|Bid||13.48 x 3200|
|Ask||13.56 x 4000|
|Day's Range||13.30 - 13.68|
|52 Week Range||11.81 - 19.97|
|Beta (3Y Monthly)||N/A|
|PE Ratio (TTM)||41.67|
|Forward Dividend & Yield||N/A (N/A)|
|1y Target Est||N/A|
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(Bloomberg) -- Sign up for Next China, a weekly email on where the nation stands now and where it's going next.For decades, NetEase Inc. has been the perennial runner-up to the likes of Tencent Holdings Ltd. in China’s evolving internet landscape. Now it’s betting on a bookish computer scientist to catapult it to the top of the class in the nation’s $36 billion online education market.Zhou Feng, chief executive officer of NetEase Youdao, is charged with helping NetEase escape from under Tencent’s enormous shadow and find life beyond video games. The U.S.-trained software coder handpicked by billionaire founder William Ding Lei is creating an all-in-one learning platform to tap the lucrative space where education and technology overlap. To bankroll that expansion, the company could float Youdao, last valued at $1.1 billion, as soon as this year.Zhou is counting on a decades-old custom. Every summer, millions of Chinese high school students sit through a grueling two-day college entrance exam, or gaokao, that helps determine the course of their lives. That’s why China’s tiger moms and dads have long sent their kids from as early as kindergarten age to private tutoring classes for English, math and sciences.Intense competition has fueled an education boom, particularly targeting the K-12 group that includes students from kindergarten through high school, creating a coterie of multi-billion-dollar corporations. Leading players like New Oriental Education & Technology Group Inc. and TAL Education Group that still rely mainly on in-class teaching have gone public in the U.S. and seen their shares soar. Online startups such as the Tencent-backed VIPKid are still trying to convince parents that digital instruction can be as good, if not better than brick-and-mortar classrooms.Through combining content with the latest technology, Zhou sees a business chance for Youdao, whose name loosely translates to “there’s a way”. Courses can be taught through high-speed live-streaming, enabling smooth communication between teacher and student. Artificial intelligence-powered “tutors” can grade homework and use data to evaluate student test results, he said.“That’s what we have always been good at,” said Zhou, 40, a University of California at Berkeley alumnus with a penchant for blending English words into conversations. “Almost every industry in China has been transformed by the internet, but that’s not yet the case for education.”Revenue for China’s online education market is estimated to have reached around 252 billion yuan ($35.7 billion) in 2018, and is expected to more than double in 2022, with 264 million paying users, according to iResearch.But there’s yet to be a clear winner -- even for top tuition providers like New Oriental, its digital arm Koolearn in 2017 only accounted for less than 1% of the total revenue in the local online teaching market, according to Frost & Sullivan data cited in its prospectus. What sets Youdao apart is its exclusive focus on online and its expansion into education-related hardware. It has launched a slew of products from apps for note-taking and children’s stories to smart devices like a 799 yuan electronic dictionary pen, which allows students to scan printed text and translate it instantaneously.“NetEase’s technology support and the company’s online DNA and roots should make its products more sophisticated than traditional education providers,” said Bloomberg Intelligence analyst Vey-Sern Ling. Still, not having physical classrooms means it could be difficult for Youdao to expand beyond structured, standardized learning or test prep, he said.NetEase could do with a win. Founder and CEO Ding has a master plan for China’s second largest game developer to delve into three sectors including e-commerce, music streaming and online education, but the result is best described as mixed. Its music arm has grappled with rising content costs, as it has to sublicense a large chunk of songs from its much bigger rival, Tencent Music Entertainment Group. Although e-commerce has grown to become NetEase’s largest division after gaming in terms of revenue, it sold its popular import platform Kaola to Alibaba Group Holding Ltd. in a $2 billion deal.That magnifies the importance of Youdao and its leader, with whom Ding shares a long history. Back in 2004, when Zhou was pursuing his doctorate degree in computer science, NetEase’s CEO came across his paper on filtering junk emails, and, ironically, shot him a message that was mistaken as spam. It had no body text but just a subject line: “I’m Ding Lei, I have a technical question for you.”The two eventually got in touch via phone calls, and Zhou worked part-time for NetEase for three years. After earning his doctorate in 2007, he officially joined the company as lead architect for Youdao in Beijing, which at the time was trying to morph from a digital dictionary into a web search engine. To challenge the local leader Baidu Inc., Youdao’s approach was to operate a slew of vertical search services at one time, in everything from news to blogs to maps.Those efforts failed, and in 2012 Zhou decided to close the search operation. “That was when we hit our lowest point,” he said. Zhou shifted the 400-person team to develop learning apps instead.Youdao’s revenue rose 60% in 2018 from a year earlier, while sales for K-12 courses increased three-fold in the same period, he said. Online courses have surpassed advertising as Youdao’s largest income stream, Zhou said.Now of the nearly 2,000 employees Zhou oversees at Youdao, half are teachers and other staffers dedicated to building up its online class portfolio. “Learning is much more difficult than playing video games,” he said.To contact the reporter on this story: Zheping Huang in Hong Kong at firstname.lastname@example.orgTo contact the editors responsible for this story: Edwin Chan at email@example.com, Colum MurphyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Alibaba Group Holding Ltd. bought NetEase Inc.’s Kaola e-commerce platform for about $2 billion and invested in its music streaming service, forging a rare partnership between two of China’s largest internet giants.The deal hands Alibaba the biggest Chinese online marketplace for foreign brands after its own Tmall Import and Export. Kaola will now operate independently but under new Chief Executive Officer Alvin Liu, a Tmall veteran. Separately, Alibaba and billionaire co-founder Jack Ma’s Yunfeng Capital will invest $700 million in NetEase Cloud Music. NetEase remains the controlling shareholder of its music app.Alibaba and NetEase -- both based in the prosperous eastern city of Hangzhou -- have long fought social media titan Tencent Holdings Ltd. across several fronts but the landscape is shifting. The emergence of Tencent-backed rivals like Pinduoduo Inc. is testing Alibaba’s dominance of retail. NetEase has long been a distant runner-up to Tencent in gaming and now also music streaming, while Alibaba has its own music app Xiami. The sale of the low-margin Kaola platform now allows NetEase to focus on its bread-and-butter gaming business.“NetEase can further optimize its costs while Alibaba strengthens its leadership in cross-border e-commerce,” Thomas Chong and Ken Chong, analysts at Jefferies, wrote Friday. “On the other hand, we believe NetEase Cloud Music can benefit from potential synergies with the Alibaba ecosystem.”Read more: Tencent Music Dives as Watchdog Probes Its Record-Label TiesThe Kaola deal creates a dominant bazaar for consumers seeking foreign labels and goods. Alibaba and Kaola, which is loss-making on an operational level, controlled almost 60% of all transactions on China-based platforms for foreign brands in the second quarter, according to research firm Analysys.It also deepens a seeming alliance. NetEase founder William Ding and Alibaba CEO Daniel Zhang exchanged good-natured banter during a long TV interview aired in China just last month. Asked about their rivalry, Ding joked: “Many of our employees might be husbands and wives.”What Bloomberg Intelligence saysAlibaba’s $2 billion acquisition of Kaola, NetEase’s cross-border e-commerce platform, will make it the go-to channel for Chinese consumers seeking high-quality foreign products.\-- Vey-Sern Ling and Tiffany Tam, analysts-- Click here for the researchThe investment will prove welcome to NetEase, which like Alibaba has grappled with rising content costs.NetEase Music most recently raised $600 million in November when Baidu Inc., General Atlantic and Boyu Capital participated in a fundraising round. The latest capital injection comes after China’s antitrust authority launched a probe into its much larger rival, Tencent Music Entertainment Group, over its licensing practices. Under government pressure, Tencent Music and NetEase Music last year agreed to relicense more than 99% of their music catalogs to each other.“What really matters is the 1% exclusive content,” said Shawn Yang, a Shenzhen-based analyst with Blue Lotus. “Now that NetEase has new funding that can be used to buy copyrights, it will definitely be a threat to TME.”(Updates with analysts’ comments in the fourth paragraph)To contact the reporter on this story: Zheping Huang in Hong Kong at firstname.lastname@example.orgTo contact the editors responsible for this story: Edwin Chan at email@example.com, Colum MurphyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Tencent Music Entertainment Group fell the most in five months as China’s antitrust authority investigates exclusive licensing deals it forged with the world’s biggest record labels.The State Administration of Market Regulation, which launched the probe in January, is scrutinizing the Shenzhen-based company’s dealings with music labels including Universal Music Group, Sony Music Entertainment and Warner Music Group Corp., Bloomberg reported Tuesday. Shares of Tencent Music slid 6.8% in New York, marking their steepest drop since March 20. The rout pushed the stock into negative territory for the year, down 4.9%.The three largest record labels have all sold exclusive rights to a major chunk of their music catalogs to Tencent Music, which is controlled by social media titan Tencent Holdings Ltd. but also backed by Sony and Warner. Tencent Music then sublicenses that content to smaller rivals, an arrangement they complain is unfair. Tencent Music pays fees that are unreasonably high and passes along much of those costs to its competitors, people familiar with the matter said. Licensing songs from Tencent Music for use in China can be twice as expensive compared to when licensing directly from major labels for the rest of the world, said one of the people, who asked not to be identified because the arrangement is private.Music and video platforms, including those operated by Alibaba Group Holding Ltd., Baidu Inc. and ByteDance Inc., all have to sublicense content from Tencent Music. The regulator’s actions pose a threat to Tencent, which leveraged a billion-plus social media users to dominate a Chinese online music industry expected to be worth $30 billion by 2023. Music is now a key driver for the WeChat-operator, which is struggling to sustain growth as U.S.-China trade tensions depress its home economy.Tencent Music, NetEase, ByteDance, Baidu and Alibaba declined to comment on the probe, which was previously reported by Capitol Forum and MLex without giving details of the pricing concerns of other platforms. The three biggest labels also declined to comment. The regulator didn’t respond to a fax seeking comment.Read more: Tencent Tumbles After China’s Slowdown, ByteDance Hit Ad SalesTencent Music, which floated in the U.S. last year, boasts the country’s largest music content offering, with more than 20 million tracks from over 200 domestic and international labels, according to the company’s prospectus. For the June quarter, it had over 650 million monthly active users and 31 million paying subscribers across its QQ Music, Kugou and Kuwo apps. Revenue from online music services rose 20% to 1.56 billion yuan ($218 million) in the period. But its gross margin declined to 33% from 40% in the June quarter in part because of waning sublicensing revenue from competing platforms, Chief Financial Officer Shirley Hu said on a conference call in August.Long a haven for piracy, China became one of the 10 largest music markets in the world in 2017 and climbed to seventh position last year. Major record labels’ sales have ballooned in the country thanks largely to the exclusive deals with Tencent. Music publishers are still hoping more people in the world’s most populous country will opt to pay for music.Tencent Music isn’t the only company to own exclusive rights. NetEase Music has also acquired exclusive rights to individual artist and record labels and continues to bid on licensing, according to industry figures. Many independent record labels have opted not to sell anyone exclusive rights, and say they have benefited from that arrangement.As part of the ongoing investigation, regulators solicited input from competing music platforms as well as the record labels involved, according to the people. China’s copyright watchdog in 2017 warned streaming services including Tencent Music against entering exclusive licensing deals. Under such pressure, Tencent Music and distant-second rival NetEase Music last year agreed to sublicense more than 99% of their music catalogs to each other.“Based on what I’ve observed in the past, such regulatory scrutiny doesn’t usually amount to much, especially in the area of antitrust in China,” Bloomberg Intelligence analyst Vey-Sern Ling said. “One potential outcome is to also try to control the price of sublicensing. However, these are commercial agreements and could be hard to manage.”The investigation may complicate Tencent’s expansion ambitions. It’s in talks to buy 10% of UMG in a deal that would value the world’s biggest music label at $34 billion and help bolster its Asia presence.Music streaming is one of Tencent’s few business units that has made it big beyond its home market. Tencent Music said its karaoke app WeSing has been topping the download chart in the Philippines’ Google Play in recent months after it was launched in Southeast Asia. Tencent also owns a stake in the world’s leading music streaming service, Spotify, while the Swedish company is invested in Tencent Music.(Updates with analyst comment in third to last paragraph)\--With assistance from Lulu Yilun Chen, Miao Han, Gao Yuan and Nick Turner.To contact the reporters on this story: Zheping Huang in Hong Kong at firstname.lastname@example.org;Lucas Shaw in Los Angeles at email@example.comTo contact the editors responsible for this story: Peter Elstrom at firstname.lastname@example.org, Colum Murphy, Edwin ChanFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
In today’s look at the market movers in the tech sector, Activision Blizzard (ATVI) rose 5% and CrowdStrike (CRWD) fell 5.4% to close at $84.08.
Tencent Music's broad and deep song portfolio has enabled the company to generate revenue by sublicensing content, but it has also made the company unpopular in some quarters.
Stocks rose after the U.S. backed off on Chinese tariff threats. Meanwhile, JD.com and Tencent Music Entertainment reported better-than-expected Q2 results.
Tencent Music Entertainment earnings and revenue for the second quarter topped Wall Street estimates, but the stock wavered for the China-based provider of music streaming services.
Tencent Music Entertainment Group (NYSE: TME ) could achieve strong growth in music subscription sales in the 2019-2021 timeframe, its margin expansion is likely to decelerate as the company continues ...
Chinese music streaming giant Tencent Music Entertainment (TME) reported its second-quarter earnings results after the closing bell on August 12.
General Electric, JD.com, Tencent Music, Advance Auto Parts and CIT Group are the companies to watch on Tuesday, August 13, 2019.
Tencent Music Entertainment shares were indicated lower in pre-market trading Tuesday after the China-focused music streaming platform posted weaker-than-expected second quarter revenues and slowing user spending.