A case study of NetEase Cloud Music by SWOT, Porter's Five Forces, Business Model Canvas and Blue Ocean Strategy Canvas.

1. Group Discussion
Week 5:
NETEASE CLOUD
MUSIC
BY:
JIANG YUXUAN
ZHOU TIANZI
SONG XIAOYAN
WU YALIN
TANG SIYING
HU YADAN

2. Instructions
2
· SWOT ANALYSIS
· PORTER’S FIVE FORCES
· BUSINESS MODEL CANVAS
· BLUE OCEAN STRATEGIES

4. 4
STRENGTH
· UI（User Interface) Design
· Music Community for Comments and Interactions
· Algorithmic Recommendation& Personalization
· Special Pages of Branded Singers & Music Producers
· Development Plan of Original Music Producers
· Tickets for Music Festivals & Concerts

5. WEAKNESS
5
· Insufficient Music and Songs of Copyrights
· Unclear Music Genre Division
· Limitation in Access to Song Listening and Downloading
outside Mainland China

6. OPPORTUNITY
6
· Improvement in Awareness of Music Copyright Protection
· Establishment of Music Interaction and Socialization
· Limitation in Access to Song Listening and Downloading
outside Mainland China
· Convenience Provided by Increase in Mobile Terminals
· Purchase of Online Listening Rights without Data Consumption

7. THREAT
7
· Lack of Capitals in Music Copyright Purchase
· Lack of Corporate Alliances
· Management Staff Change*
*Jiemian News (August 1, 2016), “網易回應王磊已於4月離職網易雲音樂 由副總監丁博接任”.Retrieved
from https://www.jiemian.com/article/775332.html

8. PORTER’S FIVE FORCES
8
Threat of New Entry Threat of Substitution
Intensity of Rivalry among Established Firms
Bargaining Power of Customers Bargaining Power of Suppliers
2.

9. High Barriers
Mainstream music apps in China are estimated over billions of dollars: NetEase Cloud Music
(over$1.5billion), Xiami Music (over $400m) and QQ Music (over $1.8 billion after IPO in
NASDAQ on November, 2018)*, creating high entry for online music listening and downloading
startups.
* 36kr(April 11, 2017). “網易雲音樂獲7.5億A輪融資，躋身獨角獸行列”. Retrieved from https://36kr.com/p/5070326.html.
Q D a i l y ( S e p t e m b e r 2 4 , 2 0 1 6 ) . “ 據 說 阿 裏 音 樂 估 值 3 0 億 ， 不 懂 它 做 啥 了 能 值 那 麽 多 錢 ” . R e t r i e v e d f r o m
http://www.qdaily.com/articles/32579.html
THREATS OF NEW ENTRY
9

10. Loyal Users
THREATS OF NEW ENTRY
10
NetEase Cloud Music keeps a high
rate of monthly users(66.1%), activity
( 1 9 . 6 % ) a n d w e e k l y l o y a l t y
index(46.7%)
*source: QUESTMOBILE(July 2018)

11. Brand Awareness
THREATS OF NEW ENTRY
11
NetEase Cloud Music has declined in
exclusive user rate from 70.5% to
50.2%, indicating its reduction of
brand effects
*source: QUESTMOBILE(July 2018)

12. Limitation in Copyright Amount
Research and Development in Cloud Technology
THREATS OF NEW ENTRY
12
NetEase Cloud has now contracted with Avex(Japan’s
largest company) for its exclusive music copyright, not
making progress in business partnership with record
companies in China, Europe and North America
NetEase has developed over
$20m in the development of
online music community,
cloud music storage and
algorithmic recommendation
*source: QUESTMOBILE(July 2018)

13. THREATS OF SUBSTITUTION
13
Though having the highest monthly
active user(MAU）rate(92.6%) ,
online music apps face threats
from online radio(53.8%), online
karaoke (46.9%) and music live
streaming(28.3%) API.
The penetration rate of online
karaoke and radio API has
reached over 100m in July, 2018,
containing great potential in
Chinese market.
*source: QUESTMOBILE(July 2018)

14. THREATS OF SUBSTITUTION
14
Music app does not serve as an API of
listening and downloading, but focuses
on UX(user experience). This means
more interactions and gamification.
Interactions: Users watch live
streaming videos to comment and
socialize with others as they do in
music apps.
Gamification: Users participate in
vocal part (karaoke) and edit their
singing to get personal experience.
Interactions+Gamification: Users
design their homepage in karaoke apps
and snatch lyrics matching pictures they
select to share in SNSs.
*source: QUESTMOBILE(July 2018)

15. 15
*source: iresearch.com.cn (Feb 2018)
NetEase Cloud Music mainly provides
online & offline music.
Products that can fulfill this function can
be considered as its rivals.
According to IRESEARCH, there are
four popular music applications existed
in the market, ranking along with
NetEase Cloud Music, including
Kugou, QQ, Kuwo, Xiami music.
INTENSITY OF RIVALRY AMONG ESTABLISHED
FIREMS

16. 16
*source: iiMedia Research (Dec 2016)
These close competitors demonstrate
great potential in seizing market share by
grabbing a large number of users, as the
pie chart shows.
INTENSITY OF RIVALRY AMONG ESTABLISHED
FIREMS

17. 17
*source: iiMedia Research (Jun 2018)
According to the customer satisfaction
survey, competitors have provided
high-quality products and services
comparing with NetEase Cloud Music.
QQ, Kuwo and Kugou have gained
higher customer satisfaction than
NetEase.
INTENSITY OF RIVALRY AMONG ESTABLISHED
FIREMS

18. THREATS OF BARGAINING POWER OF CUSTOMER
18*source: iresearch.com.cn (Oct 2017)
The number of Chinese
mobile music application
users have showed an
increasing trend over time,
and reached 7.2 hundred
million in August 2017,
consisting 62.7% of mobile
users in China.

19. THREATS OF BARGAINING POWER OF CUSTOMER
19*source: xiazai.zol.com.cn (Oct 2018)
More than twenty existed
products provide the same
functions as NetEase.
The cost of user’s switching
from NetEase to another
competitor is low.
Customers’ bargaining power
is strong.

20. BARGAINING POWER OF SUPPLIERS
20
Music publishers sale copyrights to music apps in order to earn profits. As the unique
supplier of each album or song, the publisher has strong power in determining whether
provide the copyright or not.
For companies like NetEase, the bargaining power of suppliers is strong, as there is no
substitute to choose from in the mobile music application market if they want to provide
popular songs and albums.

21. Business Model Canvas
3.

23. BLUE OCEAN STRATEGIES
ERRC GRID
23
4.

24. High
Low
offeringlevel
Strategy Canvas
NetEase
QQ

25. ERRC GRID
Eliminated
CreateReduce
Raise
• Bullet Comment • Recommendation Algorithm
• UGC Quality
• UI Design
• Radio Categories
• Music Column • Online Mall
• Mode Selection

26. FACTOR ELIMINATED
• Bullet Comment –
NetEase Cloud Music just kept the music playing
page simple and clean to prevent distractions that
might ruin user experience.
There is no need for NetEase Cloud Music to add
such a function because it already has great user
generated content in the comment box.

27. FACTOR REDUCED
• Music Column–
Cloud Music inserted the entry to its music column
articles only in the web version, so that its mobile
version App sticks to the strategy of differentiation
instead of getting bloated.

28. FACTOR RAISED
• Recommendation Algorithm - Cloud Music
does well in predicting what songs will
resonate with a user’s particular taste in music.
• UGC Quality – The level of stickiness that the
service has developed with its users, reflected
by the number of comments that fans leave on
the pages dedicated to the individual songs, is
being viewed by music industry insiders as a
kind of miracle within the Chinese music
market. The comments are widely shared
across the social media networks, which also
attracts great traffic to the App.

29. FACTOR RAISED
• UI Design - Just on the single item of the how
quickly – how many revolutions per minute -
the image of the vinyl record spun on the play
page, they adjusted it more than two dozen
times.
• Radio Categories – Cloud Music has included
a wide range of radio content for subscription
and also tapped the paid content business.

30. FACTOR CREATED
• Online Mall – Cloud Music Mall
includes music products such as
headphones, speakers and musical
instruments as well as goods related
to popular internet IPs like Gin Tama.
• Mode Selection – Cloud Music
prepares night mode, driving mode,
focus mode, stress-relieving mode
and preschool mode to satisfy
various user needs.

31. THANK YOU
: )