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The Sound of Failure

On February 2021, Xiami Music, a streaming platform owned by Alibaba, shut down its service for good.

In 2007, Xiami Music was founded by Wang Hao, a former guitarist in a college band. Xiami, a P2P music platform, allowed music fans to buy their favorite music at a low price, directly from the musician on the platforms, while sometimes bypass the copyright owners completely. After initial success the platform was acquired by Alibaba in 2013.

Xiami’s declined started in 2015, when China’s National Copyright Administration started to crack down on music piracy. Xiami’s competitors, in turn, started acquiring the rights to popular copyrighted music; Xiami, however, seems was asleep at the wheel. In January 2016, Wang Hao left Xiami, and the platform saw a rapid decline in attention from users and managers at Alibaba, alike. In February 2021, Xiami Music shut down its services for good.

Unlike their international counterparts, China’s music streaming platforms are still struggling to make ends meet. In China, still only few users see a need to pay for music services. Being used to free music for many years, copyrighted or not, has led to a genuine reluctance to pay for any streaming service. QQ Music, for example, is a leading music platform with more than 270 million active monthly listeners — only 8 percent of which are paying users, however. This is a far cry from the 40 percent paying rate of Spotify, as an example.

It is, therefore, left to the platforms themselves to educate and entice users to pay for the services they consume if they want to avoid the fate of Xiami. Tencent, for example, is trying to provide users with a comprehensive entertainment ecosystem, with music services bundle in with gaming, video, and other services. Netease, on the other hand, is trying a different approach by trying to make its service more social — adding a plethora of social functions and integrating them into its music streaming platform. Netease’s hope is to monetize the social interactions themselves through ad revenue.

It is still early to tell which of these attempts will be more successful, or whether either of them will be successful at all. At this point it seems that none of China’s major music services – Kugou, QQ, Kuwo, Netease, or Migu have figured out a viable business strategy to operate a viable and profitable music streaming business.

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