoQ and 7.53 percent YoY), gross profit grew to CNY 333.65 million ($46.56 million), reflecting quarterly growth of 16.84 percent and a noteworthy 679.12 percent hike from July, August, and September of 2021.

NetEase execs attributed Cloud Music’s improved performance “to increased net revenues from its social entertainment services” and subscriptions, besides “continuously improved cost control measures.” Additionally, NetEase disclosed that it had spent about $6.9 million to acquire roughly 700,000 Cloud Music shares during the quarter.

When the market closed today, Cloud Music stock was worth HK$68.70 (currently $8.79) per share, whereas NetEase shares finished at $66.63 apiece. Meanwhile, each share of NetEase rival Tencent’s streaming company, Tencent Music (NYSE: TME), was worth an even $6.

The sum represents TME’s highest day-end value since February and follows the release of Tencent Music’s Q3 2022 earnings report. According to the performance analysis, the streaming business – which operates QQ Music, Kugou, and Kuwo – generated approximately $155 million in net profit and, despite a dip in overall usership, managed to grow its subscriber base by nearly 20 percent YoY.

Worth noting in conclusion is that ByteDance, on top of rolling out the aforesaid Chinese streaming platform, is reportedly in talks with the major labels to make a music service available to users around the globe.

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