Tencent is trying to do something few companies have managed to pull off yet in China: get consumers to pay for digital music. In a country where piracy is rampant and Internet users have long been accustomed to getting free entertainment, Tencent’s paid subscription model for online music represents a bold attempt at cracking a very challenging but potentially large market.
In China, 478 million people—more than the entire population of the U.S.—listen to music online, according to government statistics. But revenue generated from online music is still tiny compared with the U.S. Last year, China’s digital music revenue stood at $91.4 million, ranking No. 11 in the world, while the U.S. led the list with $3.5 billion, according to music lobby group, the International Federation of the Phonographic Industry.
In the West, consumers are used to the idea of paying for digital music thanks to Apple Inc.’s iTunes and Spotify Ltd.’s premium music service, which hasn’t entered China. However, paying for downloaded music hasn’t been a successful model in China in the past due in part to piracy, industry experts say.
To compete better, Apple on Monday unveiled Apple Music, which combines a subscription-based, on-demand streaming-music service for $9.99 a month, a 24-hour global Internet radio station, and a service for artists to connect with listeners.
There are more than 100 pirated music sites in China, according to industry estimates. One of the most popular pirated music sites gets 168.5 million visits a month—far more than any other legitimate online music service, according to IFPI.
Still, Tencent is trying to persuade users of its QQ Music—its Spotify-like service that lets users stream most songs free of charge—to pay for the premium Green Diamond membership, which offers higher-quality sound, members-only concerts and chances to win backstage passes to meet pop stars.
Read more at The Wall Street Journal.