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The “breaking independence era” of online music

  Nowadays, the Chinese music market has also entered the era of “breaking independence”. How to adjust the strategies of the original monopoly companies and competitors? Perhaps as early as ten years ago, the copyright battle between Apple and Spotify had already given the answer.
The big battle between Apple and Spotify

  In 2001, Apple released the iPod, a god-level hardware product. Users imported uncopyrighted music downloaded from the Internet into the early iPod, and it became very popular once it was launched. At that time, the global music industry was in a period of decline due to Internet piracy, and Apple was just one of the many instigators behind this trend.
  In 2003, when iTunes was launched with the third-generation iPod, Apple transformed itself into the “savior” of the music industry. Before the product was released, Jobs spent a lot of time signing agreements with the three major record companies. The main purpose was to introduce these record companies to their iTunes platform and adopt a single sales business model (Jobs always believed that users wanted to own music, and Not renting music), at $0.99/song, the record company can get 70% of the share, which is significantly higher than the sales of physical CD records.
  In the following years, Apple became the world’s largest downloader of genuine paid music. As of January 2007, the iTunes store had downloaded 2 billion times of music, and its platform had a total of 1.4 billion U.S. dollars for the music industry.
  Based on this, Apple has formed a close cooperative relationship with the three major record companies, even including personal relationships. Jobs himself once expressed his willingness to acquire Universal Music, but he did not enter the formal stage because of the low price.
  In 2009, it originated in Sweden. At that time, the emerging Spotify had more than 10,000 new users every day. The company had 75 employees and was valued at 250 million US dollars. However, the company’s finances are still in a dangerous state, gross profit is negative, the company still needs to enter the largest music payment market-the United States. To enter the US market, the core obstacle is the three major record companies-to get the copyright in their hands.
  In fact, in the development of Spotify, the biggest obstacle lies in this. It is to start difficult and difficult negotiations with Universal, Sony, and Warner, which together hold 70% of the global music recording copyright, and do not hesitate to give away equity at a low price. “Terms get the opportunity to develop business (after Spotify went public in 2018, the three major record companies hold approximately 10% of the shares).
  However, in order to win the US market, the previous payment, equity, and promise to continue to convert free users into paid members are only necessary conditions, and Spotify has to face the attack of its powerful rival Apple.
  In the US copyright negotiations, Jobs actively played the banner of anti-Spotify and used his relationship with Universal Music to try to prevent Spotify from obtaining the copyrights of the three major record companies in the United States. He insisted on his own view: Users want to own music, not rent music, and the streaming media payment model has no prospects (obviously he was wrong this time).

  In fact, Apple used its platform status to perform monopoly-related behaviors. In 2016, it was fined US$450 million for cooperating with five book publishers to reduce competition and increase book prices.
  All this did not shake Spotify’s belief in winning the US copyright. It took nearly two years to “soft and hard” and finally won the copyright of the three major record companies in mid-2011.
  You may be familiar with the subsequent plot. With its smooth listening experience, accurate algorithm recommendation, and exclusive free mode, Spotify has become the world’s largest large-scale streaming media platform. Even in the hinterland of Apple, Spotify still has the number one. market share.
The Chinese market where the rain is coming

  Coincidentally, China’s streaming music market is also staged a similar story. In 2016, Tencent Music Group, a merger of Ocean Music and QQ Music, became a leading player in the industry.
  When formulating a competitive strategy, the company chose to sign exclusive agency agreements with copyright owners represented by the three major record companies as one of its core strategies, in an attempt to cut off other competitors’ chances of survival from the source.
  This trick can be said to have a significant effect. Related competitors are gradually withdrawing from the competition. So far, only NetEase Cloud Music is still in the streaming music track.
  In fact, the dispute over the exclusive copyright strategy of Tencent Music has been around for a long time. In the end, under the mediation of the National Copyright Administration, Tencent Music Entertainment and NetEase Cloud Music reached an agreement on online music copyright cooperation. The two parties will mutually authorize music works that account for more than 99% of their exclusive number, and agree to conduct long-term cooperation on music copyright.
  But for some reason, Tencent Music still retains core copyrights such as Jay Chou and Mayday and has not authorized NetEase Cloud Music, which has always brought continuous regulatory pressure to it.
  In July 2021, with the anti-monopoly trend, the State Administration for Market Regulation issued an administrative penalty decision on the illegal implementation of the concentration of operators in the acquisition of equity of China Music Group by Tencent Holdings Co., Ltd.: ordering Tencent and its affiliates to take measures to restore relevant market competition , Including the removal of exclusive copyright agreements and conditions that are superior to other competitors, high prepayments and other methods must not be used to increase the cost of competitors in disguise, eliminate or restrict competition.
  In August 2021, Tencent Music announced that it would give up its exclusive copyright, and the music industry has entered a new era. Where will streaming music “break the era of independence” heading?
The “Era of Breaking Independence” of Chinese Music Copyright

  After “breaking independence”, no platform can sign an exclusive license agreement with a record company. However, if NetEase Cloud wants to own the head copyrights of Jay Chou and Mayday, it still needs to sign a contract with the copyright owner. Is the copyright owner willing to negotiate a contract with NetEase Cloud? Is the relevant copyright price acceptable to NetEase Cloud?
  The answer is unknown, that is to say, whether the copyright structure will change as scheduled in the future is not determined, and it will eventually be the result of a multi-party game.
  Here is another question: how important is the music copyright of top artists like Jay Chou to the platform? In fact, the quantitative results may only be known within the platform, but from Spotify’s experience, the actual impact may not be as large as outsiders think.
  In November 2014, Taylor Swift released his new album “1989”. The album sold 1.2 million copies in its first week, the highest since 2002. But this result has nothing to do with Spotify. The latter’s record company requested that the album be only available to paying members, but Spotify refused, so Taylor Swift took all his music offline on Spotify.
  Taylor Swift also reminded fans to get new albums from iTunes, or two other competing platforms Rhapsody and Beats Music (Apple has completed the acquisition). However, from the actual situation, the impact of all Taylor Swift music offline on paying members is only a few hundred paid members, while the total amount of Spotify paid at that time was 15 million.

  The user experience of any Internet product is determined by supply, distribution and demand. After the policy breaks the supply-side differences on the copyright music side, future industry competition will inevitably return to other dimensions such as the personalized distribution of other content supply (such as independent musicians), and the social interaction of demand-side users.
  This is similar to overseas streaming media competition. Spotify, Apple Music, and Amazon Music platforms do not have significant so-called exclusive copyrights. Everyone’s competition is more of competition in other user experience dimensions.
  From the perspective of user experience, the community atmosphere of NetEase Cloud may become one of its competitive advantages, and personalized and accurate distribution based on user needs is expected to become the key to the platform’s competition for users.
  Like the video industry, music is also a content industry, which meets the needs of users for content consumption. The difference is that high-frequency users of music, especially popular music consumption that the masses appreciate, focus on young users, and there are even relevant data that prove that people no longer accept new music once they reach middle age, and tend to listen to classic music that they were familiar with when they were young.
  Therefore, the durability of music copyright content is much higher than that of video content. This is also the reason why the three major record companies and Jay Chou can maintain a strong position for a long time.
  However, streaming media platforms should understand that the prosperity of the music industry must be based on the prosperity of the music content side. Everyone can make a big cake together, and everyone’s cake can be bigger.
  How does Jay Chou compare to Taylor Swift? From the perspective of the strength of the music itself, it can be said to be equivalent. The reason why Jay Chou’s music is so valuable is mainly due to its scarcity. From the side, this reflects the lack of success in China’s music industry.
  Some people often compare Spotify’s close to 45% pay rate with the pay rate of Chinese streaming media platforms. One of the implicit conditions here is the content supply side, that is, the Chinese music scene can match the strength of European and American music circles.
  Objectively speaking, do we have? Not only not, we are still too far away.
Only care about copyright contention? The pattern is smaller

  Rather than caring about the competitive landscape of the platform after the “breaking of independence” of music copyright, we should care about how the platform supports the complex issue of the revival of China’s music industry after the simple and rude competition strategy of “buying exclusive rights at high prices” fails.
  Compared with China’s prosperous short video industry, the underlying driving force behind it is the “Era of National Video Creation.” According to conservative estimates, China’s monthly short video producers (publishing at least one short video) have at least 300 million users. Even with the higher threshold of China Video Supply for Standard B Station, the latter has more than 2 million active authors per month. In the music industry, the accumulated independent music talents on NetEase Cloud and Tencent’s music platforms are only 200,000. Note that the front is the concept of monthly life, and the back is the concept of registration, which is not comparable.
  The job of the platform is to build roads, build infrastructure, and provide the foundation for industrial prosperity. For example, create more powerful creative tools to lower the threshold of music creation; create powerful feedback channels to encourage more creators to express emotions through music works; create better channels for monetization to help high-quality creators monetize. Under the strong impact of short videos, this kind of work is not easy, but it is not impossible.
  All the glory will eventually fade, and most of the classic copyright will eventually be diluted by time. Only the ability to continuously innovate is the driving force for an industry’s continuous advancement and the real barrier to competition for an enterprise.

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