Recently, Netease made intensive moves to Tencent. First, it accused the publicity materials of “glory of the king” of plagiarism. Later, Netease cloud music reported the unfair competition of Tencent music in its real name and said it had filed a lawsuit.

Behind the combined fist of public opinion is Netease, which has been angry for a long time. With business ethics and regulatory policies, it launched a declaration of war on Tencent, which is in a period of performance downturn.

Can Netease’s major business lines catch up with Tencent? Can “Millennium number two” break through itself?

Mingzheng

The Internet industry, which has been flat for a long time, has burst out a new “melon”.

On April 27, Netease cloud music released the statement on prosecuting Tencent music for unfair competition on the official wechat official account, which began with the following statement: domestic online music has no grass because of unfair competition.

In fact, this statement is not exaggerated at all.

According to the data previously disclosed by AI media consulting, as of December 2020, the top eight monthly live users of China’s online music app were kugou music, QQ music, KuWo music, Netease cloud music, Migu music, Xiaomi music, yinyuetai and shrimp music.

Among them, shrimp has been shut down, and yinyuetai is suspected to have closed down; Xiaomi music and Migu music are backed by Xiaomi and China Mobile respectively; The industry’s top three cool dog music, QQ music and KuWo music belong to Tencent Music Entertainment (TME).

Cloud music (09899. HK) controlled by Netease is also backed by two strategic shareholders of Baidu and Alibaba. Therefore, it is also regarded as the last fortress against Tencent music.

Netease cloud music used to be a phenomenal product. The iconic vinyl record playing page, “net suppresses the cloud” came out of the circle, and its social function is prominent. It uses “cloud village” to attract a large number of young users.

However, no matter how well the product is made, as a player, without music copyright, “I can’t hear Jay Chou here”, it still makes most users unable to love.

In 2016, China Music Group, which initiated the “exclusive copyright model”, merged with QQ music to form Tencent music entertainment. In the next few years, the company will give full play to this model and seize market share on a large scale.

With the intervention of supervision, this situation began to break the ice. In July 2021, the State Administration of market supervision imposed an administrative penalty on Tencent Holdings (00700. HK) for its acquisition of China Music Group, requiring the cancellation of the exclusive agreement reached with the upstream copyright party.

However, at the practical level, the split situation of copyright has not changed significantly. For example, today’s Netease cloud music, many of Jay Chou’s albums, still can’t listen.

Netease cloud music pointed out various problems of Tencent music in its statement, including “malicious infringement of copyright and suspected confrontation and rectification”, plagiarism and so on.

That afternoon, Chen Mo, the public relations director of Tencent music and entertainment brand, said in the circle of friends that he would not join the ranks of mouth fights. The relevant evidence has long been retained and the lawsuit has been launched one after another.

This event is not a single action of Netease cloud music. Just a week ago, on April 21, netease-s (09999. HK) issued a document on the official wechat for its mobile game “painted travelers in time and space”, saying that the publicity materials of “glory of the king” were suspected of plagiarizing a poster released in June 2021. Tencent’s response is the same.

in-fighting

Tencent and Netease, as Internet giants and the number one and number two in the global game industry, have been competing at all levels and occasionally quarreling, but they are basically in the “secret fight” between you and me, and have never really fought.

In 1997, Ding Lei founded Netease, with portal and email as the business core. In 2000, he went to NASDAQ to ring the bell.

Then, the Internet foam burst, and Netease, which was in urgent need of new stories, entered online games in early 2001. In December of that year, it launched MMORPG’s masterpiece journey to the West. The first one shot started, and the company successively launched “Dahua journey to the west 2”, “dream journey to the West online” and so on.

At that time, QQ, founded almost at the same time, saw a surge in users. Tencent, which was looking for a cash flow model, found the wealth password of the game and launched Tencent game hall in 2003 to break the game with leisure games.

In the early days, the secret of Tencent Netease’s rise was similar, and the game was used as the cash export of traffic. However, because QQ traffic is larger, and Netease’s mailbox and portal transformation are not direct enough, Tencent games catch up from behind, and the gap is gradually widening.

If the main body of Tencent Netease’s game competition in the first stage is traffic, then when the era of mobile games comes, the main body of competition in the second stage becomes products.

The product power of Netease Games has always been an advantage. The series of “big talk journey to the west” and “dream journey to the west” have been the cash cow of the company so far. However, Netease’s advantages in medium and heavy games were offset by Tencent’s layout on the mobile terminal, and “glory of the king” came.

The third window period in which Netease games catch up with Tencent games has appeared in recent years. Due to the limitation of edition number and the decline of user increment, Chinese game manufacturers have embarked on the road of going to sea.

Netease had an earlier layout, and works such as “Yin and Yang master” were a great success in the overseas market. At this time, Tencent raised its capital stick and successively launched super mergers and acquisitions in overseas markets, bringing the revenue of well-known game companies such as supercell and Sumo under its command, and the leading position at the product level was immediately wiped out.

In 2021, Netease Games achieved 45.5 billion revenue in overseas markets, equivalent to 0.7 Netease games.

In the third stage, Tencent game won in capital and left Netease game far behind in the form of dimensionality reduction.

In 2009, Tencent holdings disclosed the scale of game business for the first time, with an income of 5.385 billion yuan, compared with 3.4 billion yuan for Netease games, less than 1.6 times.

However, the gap between the two sides has widened rapidly. In 2014, Tencent reached the top of the global game leader, and the ratio became 4.6.

After that, although Netease games tried to catch up, they failed to change the overall situation after all. In 2021, Tencent’s game revenue was 174.3 billion yuan, while Netease’s game revenue was 62.8 billion yuan, a comparison of 280 million yuan.

More importantly, Netease game business accounts for 71.69% of the company’s operating revenue. It can be said that there are only games, while Tencent games account for only 31.12%. In addition to games, there are social networking, finance, content, cloud and so on.

resistance

Why did Netease choose to escalate the dispute at this time? It has been suppressed for years and needs to be broken. Netease finally sees the opportunity.

In terms of game business, Netease should not only deal with Tencent’s products