TMTpost: What Impacts Will Apple Music Have On The Chinese Streaming Music Industry?

No matter what, it is high time BAT should think hard and figure out strategies to address Apple’s challenge, as the famous Chinese philosopher Confucius once said: one should take things as they come.

Before I get to the point, I want to share with you the story of a friend of mine who is currently an engineer in Apple’s OS Department. Three years ago, she downloaded several songs when she was idling in his own department. But several days later, she was informed by the Community Administration Committee that she needed to take a one-week course on intellectual property. Her story best demonstrated the degree to which intellectual property was protected in the US.

Internet, however, is commonly regarded by over 700 million Chinese netizens as a huge platform for them to get access to all kinds of resources, including music, movies, news, pictures, etc. for free. There is no denying the fact that the boom of the Internet have significantly enriched the work and life of many Chinese netizens. Yet, Chinese netizens are so accustomed to “receiving free meat pies from Heaven” that they expected the Internet to be free all the time. Chinese Internet companies, however, suffered a lot from such mentality and were constantly held in the struggle between providing services for free and charging netizens with a small amount of money.

On September 30th, Apple announced that it would bring Apple Music, Movies, and iBooks to its customers in China. “The Chinese market has already become our largest market in the world in terms of app download times,” says Eddy Cue, Apple’s senior vice president of Internet Software and Services.

To better meet the need of Chinese users, Apple set up a special team from China to pick the best pieces out of a sea of music, movies and books items. Apple teamed up directly with several Chinese music recorders and have already received the copyrights of over a million music items up to now. Moreover, users get to listen to music items exclusively-owned by Apple Music and even interact with music stars such as JJ Lin via Apple Music’s Connect function. Besides, users will be receiving recommended music items from Apple Music’s “For you” service and listen to Chinese local music stations via Apple Music.

To celebrate the launch of iTunes Movies in China and meet the need of Chinese customers who have been accustomed to “receive meat pies from Heaven”, Apple Music will be available as a free 3-month trial for customers in China starting from September 30th. After the trial period, a subscription fee of 10 RMB/month will be applicable, while the pricing of the family plan for up to six members is 15 RMB/month.

On the one hand, the entry of Apple Music, along with its various new functions, will certainly pose a threat to Baidu, Alibaba and Tencent (also known as BAT, three leading Internet giants in China). While Tencent and Baidu’s performance in streaming music industry has always been unsatisfactory, Alibaba has only begun to conduct business in interactive entertainment sector. On the other hand, however, the challenge of Apple Music will force BAT to refocus their attention on streaming music business and even invest heavily in this sector.

So what impacts will Apple Music have on the Chinese streaming music industry, composers of digital music and even the landscape of copyright and intellectual property in China?

Up with music recorders and musicians, down with music app developers

At present, music items on Apple Music are either purchased by Apple previously or purchased from Chinese music recorders to cater the Chinese market. Apple is well aware of the importance of copyrights and intellectual property rights and is willing to obey the relevant regulations on copyrights as a foreign company here in China. However, as an influential global tech giants worthy of 639.6 billion USD, Apple is at an advantage when negotiating with Chinese music recorders compared to BAT. In this case, Ali Music, led by Gao Xiaosong, a famous musician, movie director in China, is going to face great challenge from Apple Music.

Although music apps have always been one of the most popular kinds of apps for smart phone users, no music app developer has figured out how to make profit out of the huge traffic in music apps. QQ Music did attempt to carry out Green Diamond VIP service, but it seemed that the project ultimately soured and Tencent was forced to provide free music service while spending over 200 million RMB annually in buying the copyrights from music recorders.

Rumor has it that Baidu and Tencent even planned to sell their music businesses for a while due to their failure in this sector. In the meantime, Ocean Music and NetEase Cloud Music sprang out and bought a good number of copyrights of music items. Faced with the competition from Apple Music, both BAT and other major streaming music service providers need to re-evaluate their business strategy in this sector. It is probable that the competition in this sector will only become fiercer and fiercer in the near future.

At the same time, music recorders and musicians seemed to be happy with fiercer competition. With greater importance attached to intellectual property rights and copyrights and increasing need for music items, music recorders and copyright owners will be able to make a fortune by raising the price of the copyrights of their music items. As a matter of fact, major music recorders such as Warner Music, Sony Music, Universal Music and Rock Records have already been earning over 100 million RMB annually merely by selling their copyrights.

A major shift in the industry is expected

Apple is currently the leading digital music store in the US, and has already sold over 30 billion pieces of music items. With so large number of copyrights in hand, all Apple needs to do to cater to the Chinese market is to buy copyrights of as many popular music items as possible from Chinese music recorders.

Several players have been dominating the Chinese streaming music industry, including Ali Music, QQ Music, NetEase Cloud Music, Kugou Music, Kuwo Music and some online radio apps. It has already become a common practice for music apps to buy copyrights and even exclusive copyrights from music recorders in order to ensure enough traffic and diversify music libraries. Consequently, huge sum of money is spent in buying copyrights and wasted.

Since Baidu Music, QQ Music and Ali Music reached no consensus over the streaming music business and copyright purchase, they failed to team up together and dominate the Chinese streaming music industry. Gradually, BAT’s users turned to other emerging music apps such as NetEase Cloud Music and Ocean Music. That’s when Alibaba cashed in and aimed to integrate streaming music service into its interactive entertainment ecosystem.

It is in this background that Apple Music entered China. Major Chinese streaming music platforms lag far behind Apple Music in terms of capital, influence and the number of copyrights. Moreover, Apple’s entire ecosystem of hardware and software is going to help Apple lead substantially in the industry. Under such circumstances, I call for a potent mediator who can check Apple and lead the Chinese streaming music industry to a brighter future.

No matter what, it is high time BAT should think hard and figure out strategies to address Apple’s challenge, as the famous Chinese philosopher Confucius once said: one should take things as they come.

[The article is published and edited with authorization from the author @Li Anlin, please note source and hyperlink when reproduce.]

(Chinese Version)

Translated by Levin Feng (Senior Translator at ECHO), working for TMTpost.
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