According to the Global Music Industry Report 2019 China entered the world’s top ten music markets for the first time in 2017. It climbed to seventh place in 2018, achieving rapid growth in the short term. The report also shows that in the global music industry revenue, digital music revenue accounted for 58.9%. In 2019, the digital music market in China has reached 10.3 billion yuan, up from 4.7 billion yuan in 2017.
An increase of nearly 60% is a manifestation of the commercialization of the market. At the same time, it has linked up and downstream enterprises in the music industry chain, bringing new opportunities for the development of the music streaming platforms in China.
Data Source: iResearch, Digital music market in China
Intellectual property protection is behind the rising of the music streaming platforms in China
There are several reasons that contributed to the growth of the music streaming platforms in China. It started with strict rules for protecting intellectual property. In 2015 the Chinese authorities launched an operation called Sword Net, which required music streaming platforms in China to remove unlicensed music. After that, the digital music market in China more than doubled in size, growing 113.2% compared to the same period the previous year.
Until this operation took place, music streaming platforms in China depended on advertising. Between 2013 and 2015, advertising accounted for over half of revenue, but in 2018, advertising only contributed 23 percent. At the same time, subscriptions accounted for 59 percent and intellectual property management accounted for 18 percent of total revenue. The increased number of Internet users in China and the creation of online payment systems also contributed to the growth of the digital music market in China.
Advertisements
Advertising is still an important part of music streaming apps in China. For example, 50% of QQ Music’s income in 2017 came from ads on website pages and mobile apps. Therefore, attracting huge and growing numbers of users onto platforms brings income from advertising.
Tencent’s music streaming platform Joox is very strong on advertising. Advertisements on Joox can be splash screens, banners, campaign-style ads, and audio ads. Such brands as Coca-Cola, Fendi, Dior and Oppo have partnered with Joox for promotion. Paid-subscription users can listen to songs without ads, skip songs as they like, and access offline listening by downloading songs.
Who are the main users of music streaming platforms in China?
Most Chinese music streaming platform users are between 18 to 34 years old. Nearly 60 percent of millennials use two or more apps for streaming music. That’s far higher than older users, 35 and up, where only 39 percent do the same.
How much do users pay for music streaming platforms in China?
The interesting thing about Chinese music streaming platforms is that they are all free. Most apps make money by offering better sound quality subscriptions, advertisements, concert tickets, virtual gifts, and song purchases. In 2020 Tencent Music had 12.8 million users with paid-subscription, what costs an average of 111.1 yuan (15.66 US$) a month. Annual subscription for NetEase Music costs 179 yuan or 26 US$. As for Xiami, owned by Alibaba, users have a VIP membership plan called “88 VIP”. They pay annual fee of 888 yuan (128 US$) and get an access to Youku, a subscription to Xiami as well as discounts on Chinese food delivery platform Ele.me.
Source: Inside Retail Asia, 88 VIP from Alibaba
How do Chinese music streaming platforms compare to Spotify and Apple Music
While the US music streaming market is mature and major music streaming platforms all offer similar products for similar prices, it is much more dynamic and competitive in China. There are 15 different audio streaming services in China with at least one million daily active users.
While music licensing in China is cheaper than in the US, none of Tencent’s competitors reported profits. Similar to Apple Music or YouTube Music, most Chinese music platforms have resource-rich parent companies. Whereas many American music platforms like Spotify focus on subscriptions, Tencent Music also sells individual songs, premium memberships with higher sound quality, but also, users can send virtual gifts to artists. The subscription fees for Chinese music platforms are incredibly low, causing platforms to be more creative in how they monetize.
China’s podcast market is also taking off, but unlike American platforms, there is little overlap between music and podcast functions.
Apple music uses TikTok to expand its subscribers base in China
Apple Music uses Chinese short video app Douyin (TikTok) to grow its subscriber base in China. Douyin is the most downloaded iOS app in Q1 2018. Apple and Douyin have created a partnership where Douyin users who are subscribed to Apple can access the complete music library directly from the Douyin app.
Source: Beebom, How to connect TikTok with Apple Music
China’s Tencent is buying stakes at Spotify
In 2017 Spotify and Tencent Music jointly announced an equity investment agreement. Spotify claimed that Tencent holds a 9.2% passive stake in the company. Passive equity refers to holdings that cannot affect the company’s business operations. In other words, Tencent as a shareholder can only participate in dividends, but not in company management. This cooperation means that the relationship between the two biggest digital music platforms will be closer.
Chinese tech giants lead in the digital music market in China
Data Source: QuestMobile, Market share of the music streaming apps in China 2018
Tencent Music owns four key Chinese music streaming platforms
Tencent Music Entertainment (TME) is China’s largest music streaming company, which began trading in New York in December 2018. TME has a solid market position with 800 million users worldwide, three times more than Spotify. However, it has less than four percent of those users pay to subscribe, compared to 45 percent on Spotify. TME owns music services including QQ Music, KuGou Music, Kuwo Music and WeSing.
As of October 2020, Tencent’s music apps – KuGou, QQ, and Kuwo – were the three most popular music streaming apps in China.
KuGou Music
In 2019 KuGou, which means Cool Dog, has made it to the top of the rankings, reaching a very wide audience, especially in low-tier cities. Most of its content is for square dance and KTV tunes by the local population. KuGou has won users over by integrating KTV streaming, which allows users to receive “song coins” that can be converted into real currency. Users can comment on songs through “marker screens” (弹 幕). They also can listen to, watch, and interacted through a social platform. The monthly active users of KuGou totaled to 297 million.
QQ Music
Although QQ Music has the same features as KuGou such as radio, KTV and live streaming, it caters to a more urban user base. QQ Music also offers articles and allows users to watch music videos, concerts, and interviews with famous musicians. It also includes international stars such as Linkin Park. The app had 211.4 million users as of 2019. It owes its success to Tencent’s huge presence in the Chinese market, including WeChat. This allowed the service to strike deals with major record labels.
Kuwo Music
Kuwo is an application focused on KTV streaming. The app hosts KTV tournaments with cash prizes. It also broadcasts popular talent and comedy shows. Kuwo also reserves part of its app for China’s emerging DJs. Like other apps, Kuwo offers song purchases and subscriptions. It tries to make money from games in apps and from its own brand of headphones and speakers. The app has 107.7 million MAU as of 2019.
WeSing
Karaoke is a popular entertainment among all ages in China. The Chinese government’s 2019 report estimates the karaoke sector at 101 billion yuan ($ 14.8 billion), up 12.3% from the same period last year. Karaoke platforms such as WeSing contributed to this growth. With karaoke bars closed during the pandemic, WeSing offers Asian users another option. Online karaoke platforms remove the aspect of public embarrassment and give users the ability to re-record their performances. Besides, social elements help users chat and sing with friends.
This Chinese music streaming platform owned by Tencent is also available in the Philippines, Indonesia, Thailand, and Malaysia. WeSing represents 77% of all online karaoke users in China and is especially popular among young generation. 50.3% of users are between the ages of 25 and 29.
Source: East meets West, WeSing karaoke platform
NetEase Cloud Music: the main rival of Tencent Music
NetEase Cloud Music is a leading provider of interactive music streaming services in China with over 800 million registered users all over the world and over 30 million tracks. One of the most popular features there is the comments area for user communication. 61% of NetEase Cloud Music users read comments and about 25% of users write comments. NetEase also launched Cloud Village, which builds user communities of interest and encourages the creation of music blogs. NetEase Cloud Music has developed and refined its recommendation algorithm to help users easily find more songs through “Private FM” and daily recommendations.
However, among Chinese netizens, NetEase has become associated with loneliness; as people tend to open up in the comment section about their personal struggles. In response to this, NetEase started a Cloud Healing Center where users can seek emotional support.
In November 2019 it received a $600 million infusion from investors including Baidu and General Atlantic.
Data Source: Bjreview, NetEase users worldwide
Xiami Music: backed by tech giant Alibaba
Alibaba’s Xiami Music is another major music streaming platform in China. In 2013, Alibaba acquired Xiami Music This was also the beginning of Alibaba’s formal entry into the music industry. In 2015, Alibaba built Alibaba Music and selected Chinese KOLs in the music industry to join. Namely, it was well-known musician Gao Xiaosong, who served as chairman.
Xiami started out as a P2P platform but then had to abandon this model due to copyright regulation. The service recently added more niche content featuring young musicians. It also launched a talent scouting program, where users can explore and select their favorite from over 6,000 new artists. In 2019 it teamed up with NetEase Cloud Music to share music libraries to expand its song repositories.
Source: Music Ally, Xiami Music platform
How COVID-19 outbreak impacted the Chinese music streaming platforms
The COVID-19 outbreak in China and the need for people to stay at home had an impact on many industries. First, it reduced overall consumer purchases. Nevertheless, during the period from March to July 2020, audio content activity increased by 6.2% year-on-year.
Live concerts streaming became especially important. For example, Wave, a virtual concert platform that has already hosted events for John Legend and The Weeknd, has signed an agreement to move its virtual concerts to China as part of a partnership with Tencent Music Entertainment Group. The deal says Tencent is acquiring a minority stake in the music service.
Through the partnership, TME will be able to stream Wave events in China across all of its platforms.
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