A Case Study of Netease Cloud Music
Celia Gao, 1155082077
1. Introduction
Recently, Cheetah Global Lab has ranked all kinds of Android Apps in 2016, mainly according to their weekly penetration rates of active users.
In the area of mobile music apps, Kugou music, QQ music and Kuwo music occupy the top three positions (see figure 1). Their penetration rates are 14.396%, 10.216% and 3.451% respectively. These three apps all have close relationships with Tencent. In July, 2016, Tencent claimed that it had come to an agreement with China Music Corporation that QQ music would combine with CMC (which owns Kugou and Kuwo) to become a new music group held by Tencent Group. Therefore, Tencent is no doubt the biggest winner in domestic online music area. Netease cloud music follows behind, which has a weekly penetration rate of 1.429%. It’s noteworthy that its weekly number of opening, which is 40.6, far surpasses other mobile apps. Duomi music and Xiami music stand fifth and sixth. The latter one was acquired by Alibaba Group in 2013. Ali
planet, which is in the tenth position, is also a music product of Alibaba. The
seventh is Baidu music.
Ranking
|
Application
|
Weekly Penetration Rate
|
Weekly opening number
|
1
|
Kugou music
|
14.396%
|
18.7
|
2
|
QQ music
|
10.216&
|
19.7
|
3
|
Kuwo music
|
3.451%
|
15.2
|
4
|
Netease Cloud music
|
1.429%
|
40.6
|
5
|
Duomi music
|
0.451%
|
8.6
|
6
|
Xiami music
|
0.367%
|
16.2
|
7
|
Baidu music
|
0.276%
|
9.5
|
8
|
Migu music
|
0.153%
|
11.0
|
9
|
Aiting 4G
|
0.145%
|
22.1
|
10
|
Ali Planet
|
0.126%
|
10.2
|
Figure 1.
In
short, the whole digital music industry has almost been integrated by BAT (Baidu, Alibaba and Tencent). And the current digital music market is close to an oligopoly that is dominated
by
a
few
firms
hold
a
similar
share.
Thus, how can Netease cloud music break through the wall and capture more market share?
2. SWOT
Analysis
The characteristics of Netease cloud music are quite obvious. In terms of its strength, the biggest advantage is that it has good product experience. It has
delicate user interface. The player UI imitates vinyl records, which creates some retro flavor. Besides, it also successfully adds social
elements to this platform. By establishing song menus, posting in the comment
area, translating lyrics and sharing music in the moments, the user loyalty has
been strengthened during these content-producing ways. Therefore, Netease owns stable
and high-quality user group.
In terms of its weakness, After National
Copyright Administration of China released the notification that online music
services should stop distributing music which has not been authorized, the
market competition is in fact a fight on the copyright. However, Cloud music has
nothing on financial resources when comparing with BAT group. Nowadays, Tencent
series holds the largest music library in China. Since the music library is the
most core and fundamental thing of a music app, the loss of music means the
loss of users.
However, the protection of copyright in turn brings
opportunity to Netease to some extent. It enhances the
profession barrier of digital music industry. Small companies can hardly have a
share in this market, let alone new entrants. Moreover, Netease now has 200 million
registered users. These users are mainly young people who live in big cities
and have high education background. They have great consumer loyalty to this
product. When their economic power grows, their potential would outbreak in
music consumption, which can bring about huge economic benefits to Netease.
From a supplier’s perspective, when digital music market becomes oligopoly,
their bargaining power would be weakened. Thus, record companies would prefer
to cooperate with high-growth potential product like Netease.
In terms of
threat, as is mentioned above, Netease faces with many strong competitors. These
music apps have their own competitive edges. For example, Kugou music owns the most active users
among other mobile music apps acoording to the ranking. Kuwo
has greater user experiences after its revision in 2015. QQ music holds the
most sufficient music library. Aiting 4g are free to Telecom users. In the
future, the competition would become fiercer.
3.
Suggestion
In conclusion, Netease Cloud music does a good job
in user experience. The social elements added in its platform increase the user
adhesiveness. In the future, Netease should maintain this characteristic while
creating more interactive contents. Besides,
Netease can also make the most of its brand to develop new businesses such as selling
peripherals or holding offline activities.
As the physical music album market is declining
gradually, digital music market is on the rise. Issuing albums through online
platform has become the mainstream. Netease can put more emphasis on this
business and cooperate with major album companies to make up for its predicament
of lacking music library.
Reference
1. QDaily
(2016). Since the Online Music Industry Has Been Integrated by BAT, What’s The
Chance of Netease? Retrieved from:
2. Rong,
R (2017).2016 Annual List of China apps.
Retrieved from:
3. iiMedia
(2016). 2015-2016 China Online Music Market Research Report. Retrieved
from: http://it.sohu.com/20160310/n439952810.shtml
Hi Celia,
ReplyDeleteAn insightful analysis of the market of mobile music APPs in China! And I would love to add several points to it.
It is true that Netease Cloud Music has done great job in user experience and one of the most attractive features of is its intelligent recommending algorithm. The system is able to perfectly match the users with the music tracks in tune with their taste. People will feel like that it really knows what they need and tend to develop high level of loyalty to the product.
However, as it is mentioned in the essay, copyrights are vital to the competiveness of online mobile APPs according to the newly released policy. And the battle of copyrights is actually the battle of capital. In this sense, Netease do not have an advantages over giant companies like BAT.
Moreover, the potential revenue gained from the user is not that promising. The majority of the Internet users in mainland China are used to consuming streaming music for free for quite a long time. It takes time to cultivate their consuming habits.
Confronted with these problems, I supposed that one of the solutions for Netease lies in the cooperation with indie musicians. The works of indie musicians are not widely spread on the Internet and their fans have extremely high loyalty and strong purchase intention. For instance, if Netease can acquire exclusive licenses or rights of first launch from the indie musicians, the company can turn the fans of these musicians into loyal users of the platform. More importantly, by doing so, the company can build up a more favorable image to the niche groups and gain more revenue from the niche market, which could be its unique advantage over other competitors.
Thanks for sharing. As you mentioned, the merge of Tencent's QQ Music service with China Music Corp posed a big threat to Netease Cloud Music. An individual mainly cares about the music resources and user experience when using the music app. I agree that Netease doesn't have a large music library as Tencent, and Tencent's advantage will be even more obvious considering the merge with CMC. Fortunately, Netease cloud music is reputable with its user experience, mainly the music recommendation based on big data and the vibrant social atmosphere. However, as users' switching cost from one app to another is fairly low because of the freemium business model. It is hard to say that Netease can stand out from the competition solely depends on creating an user-friendly environment.
ReplyDeleteMy thoughts around this is also considering targeting the niche market as mentioned by Lei, but as I knew that many other music apps like Xiami also took this approach. So Netease will have to think more about how to outperform those competitors as well.
- by Shiran Jiang, 1155084678
It’s a very practical and insightful analytics towards online music industry! I totally agree with you that the most shining function of Netease Cloud Music is user experience since I just turned to use Netease a few months ago from Xiami. I was totally excited about the personal music albums from others so that I could save my time in searching one from one. However, after a few months, I got little tired since the app always introduces similar song albums for me. And sometimes some songs repeatedly appear in different lists. I suppose that Netease Cloud Music should explore more user-friendly pattern on introducing song album by deeply analyzing user data from background.
ReplyDeleteIn terms of development, except for continuously competing with others in copyright field, I suppose that it should still enhance its specific music function, such as sharing community. Since most of the users don’t just use one app for music but alternately use 2 or more apps, NCM should highlight its position by outstandingly function. For example, introducing ranking rules of music critics to encourage people to share professional music opinions, etc. This rule could strengthen user stickiness, activeness and even meet its own culture: high quality and sharing.
On the other hand, as you mentioned in the essay, the copyright battle may be more fierce in the future. As far as I am concerned, I guess NCM may have cooperation with Tencent or other apps one day since the cost to fight for copyright may become higher and the large resources would be mainly divided. It may be beneficial for both Tencent and NCM if they have cooperation to level down the cost of operation in the future and there may be more competition zone for them.
Thanks!
Comment by Lun, lixin (1155081992)
#Mobile_Application_Development
ReplyDeleteGreat Blog!
Build your own online music app and explore your music and videos to the world. An app is better way to get entertained. Preview an online audio video app: #Online-audio-video
Thanks!