Music Market Focus: China Streaming, Recording Business In China [Part 1/2]

Tencent's Music MSE services are built on the same principle of virtual gift-giving. The user is brought into the TME's ecosystem by the free music streaming — but the actual money is made on the virtual gifts they would send to the performers. To put it in perspective, in Q2 of 2018, TME was making $1,27 per month on each of the 23,3 million paying users of its online music services. Over the same period,an average paying user of WeSing or KuWo/KuGou live spent almost 13 times more on virtual diamonds flying over the live-feed, as the MSE services' 9,5 million paying users brought a monthly ARPU of $16,37.

Not so long ago Coachella and YouTube made headlines, as the first weekend of U.S. festival broke the records by generating 82.9 million live views on the platform in the course of two days. Well, what if I tell you that the performances of Childish Gambino, BLACKPINK, Billie Eilish and alike, all combined still fall short of a single TFBOYSconcert, celebrating the four-year anniversary of the Chinese boys-band? The performance, live-streamed across all of the apps in Tencent's ecosystem, gathered, according to Tencent,a total of 118 million live views, peaking at 7.66 million concurrent viewers, with over 340 million virtual gifts sent out during the stream. The gifts are  priced in a range from 0.05 to 1000+ RMB, and even if we assume the cost of an average donation at 0.5 RMB ($0.073), that would still make about $25,000,000 pie split between TME and TFBOYS — which is about as much as Ed Sheeran made in gross ticket sales over 4 nights at Wembley Stadium last year.

Perhaps the most interesting question here is, how do you actually qualify that revenue from the artist point of view? On the one hand, the whole system is powered by streaming as the primary traffic source, so the recording industry still plays a vital role in the value chain. On the other hand, the content that actually triggers the donations and gift-giving is a live performance — although it's pretty far from the western convention of how the concert industry makes money.

Perhaps the answer is neither. The MSE services carve out the space between the live and recording industries, but they aren't focused on the master recording or live experience. What the TME's "Streaming" excels at is monetizing the fandom, and in that sense, MSE services are a digital analog of the Japanese CD-based business models, that work on the same principles of turning fan-engagement into hard cash. The fact is that the two countries, despite their political tensions, have a lot in common. Just like in Japan, the fandom culture and the idol-system dominate Chinese mainstream music. Just like in Japan, you can find the stories of passionate fans buying huge ad-spaces, at home or overseas to celebrate their idols. Japanese AKB48's business model, that we've explored in detail in our Market Focus: Japan, had huge success on the Chinese market, spawning 3 idol super-groups: SNH48, BEJ48 and GNZ48, based in Shanghai, Beijing and Guangzhou, accordingly. Even if the approach to actually turning the fan's attention into money is different, the core cultural drivers behind it are the same.

Of course, not every artist on the market can succeed within the TME's monetization model. TFBOYS' concert is an extreme case of TME's system in action, that is unreachable for the mid-class artists. TFBOYS are one of the most prominent artists in China right now — the band's member Wang Junkai, for example, holds the Guinness World Record for the most shared post on Weibo (Chinese analog of Twitter) with over 43 million "retweets". The revenue of a mid-sized artist would be nowhere near the $25 million figures. Furthermore, if you take a quick look at the content that is live-streamed on KuGou Live, you won't find that much in terms of the actual live performances, in the western sense. More likely, you will catch something along the lines of music talk-shows: ever-cheerful hosts, laugh sound-effects and audiences applauding on cue. The fact is that, while Tencent uses the MSE services as the main way to monetize it's streaming empire, the artists that can engage with the platform are either top-tier performers like TFBOYS, or the aspiring pop-idols, trying to build up their following. At the same time, if we take a look at the "physical' live industry, pop music accounts for only 11% of shows in China — so it's about 90% of artists that are left out on the curb of the TME live-streaming services.  The rest of the industry can still make money on plain streaming, right? Well, if we take MSE out of the equation, the scope of the recording industry is not there yet. Making real money from streaming is hard — if not impossible — for most of the artists on the market. TME's per-stream payout, for example, is just 0.001 RMB, or $0.00015, which is about 3,4% of what Spotify pays the artist. Of course, TME has nearly six times more users than Spotify, which helps level out the field a bit — but still, it's $150 made on a million of streams.

Source: Hypebot.com

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