直播和短视频正在改变音乐产业（国在线音乐产业）

1、ContentsOURTHESISINPICTURES5PIVOTALQUESTIONS7 HYPERLINK l _TOC_250006 Q:CanChinasmusicsubscriptionrevenuedoubleinthreeyears?7 HYPERLINK l _TOC_250005 Q: Will the rise of Tik Tok be a disruptive force for Chinas existing music channelsandlabels?25 HYPERLINK l _TOC_250004 Q: Can music live streaming a

2、nd online karaoke revenue outperform the overalllivestreamingsector?32OutlookforChinasonlinekaraokeandmusic-centriclivestreambusiness33 HYPERLINK l _TOC_250003 Companypages36 HYPERLINK l _TOC_250002 Tencent Music (Neutral,US$16.50PT)37 HYPERLINK l _TOC_250001 NetEase (Buy,US$315.00PT)40 HYPERLINK l

3、_TOC_250000 Spotify (Buy,US$182.00PT)43China Online Music IndustryUBSTHESISMAP aguidetoourthinkingandwhatswhereinthisreport HYPERLINK l _bookmark1 OURTHESISINPICTURESMOSTFAVOUREDLEAST FAVOUREDSpotify, TMEPIVOTALQUESTIONSQ: Can Chinas music subscription revenue double in threeyears?Yes,weexpectsubscr

4、iptionrevenueinthestreamingmusicsegmenttorisefromRmb4.5bnin2018 toRmb9.2bnin2021.Penetrationisdrivenbyrisingincomesandthelowsubscriptionfees.Chinese consumers have had a long experience of free streaming, which means platforms need to reduce free users rights. Leading platforms need to do so careful

5、ly due to competition. We expect penetration to experience a mild acceleration, from 0.8% in 2018 to 1.4% in2023E. HYPERLINK l _bookmark2 moreQ: Will the rise of Tik Tok be a disruptive force for Chinas existing music channels and labels?Yes. Already, 40-70% of hot songs on QQ Music and NetEase Musi

6、c become popular due to exposure on Tik Tok. Our analysis indicates over 20 x more songs are played on Tik Tok than QQ Music and iQiyi. Tik Toks parent, Bytedance, is reportedly looking to launch a music streaming service in autumn 2019. Its potential entrance could lead to another round of copyrigh

7、t competition,andtheshareofexistingplayerscouldbediluted. HYPERLINK l _bookmark3 moreQ: Can music live streaming and online karaoke revenue outperform the overall live streaming sector?Yes.iResearchexpectsChinasmusiclivestreamingandonlinekaraokemarkettogrowata28.4% revenue CAGR from 2018 to 2023, re

8、aching Rmb130.5bn, mainly driven by the online karaoke segment.Thisisabovethe16.9%revenueCAGRitforecastsforthewholelivestreamingsegment over thesameperiod. HYPERLINK l _bookmark4 moreUBSVIEWWe are positive on the long-term growth of Chinas music sector, as the paying ratio and average revenueperuser

9、(ARPU)arestillwellbelowglobalstandards.Wealsobelievethepayingratiowill increaseatanacceleratedpace.However,webelieveleadingplayerslikeTMEhavetobalancethe paceofmonetisationconsideringthatChineseconsumersareaccustomedtofreehigh-qualitymusic streaming services, and competition remainsintense.EVIDENCE1

10、) In the US, penetration of paid music subscriptions has accelerated since 2016. 2) Our analysis showspaidsubscriberpenetrationiscorrelatedtoacountrysper-capitaGDP.3)Areviewofsong rankings on QQ Music and NetEase music, shows 40-70% of the most popular music is Tik Tok driven.4)Ouranalysisshowsthenu

11、mberofsongsplayedonTikTokis20 xgreaterthanQQMusic and iQiyi, making it more influential in terms of volume.WHATSPRICEDIN?TMEistradingat28.5x2020EPE,significantlyabovelive-streamingplatformsMomoandYYs10.4- 11.5x.WebelieveinvestorsaremorepositiveonTMEsmusicbusiness.How many units of each item can a mo

12、nthly music subscription purchase in China?2.862.670.530.410.423.002.862.670.530.410.422.502.001.501.000.500.00Pork,kgApple (fruit), kg KFC ZingerBurger,unitCocaCola,canGantenWater,bottleSource: Company data, UBS estimatesMusic value chain in ChinaMusiciansLabelsMusic channels xMusiciansLabelsMusic

13、channels xMusicmarketingplatformsStreamingmusicplatformsCopyr ight buyer sCopyr ight o r igins FunctionsUpstream production resources, singers, songwriters, performers, Publishing music products (digitalmusic albums, consumersProviding recording, marketing, and agencies services forHelping music pro

14、mote new songs or other music products consumersTV channels, radio stations, shortvideo platforms, Musicplatformsthatprovidevastcontent libraries for consumersConsumersbeconnectedthe platforms,andstreamthemusictheyRevenue size Rmb bn CopyrightvaluewasroughlyRmb6-8bn(2018),sharingc.84%n/aMarket of Rm

15、b7.6bnforTik-tokisaTik-tokisamajormarketingchannelfortopmusicTME controls top 4 music platforms in of DAU share12.0%10.0%8.0%6.0%4.0%2.0%0.0%Kugou QQMusic KGeKuwo NetEase XiamiMusicMajor player s & landscape ZhiqianXueJayChou TFBoys JieEason ChanJJ G.E.MSong HanLu Steve Most popular musicians on QQ

16、MusicLabels behind top musicians13.913.612.612.211.8Most popular musicians on QQ MusicLabels behind top musicians13.913.612.67.4Followers on QQ MusicFutur e tr end Source:Companydata,UBSMusicians now have more channels become well known and popularamongconsumers,plansup by internet platfo

17、rms are turning more They have more diversified monetise, including copyright shows, and streaming tipping, Labels are seeing a major opportunity monetise their copyrights through streamingpaidsubsareexpected rise pattern;Theyaremorechallenges,their traditional function of discovering and marketing

18、now threated by new models, such algorithmrecommendations of short video segmentsRadio losing importance a marketing channel, while TV stationsremain important, music variety showsareinfluential and way produce new top starsThe very recent trend the strong rise of Tok. It has become the most importa

19、nt channel for songs become popular a very shortChinas music industry a turning point movie industry 2002 andonline video 2015, and we expect increase paid subscription penetration;Leading players TME need balanceuserexperience,ofdriving penetration too aggressivelyChina Online Music Industry 29 Jul

20、y 2019China Online Music Industry 29 July 2019ChinaOnlineMusicIndustryUBS ResearchOURTHESISINPICTURES HYPERLINK l _bookmark0 returnChinasrecordedmusicmarketisfarsmallerthanall other entertainmentcategories.16.0014.0012.0010.00201720182019E2020E2021E2022E2023EYoYStreaming music subs revenue, Rmbbn70%

21、60%50%40%30%20%10%0%Weestimatestreamingmusicsubscriptionrevenuein China could reach Rmb14.4bn in2023.1.60%1.40%1.20%1.00%0.80%0.60%0.40%0.20%0.00%4.563.741.8754.563.741.874.543.532.521.510.502014 2015 2016 2017 2018 2019E 2020E 2021E 2022E 2023EChange of music subs penetrationQQMusicNetEaseXiami Con

22、tent library score for core artistsWe expect the pace of paid subscriber penetration for music to accelerate in the next five years.In terms of music content, NetEase is closer to TME in terms of content richness (QQ Music is part of TME), and TME has to be careful in trying to drive paid subscripti

23、ons too aggressively.Note:1)contentlibraryscoreindicatestherichnessofanartistssongsincontentlibrary.Fullmarkis5,indicatingthata platformhasalmostallthecopyrightsofaspecificartist,while0meansnocopyrightheld;2)samplewas85 artistswithmore than1mnfollowersonQQMusic;ChinaOnlineMusicIndustryUBS ResearchOU

24、RTHESISINPICTURES HYPERLINK l _bookmark0 return140.0120.0100.00.032.6%15.7% 17.6%9.5%6.0%5%-3%0%0%0%-24% -24%-27%-32%-31% -32% -30%32.6%15.7% 17.6%9.5%6.0%5%-3%0%0%0%-24% -24%-27%-32%-31% -32% -30%-49%-57%ARPUforstreamingmusicsubs,RmbYoY-ARPUDiscount to iQiyis video subsfee40%30%20%10%0%-10%-20%-30%

25、-40%-50%-60%-70%WeexpectARPUforstreamingmusicsubscriberstobe largely flattish before 2023.70.0%70.0%40.0%80.0%70.0%70.0%40.0%70.0%60.0%50.0%40.0%30.0%20.0%10.0%Our analysis shows 40-70% of top 10 songs for QQ MusicandNetEaseMusicin2017-18becamepopular due to exposure on Tik Tok (were TikTok-driven).

26、0.0%QQMusic,2018NetEase,2017NetEase,Ratio of Tik tok-drivensongs201.050.2425201.050.24201510We estimate Tik Toks music traffic is over 20 times5greater than otherplatforms.0Tik TokQQMusiciQiyiEstimated daily traffic of music contents, bn video-view or song played140.0170%130.53180%120.0147%110.73160

27、%140%100.090.37120%80.060.070%53.6570.88100%80%iResearchestimatesa2018-23revenueCAGRof29%in Chinasmusic-centriclivestreamandonlinekaraoke40.020.08.921.9737.3744%32%27%23%18%60%40%20%market, outperforming the overall live streaming segment.-0%201620172018 2019F 2020F 2021F 2022F 2023FIndustryRevYoYGr

28、owthSource: iResearch, company data, UBS estimatesChinaOnlineMusicIndustryUBS ResearchPIVOTALQUESTIONS HYPERLINK l _bookmark0 returnQ:CanChinasmusicsubscriptionrevenuedouble in threeyears?UBS VIEWYes, we expect subscription revenue in Chinas streaming music segment to risefromRmb4.5bnin2018toRmb9.2b

29、nin2021.Wealsoexpectarevenue CAGR of 26% in 2018-23, reaching Rmb14.4bn by 2023. We think this will bemainlydrivenbyacceleratingpenetration,aswealsomodelflattishgrowth in subscription prices. We think tailwinds in Chinas online music industryare similar to those in the West, and include a growing sm

30、artphone installation base, and high 4G mobile network penetration). At present, music subscription penetration in China is being driven by rising incomes and affordable subscription fees. However, Chinese consumers have had a long experience of free streaming, which means platforms need to reduce f

31、ree users rights. Leading platforms need to do so carefully due to competition. We therefore expect the penetration rate to accelerate mildly, from 0.8% in 2018 to 1.4% in 2023, and music subscription penetration to reach 8.6% in2023.EVIDENCEIn the US, the yearly increase in paid subscriber penetrat

32、ion for musichas accelerated for the past three years. In 2016, the rate jumped from below 1ppt to 3.6ppt. This was due mainly to favourable industry tailwinds such as thegrowingsmartphoneinstalledbaseandimprovingwirelessinfrastructure.Ouranalysisshowspaidsubscriptionpenetrationiscorrelatedtoacountr

33、ys per-capita GDP.In China, paid subscription plans in China are currently differentiated from non-paying users by allowing music downloads. Of the recent top 100 songs onQQMusic/NetEase,only4%/6%canbedownloadedbynon-payingusers, while they can stream 84%/97% of the music.AccordingtoUBSEvidenceLabsu

34、rveydata,NetEaseMusicsiOSdownload share has risen to 37% in 2019, from 3-6% in 2014-15. We think competition will make leading platforms like TME careful of pursuing subscriber penetration too aggressively.According to TME, the main portion of QQ Music users are younger than50. This potentially limi

35、ts the TAM of music payment.WHATS PRICED IN?TMEistradingat28.5x2020EPE,significantlyabovelivestreamingplatforms MomoandYYs10.4-11.5x.WebelieveinvestorsaremorepositiveonTMEs music business than Momo andYYs.Streaming is emerging as a major music channel globallyOverthepasttwodecades,onlinemusichasresh

36、apedtheworldsrecordedmusic industryinmanydifferentways.Inthefirststage,thetotalvalueofrecordedmusic salessunkintomultipleyearsofdecline,asApplesiPodandiTunesdisruptedthe incumbent physical music value chain. Over the past 10 years, as Spotify successfully connected millions of Western consumers to i

37、ts streaming music service, recorded music finally reached a new dawn of rebooted growth. The recordedmusicindustryhasregisteredhighsingledigitgrowthsince2016.Andin 2018, streaming music accounted for 56% of recorded music revenue,becoming the single most important music channel.Figure2:Streamingmus

38、ichasbroughtrecordedmusic back to growth globally (US$ bn).Figure 3: and has become the major revenue channel for music (% of global music revenue)-1999 2001 2003 2005 2007 2009 2011 2013 2015 2017PhysicalDigitalYoY, total recorded music,RHS10%8%6%4%2%0%-2%-4%-6%-8%80.0%70.0%60.0%50.0%40.0%30.0%20.0

39、%10.0%0.0%56.0%45.5%35.2%23.1%16.2%11.4%3.3%4.9%7.8%2010 2011 2012 2013 2014 2015 2016 2017 201856.0%45.5%35.2%23.1%16.2%11.4%3.3%4.9%7.8%StreamingmusicNon-streamingdigitalPhysicalSource: IFPISource: IFPIWe believe almost all players along the music value chain benefit from the streaming music patte

40、rn.Consumers can enjoy instant connection to large music libraries. Leading playerssuchasSpotifyandTMEhavelibrariesof20-30mmusictitles,including widelydiverseartistsandgenres.Streamingmusicplatformscanrecommend musicusingbigdataalgorithms,diggingthepotentiallikesoflisteners.Users playlists can also

41、always be accessible on thecloud.Forplatforms,streamingisanefficientbusinessmodelalsousedinotherforms ofentertainment,suchasonlinevideo(Netflix)andvideogamesforplayerslike Sony, Microsoft and Nintendo). It is more sustainable than a one-off sales model,asthesunkcostofasubscriptionfeeleadstobetteruse

42、rengagement.Labels can eliminate the physical costs of producing and distributing CDs or vinyl LPs, as well as the costs of physical channels. With streaming, they can instantly reach millions of users. Streaming music also leads to a higher consumption of back catalogue tracks, as subscribers can e

43、asily access the wholecontentlibrary,andtheplatformsrecommendationsbasedonbigdata. In 2016, in the US, back catalogues accounted for 62% of total streaming consumption, compared to 59% for physical albums and 55% for digital downloads.Casestudy:theriseofSpotifyintheglobalmusic streamingmarketSinceit

44、slaunchin2008,Spotifyhasemergedasacategoryleaderinthestreaming media space and we expect its moat to widen over the next three to five years againstatotaladdressableglobalmarketofaboutUS$120bn(UBSestimate2022). As of Q119, Spotify had 100m Premium subscribers, and an additional 123mad- supported mon

45、thly average users(MAUs).We expect Spotifys Premium subscriber base to more than double over the next few years, reaching about 242m in 2023 (with a similar number of ad-supported accounts).Thiswillbedrivenbyacombinationoffavourableindustrytailwinds(eg, a growing smartphone installed base, improving

46、 wireless infrastructure, low streaming music penetration globally); and company-specific factors such as its distinctive technology and product features (eg, its recommendation engine), the favourable demographic profile of its customer base (with ample runway interms of penetration) and high custo

47、mer satisfaction scores versus competing subscriptionservices(basedonUBSEvidenceLabdata,USonly).242212183153124967049Figure 4: Spotify Premium subscriber base (m)2422121831531249670492502001501005002016201720182019E2020E2021E2022E2023EEuropeNorthAmericaLatinAmericaROWTotalSource: Company data, UBS e

48、stimatesSpotify is focused on a business model that will drive monetisation through paid subscriptions and advertising, with both capitalising on the narrowing of the gap betweenuserconsumptionandmonetisation.Whilethevastmajorityofrevenueis generated through Premium subscriptions (about 90% in 2018)

49、, we view advertisingasoneofanumberoflonger-termcalloptionsthatcoulddriveupside toSpotifysrevenuegrowth(andmarginstructure).Specifically,driversthatcould further lift ad-tier monetisation are: ad load growth, elongating freemium user consumption, expanding the ad product portfolio and programmatic c

50、apabilities, improvingadspendROIforadvertisersbyintroducingmoreeffectivetargetingand analytics tools and finally, growing video and non-music content including podcasts.Fromageographicperspective,Spotifyoperatesin79countriesandterritories(as of Q119) and has significantly expanded its presence in em

51、erging economies. Morerecently,thecompanylaunchedSpotifyLite(aliteversionofitsAndroidapp) in 36 countries, designed to work seamlessly on lower-end devices. As of today, Spotify has not shown any ambitions to build a presence in China beyond its investment in Tencent Music.Whilethestreamingmusicbusi

52、nesstendstohaveachallengingmarginstructure, we believe Spotifys current (and growing) scale with respect to its importance to the overall music industry will allow it to maintain or improve its relative negotiating position for global music rights in the short-to-medium term. In addition, we expect

53、incremental new revenue growth from call options (including podcasts, advertising and creator services) as key drivers to improve margin leverage in the longer term. Accordingly, we forecast Spotify gross margin to expand from about 26% in 2018 to 32% in 2023 (versus managements long- term guidance

54、of 30-35%) and turn EBIT positive in2021.Music is a serious laggard among Chinas entertainment categoriesIn China, music is a major laggard category among all entertainment forms in termsofmarketsize(revenue).In2018,Chinawasonlytheseventhlargestmusic marketintheworld,smallerthanFranceandKorea.Thisis

55、verydisproportionate as it is first or second in most other entertainment categories. Chinas recorded music market was US$531m in 2018, marginal compared to the US$10bn+ markets for games, TV advertising, and onlinevideo.Figure5:Despitefurtherimprovement,Chinasrecorded music industry was only sevent

56、h globally in2018Figure6:andtherecordedmusicmarketwasmuch smaller than other entertainment categories(2018)20132014201520162017201871012142121071012142121510152031.532018, $ bn14.7110.298.971.190.5335.0031.532018, $ bn14.7110.298.971.190.5330.0025.0020.0015.0010.005.0025GlobalrankingofChinasrecorded

57、musicindustry,intermsofmarketsize-Online gameTVads.Online videoMovieOnline novel RecordedmusicSource: IFPISource: Wind, IFPIBut we believe music has reached an inflection point in China much like those reached by the movie sector in 2002 and online video in 2015the release ofkey drivers that made ac

58、celerated growthpossible.Growth in movie industry revenue recovered in 2002, opening a gate of 66x growthinthefollowing16years.Thecoredriverwasthereformofthecinema circuitin2002.Previously,tofulfillfilmdistribution,Chinasfilmproducershad to deal with close to 1,000 cinemas nationally. This difficult

59、 issue caused multiple years of box office declines at the end of the 1990s. In 2002, Chinas regulator required that all cinemas be affiliated to a cinema circuit, which greatly facilitated film distribution.2015 was a turning point for Chinas paid video industry. Previously, Chinese consumers almos

60、t never paid for video content, except for movie tickets. But Chinas satellite TV stations also experienced over a decade of content competition, driving Chinas drama quality to higher levels. In 2015, iQiyi releaseditsexclusiveonlinedramaTheGraveRobbersChronicles,andreceived 2.6m subscriber orders