In its 2016 earnings report, Spotify, the world’s largest music streaming platform, saw a 52% increase in revenue over the past year to $3.3 billion. But its annual net loss also increased to $597m, making profit a nightmare.
In China, most of the mainstream online music platforms are in a state of unprofitability, which can not help but cause us to think, behind the rapid development of online music platforms, what limits their road to profitability?
What makes online music platforms difficult to monetize?
There are two main reasons why online music platforms are struggling to monetize.
For one thing, the ever-rising cost of music rights is a mountain that cannot be moved in front of online music platforms. In the market competition, in order to compete for exclusive copyright, major platforms buy up a large number of content Copyrights at high prices, resulting in increasingly scarce copyright resources and raising copyright costs from the side. And according to an industry insider of online music platform, the music copyright fee paid by the platform every year is calculated at 100 million.
Second, users’ weak awareness of paying makes it difficult for online music platforms to make a profit breakthrough. The development of the Internet has brought a lot of convenience to people’s life, but by the early stage of the Internet and traditional market competition of low price or even free consumer promotion strategy, also let users formed the consciousness of free access to all kinds of resources through the Internet habits, habits cause such consciousness after the rise of the Internet, each big platform is difficult to let users pay very good habit.
Ding Bo, vice president of netease Cloud Music, once revealed that the current payment rate of online music in China is only 5 percent, compared with 30 to 50 percent in the Western music industry. It can be seen that for online music platforms, in order to obtain user traffic, the range of open resources must reach a certain extent, which is enough for most users. Therefore, it is difficult to obtain the income of paid members by grasping the pain points of users in the early stage.
How to solve the difficulties of high music copyright costs and low user payment rate has become the direction of active exploration of online music platforms.
Win-win cooperation ecology or solve online music platform difficult to profit magic spell
Compared with the pain point of low user payment rate, the mountain of copyright is not so difficult to shake. If each online music platform realizes the sharing of exclusive copyright and creates a win-win cooperation ecology, it can reduce the problem of rising music copyright fees. One is to reduce the high cost of copyright. Second, it can eliminate the vicious competition brought by copyright monopoly, so that small and medium-sized online music platforms have more living space; Third, with the help of the flow of various platforms, the works of record companies and musicians can be better promoted, so that all parties can obtain higher income; Fourth, users can also listen to their favorite songs on their favorite online music platforms or apps, instead of having to move between different platforms due to copyright restrictions.
Not long ago, Ali Music and Tencent Music Entertainment Group jointly announced that they reached a mutual licensing cooperation. In terms of Tencent Music Entertainment, the music Copyrights of the world’s three major record companies (Universal, Warner and SONY), YG Entertainment and JVR are transferred to Ali Music, with a music library of more than one million. And Ali music will be the exclusive agent of the Rolling Stone, China research, believe, Asia and other music copyright also transferred to Tencent music entertainment. The cooperation between the two parties sets a precedent for the sharing of music copyright, and realizing the sharing of copyright across all platforms is the perfect choice to create a win-win cooperation ecology.
Sharing music rights will not only benefit all parties, but also help all platforms to cultivate the awareness of paying users.
According to iResearch, more than half of China’s online music users listened to music several times a day in 2017, and more than 80% listened to music for more than half an hour at a time, making music an integral part of users’ lives. Just as people in their daily life need to pay for phone calls and broadband fees to access the Internet. If music can be listened to only by paying for phone calls and broadband, many users will be willing to pay for it. For example, the current paid membership service mainly focuses on new album purchases or song downloads. Although users’ perception of “not paying more for free” leads to a weak awareness of paying, it is also feasible to cultivate users’ paying habits in view of people’s love for music.
On the one hand, domestic online music platforms can learn from the experience of KKBOX, a Digital music platform in Taiwan, and transform into charging software. With the increasingly standardized copyright market, they can achieve mutual benefit and win-win through joint transformation through cooperation and turn users’ free consciousness into good paying habits.
On the other hand, free users can tap their spending potential. For example, Spotify recently launched a “Sponsored Songs” feature for free users. Users can only cancel the feature if they pay a fee or sign up for a membership. Otherwise, they have to “endure” it. This helps record labels and musicians promote new songs; Secondly, the platform can avoid excessive advertising bombing to harm the user experience; Third way can promote the conversion of free users into paying users, thus further improving the profit space.
In addition, iResearch data shows that paying music users are mainly in the 20-35 age group of the new middle class, and have relatively high education levels. This part of the user group has stable income and high income, and has strong consumption ability. We can further open value-added services for them and increase the channel of realization.
Monetization aside, what’s the future of online music platforms?
When music copyright is no longer the main reason to burn money, when music payment is as normal as phone fees, and all online music platforms have guaranteed profits, how to create different music platforms has become the main exploration direction of all music platforms, that is, to create differentiated operation.
First of all, at the user level, the value of music platform for users lies in the enjoyment of music audio-visual, so differentiation needs to pay more attention to user experience.
First, personalized music recommendation. The platform can use big data technology to portrait users, analyze the types of music users like to listen to, and generate personalized optimal song list recommendation, so as to capture the hearts of users and retain users. For example, netease Cloud Music recommends 20 songs for users every day to catch users’ ears. In this process, netease Cloud Music recommends similar songs based on users’ previous listening habits.
Second, user interface interactive reviews. Social platforms such as wechat, QQ and Momo are becoming more and more popular among netizens, which shows that interaction has become a life habit for users. When there is a happy and touching event, a delicious restaurant, a beautiful scenery, people always want to share with others, and when they hear a moving melody, people are also willing to share. Improving users’ social interaction on the platform is also critical. Users can share their musical feelings with many like-minded people, or quarrel with users with different tastes over a particular song. For example, netease Cloud Music, Xiami, Ku and others all have song comment functions, which enable users to enjoy the happiness of sharing and interaction and also enhance user stickiness.
Third, upgrade users’ audio-visual experience. Although users mainly listen to music on the platform, they also enjoy watching MV of their favorite songs. The platform can not limit the music form to two-dimensional audio-visual effect, but expand to three-dimensional audio-visual effect to create multidimensional audio-visual mode. For example, 3D movies, VR experience hall and holographic image are now popular among audiences. If such new high-tech is applied to music, its new and novel experience will surely be loved by users, and peripheral products can also be developed through this, and multiple profit channels can be expanded.
Secondly, in terms of content producers, online music platforms not only serve music audiovisual users, but also serve content producers.
With the help of the platform, record companies and musicians can play a wide role in the promotion of their works, as well as open up sales and make multi-dimensional profits. However, the continuous development of the Internet has caused a great impact on the traditional industry, the traditional record company has gradually not as good as before, mining and training new talent is powerless, and buried in the public music talent is too numerous, common talk “master in the folk”.
Fostering original musicians and creating the whole online music industry chain have become another means of competition for differentiated operation of various platforms. On the one hand, there is a lack of excellent original musicians in the music market. Fostering original musicians can bring fresh blood to the music market and improve its ability to sustain blood production.
On the other hand, with the development of the network and the increasing number of netizens, the platform can widely promote new people and new works by virtue of its own traffic advantages, and both the platform and the content side can reduce huge promotion costs. Platform side and content side cooperate for a long time, and there is better negotiation space on copyright fees. This mode is conducive to the future development of new artists, and also helps the platform to build the whole music industry chain, so as to maximize the interests of both parties and achieve mutual benefit and win-win situation.
In addition, for online music platforms, fostering independent musicians is just like online video platforms developing homemade dramas, which is not only to control the current copyright costs, but also to invest in the future market. In 2017, all streaming media platforms are committed to creating their own musician plans. Tencent has the “Original Musician Support Plan”, Xiami has the “Seeking Light Plan”, netease Cloud Music has the “Stone Plan” and so on. Musician plan has become a key bet on the future market of each platform.
For example, recently, netease Cloud Music and KKBOX announced a strategic cooperation to jointly build the world’s largest Chinese music promotion platform, and carry out in-depth cooperation from multiple aspects such as song list push, music tour, short video and support for original music, with the whole music upstream and downstream industry chain as the future orientation. On the one hand, netease Cloud Music has accumulated a huge number of 400 million users through the differentiated operation policy. On the other hand, KKBOX has been deeply engaged in digital music platform for many years and has a mature music ecological chain and brand influence. The cooperation between the two parties will bring infinite possibilities to the future music market, and a new music ecological chain will shine.
In short, if online music platforms want to secure more market share in the digital music market, the first task is to break free of the shackles of difficult monetization. Cooperation between platforms to create a mutually beneficial and win-win music ecological chain is a good prescription, and then to seek differentiated operation methods to improve the core competitiveness, the future of digital music market will be unlimited.
Liu Kuang, meditation on the Internet, wechat official account: Liukuang110