Professional Documents
Culture Documents
2019-01 Digital Online Music in China
2019-01 Digital Online Music in China
Authors
Shen, X Williams, R
Zheng, S Li, Y
Liu, Y Gerst, M
This release was supported by the RCUK funded Centre for Copyright and New Business Models in the
Creative Economy (CREATe), AHRC Grant Number AH/K000179/1.
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Technological Forecasting and Social Change
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Acknowledgement
The research on which this paper is based was funded by the AHRC China Digital
Copyright Centre, the Newton Fund and the RCUK Research Centre for Copyright
and New Business Models in the Creative Economy (CREATe). We would like to
thank Prof Charles Baden Fuller, Prof Neil Pollock and Dr Hyojung Sun for helpful
feedback on earlier drafts.
Abstract
The digitisation of music and other creative industries has followed a
dramatically different trajectory in China, patterned by its distinctive historical
and institutional context. In contrast to the West, where established intellectual
property rights holders (e.g. record labels) retained control, despite digital
disruption, China has become a laboratory for sustained, large-scale
experimentation with services.
Though a liberal environment initially allowed many online music services to
emerge, recently enforced requirements to pay license fees provoked rapid
restructuring. Through merger and acquisition, the wealthy internet platforms
(BAT: Baidu, AliBaba, Tencent) now dominate the market.
This detailed qualitative study of the strategies and interactions between
industry players, the administration and international business reveals how BAT
competed to sign up content and establish ways to provide low-fee or free music
services that would be sustainable in the Chinese context. They were compelled
to pursue discovery-driven innovation, based on ‘trial and error’ learning,
launching and adapting services at scale in an extremely turbulent setting.
Building on their differing core businesses they developed diverse online music
businesses, integrated with services across adjacent platforms (film, TV, games)
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Digital Music China Revision. October 2018
Keywords
digital music; China; creative industries; science and technology studies; ecology;
discovery-driven innovation; cross-platform service infrastructure
Introduction
Digital technology with its near zero copying and (since the internet)
transmission costs has disrupted value chains based upon the trading of music
and other cultural products stored on physical media such as records or compact
disks (CDs). A 2014 Special Issue of Technological Forecasting and Social Change,
examined these processes of “disassembly” and “reassembly” of business and
service models (Mangematin et al. 2014:2). It highlighted the efforts of
entrenched industry players in the West to reassert their control over the sector
(Blanc and Huault 2014; Dobusch, and Schüßler 2014), an observation
confirmed by later work (Rogers and Preston 2016, Sun 2016).
The study we present here, conducted between 2015 and 2017, charts the
strikingly different picture of China’s digital music environment. The rapid
proliferation of a wide-range of online services in music, film, literature and
beyond is driving radical reconfiguration of business and service models and
paving the way for a resurgence in its cultural industries.
Focusing in this paper on digital music services, we will show how China’s so-
called ‘internet giants’1, Baidu, Alibaba and TenCent (jointly described as BAT)
have become heavily engaged with the whole process of digital cultural content
creation and distribution. Exploiting, through takeover and emulation, the
flowering of start-up digital music platforms and services, BAT has launched a
huge range of free and low-priced services.
Our project had an overarching objective to understand how the rapid and far-
reaching changes in China’s digital cultural ecosystem had been shaped by
China’s very different institutional and legal setting. Our specific research
questions addressed the distinctive dynamics of innovation in terms,
respectively, of process and outcomes: how these contextual features had driven
a process of sustained experimentation (discovery-driven innovation) at scale;
and, how this has resulted in the emergence of distinctive novel service models
and value propositions.
Writers from organisation studies and science and technology studies (STS) have
examined the potentially disruptive outcomes of digitisation in creative cultural
industries. However their differing analytical tools and presumptions have
generated somewhat contrasting accounts. STS would anticipate that digitisation
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Digital Music China Revision. October 2018
This paper is organised into five sections. We outline our analytic framework,
and discuss our methodology/research strategy. After characterising the Chinese
context, we chart in detail the evolution of online music development. We then
analyse how the development of China’s digital music industry was shaped by its
historical institutional and regulatory context. Our conclusion highlights the
dynamic evolution of China’s digital cultural ecology, through sustained
discovery-driven innovation at scale and reflects upon conceptual and
methodological issues involved in addressing the evolution of sectors in flux.
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Digital Music China Revision. October 2018
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These debates also bear upon ecological and ecosystem perspectives. The
critique advanced by Meyer et al. (2005) of equilibrium presumptions can
equally be applied to life-cycle models (e.g. Waldner et al.’s [2015] account of
how opportunities for innovation vary at different stages in a product life-cycle).
Such cyclical models, with their tacit presumption of homology between
successive cycles, are perhaps better suited to addressing changing product
cycles within a broad technology paradigm; their relevance may be questioned in
the case of sectors that are emerging or in flux (like this case) where radical
disruption may transform boundaries, structures and paradigms (Meyer et al.
2005).
A similar critique can be applied to ecosystem models (Shaw and Allen 2016,
Tsujimoto et al., in press), whose current popularity is driven in part by the
salience of technology platforms (Wareham et al. 2014). Applying templates
from biology food chains (Moore 1993) these accounts focus on the
establishment of stable structures and locations within a sector, highlighting the
role of focal organisations or other governance structures (Wareham et al. 2014)
in generating the alignments needed within a multilateral trading community
“for a focal value proposition to materialize” (Adner 2017:40). These analyses of
ecosystems in terms of characteristic positions and structures within the
community of players, conceived as coherent systems (Tsujimoto et al., in press)
or meta-organisations (Gawer 2014) also rest upon equilibrium presumptions
which are not appropriate for the developments we address. We note the
observation by Tang and Lyons (2017) that existing business ecosystem models
do not match well the development of digital music in China. Other, more
appropriate conceptualisations are available, which we explore below. They are
often couched in terms of ecologies (Abbott 1995), to avoid the presumption of
set boundaries and positions that besets much ecosystems writing.
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Digital Music China Revision. October 2018
Firms may need to balance and manage tensions between experimentation and
exploitation (Smith et al. 2010; Achtenhagen et al. 2013; Massa et al. 2017).
Experimental approaches may give way to more carefully calculated choices
geared towards securing competitive advantage as markets become stabilised
(Massa et al. 2017). These observations are particularly pertinent to rapidly
changing digital creative industries. Hadida and Paris (2014) criticise the
continued resort to traditional value chain models despite evidence that they are
not applicable or effective for industries in a state of flux like digital music. They
highlight “the diversity and plurality of value propositions, the co-construction of
value, and the expanded role of intermediaries in the creative industries” (Idem.:
94) despite the absence of a proven economic model.
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Digital Music China Revision. October 2018
Methodology
Research strategies for addressing dynamic ecologies
Meyer et al. (2005: 458) argue that organisational science researchers studying
“volatile ecosystems, emerging sectors, shifting boundaries, and proliferating
network forms” need to adopt more complex research strategies, triangulating
between diverse historical, ethnographic and structured survey
methodologies. Meyer et al. (2005:458) note how, in seeking to engage with
rapidly changing settings, their “research design shifted from cross-sectional
to longitudinal data collection” while “the theoretical platform shifted from
testing a variance theory to building a process theory. … In each case, the
unit of analysis shifted from focal organizations in exogenous environments,
to be replaced by a set of nested units— organizations, that collectively
constitute a population, amalgamated into an ecological community,
embedded in a changing organizational field.” (see also El Sawy et al. 2010).
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Digital Music China Revision. October 2018
(Huygens et al. 2001; Zott et al. 2011; Mangematin et al. 2014; Baden-Fuller and
Mangematin 2015, Massa et al. 2017).
Research design
The findings presented here arose from an investigation: Convergence or
differentiation in IP protection? A case study of new models for digital film, music
and e-fiction production and distribution in China, funded by the AHRC China
Digital Copyright Centre, the Newton Fund and the RCUK Research Centre for
Copyright and New Business Models in the Creative Economy (CREATe). Our
attention had been drawn to novel developments in China’s digital cultural
industries which differed from those in the West, in which the BAT internet
giants appeared to be playing an important role.
Our research emerged with a broad concern to understand how digitisation had
been shaped by China’s very different institutional and legal setting. As the
project developed this evolved into a more specific set of research questions that
sought to account for the rapid and far-reaching changes in China’s digital
cultural ecosystem; how these had driven a process of sustained
experimentation (discovery-driven innovation) at scale; and, how this has
resulted in the emergence of distinctive novel service models and value
propositions.
Careful preparation was needed to develop and guide this exploratory study
(Walsham 1995). We established an interdisciplinary team of seven Chinese and
UK scholars, supported by research students, who began to develop an
understanding of developments in digital cultural industries in China initially
through desk research. We tracked cognate developments in Europe and North
America through desk research, doctoral research (Sun 2016) and discussions
with colleagues in the CREATe programme. We refined these initial
understandings through informal discussion with established academic experts
in these fields from Chinese universities/research institutes active in the
industries in question and extending research access through ‘snowballing’
techniques to Chinese industry and policy players. Establishing research access
and broadening and sustaining it over time presents particular difficulties in the
Chinese context where there has not been a tradition of access by industry and
policy communities to social science research.
Our goal was to establish a long-term relationship with key stakeholders in the
field. A concise description of the research project was produced to attract and
sustain the interest of the targeted players and establish consent and research
governance arrangements. Data collection and processing sought to gain
understanding of complex processes unfolding in real time primarily through
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Digital Music China Revision. October 2018
Fieldwork was conducted between December 2015 and April 2017, a duration
that afforded some opportunities to observe changes over time in the strategies
and activities of the players involved. The primary data collection comprised 59
semi-structured interviews, conducted in three blocks, with a total of 73
respondents (a table showing anonymised respondent roles has been uploaded
as an appendix). This was supported by diverse secondary sources in English
and Chinese. We reviewed policy documents and the existing literature, and also
tracked the enormous array of media reports, online blogs and commentary.6
The research team also embarked upon an array of exploratory activities
including, registering and using purposively the online services provided by the
platforms under scrutiny, taking part in events organised by key players and
stakeholders, and discussing various pressing issues with them. The team also
kept a watching brief with their peers and contacts regarding the evolution of
new services and practices (e.g. regarding consumption of online music, e-
literature, videos) during the period of the project. We also organised end-of-
project workshops (Beijing 6.4.2017; Edinburgh 5.6.2017) to which we invited
academic and industry experts, policymakers and practitioners, including most
of our respondents. The workshops were designed to elicit additional inputs and
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verify and extend emerging findings. In a context in which there are few
established sources or fora they provided an opportunity to explore and
reconcile different stakeholder perceptions.
Though we were not able to directly address the experience of music consumers
and music creators engaging with these services - a matter of concern insofar as
our framework and industry perceptions flag their crucial importance - we were
able to examine the understandings of consumers/consumption amongst the
practitioners we interviewed and also draw upon online sources and the modest
academic literature on this subject and finally draw upon the experience of our
Chinese researchers (and that of their peers) who registered on these platforms
and used as many services as possible.
As a result, the music industry in China was very undeveloped compared to the
West in terms of both the quantity of music works and music related business
entities.7 The other feature inherited from the socialist regime was the weak
copyright regime. As music and other creative works had been created with
resources from the state, they were seen as belonging to the entire population.
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driver in the Northeast region. It remained unknown until 2001 when he decided
to put it on a website. It rapidly became a major hit without any professional
promotion. The story was made into various online flash animations. The song
became very popular across the country – and was seen as the first example of
popular original online music that became known as "network music". A TV
drama series used the song as its theme music. The author subsequently became
a household name, enjoying fame not only as a composer and singer but also as
an actor and movie producer.
The result was a highly dynamic and diverse ecology. Various players including
software developers and equipment makers as well as musicians (Tang and
Lyons 2017) entered the arena and pushed out music apps and services. In this
period, the digital online music space was far from "stable". No business made
significant income (apart from mobile phone service providers selling
"ringtones", a business based on a very low unit price and a huge volume of users
[Liu 2010, Priest 2104]).10 Because of piracy, the Chinese music industry had to
identify alternative sources of revenue to selling records, including income from
live performances, merchandising, brand sponsorship deals, advertisement-
funded music services (Liu 2010). These services broadly mirror, and indeed
were often copied from, similar developments in the West. However in the West,
actions by established music industry players against Peer-to-Peer and other
unlicensed downloading services kept these services in the informal economy
and left little space for legitimate businesses to emerge (Sun 2016). In China the
internet became an arena for the integration of old and new business operations
in which innovation could flourish. 11
China’s huge and still growing base of netizens creates varied demands for
entertainment from users with differing backgrounds and preferences. Music
websites were prompted to develop diverse services to meet these diverse
needs. The People’s Republic of China, Ministry of Culture highlighted a surge in
the number of new music websites which increased from 452 to 695 between
2011-2013 (Ministry of Culture 2012, 2014). Though these competing services
copied Western models and copied each other in terms of the applications and
services offered, this was only the start of a sustained innovation process.
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Digital Music China Revision. October 2018
There was thus widespread surprise in 2011 when Baidu agreed an out of court
settlement for copyright infringement with the Western record majors -
Universal Music Group, Warner Music Group, and Sony BMG for infringing their
copyright (Dong and Jayakar 2013) who, for an estimated RMB 37 million (USD
$5.7 million) signed a two-year deal to license over 0.5 million songs from their
catalogue. This development was a combined product of a number of pressures:
growing international pressure on China to comply with World Trade
Organisation rules, tightening up of China’s domestic internet regulations and
stronger Administrative Enforcement (in the face of pressure from Western and
domestic cultural industries), (Dong and Jayakar, 2013; Street et al. 2015)
coupled with a significant shift in Baidu’s business strategy (Dong and Jayakar,
2013). In that period, Baidu’s dominant position in digital music was being
eroded by the proliferation of new services. QQ music, set up by Ten Cent in
2004, had by then acquired over 10 million users, closely followed by Xiami
Music (9.5 Million) and Douban FM (8M). Baidu saw an opportunity to gain
market advantage as the “only legal music distributor in China.” (Dong and
Jayakar, 2013:98). Some saw this as a turning point that “changed the whole
ecosystem” in China.13 In particular, industry players realised that copyright
could be utilised as a tool for competing with their peers.
These developments were consolidated in 2012, with the third revision of the
Copyright Law of China in 21 years, and above all by the decision of the Standing
Committee of the National People's Congress of 31 August 2014 which led to the
establishment of Intellectual Property Courts in Beijing, Shanghai and
Guangzhou. Under the new enforcement regime, Internet platforms were forced
to buy licenses for contents and review materials before putting them online to
ensure that all contents on their platforms did not infringe copyright and the
rights of performance, broadcasting and other neighbouring rights. In July 2015,
the National Copyright Administration further ordered that all online music
service platforms must take down unauthorised music from their platforms by
31st October 2015.
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Digital Music China Revision. October 2018
This prompted a rapid process of acquisition and merger in the creative cultural
industries, reinforced by powerful economies of scale, in which the cash rich BAT
‘internet giants’ became the dominant players.
By December 2016, the number of internet music users in Mainland China had
risen to 540 million (70.8% of all netizens).14 The pace of online music
development has been accelerated by the advanced state of mobile technologies.
China is becoming one of the global front-runners in terms of 3G and 4G services
and there has been rapid growth in use of mobile devices, such as affordable
smartphones. Digital music services, initially based upon pcs, all migrated onto
mobile devices. Mobile access therefore figures strongly in China, particularly in
the youth market (21-30 year olds) (Xiang 2014a). Numbers are still growing,
indicating the considerable potential of the online music market (China Internet
Network Information Center, 2016).15
Though Baidu, Alibaba and TenCent are all actively engaged with music,
literature and film distribution, their service development strategies have
differed, shaped by their particular historical core businesses and distinctive
strengths. We now briefly examine how each player has been pursuing their own
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trajectories and strategies, building upon their existing market position and
capabilities, to explore new opportunities and to strengthen positions in the
Chinese market and to respond to the challenges posed by its competitors.
Baidu
Baidu, by far the largest player at the outset, was the first of the BAT players to
engage with music services. Its successful Chinese search engine, established in
2000, was one of those widely used to locate pirate content. From 2004, use of
its MP3 search service, providing ready access to a virtually unlimited selection
of unlicensed music, grew rapidly to include a large share of the population.
In the aftermath of its landmark legal settlement, in October 2012, it relaunched
its music products as Baidu Music, with licensed music rather than MP3 search
on the front page of its website “putting all the legally available music on its
various services into one place” (Custer 2012). Its licensed services were based
upon providing a share of advertising revenue to license holders on a per
play/download basis.17 Baidu saw music services as a way to enlarge its base of
internet users. However it was less innovative and lost market share to the
emerging fremium music streaming services. In December 2015, Baidu Music
announced a merger with Taihe (太合) Music Group, a conglomerate of pop
record labels and publishers.18 They could be seen, in some sense, as a
‘traditional’ player in China’s music industry, with a catalogue of 700,000 songs
around half the Chinese music market (Tang and Lyons 2017; Ingham 2015;
PRNewswire 2015). It also appointed managers with digital music backgrounds
(from Douban and Netease) (Music Business China 2016).
Alibaba
Alibaba’s core business is e-commerce, which made it at the outset China’s
highest valued internet player. Alibaba explored the viability of a wider range of
online creative culture services, drawing on its role as an e-commerce platform
offering business services. In January 2013, Alibaba Group had surprised many
by announcing its acquisition of China’s 5th biggest digital music streaming
service Xiami music. Xiami (or little shrimp -虾米音乐), was a platform targeted
towards individual musicians, founded in 2007 by a former Alibaba
programmer/analyst (Shen 2013). The subsequent acquisition in December
2013 of the TTPOD music-streaming app (TianTianDongTing 天天动听) led
some to suggest that Alibaba was taking over the music industry (Kaufman 2013,
Dredge 2016). These were merged in 2015 into a new division: Alibaba Music
Group (阿里音乐). Music sector players (Gao Xiaosong, onetime singer-
songwriter and Song Ke, a former executive with Warner Music) were brought in
as chairman and CEO respectively (Flanagan 2015).
Though Alibaba moved earlier in responding to the new licensing market, it was
TenCent that made the most decisive interventions, as we will see below. Though
Alibaba responded to developments by Tencent and other players with a
comparable range of free and subscription services, Alibaba has developed a
more distinctive strategy in its focus on creator services, like “Xiami yinyueren” [
虾米音人] (“shrimp musician” in Chinese), aimed at fostering grass-root
development of musicians and targeting not only reputed musicians but also,
increasingly, unknown and would-be musicians. Its initial services allowed
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Digital Music China Revision. October 2018
people to register as independent musicians and upload their new pieces and/or
demos online. Gradually, these services expanded and were adjusted to meet
local needs. Each registered independent musician is allocated a domain name
and webpage. On this dedicated space, musicians can present new work and
share albums with their registered fans in return for getting feedback and
comments. This kind of service is termed “Zaoxin” (造新) novelty creation. For
example, in 2014, Xiami launched a programme - “looking for unseen originality”
(寻光计划) – deliberately designed to help unknown, amateur or new musicians
bring out their debut albums to a wide audience. It has published 13 dedicated
albums for these new artists, who have, from being unknown, become popular in
China and well recognised in the music field.19 Since becoming part of AliBaba in
2015, Xiami Music has continued to focus on serving “unseen /undiscovered
talents” and has stepped up the activities of this musician platform. The new
artists and their albums have been praised for their originality and quality.20
Building upon this, Alibaba launched an integrated platform – Ali Planet in
2016.21 This brings in elements of Alibaba’s Taobao e-commerce platform with
its core mission of providing business opportunities for small and medium-sized
companies. Four of Xiami’s founders had worked for AliBaba and were familiar
with its Taobao model. AliPlanet promotes a range of music related activities
outwith streaming, including online promotion of music contents, sale of
merchandising and other related products (e.g. album cover design tools). This
includes front and backstage services to assist creators for example with music
recording, stage concert organisation, and live broadcasting online. As well as
offering opportunities for potential and unknown talents, it also creates business
opportunities for professional music studios and live concert organisers.
TenCent likewise announced its own “Musician (音乐人 in Chinese) Plan” in
2017 to attract more grassroots musicians and composers to its platforms, after
experimenting with platforms for independent musicians for several years.22
TenCent
TenCent’s free instant messaging service WeChat, launched in 1999, attracted
around 300 Million users in only two years and became the foundation for a
huge range of services (China Internet Watch 2014). In 2004, TenCent launched
its QQ music platform. Building on these popular services it developed a
profitable online games business and subsequently launched a stream of
interactive entertainment services. Its subsequent success in combining free and
subscription services across its growing range of services – most notably online
games and mobile applications - allowed it to catch up with Baidu and Alibaba
(Hariharan 2017). By 2015 had become the 2nd biggest player in music
streaming services with an estimated 15% of China’s digital music streaming
market (Osawa 2014). In a further dramatic development, in July 2016, TenCent
established itself as by far the largest player amongst online music platforms in
China through a merger involving acquisition of over 60% of the shares of China
Music Corporation (CMC). CMC had in 2015 acquired China’s largest music
service provider Kugou (酷狗) with around 28% of the market and the 3rd
largest player Kuwo (酷我) with 13% market share (China Internet Watch 2014,
All Tech Asia 2017).
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The digital music companies have launched various other kinds of offering in a
process of sustained experimentation. This includes, for example, allowing fans
to follow their favourite celebrities online and giving them exclusive tickets for
live events. Though these are targeted to subscribers, non-fee paying members
who do not have the money or are unwilling to pay, are still able to access the
content if they can wait for a week or so and do not mind the lower quality of the
music recording, or are willing to earn credits (see below).
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environment in which Baidu, Alibaba and TenCent have become the dominant
social media platforms in music (and elsewhere) by acquiring smaller start-ups
with their music specialists and user bases.
There are many other players however. The largest independent is Netease (网
易), originally a Chinese Internet technology company, which recently (April
2017) secured substantial venture capital financing (RMB 750 Million) for its
NetEase Music Cloud(网易云音乐).25
The major players eye each other closely. Their strategies are visibly shaped by
the interactions between them: strategic moves by one player triggering
responses by others through imitative attempts to catch up or by differentiation
– involving fierce competition and at times also collaboration. Though this
account focuses on competition in music, the competitive struggles between BAT
have been waged across digital music, film, video, literature and games.26
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licensing agreements with BMG (the world’s fourth biggest music rights
company, with over 2.5 Million copyrights) and Universal Music Group (Music
Business Worldwide 2015). Though this was ‘a drop in the bucket’ (Owsinski
2015) compared to pirate sites or QQ Music’s armoury of 15 million pieces of
licensed music, AliBaba was able to exercise competitive power in the music
market because of the quality of the music in its listings which included for
example the Rolling Stones.
This struggle to sign exclusive rights marks a qualitative shift in the character of
competition for music access. What had previously revolved around allowing
easy access to the widest possible selection shifted to providing exclusive access
to what Alex Taggart, from China Music consultancy Outdustry Group, described
as “weaponised” music (Tang and Lyons 2017:12) that the platforms “couldn’t
afford to lose” (cited in Horwitz 2015). In this period platforms began suing
other platforms for distributing songs they had acquired licenses for (Horwitz
2015).28 Licensing thus shifted the focus of competition from the ‘body’ to the
‘head’ of the long-tailed music market. By offering exclusive access to music that
was trending, the platforms were competing to build their customer bases and
promote uptake of subscription services (even temporary exclusive distribution
agreements would attract subscribers seeking access to new releases before
pirated copies became available). While users of free services could afford to sign
up to multiple services, paying subscribers needed to discriminate: consumers
would select services that offered the particular music they wanted at a cost they
could afford.
The competition for exclusive deals drove up the cost of licensing contents,
particularly from overseas record labels. Though initial attempts to dampen
down competition between Alibaba and TenCent were not successful (China
Music Business, 2016), by the time of our second round of fieldwork at the end of
2016, the main players had come to the view that this competitive strategy was
“unsustainable”(TenCent Legal consultant, interviewed 9 December-2016).
The deals that were signed, for example, between TenCent and Warner Music,
unusually allowed the internet companies to negotiate licensing deals with local
Chinese music services (in contrast to the rest of the world where labels license
their music directly to music services) (Cookson 2014). The platforms have
begun to sub-license their content (e.g. TenCent offered part of its catalogue to
the smaller service Duomi) (Tang and Lyons 2017). As the result of direct state
intervention, the big players like TenCent Music agreed to sub-license their
contents acquired from overseas record companies to other platforms to avoid a
bidding war in the industry (discussion at project final workshop, Beijing, April
2017).
A wide spectrum of services has emerged in China’s music space. They are highly
differentiated and change in form and scope over time. Many of these elements
(including use of pirated copies of software) were copied from the West.
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Services were shaped by spillover from related sectors. The early commercial
success of online music show platforms shows like YY and 9158, which became
unexpectedly lucrative after they introduced virtual gifts that audience members
could buy for performers, prompted similar offerings from internet companies
including TenCent (Xiang 2014).30
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tastes. Technically, the platform can help users find each other by knowing their
downloads and their comments and rating of the music pieces. This function has
been promoted by the Xiami music platform with the label “sharing the same
rotten taste” (臭味相投): a humorous way to describe the like-minded.
As with early music streaming services in the West, users within communities
share each other’s album folders. Other services offered include for example
“Xiami loops” (virtual spaces online), in which groups of users can gather at a
particular time and organise a forum to discuss a particular topic or host a
concert by one of the users, to introduce his/her favourite music pieces
selectively (like a DJ), and set the stage by inviting comments and views from
attendees. Through these activities, individuals can gradually build a reputation
within the group/community, playing a role like music critics. The online “loops”
(forums and concerts) with specially selected themes attract the attention of
artists and celebrities, particularly when hosted by “online music critics” with a
reputation. When professionals and musicians take part in these events, the
events add further values to all attendees, for example, co-generating new
meanings to existing works.
These various services have the effect of linking consumers together and linking
them in many different ways to creators and to the digital platforms. This creates
a method to collect information and sentiment that have value to the parties
involved. This web of services is crucial to understanding how the financial
viability of services may be established.
BAT were rich with cash from their highly profitable core businesses (and did
not need venture capital). Our industry interviewees indicated that the large
internet companies are not expecting their investment in music services to be
profitable in the foreseeable future. For example AliMusic staff were told that
they had 7 years to build their industry. This long-term perspective enabled the
emergence of a wide range, and numerous configurations, of services directed
towards consumers as well as creators. Though protected in the short term,
these operations arise within organisations that are subject to fiscal discipline.
The issue will be posed at some stage of how digital music services can become
financially sustainable. Not many of the customer services we reviewed directly
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The incentive for the internet giants to invest in music and other cultural content
production and distribution has been to attract users and keep them active on
the platforms. Thus Baidu respondents saw the retention of their music business
as crucial regardless of whether it brings in income revenue or not. “You have to
know, for us, internet business is ‘liuliang’ [流量, meaning “the volume of data
flow”] “liuliang” brings us users that we have to focus on… in music, we have
been burning moneys [sic], lots of them…”. (Baidu manager interviewed
December 2015).
Tang and Lyons (2017) suggest that these developments may constitute an
alternative model to the digital music value chains established in the West. They
differ from the conventional investors who drove specialised digital music
services elsewhere in that: “their interest in music services is not solely directed at
profits; instead, these music services are combined with their other services (e-
commerce, search, social messaging, games) to create synergies within their own
corporate structures.” (Tang and Lyons 2017: 17).
By weaving together a wide range of online services across the digital economy,
including e-commerce services and their own payment systems, across a range
of cultural industries as well as their digital music services, the BAT internet
giants in China have been able to establish cross-sector platform infrastructures
through which an array of different value propositions can be simultaneously
22
Digital Music China Revision. October 2018
Figure 2 seeks to illustrate this process. It shows how, through the integration of
services across different platforms, the BAT internet giants have each created
their own cross-platform service infrastructure which can capture multiple value
propositions (both through direct monetisation and through aggregating
volumes of user data and engagements). It shows how these strategies operate at
(at least) three levels:
23
Digital Music China Revision. October 2018
Conclusion
24
Digital Music China Revision. October 2018
China’s music and other digital creative industries have in consequence followed
a distinctive trajectory. 33 The outcomes are likely to differ significantly from the
models that have emerged and became dominant in Western contexts controlled
by powerful record labels with huge IP rights holdings. Developments in China,
where record labels were weak and where the technology platforms have come
to play a key role, may constitute an alternative model (Tang and Lyons 2017)
and offer a strikingly different pathway for the evolution of digital music and
other cultural content services. Players outside China may wish to explore the
applicability of the models emerging in China for their own settings.
Substantively: with few established service models and only weak institutional
templates, Chinese players drew extensively from a range of Western digital
business and service models. However they have adapted them selectively to
their own business contexts, recombining and progressively extending them to
create radically different configurations. Such ‘realisation of new combinations’
of already existing ideas, reconfigured and combined with the entrepreneur’s
own novel ideas are of course at the heart of Schumpeter’s (1912: 159) ground-
breaking definition of innovation (Kurz 2012). As a result, these mimetic
processes (and coercive isomorphic pressures from the globalised licensing
system) have not to date resulted in convergence with the West (c.f. Di Maggio
and Powell 1991).
25
Digital Music China Revision. October 2018
et al 2010) take a very different form. Seeking to develop and exploit customer
linkages across multiple markets and services, BAT have launched and further
innovated services at scale – turning China into a laboratory for developing and
realising business innovations. We find evidence of what Aldrich and Fiol
(1994:666) described as “meaning making on a grand scale”. The commanding
heights of China’s digital economy are characterised not by risk avoidance but by
a more aggressive learning economy, combining pace and scale through the
proliferation of full-scale business launches and sustained innovation. Similar
observations have been made in relation to other sectors including renewable
energy (Korsnes 2015). We must reconsider prevalent accounts of China as “a
nation of copycats” (Thompson, 2016:1). Thomson argues (2016:10) that China’s
current high tech boom has generated, as well as tolerance of risk, “manic and
fierce competition”, illustrated by the emergence of thousands of Uber-like
services in China compared to the handful typically emerging in Western
economies.
26
Digital Music China Revision. October 2018
context and also how their strategies and interactions between them may
reconfigure this context and enable different pathways and trajectories to
emerge (Pollock and Williams 2009; Hyysalo, Pollock and Williams forthcoming
2018).
This exploratory study of an emerging ecology was limited in duration and scope
(focused around the key BAT players). More robust understanding could be
achieved by extending the depth, breadth and duration of enquiry. The
methodology adopted did not allow the insights into specific organisation
processes that might be afforded, for example, by more detailed ethnographic
case-study of a particular organisation. A key limitation was that it was not
feasible to undertake primary research into the (crucially important) experience
of music creators and consumers.
We have charted some opening scenes in the emergence of China’s digital music
ecology. Processes of experimentation and longer-term distributed “social
learning” (Sørensen 1996) will continue as China’s cultural industries and legal
system evolve. We see this exploratory study as the starting point for a longer
term programme of investigation. By extending this study we hope to track the
further evolution of the sector and the unfolding biography (Hyysalo, Pollock and
Williams forthcoming 2018) of China’s digital cultural industries.
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Funding
This work was supported by the UK Arts and Humanities Research Council
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Notes
1 In this paper we use the actors’ term ‘internet giant’, though Western usage might characterise these as
social media platforms – such as Facebook Amazon Netflix Google(with the inelegant acronym FANG).
2 The definition of platform varies between analytic traditions. This paper follows the usage of Plantin et al.
contexts present entrepreneurs with many constraints, yet they also set the conditions that create windows
of opportunity. Through processes of social construction, entrepreneurs can develop new meanings that
may eventually alter institutional norms”.
4 Here we were guided by our STS-informed methodology which addresses the “translation terrain”
(Williams, Stewart and Slack 2005), comprising: the character of the key players involved; the perceptions,
capabilities and strategies of these key players; how these are shaped by the historical context; the
relationships between players, the dynamics of the interaction between them; changes in their strategy and
arrival of newcomers and how these shape the development trajectory (co-evolution).
5 WeChat is an alternative messaging service to email communication while having various advanced
features, such as on-time audio & visual conversation, and existing messaging transfer.
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Digital Music China Revision. October 2018
6 Online media searches in Chinese were particularly fruitful using search terms baidu baike (百度百科 in
Chinese), baidu wenku ( 百度文库 in Chinese) and zhihu.com (知乎 in Chinese). The information collected
in this way was often inconsistent and partial, requiring careful triangulation between sources.
7 The weak development of China’s music industry can be illustrated by comparison with the UK. In 2014
there were 41,000 musicians in the UK (source: https://www.statista.com/ sampled April 2017) compared
to around 16,800 registered members of the Chinese Musicians Association (the body established in 1949,
which includes composers, singers, music critics, lyric writers, educators, translators and music activity
organisers). Though there are no official statistics, industry estimates suggest that in 2017 60,000
independent performers were registered on the six online music sites and had released more than 100,000
digital albums. These were previously mainly amateur music enthusiasts (Chen 2017)
8 Hou Yan, Sell feelings? Xue Cun make the movie ”Northeast people are living Lei Fengs”, December 13th 2016,
accounting for almost 80% of the music market in 2011, Baidu was fiercely criticized by Western industry
organisations such as the International Federation of the Phonographic Industry and was subject to 84
cases in Chinese courts, seeking compensation of RMB 17.3 Million (Dong and Jayakar 2013:88)
10 The mobile phone operators created the earliest charged services. China Mobile’s Migu service launched
in 2002, China Telecom’s i-music and Unicom’s Wo Music, charged users to download music for ringtones.
These even by 2013 still accounted for the majority of revenue for digital music. The mobile operators also
offered data plans in partnership with digital music services such as Xiami and TenCent (Xian 2014). The
mobile companies were slow to develop a wider range of services oriented towards users (Wang 2017).
Though China Mobile set up a streaming service in 2015, they have not become major direct players in the
provision of digital music.
(https://www.chinatechnews.com/2015/11/04/22260-why-is-china-mobile-forming-an-internet-
company-now last sampled 25th July 2017)
11 Peer to Peer technologies arguably heralded a similar process of experimentation in the West – most
famously Napster. Though this was closed down in 2002 as a result of copyright enforcement it culminated
in new service developments like Spotify and other providers of music streaming services (Sun 2016). The
period of experimentation in China started later than (and is clearly informed by experience of) their
Western counterparts – but seems to be continuing relatively unabated.
12 A manager from TenCent, the biggest player, noted, “before 2013 there was no copyright management
the milestone that changed the whole ecosystem. Since then the government has said that it is stepping up
its commitment to protecting intellectual property rights and that the development of the music industry is
a major priority.” IFPI (2014:36)..
14 Analysys.cn, (10/4/2017) 2017 Annual analysis of Mobile Music Industry in China, (in Chinese)
our core strategy is based on online advertising and dominating at consumers’ main points of entry to the
internet.” (IFPI 2014:36-7).
18 Taihe Entertainment Group was a leading Chinese independent record label that owned two leading
Chinese pop music labels (Taihe Rye Music, Ocean Butterflies Music) and Touch Music Publishing (Ingham
2015).
19 http://www.xiami.com/collect/40906776 last sampled 2 August 2017
20 http://science.china.com.cn/2015-05/20/content_7919304.htm last sampled 2 August 2017
21 Alibaba Music have upgraded their music streaming service with a new online platform - Alibaba Planet -
to connect fans and performers. Jacca-Route, “Alibaba Music Connecting Fans and Artists With New Planet
App’,, Digital Music News 21 April 2016 http://routenote.com/blog/alibaba-music-connecting-fans-and-
artists-with-new-platform/ last accessed 11 May 2017
22 Cussion Pang, chief executive officer of TenCent Music Entertainment group, stated: “Our goal is to ensure
that original music composers and musicians on our platforms would have earned a total income of 500
million yuan (US$74 million) in three years,” Meng Jing (2017), ‘TenCent banks on original music to become
36
Digital Music China Revision. October 2018
China’s Spotify’, South China Morning Post, 24th July 2017, sampled 31st July 2017
http://www.scmp.com/tech/enterprises/article/2103911/TenCent-banks-original-music-become-chinas-
spotify (original article title ‘TenCent to shake up the market for music’)
23 Thus TenCent’s green diamond - the most popular paid-for digital music service – charges 10RMB per
month 114RMP p.a. (2016 figures) and was estimated in 2015 to have 3 million subscribers (IFPI 2015).
Baidu’s advertisement-free “VIP” streaming service also costs 10 RMB/month (Millward 2015). Price and
features of the main subscription services are summarised in Tang and Lyons (2017:12 Table 2)..
24 As well as the price, uneven access to mobile data services meant that users might cache 30-50 songs on
their mobile phones from streaming services for “listening on the go”. (“Matthew D.”, 2015)
25 https://www.crunchbase.com/organization/netease-cloud-music#/entity and
37
RCUK Centre for Copyright and
New Business Models in the
Creative Economy