麦格理-中国-互联网与媒体行业-音乐产业：中国的崛起-2019.2.12-44页.pdf

Please refer to page 41 for important disclosures and analyst certification,or on our website February 2019 China EQUITIES China pan-entertainment market size Source:iResearch,Macquarie Research,February 2019 Paying ratio among pan-entertainment verticals Source:Company data,iResearch,Macquarie Research estimates,February 2019 Inside Music:rising power in China 2 Gauging the size of Chinas music pan-entertainment market 6 Market consolidation post copyright regulations and content war 12 Tencent Music Entertainment(TME US)14 Analysts(update)Macquarie Capital Limited Wendy Huang,CFA +852 3922 3378 Ellie Jiang +852 3922 4110 Frank Chen +852 3922 1433 John Wang +852 3922 3578 China Internet and Media Music:rising power in China Key points Improving IP protection and social networking has sparked rapid growth in online music sales.Music is under-monetized in China,compared to games and video.Music pan-entertainment market forecast to grow from Rmb33bn in 2017 to Rmb215bn in 2023.We initiate on Tencent Music Entertainment with Outperform.IP and content is king in Chinas internet and entertainment space As we enter into the Year of Pig,we conduct an in-depth analysis of Chinas entertainment and media sector,with initial focus on the music industry.Compared to other content,music is highly recyclable and has lower hit-or-miss risk than video,games and movies.We believe Chinas internet space is also entering into a new era where content,rather than distribution channel,is king.We initiate coverage of Tencent Music Entertainment,the No.1 entertainment stock in China,with an Outperform rating and a target price of US$19.5.Improving IP protection fostered good paying behaviour in China Chinas music market has been under-developed and fragmented due to deficiencies in copyright protection until 2016,when the government started to terminate unauthorized music online.In 2017,Chinas music market ranked No.10 globally,with revenue of only US$0.3bn,compared to US$5.9bn for the US.In contrast,China has overtaken the US to be the largest online game market in the world in 2017,with US$33bn revenue.Higher user penetration,yet lower paying ratio Compared to other entertainment media in China,music has higher internet user penetration(71%)than mobile games(64%),short video(46%)and online literature(17%).User penetration of music is second only to that of video(94%).Although both music and video have gained significant users in the past one year,monetisation of the music industry in China is still in its infancy,as is evident from the paying conversion gap vs video and gaming industry.With diversified and innovative revenue models,investment in quality and curated music content,we believe music will be able to tap the deeper pockets of younger consumers and see paying conversion rise from 4%in 2018 to 10%in 2022.iResearchs blue-sky forecast is more aggressive,projecting 22%by 2022.A dynamic music pan-entertainment market with two major players Chinas online music pan-entertainment market consists mainly of subscription/digital music purchases,online karaoke,music-centric live streaming,online advertising,and online music copyright operations.Chinas music market is highly dynamic,which enables Chinese consumers to engage with music in many ways,including discovering music,listening,watching,singing and socializing.According to iResearch,this broad definition pan-entertainment market for music in China will register 37%CAGR from Rmb33bn in 2017 to Rmb215bn in 2023.Tencent dominates this high-growth market with the top four music apps in China,followed by NetEase Music.247153356791051381782150%20%40%60%80%100%120%140%050100150200250(Rmb bn)Online music pan-entertainment marketyoy%4%5%9%15%20%0%5%10%15%20%25%Macquarie Research China Internet and Media 12 February 2019 2 Music:rising power in China China ranks No.10 in the fast evolving global music market The global music markets revenue bottomed in 2014 at US$14.1bn,as digital music revenue started to make up for losses in physical sales(mainly CDs).According to IFPI,digital sales,including streaming,accounted for 54%of global music revenue in 2017.Streaming music revenue alone increased 41%to$6.6bn in 2017,with 176m paying users(adding 64m from last year)and accounted for 38%of global music revenue.The global recorded music market has been dominated by the three largest music groups:Universal Music Group(UMG),Warner Music Group(WMG),and Sony Music Entertainment(SME),whose collective market share in revenue was 74%in 2017 based on our estimate.UMG had a 30%share of combined physical and digital recorded-music revenue.Its digital recorded-music sales were also the highest among all peers,taking approximately 32%of total revenue made in global recorded-music industry in 2017.Fig 1 Global recorded music industry revenues 1999-2017(US$bn)Source:IFPI,Macquarie Research,February 2019 Fig 2 Global recorded music revenue by segment(2017)Fig 3 Recorded music companies revenue share(2017)*Streaming primarily refers to paid subscription audio streams.Synchronisation refers to revenue from the use of music in advertising,film,game s and television programmes.Source:IFPI,Macquarie Research,July 2018 Source:Sony,WMG,Billboard,IFPI,Macquarie Research,February 2019 25.223.423.821.920.119.518.116.314.111.910.48.98.27.66.76.05.75.55.20.41.022.73.43.73.94.24.44.34.03.83.22.80.10.20.20.30.40.40.61.01.41.92.84.76.60.60.70.80.90.91.01.21.31.31.41.41.61.81.92.02.32.40.30.30.30.30.30.40.30.30.05.010.015.020.025.030.01999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017PhysicalDigital(excl.streaming)StreamingPerformance RightsSynchronisation revenuesPhysical30%Digital(excl.streaming)16%Streaming38%Performance Rights14%Synchronisation revenues2%UMG30%SME23%WMG21%Independents26%Macquarie Research China Internet and Media 12 February 2019 3 China music market revenue increased 35%to$292mn in 2017 per IFPI,ranking 10th among the top music markets globally,up from 12th in 2016.Fig 4 Top 10 music markets revenues 2017(US$bn)Source:Company data,Macquarie Research,December 2018 Music is under-monetised in China Online music is one of the most active verticals in Chinese pan-entertainment industry.Per Questmobile,7 out of 10 internet users in China use online music services,a penetration rate second only to that of online videos.Active user penetration for the online music vertical expanded 9ppts to 71%in July 2018,surpassing mobile games.However,the music industry has been under-monetised in China,with the lowest paying ratio4%among all pan-entertainment verticals.In comparison,online games have the highest paying ratio20%per our estimate,while live streamings paying ratio averages 9%,despite the lowest active user penetration.Fig 5 Pan-entertainment industries active user penetration Source:Questmobile,Macquarie Research,February 2019 5.92.71.31.30.90.50.40.40.30.30.01.02.03.04.05.06.07.0USAJapanGermanyUKFranceSouthKoreaCanadaAustraliaBrazilChina80%62%64%27%16%6%6%94%71%64%46%17%8%6%0%10%20%30%40%50%60%70%80%90%100%Online video Online music Mobile gameShort videoOnlineliteratureMobileAnimationEntertainmentlive streamingJul-17Jul-18Macquarie Research China Internet and Media 12 February 2019 4 Fig 6 Paying ratio comparisons among pan-entertainment verticals *Online music data as of 2017,Online literature and livestream are as of 3Q18.Online videos and mobile games data are on our estimates.Source:Company data,iResearch,Macquarie Research,February 2019 Compared to rapid growth in the game industry,Chinas music market is still at an early stage of development.In 2016,Chinas total revenue in game industry reached$27.1bn,for the first time exceeding the USs$24.9bn.On the other side,Chinas music market generated only$0.3bn revenue in 2017,compared to US$5.9bn revenue from the US music industry.According to iResearch,the recorded music market in the US was 45 times that of China in 2017 on a per-capita basis.The gap,however,should narrow with Chinas per capita spending on recorded music likely more than quadrupling over 2017-2023,per iResearch.Fig 7 China vs US music industry revenue Fig 8 China vs US game industry revenue Source:IFPI,Macquarie Research,October 2018 Source:Newzoo,Macquarie Research,October 2018 4%5%9%15%20%0%5%10%15%20%25%Online musicOnline literatureLivestreamOnline videosOnline games0.1 0.2 0.2 0.3 4.9 5.0 5.3 5.9 -1.0 2.0 3.0 4.0 5.0 6.0 7.02014201520162017($bn)China musicUS music18.121.827.132.421.322.624.927.6051015202530352014201520162017($bn)China gameUS gameMacquarie Research China Internet and Media 12 February 2019 5 Higher willingness to pay for music,especially among younger consumers Thanks to stricter copyright protection,growing penetration of online music services and increasing willingness to pay,we expect to see Chinas online music industry on the rise,with expansion in the paying user base and enhanced monetarization capability.According to Questmobile,approximately 60%of Chinese consumers are willing to make purchases for online music,and membership on music platforms is the top spending items among paying users.60%of users in China are willing to pay for online music,per Questmobile.In particular,users below 35 years showed higher interest to pay.Among paying users,77%of have purchased membership and+48%have paid for digital albums or songs.30%of users have chosen to tip the live broadcasters with average ARPU of Rmb32.8 each time.Fig 9 Chinese consumers willingness to pay for music Fig 10 Consumption type and ARPU for online music users Source:Questmobile,Macquarie Research,December 2018 *ARPU for membership purchase is on a monthly basis.ARPU for the rest is based on each purchase.Source:Questmobile,Macquarie Research,December 2018 Fig 11 Age demographics of online music users(July 2018)Fig 12 User demographics of online music user(July 2018)Source:Questmobile,Macquarie Research,December 2018 Source:Questmobile,Macquarie Research,December 2018 8.2%2.7%5.3%7.7%10.5%19.8%32.0%35.9%29.1%24.8%38.2%44.7%59.8%61.4%65.5%67.5%51.3%35.5%0.0%10.0%20.0%30.0%40.0%50.0%60.0%70.0%80.0%90.0%100.0%OverallUnder 24years old25-30years old31-35years old36-40years oldOver 41years oldUnwillingNot sureWillingUnder 24 years old38%Ages 25 to 3031%Ages 31 to 3515%Ages 36 to 409%Ages 41 to above7%Tier-1 cities14%Tier-2 cities30%Tier-3 cities20%Tier-4 and below cities36%Macquarie Research China Internet and Media 12 February 2019 6 Gauging the size of Chinas music pan-entertainment market Driven by growing active users and high user engagement,the Chinas online music pan-entertainment market generated approximately Rmb33bn revenue in 2017,and is expected to grow to Rmb215bn in 2023 with a 6-year CAGR of 37%on iResearchs estimates.Fig 13 Music industry value chain Source:iResearch,Macquarie Research,December 2018 Fig 14 Chinas music pan-entertainment market size Source:Company data,Macquarie Research,February 2019 Chinas online music pan-entertainment market primarily consists of 1)online music service(subscription and digital music purchase),2)online Karaoke and music-centric live streaming,3)online advertising and online music copyright operations.We will discuss each segment in following section.1.83.56.515.13356.179.3105.2138178215.20.00%20.00%40.00%60.00%80.00%100.00%120.00%140.00%050100150200250201320142015201620172018E2019E2020E2021E2022E2023E(Rmb bn)Online music pan-entertainment marketyoy%Macquarie Research China Internet and Media 12 February 2019 7 Fig 15 Chinas music pan-entertainment breakdown(2018)*Online music services consist of subscription and digital music purchases.Others include primarily online advertising.Source:iResearch,Macquarie Research,February 2019 1)Online music services(subscription and digital music purchase)Revenue for online music services is generated primarily through membership subscriptions and digital music purchases.In 2017,Chinas online music services market generated Rmb4.4bn revenue.iResearch forecasts the market will further expand to Rmb36.7bn by 2023,representing a 6-year CAGR of 43%,driven by increased spending in music.Thanks to improved copyright protection,the online music paying ratio in China increased from only 0.4%in 2013 to 3.9%in 2017.Currently,a large portion of online music streaming services revenue is generated by downloads,with users paying subscription fees to download certain songs over a period.As the market matures,online music platforms will shift towards a paid-streaming fee model,which provides significant growth potential for the industry.According to iResearch,the paying ratio in Chinas online music services market will reach 28.7%by 2023.Fig 16 Online music services market size Fig 17 Paying ratio comparison in China Source:iResearch,Macquarie Research,October 2018 Source:iResearch,Macquarie Research,October 2018 Online music services11%Online karaoke and music-centric live streaming67%Online music copyright operations market7%Others15%0.40.91.93.34.46.38.110.516.727.336.70.00%20.00%40.00%60.00%80.00%100.00%120.00%140.00%0510152025303540(Rmb bn)Online music servicesyoy%0.4%0.8%1.7%3.0%3.9%5.3%6.3%8.0%13.1%21.8%28.7%1.5%2.7%6.9%13.2%22.5%28.0%33.5%37.4%39.6%40.0%41.2%0.0%5.0%10.0%15.0%20.0%25.0%30.0%35.0%40.0%45.0%2013 2014 2015 2016 2017 2018E2019E2020E2021E2022E2023EOnline music servicesOnline videoMacquarie Research China Internet and Media 12 February 2019 8 2)Online karaoke and music-centric live streaming services China has a dynamic environment for music-related consumption,including online music streaming,podcast,online karaoke and music live streaming.While a majority of music consumers make purchases on online music apps such as Kugou and QQ Music,approximately 47%and 28%of consumers also purchase through online karaoke and music live streaming verticals.Per Questmobile,as of July 2018,the number of active users reached 67m for entertainment live streaming and 189m for online karaoke.Active user penetration rate for online karaoke reached 17%as of July 2018(Fig 19).Karaoke singing has always been a popular social activity in China,which has helped to accumulate a highly engaged user base in online karaoke services.Online karaoke platforms allow users to sing and perform,while socializing in online communities with friends and others with similar interests.Currently,WeSing is the largest online karaoke services provider in China in terms of MAU.Thanks to Tencents social network,WeSings MAU registered 30%CAGR over 2016-2018,compared with the relatively flat MAU for the second-largest player Changba over the same period(Fig 21).Live streaming has also shown strong growth in China.Driven by high user engagement and a large base of musicians,the segment has demonstrated strong monetarization potential through sales of virtual gifts and premium memberships.According to iResearch,the overall size of Chinas online karaoke and music-centric live streaming services reached approximately Rmb22bn in terms