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NetEase (NTES)

Participants
Margaret Shi Investor Relations Director
William Ding Founder, Director and Chief Executive Officer
Charles Yang Chief Financial Officer
Alex Poon Morgan Stanley
Elsie Cheng Goldman Sachs
Alicia Yap Citigroup
Kenneth Fong Credit Suisse
Binnie Wong HSBC
Natalie Wu Haitong International
Thomas Chong Jefferies
Call transcript
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Operator

Good day and welcome to the NetEase Third Quarter 2020 Earnings Conference Call. Today’s conference is being recorded. And I would now like to turn the conference over to Margaret Shi. Please go ahead, ma’am.

Margaret Shi

Thank you, operator. liability today the forward-looking to company the Harbor discussion future relating qualify the the Safe of by performance and from note will statements contain to for U.S. Please established as are intended Private Securities Litigation Act. Reform future guarantees certain uncertainties, other Such and are and and of are subject performance statements assumptions factors. not to risks

and [indiscernible] general of risks are mentioned could of to filings of not undertake The results obligation its actual from factors these and including affect beyond Form law. those and that A included company to the Some Commission, any XX-F information forward-looking update NetEase’s financial differ by today’s certain with website in company the required this announcements the risk release business and press filings except cause discussion results the Exchange. Exchange company’s report discussion. in the materially could as on control Securities is and does annual in these the our on

management call, certain for purposes will discuss today’s During measures only. non-GAAP comparison financial also

For financial news a to GAAP release of quarter please measures earlier XXXX financial non-GAAP results, issued today. a reconciliation non-GAAP see earnings and the definition of third

is conference this reminder, recorded. a As being

webcast replay available addition, an investor at this presentation and the conference will In be NetEase of a on ir.netease.com. website corporate

call Officer; read the of William. Joining Executive turn behalf Charles Mr. and Officer. the call Mr. NetEase’s from will prepared on Chief now William us Yang, Charles, the on today Ding, to senior management Chief who remarks I is Financial over team will

William Ding

thank you, everyone, Thank participating for today’s and you, call. in Margaret,

are based remind to like that on would percentages I all begin, we Before renminbi. everyone

and another across strong We primary of growth are operational lines all of pleased quarter with our report financial businesses. to

billion XX% increased year-over-year revenue for by XX.X net total third quarter. Our the RMB reaching around

billion a online billion Net resilience from exchange net our which with billion Our reaching one quarter includes R&D game net foreign RMB was on XX.X X.X a of by revenues loss XX% foreign our addition efficiency operational X.X the rates. RMB best our gain of continuing by to of titles, ago included third which net year-over-year the a compared primarily in exchange expertise. existing services RMB in RMB X billion grew driven from operations income year illustration

attract of delivered For into games longest industry well packs Journey on growth mobile China, IPs both net running after Take launched year-over-year, Journey PC holidays our continue FWJ Online we for and its game continued revenues strong continue and our trend two games two of Westward that. FWJ to we to as legacy including the of titles casual the more XX% attracting a new HX, in largest nearly version the we general example, an PC above and build returning Online, their summer owing at to the third as lunched a expansion players. decades IP fans effect FWJ Fantasy MMO strength loyal new and successfully II Westward crowd operation with quarter other

game our new franchises. expand portfolio strong of through creation titles to successful continue consistent and We

that its introduce each success are well games and This follow. that themed game to Many with market opened eager of never grown much experience steadily new last before. our five has both gameplay particularly pioneered has launch, encourages the which alliances. had and terms seen brand game because revenue. years every its by introduced such users Overall blockbusters for more SLG new others SLG and as them have the has that its a creating create Invincible a in fifth since form in year scores gamer new in players anniversary In balanced to gamer. that been in Invincible top a one to comeback fan ACG October, in game up XXXX up like able strategize and the again iOS Celebrating five launched titles. season organically demonstrated and in model unwavering game strengthening categories from further dubbed new Invincible charts once growth games is standards the SLG Invincible holds loyalty reached the rules of China We are as Invincible market, We community. the of Despite China's its and popping numerous resetting position we games. on like Invincible biggest gameplay SLG SLG

continue in the going are innovate. on up build We and to SLG to expertise our genre

Our SLG the ACG and of China the Lord talked the Rings, markets. games XXXX factors both a Infinite major is genre genre was Rise one in for turning War global another The widely mainstream launch ACG China. next-generation plans in of in such and about of Lagrange into Onmyoji include game to as and our

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actresses premier some Onmyoji Yin-Yang We IP, movie actors our heated of and also The stars China's Year. movie has announced anticipation. and Chinese top New Master will first attracted on the on based which

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top This for we climbing latest chart. infrastructure, in China prerequisite Sky always development. for the to the iOS a always new the with on almost new a corporate featuring top another and are boost competition, we app Path of presents fan map, technologies As of a Path, September us similar with grossing experience Adventure a three an the has and billings at community for introduction established clear world-class September along successful discreetly advanced innovate. in gross with to saw vibrant build our The many In is titles of by DNA preparing younger Sky generations. series the we item brand to in an category RMB is among are enabled Battle direct heartwarming to no [ph] update the forefront

For example, three in-house lab built have best over years, game the AI past we the one China. in of

applying well AI in innovative the AI by technologies Our experienced to as experience. efficiency and AI development. enhance are more to able R&D game Empowered of focused game powered scientists game our brought to group our on as further we effects player's visual leading are features increase our

are On traction overseas content continuous leading front, the with our titles. updates more internationally we to gaining

following engaging the Out our quarter topping high. in grossing revenue iOS record Knives Out's presence This by a times Knives gaming Identity celebration in brand multiple with reached strengthened three overseas chart its the has off-line successful top a We a and of V series remained year further Punishment. quarter. One anniversary during the a In name in collaborations, activities Japan's and growth household reached on of Japan, series Eva second games in iOS also July. including online chart growth

five on World Ghost Lagrange, game, Quest. under Chronicle, operating Pokémon Turning Rings: than development, Revelation Infinite Akasha our Nightmare which Unknown including flagship a games Revelation Diablo of to more Rise have to been mobile MMORPGs our Immortal our we one Book, Breaker, PC. of in of Awakened, titles Lord is Magic number War, Harry Future, announced The and pipeline, we robust for the Potter: years

was mobile through and final We user Revelation beta discovery have players of of very big testing adventure. travel to and game its legacy fields, game, of and sky. the They to just encouraging. the can the across oceans, closed up on our PC of the vast version brings world deep mobile Carrying feedback round

anticipated to New to this the expecting before are users highly bring We Year. game Chinese

marketing our online billings XXX% million. revenues RMB had for XXX% to by year-over-year Youdao net with growth K-XX XXX large-scale up total Youdao’s billings and our at XXX% RMB up supported Gross expanding million, paid quarter business, segment XXX and accelerated As million another RMB of branding to education quarter. classes XXX in initiatives. from year-over-year, in strong enrollment Gross high this to reached our XXX,XXX a K-XX record around

by capabilities well. instructor and highest new servicing of those teaching the the better we summer, around as To over by strengthened top further to quality now. strengthening continued caliber serve number XXXX the assistants of our recruiting its we XXX enrollments the team increased Youdao during

Net for during attributable learning rates our the materials classes Pen content upgrade XXX make and to popularity to series. second quarter. XXX% effectively students. largely our to RMB best-in-class improved This huge the for more certain We learning million to our of year-over-year with are devices looking also retention the of grew third Dictionary and technology constantly significantly efficient offerings revenue teaching Youdao’s market the conversion by

product September, We technology the of launched brand-new and continue translating Youdao device distraction and that advancements. functions named our from market Super photos an device Dictionary all learning active In other Dictionary, supports the to lead dictionary we text electronic with the our intelligent without smartphones.

to and space be this is students committed and of highly sector’s taking right to are we the acquiring We rapid the time education advantage believe growth. online

that a We and robust sustainable grow are manner. in will to confident Youdao continue

is number and improved. to music, efforts to recent users VIP notable rapidly. customer growing in Baba with increases Paying paying Turning an innovative of has and NetEase Cloud successful our ratio collaboration We user also royalty program. Baba saw supported by continued Ali create notably experience the their the Music

us possible. third supporters resources our solutions. In record access labels and artists producers investment such terms and we as BMG the as in fullest and professional with the worldwide library to top with music composers, provide larger Concurrently, UMG marketing leading teams content, continue access we direct and music as AI such catalogues. users more technology music partnership In musicians even our music our with continue strengthening we to as emphasize on content labels to dedicated songwriters, of of to by with other well secured independent to gaining quarter, original partner music

to and Cloud and will be better users. independent millions find to incubation by they and create need various initiatives musicians, is and appreciated XXX,XXX music the to aspiring more always connect to NetEase resources than to young of have now avenue where Music lovers. music in help an home musicians help We they place with

encouraging saw revenue growth in improvement as net third continued Yanxuan, efficiencies. For operating in as year-over-year quarter we well the

in brand By now among users, itself is progress, new recognition brand and clear. China. a strategic compelling leading is for Our establishing focus Yanxuan popular steady enhancing consumer creating products Yanxuan merchandise, making as

cat of Some include our and these ergonomic in example has China. respective their for for sales most become of chairs, popular of products each bluetooth food, online categories bestsellers earphones the

improve operating user base. truly pro Additionally, giving customers our resulted as growth continue we pro value further has This enhanced efficiencies membership to for our Yanxuan, we in they rapid membership loyal in our benefits, appreciate.

further innovative measures We our our on market have as the each more products what quality post production of also marketing development, our these we of leading segments. lowering is business and effectively key what taken role product early expand makes creating and In summary, us verticals from all performances, high and to strict propels even stages to consistent manage within focus content confident in product of tracking costs. logistics

always, commitment our of on fulfill focusing as strong the return with on We to investment. and users rationale purpose a and shareholders solid will sense

remarks. We for can returns long-term community user our we our services investors. products with are provide support that confident This to and William’s continue concludes solid that excellent

Charles Yang

overview provide our quarter brief will a of XXXX, financial now I results. very third

of Sky. quarter. Net increase Mobile in abbreviated X.X from details. increased increased Cloud our million, FWJ XX% third today's record primarily from sales businesses NetEase revenues of Knives further of net net XXX% increased the RMB from K-XX Net year-over-year. you today paid the Given were with time approximately classes were due devices. encourage Life-After, the call, Total by revenues a third year-over-year, and students increased high were due earlier and increase revenues revenues our the others some from XXX revenues read reaching enrollment We RMB business. Music intelligent presenting quarter, XX% through release billion from billion XX.X quarter, X.X contribution year-over-year, in billion games billion, US$ will for year-over-year revenues learning of limited primarily for to net net Out in press the or to accounted representing a third Youdao financial the increased third online Net rapid online be up mainly quarter issued highlights. XX% on I innovative from XX.X RMB by revenues for to RMB from HX, up the driven XX% and games the online games for

gross Our the online our quarter, a third for margin margin profit for was total in the GP with quarter was breakdown XX.X%. XX% game follows. as services

this year narrow as increase the a net generally a ago. mix as was attributable As games. reminder, for primarily well licensed mobile businesses stable revenue sequential on self XX.X%, faculty is some others was number and structure. fluctuations for year-over-year increase the to comparing to last innovative PC improved GP on The growth. based on third optimization increase economies margin developed due Youdao for revenues, of GP significant the of in with XX.X% our scale, a by quarter XX.X% of GP margin third was XX.X% for was and and quarter year. improved strong The its to compared a compensation improvement quarter marks This Cloud and margin our fourth NetEase Music consecutive revenue of basis. driven of further to

would margin the of others line. the and mix of revenue due reminder, GP to a mainly this businesses fluctuate As innovative line

were third operating the RMB billion. For expenses quarter, total X

prior marketing Our XX.X% were a marketing related to was expenses compared revenue quarter-over-quarter of increased to in percentage quarter. with selling the XX.X% and net The mainly increase as Youdao. due

spending mainly certain our games comparing of expense to in increased during percentage selling as quarter, Youdao, prior and XX.X% revenues a were the on due marketing quarter. promotions XX.X% the net with Excluding

Our to development. RMB content X.X and committed in remain were us we R&D investing defines product as creation as a expenses what billion company. innovative That's technology

expenses XX.X% in R&D As compared a to prior increase. headcount with mainly quarter, revenues, quarter, XX.X% percentage net were R&D this of due the

tax included the to income loss year, the income of investment which the are last U.S. other was depreciation of net this of for billion quarter. rate investment exchange for R&D RMB income the third foreign of RMB subsidies against gain in of in effective XXX related is X.X million quarter, of net lower with Effective X.X due quarter, exchange XX.X% XXX net dollars as prior RMB rate was XX.X% XXX million, a with The million. certain quarter. operations our million games. This compared tax this mainly XXX our period and received certain compares and which quarter net to billion online rate was of RMB the XXXX Non-GAAP XXX third continuing and recognized credits X.X RMB. included exchange same income shareholders Other RMB this in or Our expenses income to RMB attributable from for billion US$ RMB million. quarter, foreign tax

for continuing X.XX earnings RMB non-GAAP were from operations diluted the per or quarter. third Our ADS US$ X.XX

Our cash position remained strong.

and our XXX XX as or approved time a share. to per cash of short-term year of per and September non-current X.XXX of policy, RMB Board investment ADS totaled US$ accordance dividend end US$ As billion our end pleased of cash Directors last X.XXX RMB we dividend equivalents, balance, that total compared deposits, report year. with with are the current and In our has billion

one ratio Thank under the repurchased September We reminder, open up million X this go a every October billion for very to every ADS let's total call your ordinary repurchase X.X ordinary for our program end, to share quarter cost we has would been Operator, shares. approximately for on you to a of Q&A. US$ As questions. like And changed XX.X attention. one ADS your billion. to the X now for of for finally, ADS program shares current our under as five to XX from ADS much

Operator

Morgan from is Alex Poon, now [Operator ahead. line go Please Stanley. open. The will take Instructions] first our question We

Alex Poon

the is months expansion, of Language] question, Chinese XX [Foreign even successful overseas regarding we question during overseas in nine game have COVID strategy. my Translating my In eight, overseas games. very mobile games for Chinese last to market RPG expansion seen

IPs. about us geographical Can and with strong very lastly, product in legacy of you Thank a landscape? what's top the your share terms competition investment? focus, your genre, So much. of lot NetEase RPG strategy has you And

William Ding

Language] [Foreign

Charles Yang

translation of provide brief William's remarks. will a I

all, Right have strategy very So Japan, Alex, first the in achieved now small focusing of step. we dedicated on overseas NetEase. for in we a are

also major Beyond casual games which terms been quite NetEase game, of has specifically in certain lineups. markets for Potter, genre. There game think the being overseas global another performing the that eyeing will in are Japan, we launch, as as Harry are games more well also for what developed well are be games in market. such UNO, There's as SLG

sophistication games quality are are a think, next about what because have we forward, peers. overseas, our of and these Going Chinese we vis-à-vis please? games when competitive competitiveness the edge very the Operator question NetEase developed games we going confident are Thanks.

Operator

you. Thank

We will ahead. next line The now take from from Elsie is GS. go open. Please Cheng our question

Elsie Cheng

[Foreign Language]

William Ding

[Foreign Language]

Charles Yang

translate briefly William's also the of then question will and I Okay. the translation remarks.

So next the response this all strong if very by the is of of in that think what you new received development the of William's game both side. we news instance, our a well the been, throughout is Xbox, the read years, format it's a the a China strategy? the is as this of as, demanded, from global COVID-XX in entertainment, -- is is NetEase’s very is industry, PSX and situation, is consumer being well and first question is for demand, good demand asking view encouraged. game recent how five interactions consumers, three It's are sector. what a so good How what to all, entertainment Game that, globally? sector

is very upside. good really with future promising So a this think sector we a

operation. ourselves dedicating focusing in we to NetEase, record almost development back decades, game of track game and two Now a have

into are about but not also We market, market. more mainstream the future, And marketing. Western the only more eyeing are Japan, we to into we and for are R&D, invest into willing European complacent

we by well and quality the very both game We're domestic all-in-all, China as be to confident willingness development. as in track very So high combining product the directing of genres are also our by our more experience, game market. received market that future well invest, the our into suaveness that record, confident can geographies international

Elsie Cheng

Thanks.

Charles Yang

let's go the question please? next to Operator,

Operator

Thank Alicia question Citi is We Please will Yap ahead. line take The Instructions] open. from our go from now next you. Group. [Operator

Alicia Yap

[Foreign Language] the music. thank online related to my you. question Hi, is So,

major come every with target hopes in is So the online how does foresee future NetEase market and you. more market, the in into music envision will you the there two a of Music future? players landscape management or China just name, do industry Cloud that players Thank to share achieve

William Ding

Language] [Foreign

Charles Yang

Okay, I will provide a brief William's translation remarks. of

confident years So commit habit seven long consumption, last sector first into challenges online might as or be consumer the we very content, coming we organically. at nurture to cycle NetEase provide there as to and to launched players. to in changed We, market on of the China's the in streaming since now, musicians but music better ourselves a same to future, over that mission, time, into have that confident high healthy achieve side, mpX. has this them more all, quality we by are Cloud way supplying seven Obviously, right there music, and market music listeners in than and and share. leading one to buying purpose want building original music, a are do ambitious to leading more share the Obviously, and bring accessed and we streaming on rather position be China. Music are two this can The the than ago and we appreciated see, organic dramatically more and we the we us the emphasize should as have will sector, support more music a promising years, as downloading all CD and able to very resources independent end a be very we users for

Alicia Yap

Thank Thank Charles. William. you, you,

Charles Yang

Alicia. next Thank Operator, please? question you,

Operator

Please from ahead. will from Kenneth go Credit Fong Suisse. our question We take now next

open. is line Your

Kenneth Fong

Impact sharing been the Language] have [Foreign to have game noticed TapTap through channel. and recent revenue of like avoid We Android like high BiliBili that Genshin some launching been launch

over any as we medium Thank about success us gradually of the game of gaming margin fee power the Cloud With negotiation How should upside as means it the developer? over that well think platforms, term time? the the you. does channel launch this room for as to and towards also a power gradually this shifting is major decline

William Ding

[Foreign Language]

Charles Yang

William's I a of brief translation will provide remarks.

is XX% so channel So the we especially iOS how arguably future norm country remain on In expensive most the the same of Android world, is Android app fee is in the for the we fee, all as global standard all, fee. channel first shifting. trend optimistic China Apple now, whereby Kenneth, as Right is China, very XX%. channel the Store know,

non-conventional they encourage that Google of better users. players suit. to going to explore to economics try and all are that probably So I an think, end follows we high effort announced Apple others the the night, to we small and in the to has quality channel including the also such others, encourage Last ways developers, Yanxuan reduce content developers. think also as saw distributing do XX% We ourselves fee other to will for Play upside the for news and

speaking, observe that shift globally to we clear and a Let's and probably trend more visible as also can broadly and see, come wait providers a all more China. that towards content trending and wise, but a should is

Kenneth Fong

Language] [Foreign

Operator

Thank you.

from our We HSBC. will now Wong, question next Please ahead. take go Binnie

Binnie Wong

in [Foreign of Youdao, Is question increased revenue. percentage the because actually marketing on -- And and even itself the of the We Language] then going sales strong shall expect terms some congrats as be in aware other changes very Thank changes of a overseas pipeline, NetEase expense. the are that into is of marketing and sales things too? structural also much launches? My had further forward mainly or into excluding in of of so we that any see and should that it our marketing as future some quarters, strategies we you the bigger again. we on launching the quarter we a

Charles Yang

and a I fairly selling of very, end. will expense directly and state ahead this that is Youdao, explanation we in call the are was that posted just the this are we my in users. now you, for from they ready to continue aggressively answer very confident this marketing invest The think Well, more sufficient earnings call. Thank to I right Binnie. time acquiring question

how investing we We selling we although more and works. are are, given unit will be into marketing rewarded Youdao, prudent by the but in the ROI economics

So this, more investing our possible. the shy as share, robust not user we are into of market expanding as and scale

and of at for to Excluding marketing quarter, comparing Youdao still XX.X% revenues our around industry net this as peers. a a very selling the percentage slightly healthy again, This many stays excluding is Youdao, XX%. below of level

Our is NetEase towards ROI selling It approach and always straightforward. very is marketing driven. always

rate very, a required very of internally. have the standard high return We of

So that for new when to marketing substantially, way, HX the as game are going invest, now FWJ existing new maintenance, selling are genres by and gross well to games as related, amounts the down road. such titles the the the for as longevity the the game substantial games Youdao, the the and the the tax the of spend either that related excluding billing, of and efficiency we we we of maintain old launch

selling So new marketing and genre, are we that's a very new to math not go when we tap resources. always into deploy international Regardless us specific which the going behind into we do think when I prudent launch, that which we or it before determining to game do genre market, we which all-in-all, market, spend I factor a of for irrationally. a think

timing matter gaps. just it's of a So

expenses in will of might quarters be which into billion the quarter, the but be up Sometimes into in be gross the marketing only be launching, we we revenue. will spending will and front these billions, recognized sales subsequent gross recognized the same reflected

Binnie Wong

very Charles, you, Thank you. Thank clear.

Charles Yang

Binnie. Thank you,

Operator

Thank you.

our now take Natalie go next We from question ahead. International. Please Haitong will Wu,

open. Your is line

Natalie Wu

Language] [Foreign Okay, translate I will myself.

and thanks very taking solid for quarter. a So for congratulations my question

also question actually sales just year, if last deal my exclude And [indiscernible] regarding loss, is the of much Music. of the expanded a and margin the and increased Cloud year-over-year. how margin to So jumped we that is wondering marketing, impact Youdao regarding X% related

And business how low we wondering much just Music, music of expanding on So that business margin well Thank have margin as should Cloud of is or related you units? how revenue of music the model profile you. to other investments business some as of the speaking if compensation the of think scale forward? going also

Charles Yang

so Okay, a question, Natalie. thank from you, my It's answer directly I'll finance related end.

RMB and that the selling billion quarter, RMB speaking, was are about that billion For Youdao. Roughly majority selling game Youdao, billion. marketing X.X expenses of and X.XX RMB is this of RMB X.X X.X related. excluding remaining is total billion Out marketing super

Yanxuan media fraction. small games comparing a just that's to represents and music So others

investing some So segments it is irrationally not really about into us a return lower in big amount.

pointed also margin out the the declining overall. trend operating of You've

that The are recognized obviously, There's both Binnie’s I for explained in particular. mathematically, think this just of question. I expenses a big to gap a reason in what quarter. timing right, is games, instance, for Youdao and

quarter. entirely not same revenue into the recognized are billions gross into However,

Beyond that, another revenue also mix. the game in is there's factor

PC stays mobile For ratio instance, relatively game and the stable.

broad were casual a game, for games, look FWJ However, of mobile but margin pioneering game, more the of more category game, a would same are so within is HX, demonstrate though is the we if a to different you with a also mobile instance genres some games, even mobile profiles. the vis-à-vis different mobile casual hardcore it MMORPG, at game, which they

enough games, operating resulting another of to that's, think ago, revenue are from you mix the factor be change, of the versus game to transition into of That a they but of years genre when again, some profile certain the a mobile margin our move terms many genres margin. the I observing different downward NetEase in whether a tap explaining I and in bigger we profiles, decided want MMORPGs, to do games, diversified more more confident most is offering. reminds you fact think changes. in familiar do we whether think us PC be small trend the right, it why is mathematics bold that's enough us it's into demonstrating pie, for might right margin

your question. it hopefully Natalie, So answers

Natalie Wu

term about music very Yes, longer but what clear, margins the business? of your

Charles Yang

your into question first second your hide you question. so music, For

a level, GP still high For fee, to Because that the music, very is helping know the now, to of because irrationally at even music making us business margins. that is it still yes so a well, admit it the at for is we improve content level. licensing economies monetization have all scale growing music is margin I loss the our

margin So negative margin, GP in but negative narrowing it margin, negative still being operating a sense, is down. the is

are licensing Going arrangement run. favor following of non-exclusive the fees think the macro trend the longer organic from we on it that On labels, music music we musicians. in the lot medium something more segments especially a independent to into licensing soon, be music, the At a same is side overall future, very record into do emphasizing With I three to time, is us. expect segment. online think profitable music in one the should all the time, are rationalized, that, years and to two also original China's more very

Natalie Wu

Got it clear. very you, Charles. Thank

Charles Yang

Thank you.

Operator

you. Thank

our take question Jefferies. now Thomas next from will ahead. We from Chong Please go

Your line is open.

Thomas Chong

set questions, NetEase is results. on for My strong about Thanks Language] [Foreign taking Cloud my Music. of and question congratulations the management a

subscribers, the about as the models? of growth into opportunities think the strong live But Thank Just about the as time the revenue, mix revenue can revenue you. we momentum. terms in if mix, and the now paying momentum we on revenue should how new as just growth touched you streaming as upon well business talk over well we the go

Charles Yang

time. of directly answer the Thomas. thank interest I'll you Okay, question in your

this I earnings probably on would the question be think call. this last

subscription So up trending first revenue very has been well. all, of

scripts paying a ratio, quarter, base, seen both increase of earlier as have the as this in the notable well in We as mentioned the user paying on. terms

upside a we room because for paying think very we comment. still disclosed the to very growing, their slightly I digit. have ratio is a the also China's a to ratio, But the also paying is compare well streaming Music, is ratios, when is format much It’s fact, monetization that online first of single music ratio. There's that base. Live from better. paying our this peers vertical industry, who plenty substantially for entire relatively improve, our partly In Cloud improve fast publicly industry low smaller a paying grow

a At becoming such are NetEase formats monetization advertising Music significant up very, already we right So same the as also actively major very and revenue. revenue Cloud instance. very other of streaming is sizable contributor now for ramping time, my live overall of

model always business is a New [indiscernible]. time it

that's I geography. music not of quarters think Apple online Because fix by for what that, industry. different been exciting saying or your the Spotify I've part try imagination China's multiple to been in already, this Music a doing has

to direction, China's probably It the Western interaction. platform we for event think give and yet some an music sector, the format Cloud social we for other a industry with whole, experimenting the think be in on new songs. NetEase pioneering together not, will be, online not players in is that on Music not interesting is we will least available as a monetization and we is And can world. play do thing one just music the avenue that, that at is I

potentially monetization is new interaction, focusing social business a models. are potentially models social and on direction media, that we this So new exploring lot a

Thomas Chong

a on Congratulations set strong Charles. of results. Thank you,

Charles Yang

Thank you, Thomas.

Operator

gentlemen, will host. that Thank and I to the now back conclude session. turn will your call Q&A Ladies today's you.

Margaret Shi

joining you Thank today. for us

please feel TPG to or us directly a any free day. further questions, you great contact Investor Relations. If have Have

Operator

and Ladies all now gentlemen, may conclude you. you and today's call Thank disconnect. that will