NetEase Cloud Music 2023 Financial Report: First Annual Profit with Net Profit of 734 Million

On February 29th, NetEase Cloud Music released its 2023 performance announcement. According to the financial report, NetEase Cloud Music achieved a net income of 7.87 billion CNY and a net profit of 734 million CNY in 2023. Throughout 2023, NetEase Cloud Music continued to advance its core ecosystem centered around music, significantly improving its monetization and profit capabilities. Benefiting from increased subscription revenue, ongoing optimization of operational efficiency, and cost control, NetEase Cloud Music achieved its highest annual profit in 2023, marking the first year of turning losses into profits, with a gross profit margin surging from 14.4% in 2022 to 26.7% in 2023.

• Monthly active users steadily increased to 206 million, with a 21.4% conversion rate.
• Despite industry-wide slowdown, NetEase Cloud Music's online music service saw a steady increase in monthly active users to 206 million in 2023, marking an 8.7% year-on-year growth. The online music business continued its robust growth with a 15.3% year-on-year increase in monthly paying users, totaling 44.12 million. Thanks to the expansion of its membership base, membership revenue continued to grow steadily, reaching 3.65 billion RMB in 2023, a 20.2% increase year-on-year. The revenue per monthly paying user for the online music service increased to 6.9 RMB.
• In 2023, the platform continued to expand its differentiated premium content, launching initiatives such as the "5 RMB Student Membership," incentivized advertising, and enhanced benefits for Hi-Fi members, including multi-terminal library access. These promotions and benefits upgrades further reduced the membership threshold and enhanced user experience. The platform saw a significant increase in high-quality active users, with continuous improvement in membership attractiveness. The ratio of daily active users to monthly active users remained above 30% in 2023, maintaining the platform's industry-leading user stickiness.
• Profitability continued to improve, with the gross profit margin reaching 26.7% and a net profit of 734 million RMB in 2023.
• In 2023, online music service revenue reached 4.35 billion RMB, a 17.6% year-on-year increase, while social entertainment services and other revenue totaled 3.52 billion RMB. The number of monthly paying users for social entertainment services increased to 1.6 million, up 20.3% year-on-year. Profitability saw steady improvement in 2023, with the gross profit margin soaring to 26.7%. The net profit for 2023 was 734 million RMB, compared to a loss of 110 million RMB in the previous year, marking the first full-year turnaround from loss to profit.
• In the new decade of the Cloud Village community, the focus is on enhancing user engagement with a renewed music experience.
• In April 2023, NetEase Cloud Music launched the "Cloud Village Ten-Year Anniversary" series of brand activities, reflecting on the achievements of the past decade and looking ahead to the development of the new decade. On January 9th of this year, the NetEase Cloud Music App announced a major redesign, centered around the theme of "getting closer to music." The redesign aims to create a purer, simpler listening experience. The new version focuses on exploring user-generated content such as music reviews and playlists, combined with the latest intelligent recommendation technology. This not only reconstructs a music community with a stronger atmosphere for music enthusiasts but also promotes the widespread dissemination of high-quality music works, benefiting a wide range of original musicians. Copyright collaboration has yielded fruitful results, further enriching the original music ecosystem.

In 2023, NetEase Cloud Music forged deep collaborations with several renowned label companies and top artists, including leading Chinese labels like Believe Music, Yuding Thread, Baimifan, and Tianyu Media, as well as prominent Korean labels like DREAMUS represented by artists like Myth. It also acquired rights to popular music variety shows like "The Voice of Taiwan Season," "China Rap Battle 2023," "The Voice from Heaven Season 4," "Drama's Catchy Songs," and "Summer of Bands 3."

Throughout 2023, NetEase Cloud Music continued to support outstanding original music, resulting in a surge of hit self-produced songs. Its advantages in youthfulness and localization were evident, with self-produced tracks like "Jingwei," "To the Clouds," and "To You" becoming viral sensations, receiving widespread acclaim. By the end of 2023, the platform's content library comprised 149 million music tracks, with approximately 684,000 original music creators contributing around 3.1 million tracks.

Furthermore, the platform focused on strengthening its advantageous music categories, such as rap, regional music, and others, thus enhancing its appeal to users. Young original musician Zheng Runze experienced explosive growth in 2023, amassing over 3.327 million followers on the platform. Recently, the self-production studio launched several themed music projects to promote self-produced music production, covering band projects, rap, R&B, instrumental music, and film and television music projects.

AI empowered the entire process of music creation, content consumption, and music recommendation, expanding the advantages of algorithmic recommendations.

In 2023, NetEase Cloud Music continued to deepen the application of AI technology throughout the entire process of music production, consumption, and recommendation. On the production side, it introduced a series of efficiency-boosting tools for music creation, covering the entire creative process for musicians, such as the Inspiration Charging Station, BEATSOUL Stimulus, NetEase Tianyin, and NetEase Cloud Music · X Studio, reducing the threshold for music creation and helping musicians improve efficiency. On the consumption side, it launched an intelligent song recommendation and explanation feature called "Private DJ" to enhance the music listening experience. Meanwhile, NetEase Cloud Music enhanced its AI-powered recommendation algorithms, further improving the efficient connection between music production and consumption. The proportion of music playback recommended by the platform continued to increase in 2023, further expanding the leading edge of its algorithmic recommendations. Exploring Diverse Music Consumption Scenarios to Enhance the Spread of High-quality Works and Deepen Copyright Value

In 2023, NetEase Cloud Music collaborated with various games such as Egg Party, Onmyoji, Dream of Three Kingdoms, and Sky: Children of the Light, expanding diverse music consumption scenarios. It broadened brand partnerships, such as customizing songs for mainstream brands like SAIC Volkswagen, Yili, and Sprite, and partnering with PepsiCo to host events like the "Passion Unleashed Music Festival." Its copyright distribution platform, Cloud Village Exchange, further improved its diversified layout in 2023, including brand-customized music, a comprehensive library for various scenes, and store background music. It deepened cooperation with leading global music platforms, facilitating the internationalization of Chinese original music. In 2023, it distributed over 1 million songs throughout the year, accumulating over 15 billion plays.

The 2023 performance demonstrated NetEase Cloud Music's sustained healthy growth, with a significant advantage in youth appeal and continuously improving profitability. Recently, several brokerages including CICC and Guosen Securities have given NetEase Cloud Music a buy rating. In 2024, NetEase Cloud Music will further focus on platform scale growth, steadily enhance platform profitability, and promote the healthy development of the Cloud Village ecosystem.