A few hundred people gathered around a wooden stage on their tiptoes waiting for their favorite singer. With the spotlight pointed at the side of the stage, Zhou Xingzhe, a 22-year old singer from Taiwan, walked onto the stage in a black suit. The crowd burst out in screams.

After a greeting and some interaction with the MC, the lights dimmed and Zhou started singing. The crowd sang with him and swung their bodies with the melody, extending their arms to clap to the beat. During the interludes, people were randomly selected to go on stage and talk with Zhou, leaving the rest wringing their hands in jealousy.  In the era of digital music and streaming media, it was a rare treat for fans.

This was one of ten live house performances that NetEase Cloud Music and Sony Music Entertainment, one of the world largest record labels, are cooperating to bring to China’s youth. Beginning next year, Yundou Live (云豆现场), the live house brand of NetEase Cloud Music, will play host to singers from home and abroad.

At a joint press conference, Ding Bo, vice president of NetEase Cloud Music said he aimed to make music live houses “as common as karaoke and movie theaters.” He anticipates Yundou Live to host its 1,000th shows in 2018, suggesting that NetEase Cloud Music is ready to expand its live music business.

Live houses, originally from Japan, are smaller music venues usually without seats. Performers stand on the stage and directly face their audience just a few feet away. “Live houses bring us closer to music, both physically and emotionally. It’s a visual and vocal treat for music fans,” Michelle Chan, PR Manager at NetEase’s marketing department told TechNode. “Offline performances also provide more ways of marketing and distribution and allow more interactions with fans.”

“Growing a live music business is consistent with China’s current consumption upgrade and Yundou Live will help NetEase Cloud Music build its music ecosystem, from online to offline,” Li Songlin told TechNode. Li works as an analyst with iiMedia Research, a consulting firm focusing on the new economy.

Launched in 2013, NetEase Cloud Music users reached 400 million in November 2017. The spinoff completed its Series A of RMB 750 million at a valuation of RMB 8 billion in April 2017, led by Shanghai Media Group. NetEase Cloud Music has become the center of the musical communities it’s built, including user-created and curated playlists, active comment areas, and independent singers.

A successful independent singer can generate large revenues from sales of their digital albums which are strengthened by Cloud Music’s precise targeting marketing strategy via the use of big data. Can’t Grow Up (无法长大), recorded by folk song singer Zhao Lei, sold more than 200,000 copies on Cloud Music, roughly worth RMB 3.6 million.

According to NetEase’s research on independent musicians in late 2016, the majority of musicians demand more effective and varied promotion and distribution channels and Yundou Live can provide that, Chan said.

Live performance at YunDou Live (Image Credit: TechNode)

Despite the emphasis on independent music, licensing issues are still an issue. In early April, Tencent, owner of QQ Music, told NetEase Cloud Music to take down Jay Chou’s music (in Chinese) after the license expired. This happened after China’s Copyright Administration demanded Tencent and NetEase to share 99% of their respective music licenses, implying Jay Chou being the other 1%. NetEase Cloud Music deleted all Jay Chou’s songs and was not able to confirm when they would be back on the platform.

A new business

The cooperation between NetEase and Sony is based on the common notion that live house business is promising, according to a NetEase press release.

In 2016 revenue from live music events increased to RMB 4.8 billion (in Chinese) from RMB 4.6 billion in 2015; live house revenues reached RMB 82 million, increasing 30% from RMB 63 million in 2015.

Tickets for live houses are usually around RMB 100, much more affordable than those of big concerts which are usually priced up to thousands of RMB. Chi Yongqiang, CEO of Mao Livehouse, once told China Business News that China’s live house market was on the eve of rapid growth. First opened in 2007, Mao Livehouse is among the first live houses in China and received tens of millions of RMB tens after pre-A funding in 2017.

“The advantage internet companies have in offline shows is that their large user traffic can facilitate the marketing and promotion, but the disadvantage is that they lack offline operation experience and physical venues, thus they usually cooperate with companies across the fields,” Li told us.

Currently, Zhou Xingzhe has more than 50,000 followers and 90,000 comments on NetEase Cloud Music, providing an easily accessible fanbase for live performances.

“Sony Music is experienced in offline shows. Zepp, operated by Sony Music, has a very active live house business,” Chan told TechNode. Zepp music halls hold both domestic and international shows and located in major cities in Japan, like Tokyo, Osaka, and Nagoya.

Despite the growth, China’s live house business hasn’t matured and companies still need to explore what business models fit best and identify their target audience. Li said this makes for a longer timeline

First launched on May 4, 2017, Yundou Live has held 469 live events for more than 130 performers and regularly performed in 32 cities. This partnership is the first time that Yundou has worked with a record label as big as Sony Music.

Benefits for Sony

“Apart from staying focused on the A&R [Artists and Repertoire, talent scouting and the commercial development of recording artists], we are also thinking about how to add value to the industry to be more competitive and provide better experiences for both performers and audience,” said Enrique Shen, Deputy General Manager at Sony Music’s Domestic Marketing and Artist Management and Development, “Cooperation with NetEase Cloud Music, is one of the areas we are exploring.”

Before NetEase, Sony Music Entertainment and Tencent Holdings, another China’s tech giant, jointly launched Liquid State, a new electronic dance music label.

According to Global Music Report 2017, Samuel Chou, CEO, China and Taiwan at Sony Music Entertainment, said labels should unite with the broader music industry, especially the live sector. “It’s not just about putting recorded music on streaming services, it is about supporting the artists and working together to build and define this new business.”