Months after the funding rumor, NetEase Cloud Music, the music and radio arm of Chinese internet portal NetEase, announced that it has completed an A round worth RMB 750 million (approx. US$ 108 million). The round puts the company’s valuation at RMB 8 billion, boosting the company to unicorn status four years after its launch in 2013.
Chinese media conglomerate Shanghai Media Group (SMG) led the strategic investment, joined by Mango Cultural and Creative Industry Private Equity Fund, a fund established by Mango Media under the flagship of Hunan Broadcasting System, and CICC Jiatai Fund, the investment unit of China International Finance Company Limited.
The capital raised in this round will be mainly used for enhancing the user experience of the NetEase Cloud Music products, increasing investment on content, developing a healthy patent system and establishing a solution for the upstream and downstream music to provide the users with abundant resources of high quality music, introduced Zhu Yiwen, CEO of NetEase Cloud Music.
In addition to the capital itself, the deal would also put the music streaming service in content partnership with SMG and Mango, two comprehensive culture groups with extensive resources in music talent shows, movies, variety show, music, and more.
Along with the funding news, the company announced that it has amassed 300 million registered users. Over the past four years, the service showed great growth potential. In July 2015, its users broke 100 million and one year later, the number broke 200 million.
NetEase Cloud Music is considered the cool kid in the music streaming market with its smart music recommendation and partnership with indie musicians. The service is also bravely forging into the short video sharing market in an attempt to make the app more social and gain more paying subscribers.
Zhu disclosed that the company’s revenue comes mainly from membership, digital albums, ads, and branded physical products (including toys, notebooks, and cups). The company’s also planning to release a smart hardware product.
As a latecomer in the field, NetEase Cloud Music is still catching up to incumbents like Kugou, QQ Music, and Kuwo Music who have support from either Alibaba or Tencent.
Both Alibaba and Tencent have invested heavily in the entertainment industry to create synergy effects across all sectors. For example, Alibaba has acquired UC browser and Youku Tudou, investing over RMB 2 billion in the strategic transformation of Tudou.
Even with the new funding, it’s hard for NetEase Cloud Music to construct a big entertainment ecosystem to compete with these internet giants. But it’s also a good option to adopt a differentiation strategy by dig deeper in a smaller niche market and avoiding the music copyright barriers.