Welcome to the NetEase first quarter 2020 earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Margaret Shi, investor relations for NetEase. Please go ahead, ma'am.
Thank you, operator. Please note the discussion today will contain forward-looking statements relating to future performance of the company and are intended to qualify for the safe harbor from liability as established by the U.S. Private Securities Litigation Reform Act. Such statements are not guarantees of future performance and are subject to certain risks and uncertainties, assumptions, and other factors. Some of these risks are beyond company's control and could cause actual results to differ materially from those mentioned in today's press release and this discussion. A general discussion of the risk factors that could affect NetEase's business and financial results is included in certain filings of the company with the Securities and Exchange Commission, including its annual report on Form 20-F. The company does not undertake any obligation to update forward-looking information except as required by law.
During today's call, management will also discuss certain non-GAAP financial measures for comparison purposes only. For a definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results, please see the 2020 first quarter earnings news release issued earlier today. As a reminder, this conference is being recorded. In addition, an investor presentation and a webcast replay of this conference call will be available on NetEase corporate website at ir.netease.com. Joining us today on the call from NetEase's senior management is Mr. William Ding, Chief Executive Officer, Mr. Charles Yang, Chief Financial Officer, and Mr. Hilton Hui, Co-President of NetEase Games. I will now turn the call over to Charles, who will read the prepared remarks on behalf of William.
Thank you, Margaret, and thank you everyone for participating in today's call. Before we begin, I would like to remind everyone that all percentages are based on RMB. Like every company around the globe, we started the year with a great deal of uncertainty amidst one of the world's worst health crisis. I am pleased to say that we have worked very hard to address the effects of the pandemic, providing help where we can, and making the appropriate adjustments to our businesses to ensure the safety of our NetEase family. We believe many companies inside and outside of China will overcome this pandemic and come out strong. We had a good quarter, increasing our net revenues by 18% to RMB 17.1 billion, and our net income from continuing operations attributable to our shareholders was up by 30% to RMB 3.6 billion, both on a year-over-year basis.
For our online games, net revenues reached RMB 13.5 billion in the first quarter on the back of our existing titles' stellar performances, growing 14% year-over-year, even though Q1 2019 was itself a very strong quarter for our game services a year ago. Our legacy PC titles, such as the Fantasy Westward Journey and New Westward Journey Online II, continued their strong performances in the first quarter with new expansion packs launched for the Chinese New Year holidays, introducing a series of new content. Quarterly revenues for these games broke new records, hitting another all-time high since their debut almost two decades ago. Momentum for legacy mobile games was also strong as we continued to supply this large and sustainable user base with continual content updates.
Take our Fantasy Westward Journey mobile game as an example, where we introduced a brand-new character which quickly gained popularity and was a strong driver for gross billings. While we continue to dominate the MMO genre, many of our recent titles in categories that are relatively new for us have also shown remarkable success and sustainability, providing us with steady revenue streams in what is now a very diverse game portfolio. Invincible, Onmyoji, Identity V, and LifeAfter, launched in 2015, 2016, 2018, and 2018 respectively, serve as good examples of our superior game longevity within different game genres. Invincible, our 2015 launch, hit another record quarter high gross billing and active users. We are pleased to see the game's strong traction in the SLG market. After more than five years of successful operations with Invincible, we have accumulated a solid SLG fan base and extensive expertise in this field.
We look forward to developing more innovative games to delight our users in this engaging and thought-provoking genre. Onmyoji continues to show remarkable longevity as we consistently introduce new characters. These additions are resonating well with new game players, further solidifying the reach of Onmyoji as a leading ACG game. As the first of our younger IPs that we have created in-house, our goal for Onmyoji is to have an even larger and deeper impact on the vibrant community of young users. In addition to Onmyoji: The Card Game, the collectible card game we launched last year, and the upcoming simulation game, Onmyoji: Yokai Koya, planned for later this year. We have more exciting new games in store based on the Onmyoji IP. Later today, this evening Beijing time, at our May 20th Game Day event, we will introduce two new Onmyoji spin-off games in brand-new genres.
Launched in 2018, Identity V and LifeAfter are also a few of our newer titles, attracting a large base of young fans and starting to demonstrate sustained longevity. Celebrating its second anniversary in April with a series of content updates, Identity V reached a milestone of 200 million registered users, attracting players with its characteristic art style and innovative gameplay. With LifeAfter, since its initial phase of stabilization, gross billings have been picking up steadily over the past few months as we launched a couple of highly popular expansion packs, introducing a series of new themes and innovative gameplay. We believe that LifeAfter will be another one of our titles that resonates with fans for many years to come.
In terms of new titles, Fantasy Westward Journey 3D was launched at the end of 2019 and delivered a stable performance in the first quarter, further expanding the reach of the FWJ franchise as a whole and captivating both returning fans as well as a new audience. In April, we launched Dawn of Isles in China, previously known as Age of Isles. As our newest MMORPG featuring sandbox gameplay, the game topped the iOS downloads chart soon after its launch and was featured by the iOS App Store. In overseas markets, we continue to gain market share in Japan. Knives Out and Identity V remain at the forefront of Japan's top grossing games chart, the user bases for both games are growing at a strong pace.
The success of these games has helped us to gain a much better understanding of Japanese users and their preferences, allowing us to better tailor our games for the Japanese market. We have integrated this successful experience and know-how into the design of other NetEase games, enhancing our ability to deliver popular titles to global audience. At the end of 2019, we began operating Invincible in Japan ourselves. With our proficiency in operating this game domestically, along with our newly acquired understanding of Japanese user preferences, we saw a steady increase in Invincible's revenues in the first quarter. Now turning to our game pipelines. Many of the games under development have the potential to achieve mass audience appeal, transcending geographies and spanning multiple genres.
We have a number of these exciting new releases planned for 2020, which we expect to help us gain more brand recognition in the broader global markets, particularly in the U.S. and European market. As announced two days ago, EVE Echoes is ready for its global launch in August. Additionally, other exciting upcoming titles include Fantasy Westward Journey, H5 version, King of Hunters, PES Club Manager, Onmyoji: Yokai Koya, Ghost World Chronicle, Revelation Online, Harry Potter: Magic Awakened, Diablo Immortal, Pokémon Quest, and Marvel Duel. Now for our education business. Youdao started the year off on a strong note with healthy gains across many of its primary financial metrics. Total net revenues accelerated by 140% year-over-year to RMB 541 million, and operating cash flow turned positive for the first time.
We are seeing an increasing adoption rate of online education, due in large part to the structural effects of the pandemic. Online courses generated gross billings of RMB 519 million, up 287% year-over-year, primarily due to continued enhancements to our course content and products. To match the needs of newly enrolled students during the pandemic, Youdao quickly developed and refined new products, helping students receive the most effective teaching online, especially for those taking entrance exams this year. In line with the growing enrollment, we carefully crafted a few more products, including junior high school math, high school English courses, which received wide popularity. We also expanded our education team to over 1,000 instructors and teaching assistants who are well-trained and incentivized to give our students the most tailored and personal support they need.
During the quarter, we further enhanced our technology offering with the launch of AI essay assessment in our dictionary app, a feature that automatically grades and offers suggestions to improve English writing. Going forward, Youdao will continue to build up its largely scalable business model and provide users with effective educational experiences empowered by great content and technology. For our cloud music business, we are also growing and proud to have celebrated NetEase Cloud Music's seventh anniversary in April. Revenue from our cloud music platform continued to accelerate with high speed, achieving triple digit growth year-over-year in the first quarter, and record high membership revenue. Live streaming revenue is also growing at a rapid pace. In the first quarter, we released several online live events that were particularly poignant during the pandemic outbreak and helps to support our independent musicians and their ability to distribute.
These include the Bedroom Live Music Festival, where well-known musicians performed at home via live streaming, and Indie Live, a high-quality broadcast of independent band live shows. While we maintain a competitive edge in our original music with now over 160,000 independent musicians on our platform, we are also looking to provide music from all over the globe to expand our music library. In March, we added popular Japanese music to our platform through our distribution agreement with Studio Ghibli, one of the most acclaimed animation studios in the world. Further adding to our catalog of songs, we recently signed a strategic partnership with Rock Records, one of the largest record labels in China. As with all of our businesses, innovation is key. Along these lines, our music platform's largest progression includes a newly launched karaoke offering for our young people.
Moving ahead, we will continue to make sensible investments in content and innovation to remain relevant and competitive in the exciting world of music. Turning our focus to Yanxuan. After a short four years, we have developed a distinct and recognizable brand with a number of notable self-developed products that appeal to a wide range of consumers. In particular, Yanxuan has made a name for itself with distinctive offerings in housing, personal care, and food categories. During the first quarter, we upgraded our membership offering to a pro membership to include more benefits, attracting a considerable new constituency. New memberships rose by 138% year-over-year, owing to our innovative marketing approaches, such as collaborating with top live streaming celebrities. Meanwhile, our inventory has been managed to a healthy level as we continuously optimize our procurement and reduce obsolete inventory. Overall, we had a strong start to 2020.
Our primary business lines grew during the first quarter, and we are pleased to have advanced our mission to bring inspiring leading products and services to our growing community of followers. We will press forward, as we have done for the past two decades, with our eyes on the long term and plans to reach incremental gains along the way. This concludes William's prepared remarks. I will now provide a brief review of our 2020 first quarter financial results. Given the limited time on today's call, I will be presenting some abbreviated financial highlights. We encourage you to read through our press release issued earlier today for further details. Total net revenues for the first quarter were RMB 17.1 billion or $2.4 billion, representing an 18% increase year over year. Net revenue from online game services were RMB 13.5 billion, up 14% year over year.
This increase was primarily driven by the strong performance of our flagship titles in FWJ franchises, New Westward Journey 2, as well as Blizzard's World of Warcraft. Mobile games accounted for approximately 70% of net revenues from our online games in the first quarter. Net revenues from Youdao also increased 140% year-over-year in the first quarter, reaching RMB 541 million, primarily due to the increased net revenues from online courses with a rapid increase in K12 paid enrollment and sales of intelligence learning devices. Net revenues from innovative businesses and others were RMB 3 billion for the first quarter, up 28% year-over-year, mainly due to increased contribution from NetEase Cloud Music and CC Live Streaming. Overall gross margin was 55% in the first quarter. GP margin for our online game services for the first quarter was 64.1%.
Our gross margin for online games is generally stable, fluctuating quarter to quarter within a narrow bandwidth based on the revenue mix of mobile and PC, as well as self-developed and licensed games. Youdao's gross margin expanded sharply to 43.5% in the first quarter. A vast improvement from 29.8% in the last quarter. This was primarily driven by the achievement of economies of scale and better faculty compensation structure. Gross margin for innovative businesses and others for the first quarter was 15.8%, up from 5.7% year over year. The improvement comes primarily from significantly increased revenue from our NetEase Cloud Music business. For the first quarter, total operating expenses were RMB 4.9 billion. Our selling and marketing expenses as a percentage of net revenue was 10.9%, compared with 13.7% in the prior quarter.
The quarter-over-quarter decrease was a result of less spending in online game promotion and Cloud Music during this quarter. R&D expenses were RMB 2.1 billion, up 5% year-over-year. We remain committed to investing in innovative content creation and product development, which is what's defining us as a technology company. Effective tax rate was 22% for the first quarter, relatively flat with the prior period, and down from 31% in the first quarter of 2019. Non-GAAP net income from continuing operations attributable to our shareholders for the first quarter was RMB 4.2 billion or $595 million, representing increase of 15% quarter-over-quarter and nearly 26% year-over-year. Our non-GAAP diluted earnings per ADS from continuing operations were RMB 32.17 or $4.54 for the first quarter of 2020. Our cash position remains strong.
As of March 31st, 2020, our total cash and cash equivalents, current and non-current time deposits and short-term investment balance totaled RMB 79.3 billion, compared with RMB 74.4 billion as of the end of last year. In accordance with our dividend policy, we are pleased to report that our board of directors has approved a dividend of US$1.16 per ADS for this quarter. This represents a regular dividend paying stream since 2013. On February 26th, 2020, we announced the board approval for a new share repurchase program for up to US$1 billion of our outstanding ADS. We announced an amendment to such program earlier today to increase the total authorized repurchase amount from the original $1 billion to $2 billion. As of March 31st, 2020, approximately 1.1 million ADS has been repurchased for a total consideration of US$342 million. Thank you for your attention.
We would like now to open the call to your questions. Operator, please go ahead with Q&A.
Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. For the benefit of all participants on today's call, if you wish to ask your questions to management in Chinese, please immediately repeat your questions in English. Due to the limited time of today's call, please also raise one question each time. If you have more questions, please rejoin the queue. We will pause for just a moment to allow everyone an opportunity to signal for questions. We will take our first question from the line of Alex Poon from Morgan Stanley. Your line open. Please go ahead.
I'll translate my questions. First question is regarding the lesson learned from COVID-19. Regarding the game business, many game genres have become very popular during this period. No matter it is mobile or shooting games and also casual games as well. In terms of user acquisition, retention, game genre, development strategy, do we have some new thoughts, new ideas after this COVID-19? My second question is regarding the music business. Top line growth is very strong. How should we think about the product development and margin trend in 2020? Thanks very much.
Thank you, Alex.
对，在疫情期间我们看到的是说，游戏是家庭主要的娱乐方式，陪很多在家的用户，能够享受更多的游戏欢乐时光。所以第一个是时间变长了，玩游戏的时间变长了。第二个是带动了很多新用户的增长，因为大家都在家，可以一起玩合家欢游戏。这是我们看到的两点。那第二点就是关于音乐。我想网易云音乐还是会坚持为中国的独立音乐人服务，为中国的音乐爱好者服务。我们会扶持和帮助更加多的中国独立音乐人在这个平台上去发展，支持他们。第二个，我们也希望热爱音乐的中国的用户，能通过网易云音乐听到更多自己热爱的精彩的作品。我觉得短期内我们所有的工作都会紧紧围绕着为音乐人服务和为热爱者改善产品这件事去努力的。
谢谢老板。
Right.
I'll provide a brief translation of William's remarks. Firstly, on games. During the pandemic, we have seen games becoming a center event for family members staying together in house, so they have more time spent together as a family as a whole to get joy and excitement and some relief from game as a broad entertainment. It is also a boost to new game users during the past quarter. These will be obviously translated into our thinking of how to focus more on R&D self-development of games that can create a bonding opportunity for family members as a whole going forward.
For the music, William emphasized, in fact, re-emphasized from his prior remarks that the ambition, the mission of NetEase Cloud Music platform is we want to create a best environment to support the development of China's independent musicians, people with talent, who can express themselves and distribute their products to a group of music enthusiasts with passion, with the exploration of new, diversified, different genres of songs. I think for the foreseeable future, that is our key focus of development. You also asked about the margin trend. I think that as we continue to grow the scale and diversification of our music revenue stream possibilities, we will naturally benefit a lot from economies of scale with the enhancement of margin trend. I think on the margin trend, we are also quite optimistic. Hope that answers your question, Alex.
Thank you very much.
We will take our next question from Alicia Yap from Citi.
Hello。
Alicia Yap, your line is open. Please go ahead.
Okay. Hi, thank you. Good morning, William and Charles. Congrats on the results. Thanks for taking my questions. My question is on your gaming business. As many other company are seeing the normalizing trend of the gamers traffic and activity post the lockdown lift off, how does that trend looking for NetEase Games? How should we think about the offsetting factor with your deferred revenue for the second quarter and also the lockdown in overseas that might benefit the overseas gaming grossing? Thank you.
Okay.
Alicia, do you want to translate your question yourself?
谢谢管理层。我的问题是关于游戏，就是我们看到其他游戏公司也有同样的一个趋势，就是说在疫情期间用户的增长，然后流水的增长，但是随着返工、复工复产这个情况的话，其实用户的traffic其实也是回到比较正常的level。所以就说网易游戏这边，大概我们要怎么想？因为我们deferred revenue这边可能多多少少可以帮忙到这个2Q的revenue，然后还有我们日本的一些，还有海外的一些产品，在这个二季度的时候，就是海外疫情比较严峻的时候，会对我们2Q会benefit到，就是会受益。谢谢。
对，其实网易有两个方面，第一个方面我们是扎根在中国嘛。那第二个方面就是我们的产品其实是有逐步的出海计划。我们以前在日本取得了不错的成绩，那其实我们现在也有准备了一些其他类型的游戏在海外发行。所以你应该不用为反攻以后这个问题所困扰和担忧。这个都是很短时间的。长时间我们还是立足中国，放眼世界，市场在全球，是这么一个地位，不用很担心。
I will provide a brief translation of William's remarks. He commented, Alicia, I think your observation is right. However, that is a short-term volatility, I think across the board, as you mentioned, other game companies and us might be seeing. However, William emphasized that the growth engine of NetEase Games is our ability to continuously produce in-house and launch new game titles, as well as our ambition of becoming a more globalized game company with more exciting titles launched into overseas market such as Japan, and hopefully very soon in the mainstream Western market. With all that, we are not overly concerned about these short-term volatilities, and we are very optimistic about the outlook of NetEase Games growth, driven by the diversification of new titles as well as diversification of new geographies.
Thank you.
We will take our next questions from the line of Natalie Wu from China International Capital Corporation. Line is open. Please go ahead.
Hi, good morning. Thanks for taking my question and congratulations on very solid quarter. [Foreign language] I will translate myself. I have two questions. First one is regarding the PC games. Your PC game outperformed the industry despite a halt of operation of the net cafe, which is quite encouraging. Would be great if management can share with us some thoughts of the future outlook for that segment. Second one is regarding Harry Potter. Just wondering if the game is ready but still need time to get approval in domestic China market, will you decide to wait for the license or will you launch it firstly in overseas regions?
Thank you.
对端游，因为大家都在家里嘛。实际上端游的游戏体验跟手游是完全不一样的。疫情期间，这个console game，就主机游戏和端游在全世界范围内都增长得非常好。不会说是一个跟网吧有正关联的一件事情，这是我们看到的一个数据。第二个，哈利波特，要不谁来回答一下？Charles。
[Foreign language] Okay, yeah. Natalie, I will translate William's comments for everyone's broader benefit for the first question, and I will answer the question on Harry Potter. Briefly, what we observed is that during the global pandemic, PC and console games in general has seen an increasing trend as more people are spending time at home. It is not so much correlated to the Internet cafes operation, as you can see from our game results, because our PC games are legacy titles running for over a decade. In case of FWJ, we see a record quarter since its debut almost 17 years ago, we are very confident about the sustained gross billing popularity of our flagship PC games. For the time being, our main concentration focus of new game development is tilted towards mobile games. Launch of new PC games will be opportunistic. We do not have a regular agenda, like we regularly launch new mobile games. That's to your first question. Second question, Harry Potter. We are very excited about Harry Potter. It is a strong IP globally, we are confident in our R&D ability to convert this IP into an exciting game title. I think it's too early to predict about the situation on regulatory approvals in China. When it comes to the stage when the game is ready for launch, whether we will do a global simultaneous launch or whether we will do overseas launch first followed by domestic upon the approval. Both are possibilities we will decide that later when the game is more advanced.
Got it. Thank you.
We will take our next question from Jiarong Si from Nomura. Your line is open. Please go ahead.
Yes. Good morning, management. Thanks for taking my questions. First of all, congratulations on a very solid quarter. 我 先 用 中 文 问 一 下 我 的 问 题 ， 就 是 两 个 小 的 問 題 。 第 一 个 问 题 想 问 一 下 ， 可 能 我 miss 掉 了 ， 我 想 问 一 下 ， 我 们 的 1 季 度 的 游 戏 收 入 里 面 多 少 是 来 自 于 海 外 市 场 的 ， 能 不 能 再 请 update 一 下 ？ 然 后 第 二 个 问 题 是 关 于 网 易 云 音 乐 的 问 题 。 从 2020 年 以 来 ， 我 们 根 据 一 些 媒 体 的 公 开 报 道 ， 感 觉 网 易 云 音 乐 在 音 乐 版 权 购 买 方 面 的 步 伐 好 像 是 比 往 年 明 显 的 加 快 了 。 我 们 看 到 媒 体 有 报 道 说 我 们 和 华 纳 、 滚 石 有 签 版 权 协 议 ， 我 们 也 购 买 了 独 家 的 一 些 音 乐 节 目 的 版 权 ， 包 括 《 歌 手 》、《 我 是 唱 作 人 》。 所 以 我 想 问 一 下 ， 网 易 云 音 乐 在 版 权 购 买 的 步 伐 加 快 ， 是 因 为 看 到 一 些 特 别 的 机 会 ， 还 是 因 为 这 个 行 业 的 竞 争 态 势 有 些 变 化 ， 所 以 才 会 做 出 这 样 一 个 决 定 ？ 我 自 己 翻 译 一 下 。I have two questions. First question is about NetEase online gaming business. Just wondering how much of NetEase online gaming revenue was contributed by overseas market in Q1. My second question is about NetEase music business. According to various media reports, it seems to me NetEase music has accelerated the purchase of licensed contents since this year, including the recent licensing agreement with top global record labels, as well as the exclusive purchase of some of the highly rated music shows. I was just wondering why it seems NetEase music became more aggressive on content purchase. Thank you.
对，第一个问题Charles你来回答吧，关于海外的那个市场。
Jiarong, first question. Overseas first quarter, our overseas revenue accounts for slightly more than 10% of our total game revenue, consistent with our level of last year. We are very confident to continue to grow, and even very strongly to grow this revenue contribution from the overseas game market in the next three to five years. [Foreign language]
对，Jiarong。我们做网易云音乐，就像我刚刚说的一样，我们非常愿意去支持中国的原创音乐人，包括对版权方也是。我们非常尊重版权方，愿意花钱去采购任何一个可以销售给我们的版权产品。我们之所以在过去碰到版权短板的问题，是有些公司垄断了版权交易，故意的不卖给我们。并不是说网易本身不舍得花这个钱，或者口袋里没有这个钱。不是的，我们非常尊重音乐的知识产权，愿意跟任何一方版权方来进行合作、采购，帮他们在中国的市场上进行音乐作品的发行和销售。所以我还是强调一点，之所以我们版权短缺的原因，是有部分公司在这个市场里面搞垄断，囤货、积蓄，是这个原因。那我希望在未来，诸位行业从业人员能够更加把力气和资源投资在中国的原创音乐上，而不是靠短期的这种垄断来获得市场竞争优势。我相信我们做音乐的，最希望能看到华语音乐在世界音乐市场、在世界音乐舞台上的崛起，而不是搞内耗，搞各种小把戏来影响市场竞争的格局。这是我的一个观点。
谢谢。
I'll provide a quick translation of William's remarks. First of all, our dedication to support and promote independent musicians and native IPs are not mutually exclusive with our deep respect and open-minded, strong collaboration with music label companies. In fact, in the past, there are obstacles in the industry preventing us from purchasing music content and music IP directly from label companies. We are very active and in deep collaboration with all these highly regarded label companies in an effort to acquire music IPs, content copyright, and will utilize our efficiency and our massive user scale of the NetEase Cloud Music to distribute their music content to a group of music enthusiast lovers.
We also want to reiterate that we hope that the whole industry in China and all the players in China can spend more focus, efforts, and resources into promoting native IPs, organic music from independent musicians, because I think it is going to be a much bigger ambition for the entire industry to see the rising of Chinese music, Chinese musicians as a whole, to play a much bigger role on the global audience, on the global stage. Okay. We will take our next question from the line of Eddie Leung from Bank of America Merrill Lynch.
Good morning. My question is about the new game launch. Historically, when we have a big year of a lot of new games to be launched, typically, the marketing spending ratio would go up. Just wondering what could be the pattern this year, and whether there would be different ways to promote new games. Thank you.
Okay. Eddie, your question is on our outlook of marketing expenses. I want to reemphasize one point. NetEase Games focuses a lot on self-developed, in-house developed games. As such, we are always excited about our lineups of new games. Whenever we consider promoting a new game, it is always a return-driven exercise internally, depending on our projections of the game's performance and expectations of the gross billing, we allocate marketing resources in a very sensible way. That is why I think in the prior quarters, I also made remarks that try not to look too much into the quarter-over-quarter fluctuations of the marketing spending dollars. In fact, if you look at my marketing dollars as a percentage of the overall revenue on the full year trend, last year, we controlled it at around 10%, a significant decrease from the prior two years. Absolute dollars is not shrinking.
That is because we are more sensible. We are more conscious about the return generation on my marketing dollars with more new game titles. Yes, we are going to spend more marketing dollars, but we are even more optimistic that with effective promotion, the new games are going to generate even faster return for us at the top line. On the financial planning aspect, NetEase remains prudent and sensible.
Got it. Thank you, Charles.
We will take our next question from the line of Alex Liu from China Renaissance. The line is open. Please go ahead.
I'll translate myself. My first question is on the cash allocation. We have very good cash flow on our core business and also very solid cash balance. Just wondering, should we think about the enlarged stock repurchase program, and perhaps further stock repurchase program as a more recurring practice down the road? The second question is on the deferred revenue. Deferred revenue balance was very strong this quarter, and I was wondering if the management could give some color on this growth and whether it's due to the mix change between PC and mobile games. Thank you.
OK。Alex，对于你的第一个问题，我们的财政政策一直非常谨慎。我们是全球为数不多的在定期支付股息的科技公司之一。事实上，我们从2013年开始支付定期股息，并将继续支付，以回馈我们的股东，尤其是那些长期支持我们的股东，他们在公司近20年的成长过程中一直陪伴着我们。股回购计划也是我们从几年前就开始实施的定期措施。当情况需要时，在我们的能力范围内，我们会向董事会提出，就像这次一样，寻求他们授权增加整体股回购的资金额度。所以这是在财政现金管理方面。至于延期收入，我们没有进一步细化具体的组成部分，但我认为你说的对。如果我记得正确的话，Q1可能是又一个既认列收入又延期收入的双双创纪录的季度。再一次，这主要是因为毛额的增长和我们PC以及移动游戏线的增长，这与你看到的年同比增长的认列收入一致。Youdao当然也在一定程度上做出了贡献，但你可以参考Youdao的公开文件获取延期收入的增量部分。understood，非常感谢。
我们接下来的问题来自Binnie Wong，来自HSBC。
[Foreign language] Good morning, William, Charles. Thank you. Good morning, William, Charles, Margaret. [Foreign language] I'll quickly translate myself. Post COVID-19, do you think that it actually changes in terms of how we view our overseas games expansion plan? What are the new opportunities you also see? How do we see our target in the next three to five years? How does that change or that remain the same? In terms of your upcoming game launches, which one do you think, because these are all very highly anticipated, which one do you think that we probably will see launches soon? In terms of how you see the significance of those? Thank you.
第一个我来回答吧，就是实际上疫情以后，对全世界这个我称之为宅家文化，就躲在家里的这个娱乐体验方式，是个利好的消息。所以你会看到在家里哪怕看电视剧的、看电影的时间也会变长，看视频的也会变长，还有玩游戏的时间也会变长。所以应该是说更多的人逐渐接受和习惯了在家里去体验这种互动的娱乐产品。那第二个就对我们来说，我们有这个一些产品，这个除了为中国的用户打造以外，我们逐渐在考虑适应海外的这个市场，我们有一些作品在今年年中和下半年都会在海外市场发放。至于说你问我哪一个更有把握等等，我觉得我们对每个游戏在当初立项和开发的过程中一直是很有信心的，因为它都对不同的细分群体。还有一个就是说，我认为我本人也会花更多的时间去思考这个未来的手机游戏或者下一代的这个互动方式，对用户的、对家庭的这个影响。好吧，这是我的回答。
[Foreign language] I will provide a brief translation of William's remarks. Firstly, how the pandemic situation globally would affect our thinking of game promotions, particularly in the overseas market. William's comment is that generally speaking, the pandemic situation requires people to spend more time in house, so it is a structural tailwind for overall activities that happen at home, playing video games, watching drama, etc. That we think is going to also benefit in our game promotions because this content is having more user time, so to speak, on a global scale. We are not particularly concerned about the pandemic situation disrupting our original plan of game launches, especially for these mature overseas market. Users are more attracted and emphasizing a lot on game quality. I think that is our biggest selling point. It is the quality of the NetEase games.
Second, you asked on the approval process and our expectation on the overseas games. It's really difficult for us to do a force ranking, which one is number 1, which one is number 2, because for all these projects, since the inception of the project business planning, we think they are all great products representing highest quality in the respective genre to a target and attract to a very different segment of target users. We are very excited. Some of the games can be launched as early as the middle of this year, and some might have to wait until the second half later part of this year.
William draws also a closing remark that he himself personally, throughout and given the pandemic situation, he's actually been thinking and giving a lot of more thoughts in terms of how game content can be designed and developed, and how game content can be distributed to fulfill a better social responsibility and value to families, to people around the globe.
Thank you. Thank you, William and Charles. That's very helpful.
We will take our next question from the line of Thomas Chong from Jefferies. Your line is open. Please go ahead.
Hi. Good morning. Thanks, William, Charles, and Margaret for taking the questions. I have a question back to the music business. Given the fact that we have been also monetizing through the live streaming business models, can you comment about how we should think about the competition in the live streaming space, as well as the competition with short-form video? Thanks, William, Charles, and Margaret for taking the question. There is a question about NetEase Cloud Music. I would like to ask, now that we are monetizing in the live streaming field, how should we look at the competitive landscape? Then there is also the competition of short videos. Thank you.
I think live streaming is one of our monetization methods, but it is not the only one. I believe that our monetization in the music business will definitely not be limited to membership, digital albums, or live streaming. I believe that NetEase will create a business model that is different from the crowd. This is a monetization. I want to go back to the most fundamental thing about this product, which is that the Chinese market is very large. We first have to do a good job of Chinese music, and do a good job of China's original music, so that more users can hear the best music from the past 100 years from each country and each ethnic group around the world. In terms of our cost expenditures, copyright is indeed the most important thing.
As I have said, we are very willing to purchase various copyrights. The difficulty we are facing now is that some enterprises deliberately monopolize these copyrights and do not transfer them. This is a major reason. I think you don't have to worry about the commercial monetization of music. Just like our games, Chinese games are free, item-based business model. This is a first in the world. You see, now some American companies are beginning to learn from us, this free, item-based business model. I believe that our music's future business revenue model will also be a huge innovation.
Okay.
I think we are overrunning on time.
Sorry, we may be running out of time. Let me translate briefly what you just said for you.
In the interest of time, I'll provide a brief translation of William's remarks just now. Broadcasting is just one way of us thinking how we can monetize on our NetEase Cloud Music platform. It is not the only way, and we will continue to explore different and innovative and diversified ways of monetization in a sensible and user-appealing way. The essence of us, the biggest ambition and the mission of us doing the NetEase Cloud Music platform is that we want to contribute whenever we can within our ability to help promote and better enhance the Chinese music industry as a whole.
It might look very different from mature market in the Western world, but we think Chinese music market is huge, with huge upside potential, and it could allow multiple players to develop its respective differentiated competitiveness, advantage, and edge in collectively making China's online music industry a better and a more promising industry.
Thank you.
Due to time limit, that concludes today's questions and answer session. At this time, I will turn the conference back to Margaret Shi for any additional closing remarks.
Thank you once again for joining us today.