Taylor Swift’s latest album “Midnights” has been released and could set a new standard for the Chinese digital music industry.
Within a day of its release, the 13-track album, priced at 35 yuan, or $4.83, has amassed nearly 200,000 copies on Tencent’s QQ Music, one of the largest music streaming platforms in China. Although $4.83 doesn’t seem like much – the album starts at $11.99 in the artist’s own online store – it’s the highest price ever set for digital albums on the market, which could indicate two things: the upstream cost of album creation has risen, or Chinese users are increasing willing to pay for online music.
The digital music industry in China has taken a very different path than the western one. For a long time, music piracy was rife in online and offline media, so streaming platforms like QQ came up with various benefits to make people pay the bill. In fact, many paid users of QQ Music have signed up for bundle deals that give them access to other Tencent-affiliated products, such as video streaming, manga, or membership of the Tencent-backed JD.com online mall. Subscribers also get a variety of value-added services within QQ Music’s platform, such as hi-fi streaming, access to online concerts, and custom app layouts.
It’s hard to say whether the price of $4.83 is the new pricing norm or just a reflection of the fandom for Swift in China. After all, the American artist is one of the few foreign celebrities to achieve 10 million followers on Weibo, China’s response to Twitter. Until now, only Jay Chou, the mandopop (Mandarin pop music) king whose songs are known to everyone of my generation, has matched Swift’s price power at 30 yuan per album copy.
After Beijing’s crackdown on internet monopolies, Tencent’s negotiating power on licensing agreements may have been weakened. For years, Tencent Music Entertainment, the company’s music arm, has been wasting money by acquiring exclusive rights from UMG, Warner Music and Sony Music Entertainment. That is no longer the case. For example, Swift’s latest digital release is also available through QQ Music’s arch-rival NetEase Cloud Music.
The good news is that an increasing number of users are paying for Tencent’s music offerings, although the penetration rate remains modest. In Q2, TME reported 82.7 million subscribers for the three music streaming apps, up 25% year-over-year; in total, 593 million people use these services every month, which means that only 14% of them pay. By comparison, 188 million, or 43%, of Spotify’s 433 million users were premium subscribers in Q2.
Spotify also has a more profitable product. If we look strictly at their music services (TME is generally a more profitable business thanks to its more lucrative live streaming platform that lives off the sale of virtual gifts), Spotify’s average premium revenue per user (premium ARPU) as of Q2 was €4.54 ($4.48). TME’s average revenue per paying user (ARPPU) was 8.5 yuan or $1.17.