Kuwo Launches YY-style Music Service, for Its Business Model.

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Kuwo, a digital music service, launched a YY Music clone called Kuwo Live Karaoke. Lei Ming, CEO of Kuwo and former chief architecture officer at Baidu, wasn’t hesitated to acknowledge that its a copy, saying “this model is very likely to make disruptive changes. It’s also possible that it will become one of Kuwo’s major revenue sources, but it may take a long time”, Mr. Lei said at the launch event, “(we have been) working on interactive music services. That YY went public increases my confidence in the future of music industry. (I) saw the changes in business model. That (growth) will be accelerated.”(source in Chinese)

Kuwo Live Karaoke works exactly the same with YY Music does: audiences can purchase virtual gifts to send to online singers; Kuwo shares revenues with singers. The most expensive virtual gift on Kuwo is priced at 200 yuan ($32), much lower than that, 120 thousand yuan worth of monthly subscription, on YY Music.

Kuwo Live Karaoke (image:hao.kuwo.cn)

YY Inc., an internet service provider that just went public on the NASDAQ two weeks ago, made $28.6mn from YY Music in the first nine months of 2012, with a 657% increase as of the same time in 2011. YY Music has become an ecosystem where, besides audiences and singers, third-party agents also take part in by organizing theme channels and events, and sharing revenues with singers. Apart from selling virtual items for audiences to show support to performers, YY Music also developed a purchasable status rankings for users — like the one used by Tencent to increase both user stickiness and revenues. YY plans to charge entry fees to live music events, according to its SEC filings.

It is widely recognized that the model was created by 9158 in 2006. 6.cn, an online video service, was also an early entrant in this business. It is expected 9158 will make at least three times the total revenue of YY Music’s in 2012 and 6.cn’s revenue will also be higher than YY Music’s, according to media reports.(9158 has some porn-related controversial issues.)

Kuwo’s Lei Ming doesn’t think those strong competition is a concern, saying this model is enjoying a rapid growth and more participants will have more users know about it.

Before the YY-style online live music service, Kuwo made revenues from advertising and offline events. The company claims it broke even. It also joined in a move, together with major players in online music industry such as QQ Music, Baidu Music, Xiami and many others, to start charging for quality music downloads in next year. Kuwo has implemented payment system to enable that and paid subscriptions for HD music video streaming and other premium services. Mr. Lei expects all those new services will bring them a big increase in revenue.

Kuwo claims it has 250mn users and 40mn mobile app users, with an eight-fold increase in the past year ( I suspect those numbers for I don’t see half of Chinese internet users are using Kuwo. QQ Music, one of the most popular, claims it has 200mn users). Before YY Music, Kuwo also copied Changba, a Karaoke app. I’m sure Kuwo cannot be the last one that copy the model, for it’s easy to copy and Chinese users like it. Let’s expect China to become the first and biggest online live music show market.