An August piece on the New York Times comparing the major music streaming services made me more aware the impact of digital age on the music industry (I mean, even Jay Z is starting his music streaming service, too.). Moreover, it helped make more sense of Apple’s recent decision on bringing its “newish” streaming platform into one of the world’s largest Apple market, China.
In this Sept. 30 press release, technology giant, Apple Inc. (Nasdaq: AAPL), announced Apple’s official release of three services in its Chinese market: Apple Music, iTunes Movies and iBook. While Apple’s U.S. customers would find these services familiar, the company’s Chinese users would finally have a chance to check out these applications on their Apple devices for the very first time.
As an effort to combat the fierce competition in a brand new market, Apple Music opened in China with a price that would be considered as “insanely cheap” by the users of its U.S. counterpart. In the U.S., Apple Music charges a monthly fee of $9.99 for an individual membership and $14.99 for a family membership. In China, this number is reduced to ¥10/month (about $1.6) for individuals and ¥15 ($2.4) for families. Customers in both markets will enjoy a three-month free trial before having to pay for streaming music on their devices. But a lower price doesn’t necessarily guarantee a stronger competition, and here’s why.
The announcement of Apple Music’ release in China came exactly three months after the service’s initial launch in the U.S. Not so coincidently, this is the same time that free trial has just ended for the first batch of American users. I found it hard to believe that these first three months have injected any confidence into Apple’s decision of bring Music to China.
It is certainly true that U.S. customers have found Apple Music’s features attracting. In August, Apple told USA Today in this interview that Music has by then recorded 11 million trial members during its first five weeks of operation. But it should be bluntly obvious to everyone, including Apple, that counting the increasing number of trial members as a sign of success would be a mistake. In August, music industry analytics firm MusicWatch conducted a survey among 5000 Apple Music customers aged 13 and older about Apple Music. They found out that more than 60 percent of the users being surveyed have already turned off the auto-renewal option for Apple Music. This means they will likely choose to not pay when their free trials end. When more than half of its domestic users refuse to pay for its service, Apple Music’s hope in China, a market filled with users who have so accustomed to striping music off of Internet for free, is incredibly lean in my eyes (and it certainly doesn’t help when I stumbled across this article where it teaches Chinese users step by step how to turn of Music’s auto-renewal). And that is only one of three reasons why I predict Apple Music’s dismal future in China.
- A Market Not Used to Pay
The majority of Chinese Internet users don’t pay to listen to music. That’s simply the reality. In general, they don’t expect anything online to be anything else other than free of charge. In the age when New York Times and The Wall Street Journal and most magazines in Apple’s Newsstand app all require paid subscriptions in the U.S., Apple Newsstand in China almost functions as a parallel world where people can download and read many magazines for free.
If one just judge by numbers, ¥10 per month for Apple Music seems competitive in the Chinese market. But the thing is, Apple is charging money for something –– streaming music and listen to it online –– that most of its Chinese competitors don’t charge at all.
For instance, Xiami, a popular Chinese music streaming platform acquired by Alibaba (NYSE: BABA) two years ago, has a “VIP service” that charges a monthly fee of ¥15 (less than a dollar higher than Apple Music). It seems like Apple is at a price advantage, but this fee is not required if a Xiami user simply wants to stream music and listen to it. The only time Xiami users would want to pay to become a VIP member is when they prefer higher quality audio (which almost no one cares) or to download music to their devices from the website, or to listen on Xiami.com outside of China.
Meanwhile, NetEase, Inc. (Nasdaq: NTES), another leading IT company in China, also has a music streaming site rivalry to Alibaba’s Xiami. Its pricing chart starts at ¥8 per month, lower than both Apple Music and Xiami, and similar to Xiami, it is also free of charge for online music streaming.
This June, Apple Music’s competitor in the U.S. and European markets, Spotify, released numbers for its paid users: more than 20 million paid subscribers and more than 75 million active users worldwide, pumping the site’s paid user ratio (paid/total) to a striking 26 percent. The same number that Spotify released is regarded as business secret for Chinese platforms including Xiami and NetEase Music because of how low (and humiliating) it is. At best, this ratio might be around five to six per thousand for the Chinese platforms. That’s right, not even close to one percent.
This is what I meant when I said the Internet environment in China is different from the one in the U.S. And this could be the No.1 factor that harms Apple Music’s competitiveness in the Chinese market. As it seems, a price that is too low for U.S. users, just may not be low enough in China.
- A Disappointing Playlist
Apple Music holds high standard for itself in terms of legally obtaining the right to stream all the music for its users. Currently, its strategy in the Chinese market is to obtain the rights through big record companies, but not through individual musicians. It’s hard to say its Chinese competitors are doing the same in this category.
This contributed to the fact that Apple Music has a much smaller playlist of Chinese pop songs, especially newer ones, when compared to its Chinese domestic rivals. When users can’t find the songs they want, it’s predictable that they switch out and go to other platforms.
- A Slow, Slow Speed
Imagine if there is anything worse than having to pay for music when you are not used to and then not finding the songs you are looking for, it would be the streaming service itself not working out. And reportedly, that’s what’s happening with Apple Music in China.
In general, Chinese Internet speed is no where close to the speed in the U.S. But simply put, Apple Music is currently requiring the same internet power to stream and function in both countries. It’s hard to imagine users stay around a platform when they can’t even listen to a song uninterruptedly.
With all that said, I am foreseeing a much brighter future for iTunes Movies when compared with Apple Music. Currently, Chinese internet users have relied on several domestic video sharing and viewing platforms including Youku Tudou, AiQiYi, LeShi, Tecent Video, etc. for viewing TV shows and movies. Noticeably, YouTube and Netflix, same as most other American websites, are blocked in China. Take one of these domestic sites, Youku, for instance, users usually need to pay a small amount of pay-per-watch fee or a relatively higher monthly fee to watch movies online. That said, iTunes Movies has a price chart very competitive in the market, plus a better selection and a sleeker interface, which may win out many customers who used to pay for movies on other sites before.
As someone with a strong interest in both media and China, I’ve rarely combined two issues together and talked about them on my blog before. I can’t, however, avoid to bring up this highly-discussed event: a Chinese newsman was arrested on Aug. 25. He later went on air through the state television channel and “confessed” for his coverage of the stock market.
Xinhua news reported his arrest as a result of him fabricating the information in an article covering the stock market turmoil in the past summer (I wrote a blog post covering the same topic). In this announcement put out by the news agency this reporter works at, Caijing.com, the agency stated by the time the announcement came out on Aug. 26, they have not yet received official notifications from the police and is unaware of the exact reason that the reporter was arrested.
My friend and fellow reporter Ju-Hyun Lee works for another publication based here at the Missouri School of Journalism, Global Journalist, and he covered this event for them in this piece. If you are interested in knowing more about this event, give it a read.
Play with RMB 