About one year ago we heard that Sina would establish a digital music company and purchase a significant amount of music rights. The company turns out to be China Music Corporation (CMC), with offshore corporate structure, and was founded by Xie Guomin, former vice president and general manager of Sina’s music division, according to Tencent Tech News (in Chinese). A company named Sea Music is the representative of it in mainland China. Although it’s not a Sina company, Sina holds a stake in it, according to the Tencent Tech report.
Mr. Xie helped Sina to go public in 2000 as a lawyer. Chinese critics think being a legal professional is a critical reason that he’d enter the digital rights market. 2013 is believed to mark a turning point for China’s music industry after years of suffering from digi-music piracy. It was reported that talks between music companies and Chinese online music services started in last year that the former urged the latter to charge users for downloading digital tracks or premium offerings. Prior to that, labels, especially those international ones, and other parties as copyright holders worked hard, including suing companies like Baidu that offered access to pirated digital songs, to have those online services to pay music rights.
From early this year, almost all of the major online music services rolled out premium subscriptions. A famous Chinese musician disclosed that the music industry had managed to have almost all online services not to offer pirated digital songs.
It is believed that the prices were relatively low when we heard that China Music Corporation was about to massively buy music rights. The Sea Music claims it has reached exclusive, long-term agreement with over 40 music labels and agencies, including EMI, BMG and Sony, that account for more than 15% of the total market.
It resembles what LeTV, one of the largest online video services in China, did a couple of years ago. When most Chinese online video services were fighting for market shares and indulged in piracy which would attract more users, LeTV bought a lot of exclusive video rights. When some videos it bought became hugely popular in the next years, other sites had to pay very high prices to buy those rights. LeTV turned profitable early on thanks to those video rights.
In nowadays’ music market in China, at least those well-known online music services cannot get away with pirated content anymore. Is it the time for China Music Corporation to start making big money by selling music rights just like how LeTV did before? At lease the major players can afford it. Tencent and Baidu are Internet giants that have tons of cash at hand and cannot see users leaving because of lack of songs on their platforms. Xiami, who once hardly afforded the copyright fees asked by music companies, was acquired by Alibaba and has no worries on it any longer.
If China Music Corporation can make big money from those rights, what it will do next? LeTV, with the money from selling video rights and gained as a result of the high expectations of stock investors, developed an Android-based smart TV system, and set-top boxes and smart TVs. Now it runs a full-round digital video business.
Last month Kuwo, one of the biggest online music services in China, denied a rumor that it was to be acquired by the Sea Music for about $100 million. It is estimated that if the prices of music rights would be driven very high like what happend in online video market, smaller players like Kuwo, Koogou and Duomi could hardly afford it. Convergence will be for certain. After the hard times in China’s online video market, Youku and Tudou, two leading players, merged into one company. Other major online video sites now are all backed by large Internet companies.
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