China's online music sector welcomes big capital inflows in 2018

Vcg111152663041.thumb_mb

Photo/VCG

Jan. 8 (NBD) – China's online music industry was highlighted in 2018, with a great deal of capitals streaming into the sector.

Under such circumstance, online music platforms like Tencent Music Entertainment and Netease Cloud Music respectively saw huge growth in the market capitalization.

Behind the tremendous capital inflows is the rapid development of China's digital music industry. 

The online music market size rocketed to 18 billion yuan (2.6 billion U.S. dollars) in 2017 from 1.82 billion yuan (266.1 million U.S. dollars) in 2012, with an average annual growth rate of 58 percent, Yang Qihu, general manager of the legal and government affairs department at Tencent Music, disclosed at the 6th China International Music Industry Conference.

Some investors claimed that Tencent-backed music platforms and Netease Cloud Music owned over 94 percent of the users in the online music market and the competition was mainly among these top music platforms.

Yu Li, partner and director of investment at ShouTaiJinxin Fund, told NBD that QQ Music, Kugou Music, Kuwo Music and Netease Cloud Music have almost monopolized the online music sector, in terms of monthly active users and their spending time, leaving bare room for other music platforms to survive.

However, while China's online music industry touched the ceiling of internet traffic increase, the sector encountered difficulty in gaining new users after the active user penetration rate reached over 70 percent.

Additionally, huge as the current user base is, the subscription rate of premium members is registered at only 4 percent on average, far behind 43 percent from Spotify, a Swedish music streaming platform.

According to Yu Li, to attract more traffic, music platforms competed for exclusive copyrights, which resulted in the rise of costs. High costs and low subscription rate forced these platforms to be more reliable on traffic, making them unable to alter the current free service model due to the fear of user loss, Yu added.

Furthermore, the online music sector is also challenged by other emerging businesses. According to Ding Bo, vice president of Netease Cloud Music, the biggest competitors for online music players in the future may be platforms like short video app TikTok.

As for the further development of the segment, Yang Ge, founding partner of Sky Saga Capital, noted that the focus should be cooperation with large-scale platforms in other sectors, which often generates whopping proceeds. 

In Ding Bo's view, the next step should be improving user experience. Apart from providing online music and social networking, online music platforms have been exploring to create more scenarios for profits making based on the constantly changing user demand. 

Experts declared the combination of music with other businesses will become new divers for the development of the online music industry.

Yang Ge predicted that online music will be combined with offline music shows, smart hardware and other diversified businesses in the future.

Yu Li said to NBD that with the support of copyrights, artists and fans, it is feasible to apply online music in offline scenarios.

 

Email: wenqiao@nbd.com.cn