Recently, Wang Hao, CEO of Xiami Music (under AliMusic), came to Beijing and talked about his ideas with CMBN in a cafeteria. He seems to be very tired when we met. It was almost time to have dinner, but Wang ordered a cup of American coffee. We asked him, “Are you prepare to burn the midnight oil?” He laughed, “It’s the forth cup of coffee today. I had a long meeting in the afternoon.”
Wang Hao is the founder of Xiami Music. If there is a metaphor, Wang is the father of Xiami Music. Then Xiami found a rich “stepfather” – Alibaba. Though being a professional manager, Wang still hoped that Xiami Music could have a bright future.
“Today is only the first step, mutually respecting copyrights. The second step is unified service. For example, people have to pay for digital download on my app. If I license my song catalog to you, you shouldn’t allow people download them for free.” Wang thought that the realization of paid download and streaming should not rely on
music copyright monopoly. The price for music licensing is already too high, which increased the barrier to entry. However, music copyrights did not bring any substantive revenues for operators in China yet.
In the future, the competitiveness of digital music platforms would rely on “user experience” rather than copyright. Alibaba hoped that it could provide more open tools forthe music industry.
CMBN: Do you think it is necessary to have exclusive licenses in the industry?
Wang: In the Chinese market, lots of things are pushed by capital. Thus, the current situation is the result from capital. The initiator is OMusic, who didn’t own any music copyright at the beginning, but spent a sum of money to get licenses and then claimed “I have to charge for copyrights”. Of course, everyone became worried and began to follow OMusic. But it was not worthwhile.
Recently, I read some comments, which disappointed me. Many users, no matter which side they stand, criticize us for taking down so much songs. Secondly, it really leads to inconvenience to some users, since they have to download several apps for listening all songs that they like. Thirdly, only a few users are willing to pay for the copyrights.
CMBN: Is it really hard to have paid users in China?
Wang: I don’t think that exclusive license could lead to payment model. It’s only a passing phase.I believe that there is such a period is because that platforms lacks bottom line in terms of the so-called legitimate content and they want unity.
CMBN: What do you mean having no bottom line? Does it mean grabbing licensing or piracy?
Wang: It’s all about grabbing licenses or piracy. It was in 2011 that Xiami started to allow users to download music for free (unlicensed music). The reason was that we didn’t have money and could not afford music license fees. Of course, we were criticized by users at that time. But we still respected the industry development, for Xiami started paid download and streaming at the beginning.
We still come across many situations. Our music such asXunguangji, is still available on some platforms, although government cracks down music copyright infringement now. We emailed take down note to infringers but usually were ignored by most of them. So, I think every platform have spent money on getting licenses or buying music copyrights until the day comes, the day everyone are normative. If there are several music companies who want to go public through culture projects in the future, it must be legal without any infringement. Thus, in the perspective of the industry, I think it’s not bad. It’s an exciting thing.
CMBN: As for government strikes music copyright infringement, Song said that Alimusic has taken down more than millions of songs. Tencent Technology also reported that Xiami Music and TTPod were the biggest victims. What do you think?
Wang: I think, at first, increasing quantity of a song catalog is very easy. But you can’t evaluate the copyright value or users’ value by such number. I admit that we have taken down lots of songs. But the number could not be millions. Actually, We still hold many exclusive deals. Meanwhile, some companies said that they have 5,000 songs, but others said 50. Does it really mean that companies who own 50 songs are worthless? If those 50 songs are golden songs and the other 5,000 do not have any, their values are different.
There were many interesting things happened in the music licensing negotiation. Many labels realized that several giants were competing, they claimed they have several dozens of thousands of songs in catalog and asked for a high price. Then you found out that there were some strange things in the catalog, such as etudes, instructional videos, and nameless folk songs. Additionally, there is no standard rate for different songs. At present, music licensing looks like selling products, licensors price licensing fees according to licensee’ s bid.
CMBN: By now, why the music industry doesn’t have a standard rate for music licensing?
Wang: Labels have their own ideas and prices. For example, Warner, Sony and Universal have their price. And Taiwan companies and mainland labels have anther prices. These are roughly prices. But is ten million yuan more reasonable than a million yuan? No one knows. What’s more, many companies have raised their price for ten times recently. It isn’t reasonable, right?
CMBN: So, what’s the music copyright competition would be in the future? Will they continue to raise the price?
Wang: In the future, there might be mutual licensing. But before it happens, we should be clear about the rules. Today is only the first step, mutually respecting copyrights. The second step is unified service. For example, I have paid songs. When I license my song catalog to others, they shouldn’t allow people download or streaming it for free. Every month, I have to send reports to music copyright owners. My data are reliable. We can’t send fake data, can we? The mutual trust between the
industries should be established step by step.
We extremely hope to sign (copyright) partnership with more labels. However, it should be under equal conditions to negotiate rather than asking for a ridiculous price or taking music copyrights as a chip.
I think if Ali can make an agreement with Tencent, music licensing prices would return to normal level at least. when Tencent and Ali come to the same deal before, labels would rise price to both sides, who billed with higher price would get the deal. Since they are competitive with each other, the hammer price could be very high finally, leading to price bubble.
The key is that the bubble brings nothing at the end. If it could bring huge investment in the industry, it will be fine. But there’s nothing now. People all think that the threshold is too high. If you want to provide excellent music service, you have to prepare hundreds of millions of money.
Furthermore, music copyrights haven’t brought substantial revenues yet. Though Tencent claim that it makes some profits from download EXO and Bingbang’ songs. However, when you look at the statistics, is it possible for a fan to download seven thousand albums?
Is the statistic real?
CMBN: You mean, you are not agree with fans economy?
Wang: I mean fan behavior does not represent the real profitable mode of music industry. In other words, if I do not produce music today, I will keep a group of fans, because every fan is crazy about his idols and would spend thousands yuan for his idols in a year. Then, I could directly make profit. Why should I produce music?
However, if the paid download and streaming is working for any new album, then I would agree this is successful. If Tencent can achieve this, I would admire them. There is no doubt that Chinese music industry needs a normal exit. Your money should come from music and return to music. This is very important.
CMBN: What do you think is the future trend of digital music? How to make profit from music?
Wang: Regardless of other factors, actually, there are a large number of people listening music in China. If you were able to provide good monthly services, it would be successful. We have user base, users won’t feel expensive for paying ten yuan a month. But the point is the service must be good enough. We did not charge in the past, for that users can enjoy free and good service elsewhere. They could download high quality music and watch various MV for free.
If I have to say what makes profit now, I don’t know. But at least, I don’t rely on paid download and monthly subscription. Because music licensing fee has increased by more than 10 or 20 times than I expected. Player is only a channel or a tool. We hope that we can create more tools to the industry in the future and they should be open.
As if you can go to Internet marketing today with many pubic tools. But it fails with the music industry at present.
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