China’s music business will grow substantially thanks to the rise of online streaming services, according to Max Hole, head of international business at Universal Music Group, the biggest record company by sales.
For decades, piracy has undermined the ability of rights holders to sell CDs or digital downloads in China. Although China has a fifth of the world’s population, it accounted for less than 1 per cent of record companies’ $15bn in worldwide revenues last year. Labels make more money in New York state than they do in China.
“The Chinese existing model for music is not entirely broken, but it’s pretty broken,” says Mr Hole, who runs Universal’s operations outside the US. “We’ve got the opportunity to skip all that and go straight to a streaming and subscription model.”
What is changing, he says, is that consumers are listening to music via streaming services controlled by the country’s biggest internet companies including Tencent, Alibaba and China Mobile.
These companies are willing to pay to license music for their platforms. This is because Beijing is stepping up enforcement against copyright infringers and because the big internet groups are looking to expand into countries with tougher copyright?regimes.?“They’ve all got aspirations in the west so they’re becoming much more amenable to a solution with intellectual property owners,” he says.
Until recently, most online platforms in China provided pirated music. But in the past three years, the “major” record companies – Universal, Sony Music and Warner Music – and some independent labels have licensed China’s eight biggest online music services.
The licensing deals were triggered by a landmark agreement in 2011 with Baidu, which runs China’s biggest search engine. That deal also settled anti-piracy litigation.
“Has [the Baidu agreement] been fantastically successful? No,” says Mr Hole. “Was it a start? Yes.”
While Chinese consumers are listening to more music on licensed services, the most popular ones are free and supported by advertising, generating very little revenue for record companies.
The next step for China’s music business – and a much more challenging one – is to convince consumers to pay. Most big free streaming services have introduced paid options following pressure from record companies.
So far, the paid userbase is small. Tencent’s QQ Music, which is one of the longest established services, has attracted 2.8m subscribers paying up to Rmb10 ($1.60) per month.
Perhaps the best evidence that it is possible to make money from music in China comes from China Mobile, the state-owned telecom group that has more than 700m customers. It reportedly generates more than Rmb22bn a year from music, mostly from ringback tones, but has hitherto shared only a small proportion of its revenues with rights holders.
Outdustry, a Beijing-based consultancy, recently predicted that the consolidation of digital music services would benefit record companies.
“We will see these few major players – with the support of the government – being able to shut down or license any rogue sites or apps,” one of its reports said. “At this point, with the market largely under control, there will be a concerted push towards more realistic freemium structures in which paying money does actually add value.”
For Mr Hole, the opportunity in China has never looked bigger. He says Universal is increasing investment in its operation in Beijing, where it has signed artists such as Sa Dingding, a folk singer from Inner Mongolia, and Li Xiangxiang, the winner of television singing competition Chinese Idol.
“I feel the wind of change in China,” he says. “Up until fairly recently I had to go to China to sell. Now they’re coming to me.”
环球音乐(Universal Music Group)的国际业务主管马克斯?霍尔(Max Hole)指出，得益于线上流媒体服务的崛起，中国的音乐行业将出现显著增长。按销售额计算，环球音乐是全球第一大唱片公司。
直到不久以前，中国的绝大多数网络平台提供的都是盗版音乐。但在过去三年中，主流唱片公司——包括环球音乐、索尼音乐(Sony Music)和华纳音乐(Warner Music)——以及部分独立唱片公司，对中国八家最大的线上音乐服务商进行了版权授权。