The winds of change are blowing in China’s online music industry. The Ministry of Culture is seriously enforcing patent law. On September 15th, all websites and search engines must delete any pirated content including multimedia embeds and widget attachments.

Many of the older music service providers that attracted users by providing free music downloads will have to change or die. A few adopt discrete models, attempting to operate below the state radar at high regulatory risk. The ones that opt to change their business model are now facing the daunting challenge of convincing their old users to switch to a new model: either paid or ad-supported.

The Free Generation

Music was always free in China before the government decided to enforce tighter control.

Baidu, the Google of China, has a massive online music catalog service called Baidu MP3, a site that provided full music albums, across all genres, utilizing its search engine pull music files off other websites.

Baidu Ting, is the Chinese search giant’s new attempt at music since they announced that Baidu MP3 is going legit. Ting largely copies another popular music site, Xiami.

But in June, Ting was reported to host only half a million songs. A search of my favourite band today yielded no results. It’s either because the band is Japanese and we are in China or Baidu Ting’s music collection still has a ways to go.

Downloading music is free for now, though I suspect soon it will require payment.

VeryCD, a top aggregator of pirated content (aka the Chinese version of thePirateBay), was taken to the brink of shutdown by government in 2009 and again earlier this year; its movie and music source catalogs were removed from the site.

VeryCD was a step up from Baidu MP3 or Ting: its music downloads were packed in zip files in full albums rather than singular mp3 files. Most albums even had different file formats for disk burning and better listening quality. Ealier this year VeryCD reintroduced its music download service, but

more discretely removing them from search results, and in some case required users to perform an extensive manual search for sources. And even this ‘under-the-radar’ practice is expected to be shutdown after 15th.

KuGou, another well-known pirated music service, even went as far as offering a music player with a built-in search engine. It enables users to search for peer-2-peer (p2p) music and download for free. Each user has a common music folder to share with every other KuGoo user–the good old Napster model. Today KuGou still offers free music download, but it will have to consider alternative solutions to avoid court summons from the Chinese government.

New Commercial Models

With the iTunes Store still unpopular China and offline record stores less developed than other countries, Chinese generally either find free online downloads or buy pirated hardcopies that cost RMB 5, a fraction of what one would pay for the real version in a store. But new business models are emerging through VIP membership or virtual currency purchases.

Tencent has set the worldwide standard for virtual goods and its VIP membership model already monetizes music. The green diamond membership allows QQ Music users to download additional songs. Regular users can gather points by being active for a long time, but paying is the quicker route.

Virtual currency is the foundation of cloud music service Xiami. Xiami is perhaps the closest China has to a Last.fm, though in Last.fm users have to pay monthly subscriptions to listen to songs and Xiami is still completely free up until the point of download.

Music content on Xiami relies upon user uploads, so from the legal perspective the site is currently under risk. Though the Xiami CEO said on Zhihu (China’s Quora) that his team will work to legalize the whole site–the money paid for downloads may go to pay for copyrights.

In August, the site announced that in 39 months since launch the site has reached 5 million registered users. The site has worked hard on cooperating with existing social networks, including a cooperation as the primary music search engine for sites like Diandian.

The .FM’s

Online music streaming is another popular web application for Chinese users, with the most popular one being Douban.fm. In China, these .fm sites are mostly hosted within existing SNS sites: Douban.fm is part of Douban, and Renren also copied Douban to some extent and launched its own .fm service.

Sina Weibo also has a new model: live streaming of real radio stations. When a user logs-in, the site auto-detects the user’s location and streams a local station.

For these .fm services their business model rely upon ads for concerts and new albums.

Music is another step in China’s official attempt to regulate the internet. Video sites like Youku and Tudou are already exploring pay-per-view business models. The soaring copyright costs there do indicate that we may see a bubble in online content costs.

 

 

KuGou, another well-known pirated music service, even went as far as offering a music player with a built-in search engine. It enables users to search for peer-2-peer (p2p) music and download for free. Each user has a common music folder to share with every other KuGoo user–the good old Napster model. Today KuGou still offers free music download, but it will have to consider alternative solutions to avoid court summons from the Chinese government.

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