China music industry want to take a 70% revenue cut from digital music sales, although the paid download campaign is still in vain. As reported, major online music services, including QQ Music, Baidu Music, Duomi, Kuwo and Kugoo, joined in a move initiated by the music industry, planning to charge for all legitimate digi-music downloads from the end of this year. Now industry people say it’s even hard to have an agreed starting time. And they know it won’t work out even if only one well-recognized service decide not to do so.
The industry also want a decent revenue sharing ratio. According to Song Ke, founder and former CEO of Taihe Rye Music, music content providers could only take a 2 – 3% revenue share with online music services. The industry as a whole have little bargaining power for 1) established third-party platforms have huge audiences they cannot ignore; 2) to some platforms, music is just for enhancing user stickiness but not a revenue driver; 3) seldom labels has a music inventory big enough to threaten the third-party services– Song Ke thinks it should be over 20%.
It is said big players, such as the Big Four labels, get bigger cuts, but not big enough.The industry’s vain hope is a 70% revenue cut. Song Ke thinks 40% is the bottom line to “sustain the music (industry)” , hoping for a 50/50 split. That’s the ratio China Mobile, the carrier who created the ringtone download business and made big money from it in 2G times, shared with content providers like Taihe Rye.
As 2-3% sounds small enough, what’s even sadder is the denominator isn’t big at all. Still, a very small number of Chinese users pay for digital downloads. With only 0.5% out of its over 5mn users paid for downloads in last year, Xiami, a quality digi-music service, hardly make profits itself. QQ Music, whose rich parent company would never hesitate to buy royalties, offers monthly premium subscriptions for 10 Yuan. But that’s not big money considering how much has been paid on royalties.
According to a survey conducted by Sina, approaching 80% of participants claim they’d still not pay for digital music; 9% would like to pay 20 Yuan for a monthly subscription; 6% would like to pay one Yuan for a download.
Instead of just being angry like what they did for years, industry people began to work on “premium” digital products to differentiate them from the pirated, old-fashioned MP3 files in the hope that consumers would be willing to purchase. Taihe Rye is developing a “template” , with quality music and accompanying design — works similarly with CD packages. The template will be compatible with iOS, Android, set-top boxes and the like.
More often than ever, some Chinese musicians or professionals concluded that, having China market in mind, the Internet cannot be a place for making profits, but can be a great medium for spreading and marketing music. And some are making good profits from concerts and offline events. Sometimes you’d wonder, whether figuring out other business models could be easier than asking Chinese internet users to pay for owning digital files?