NetEase (NTES - Free Report) -owned NetEase Cloud Music recently inked a digital music distribution deal with Studio Ghibli, one of the most renowned animation studios in the world.
The deal will enable NetEase’s music streaming platform to be the digital distributor for Studio Ghibli's music catalog in the Chinese mainland.
The platform will gain access to albums and soundtracks from films produced by Studio Ghibli, which include some of Japan’s highest grossing animated films like My Neighbor Totoro and Howl's Moving Castle as well as the Academy award-winning Spirited Away.
Ghibli Deal to Boost User Growth
The distribution deal will significantly expand NetEase Cloud Music’s already robust music library as Ghibli movies and music have always enjoyed a huge following in China through illegal DVDs and streams.
Moreover, the official China release of the movies in the past couple of years has led to an even bigger surge in popularity. Notably, My Neighbor Totoro, which released in 2018, managed to gross $26 million. However, Spirited Away managed to out-gross the former by earning $28 million in just the first week of its release on Jun 21 2019, per Variety.
NetEase Cloud Music has also gained access to a robust library of Japanese music, including popular music of Japanese anime, manga, games, J-pop and classical music through partnership with various other companies.
Notably, the platform signed a copyright license agreement with NBCUniversal Japan in September 2018, which gave them access to a massive anime music catalog.
In Apr 2019, NetEase partnered with Nippon Columbia to gain access to the latter’s expansive music library, which includes pop music and enka — a popular Japanese music genre resembling traditional Japanese music.
These endeavors are expected to drive the platform’s user growth due to the immense popularity of Japanese music in China. Further, it will gain a competitive edge in the Chinese music streaming industry.
Markedly, NetEase Cloud Music is now likely to get the first mover advantage over competitors like Tencent Music (TME - Free Report) and Baidu’s (BIDU - Free Report) Baidu Music and become the go-to platform for high-quality Japanese music.
Strong Portfolio to Drive Top Line
NetEase’s growing music catalog as well as its strong portfolio of games and movies is expected to drive the top line over the long haul.
Notably, movies like Knives Out and Identity V topped charts in fourth-quarter 2019, while Activision’s (ATVI - Free Report) World of Warcraft, which is published by NetEase in China, achieved record number of total monthly subscribers during the quarter driven by the release of WoW: Classic.
Further, a strong pipeline of games that includes Harry Potter: Magic Awakened, Diablo Immortal and Pokémon Quest bode well for the company.
NetEase currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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