How to Run a Profitable Music Streaming Business, by QQ Music

SeungRi TMG

The first profitable streaming music company in the world could come from China.

Spotify, despite beating out Apple Music and other competitors with 30 million paid subscribers, is actually bleeding money. While the company boasts high annual salaries for full-time workers, reported at over $168,000, the company reported last year a loss of over $194 million, way up from just $28 million in 2010. This might show that music streaming may not be as profitable as some think. But recently, QQ Music, better known as China’s Spotify, is reported to be turning a profit. According to general manager of the music division for parent company Tencent, Wu Weilin, the company is turning a profit. But why is it Spotify’s sinking and QQ Music’s riding high? The answer lies in taking a closer look at parent company Tencent, an e-commerce and tech giant in China.

Fresh off merging QQ Music and China Music Corporation in mid-July, a deal which was valued by the Wall Street Journal at $2.7 billion, TenCent seems to be dominating China’s online music market. QQ Music and China Music Corporation’s KuGou both claim to have over 800 million users each. TenCent doesn’t focus only on the music streaming industry, but also manages a social network, a gaming platform, and the immensely popular messenger WeChat, with more than 700 million active users. All of this gives TenCent a huge advantage when negotiating deals with record labels due to its substantial reach it has with the Chinese market. Spotify’s unprofitability can be, in part, because of the amount of revenue it has to pay to the music industry. Just last year, Spotify paid out over $1.796 billion on royalty payments.

Despite having claimed to have over 800 million users, about half of those are active monthly users for QQ Music, which makes for a substantial active user base of 400 million, 4 times the current size of Spotify’s active monthly user base. Unlike Spotify, QQ Music also offers other music services, like selling concert tickets, as well as offering an ad-free listening subscription of just 10 Chinese Yuan. Given that the average Chinese laborer earns 62,029 Chinese yuan a year, which is roughly just over $9,300 a year, 10 Chinese Yuan is really cheap.

 

Top Chinese music artist SeungRi image by BigB_Art_LIFE, licensed under Creative Commons Attribution 2.0 Generic (CC by 2.0).

5 Responses

  1. Reality

    They aren’t the first profitable streaming company. What you mean to say is they are the first profitable on-demand streaming service. And since this article has no real insight into their royalty structure, funding, Chinese government, Chinese consumers, Chinese musicians, or anything intelligent; it probably shouldn’t have been written. A simple tweet will suffice until you do a little research.

    Reply
  2. Vijay Jr.

    Agreed with the first poster. The original Mashable article this is copied from had no insight to support the claim, apart from mentioning “ticket sales!!!”, and now DMN just blindly re-writes the same content without adding anything further. Weak.

    The premise of this double-regurgitated claim relies on listing other mega-divisions of the Tencent family – Wechat, QQZone, gaming etc – which are all profitable, but very much adjacent to QQ Music, which is almost certainly not profitable. Just listing user numbers (also likely inflated) won’t cut it given the incredibly poor monetization of the free tier and the low price point and uptake of the paid tier (although this development is encouraging). Set amongst a fierce content licensing battle in China….QQ Music is profitable? No way. Big headline numbers + lazy journalism = free PR.

    Reply
    • Daniel Adrian Sanchez
      Daniel Adrian Sanchez

      Here would be the issue. You say the Tencent family is profitable, but QQ Music isn’t profitable. How so? Based on research done on the company, with over 400 million paid subscribers`, giving QQ Music the leverage it needs to lower royalty payments, unlike Spotify that has to agree to deals that heavily favor music companies, there is proof that supports Wu’s comments that this company is, in fact, profitable, unlike Spotify, which has only focused on this market. Combining that with a parent company that also has control on other top music services, and having recently joined with China Music Corp, it’s a no-brainer. As for the writing piece? Lazy journalism? We wish.

      Reply
  3. Kevin

    Daniel, you wish you were a lazy journalist? Interesting. But don’t worry, you’re not too far off. How about researching the percentage listening to Chinese music compared to US/European music on QQ? And the difference in royalty payments on domestic vs international. There’s a free hint to help you start learning how to write interesting articles. Don’t take these comments as attacks, that’s just your ego. We’re actually trying to help make DMN interesting and informative again.

    Reply
  4. Randomone

    Seungri (BIGBANG) is a top Korean artist btw, who is also promoting and famous in mainland China (not only).

    Reply

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