Throw the ‘billion’ number into the discussion, and businesses can quickly go down the wrong path.
The reason is that almost any business model based on a billion – or billions – immediately dances up visions of incredible riches. Just sell something to a billion people, or a fraction thereof, and everyone goes home loaded.
Such inflationary modeling is commonly found in mobile – ‘billions of handsets worldwide’ – and China, where the population is north of 1.3 billion. The back-of-the-envelope is just too alluring to resist, or fund, or start up.
But media companies have historically been frustrated by China, its cultural and political opaqueness, its immense levels of piracy. That certainly includes the music industry, a group that has experienced very little success selling online assets like downloads or subscriptions. Those familiar with the region note that nearly everything is pirated in China, far more than markets like the United States.
In fact, the recording industry has repeatedly encountered dead ends, despite serious attempts to tame this market. The IFPI has been mostly unsuccessful in its attempts to sue search giant Baidu, a site notorious for directing users to free MP3s.
Against that backdrop, Google China recently started offering free, ad-supported MP3 downloads and on-demand streams, a cooperative effort with Top100.cn. The site, at google.cn/music, currently houses 350,000 tracks from all four majors. “We were finally able to take action to monetize the huge music usage in China,” said Gary Chen, chairman and CEO of Top 100, speaking at the Musexpo conference in Los Angeles this week. “On the first day, we got three million downloads and streams. Now, that is closer to five million daily, at a ratio of one download to six streams.”
Sounds pretty good, if Chen and Google can effectively monetize that action through advertising. In markets like the US, the ad-supported game has been brutal, especially on Google-owned YouTube. But perhaps this has a shot. Chen pointed to a ramped-up marketing campaign, and positive response from a pirate-happy audience. “China is the second-largest advertising market in the world, we’re talking about $48.5 billion in advertising spending a year, and then about 200 million internet users who download and stream music for free.”
Alluring numbers, though Chen is challenged to show the music industry the money. Indeed, big numbers have dazzled before, and Chen still has immediate content ingestion issues to worry about. That includes a number of peculiar problems, like a general tendency among Chinese users to misspell the names of top Western performers. “People learn English in school in China, but most do not know how to spell artist names on Google search,” Chen relayed.
And that is just the beginning. “We are planning to add another 700,000 tracks in the next six months,” Chen explained. “But the real challenge is that we do not have a sizable digital distributor in China. So, we have to talk to each label directly, then organize, edit and translate track information into Chinese.”
And, at the start of a potential revenue stream, the effort could be hard to justify. “I’d love to do the Long Tail, but I’d have to hire hundreds of editors that know French, Italian, Japanese, Korean, or English,” Chen described. “We really need help and support from digital distributors,” Chen said. Perhaps billions of downloads and streams later, that digital infrastructure will start to materialize.
Report by publisher Paul Resnikoff in Los Angeles.