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NetEase spinning off its music business for Hong Kong IPO

By | Published on Thursday 27 May 2021

NetEase Cloud Music

Chinese web giant NetEase is spinning off its music streaming business and will list it on the Hong Kong stock exchange. The firm formally submitted the paperwork for an IPO yesterday.

NetEase Cloud Music is the main competitor in China to the various music services operated by Tencent Music Entertainment. As well as the core on-demand music streaming set-up, the wider Cloud Village unit being spun off also runs livestreaming, karaoke and other related services.

According to Bloomberg, a preliminary prospectus for the IPO states that Cloud Village grew its monthly music user-base to 181 million last year, of which 9% are paying subscribers.

Revenues surged 111% to 4.9 billion yuan in 2020, with “social entertainment services” in particular contributing to that surge. Meanwhile, the unit’s net losses also increased, to three billion yuan last year, versus two billion yuan in 2019.

On the IPO, NetEase said in a statement: “Cloud Village’s business is expected to undergo relatively rapid business expansion and would be appealing to an investor base that focuses on high growth opportunities in the music streaming business, different from the relatively more diverse business model of NetEase’s operations”.

One source told Bloomberg that the IPO could raise about $1 billion. Cloud Village will continue to operate as a subsidiary of NetEase following the listing, with the parent company still controlling at least 50% of voting rights.