China Has 1.4 Billion People. And Less Than $100 Million In Annual Music Revenues…

Let this be a stunning statistical warning for all ye who dare enter the Chinese music market.  Because even if you manage to crack into China politically, you’ll have an incredibly difficult time selling stuff once you’re in.

Here’s a topline look at just how few Chinese people are actually buying music.  In fact, the per-capita spend on music is a paltry 10 cents, according to a breakdown by global industry group IFPI.  Compare that to per-capita spends of $14.30 in the US, and $34.70 in Japan (which could soon be the largest music market in the world).

chinasnapshot1

Welcome to the land of near-zero intellectual property protection.  While IP at least remains a testy battleground in the US, most stuff is cracked, cloned, or otherwise compromised in China.  Indeed, it’s surprising that 10 cents of anything music-related is being sold.

chinasnapshot2

So, stay away, stay very far away?  Perhaps: regardless of the vast theoretical potential here, China is showing scant signs of improvement.  Unlike Japan, physical accounts for less than 20 percent of total music sales, also according to the IFPI.  And more lucrative digital assets like downloads and ringtones are quickly receding.

chinasnapshot3

It’s an ad-supported, maybe subscription-oriented future, if there’s a future at all for this market.

 

 

Written while listening to Vampire Weekend.

15 Responses

  1. Champion
    Champion

    Spotify premium subscribers spend $120 per year, or more than 8 times the US per capita average. And yet the vilification of streaming continues.

    Reply
      • Visitor
        Visitor

        Where you get the 0.3% from?
        USA has 310 million people.
        Muve Music: 1.5 million subscribers
        Spotify: 1.2 million subscribers
        Rhapsody: 1 million subscribers
        Others like Rdio, MOG, Xbox Music, Sony Music Unlimited: let’s assume 0.3 million

        Total: 4 million total
        4 mil / 310 mil = 1.3%

        Reply
    • A_Keyes
      A_Keyes

      Fascinating point, Champion, and thanks for putting that into perspective for us. However, the concern with Spotify and other subscription-based streaming services is that it might be attracting above-average music consumers who would otherwise buy armfuls of CDs each year, and enticing them to spend $120 a year for the premium subscription. Up until Spotify’s arrival in the US, I would usually buy a CD per week, so I spent something along the lines of $500 per year on recorded music. If Spotify’s audience mostly consists of above-average consumers like myself, then that would mean a major revenue reduction for the industry. That said, I have yet to see any studies that confirm that such a trend exists.

      Reply
        • Visitor
          Visitor

          No, the only solution is to fight the Piracy Industry.
          Stop mainstream piracy, and we’ll get rid of most of the streaming as well.

          Reply
          • Henry Chatfield
            Henry Chatfield

            Right, and the best way to fight the piracy industry is to take their revenue away from them. If streaming provides all the same content, for free, then people will move to streaming and piracy sites will lose their consumer base…which will mean they will lose their ad dollars.

  2. Jasper
    Jasper

    …Or you could get your butt over here and find out how people are making money in China. It’s still very early days and genuinely a tough market but talk to Scarlett Li, Charles Saliba, Shen Lihue, Ed Peto and countless others at the coalface. Same goes for bands, you have to there to succeed. But also please consider this, when was the last time you bought a Chinese record? How are you going to connect if you’re not there or don’t speak thei language. Don’t just sit there reading pie charts! See you at Music Matters?

    Reply
      • Jasper
        Jasper

        It’s undeniably the most exciting part of the world for the music industry right now.
        You yourself are predicting Japan to go #1, KPop is only going to grow worldwide, Australia continues to pump out amazing talent (and host some of the world’s great festivals), India is on the verge of greatness with over a billion music lovers and let’s not forget Indonesia with 240 MILLION people of whom 150 MILLION are connected by Telkom the world’s second largest mobile operator. ITunes, Deezer, Spotify, Rdio, MOG – they’re all here now and providing freemium services that are better than piracy.
        Can you afford not to be here? Let’s make it work for Music Matters 2014 ok?

        Reply
  3. Allen Johnston
    Allen Johnston

    Spent a week in Beijing at Sounds Of The Xity (SOTX) and I see how many bands are making money. There are more live events happening daily than most cities have in a week. LIVE bands are playing, and they are capturing real strong audiences. They are selling CD’s, t-shirts, caps, bags and books at each venue.
    I saw small venues (under 100 people) midsize and large venues with crowds and lines waiting to get in. Drink sales were very reasonable for the marketplace and the bands move around the city AND the country. There had to be 15 music festivals this year alone where multiple bands were featured.
    I only saw one stand alone record store but they were DEEP catalog and heavily American influenced. China lives on bootleg so it is not surprizing that cd / download sales are down.
    I was told if you make a song than YOU sell that song or someone else will.

    Reply
  4. JTV Digital
    JTV Digital

    Baidu Ting is the biggest and most popular (legal) music service in China.
    The unit revenue for downloads and streams is ridiculous when converted in € or $, BUT there are millions of transactions so it finally generates some income for big labels.

    JTV Digital | affordable digital music distribution

    Reply
  5. Archie
    Archie

    Paul,
    Some interesting observations, but ultimately quite flawed.
    1/ China is very much still a developing market. Despite the huge progress over the last 30 years, there are many reasons why people aren’t buying “luxury” products like music.
    a/ average per capita income is 8,400US$, compared to 33k in Japan and 48k in the US (World Bank 2011)
    b/ low salaries are not backed up by a welfare state (education, pensions, healthcare) so most Chinese save (China’s household savings rate is 38% compared to 3.5% in the US and 2.6% in Japan)
    Most people in China are relatively far down Maslow’s Hierarchy of Needs. When you are worried about food and shelter, why would you think about paying for something as non-essential as music?
    2/ Incredible that you are taking sales of recorded music as the only indicator of how much “music” is sold in China. That is just an incredibly 20th century paradigm. Where are your statistics for live, synch, merch, brand activity etc.?
    The first stage of consumption is a conspicuous one, and so young Chinese are paying for festivals and shows because that’s where they can be seen and appreciated. For the same reasons, they pay for disproportionately expensive cars, clothes and phones. They pay for precious few things for inside of their houses, because other people cannot “see” these examples of wealth and status. Recorded music would be even further back in terms of priorities.
    There is an emerging music industry in China – hell, companies are offering paid streaming services already, albeit at a very low price points – but this industry will not be measured in terms of recorded music sales any time in the near future. Domestic and international artists are being paid huge sums of money by brands and festivals (of which there are now over 100 in China alone), largely because there is a rising middle class who have increasing amounts of wealth and spare time and famous artists are a way to connect with these consumers.
    Assuming that the Chinese economy continues to grow (and it is a big assumption), then the music industry as a whole (rather than viewed through the narrow prism of recorded music) will continue to grow at a rapid rate.

    Reply

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