Confirmed: Alibaba buys stake in NetEase Cloud Music in $700m deal

One of the world’s biggest companies, Alibaba Group, is now officially a stakeholder in one of China’s largest music streaming platforms, NetEase Cloud Music.

NetEase has confirmed to MBW that Alibaba has acquired a minority stake in its company.

Together with Yunfeng, Alibaba is investing approximately US $700m in NetEase Cloud Music, lower than the $2bn that sources were speculating yesterday (Sept 5).

NetEase Inc. will remain the controlling shareholder in NetEase Cloud Music, according to the company.

As forecast in our story yesterday, in a separate deal, Alibaba has also acquired NetEase’s import e-commerce platform Kaola for approximately $2bn.

William Ding, the Chief Executive Officer of NetEase, said: “As the controlling shareholder of NetEase Cloud Music, we will continue to fully support the growth of this business, helping it to realize its strategic goals in the music industry.”

And Daniel Zhang, Chief Executive Officer of Alibaba Group, added: “Alibaba looks forward to becoming a partner in the future development of NetEase Cloud Music and exploring innovative collaboration in the digital entertainment space.”

“Alibaba looks forward to becoming a partner in the future development of NetEase Cloud Music and exploring innovative collaboration in the digital entertainment space.”

Daniel Zhang, Alibaba

Discussing the Kaola deal, Alibaba’s Zhang said: “We are pleased to have found a strategic fit for Kaola within Alibaba’s extensive ecosystem, where Kaola will continue to provide Chinese consumers with high-quality import products and services.

“At the same time, the completion of this strategic transaction will allow NetEase to focus on its growth strategy, investing in markets that allow us to best leverage our competitive advantages. We remain fully committed to offering our users best-in-class and differentiated online content born from our relentless drive for craftsmanship and innovation.”

NetEase Cloud Music completed a $600m Series B funding round in October last year, including backing from the likes of Baidu and General Atlantic.

Discussing NetEase Cloud Music’s business amid NetEase’s Q2 earning call in August, NeatEase Inc. CEO, William Ding, said: “We continue to innovate and create a highly differentiated product with an unparalleled social experience on our NetEase Cloud Music app. At the end of July, we added a new, highly popular community module known as the Cloud Village.

“This is a music community that fosters discussion, creation and sharing and personalized expression around music. It is presented in a format of waterfalls containing music video blog, music micro blog and many other exciting features that allow music lovers to follow and express themselves interactively.

“This brand-new module changes the way that users experience music from just listening to also watching and interacting. At this moment, we have over 800 million users on our music app, which is 50% up year-over-year. Subscriber numbers are also growing very strongly at 135% year-over-year increase.”

When asked about the potential profitability of NetEase Cloud Music as a standalone entity in the future, Ding added: “[We’ve] never officially commented on any timetable, but rest assured we feel very, very confident about the growth upside of China’s online music industry as a whole. [NetEase is] very disciplined in controlling costs at a reasonable level; as well as be focusing on the return on the various investments, whether it’s selling, marketing or R&D, into our different business segments. So profitability is ultimately our target.”

Last year, NetEase Cloud Music inked a partnership with Alibaba’s Xiami music streaming service – ostensibly a rival – in order to share libraries and grow their respective repertoires.

That move was widely seen as an attempt to strengthen both platforms against Tencent Music Entertainment, owner of QQ Music, Kuwo and KuGou.

Monthly users of TME’s mobile music services hit 652m in Q2, according to its investor filings.

However, TME is currently under investigation by China’s antitrust authority, which is reviewing the company’s status as an exclusive sub-licensing partner of Universal Music Group, Sony Music Entertainment and Warner Music Group in the territory.

TME’s majority parent, Tencent Holdings Ltd, recently made a €30bn ($33bn) bid to acquire 10% of Universal Music Group from the latter company’s Paris-based parent, Vivendi.Music Business Worldwide

Related Posts