NetEase Cloud Music and Tencent Music Reach Deep Copyright Agreement, but Competition Still Exists

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Chinese users no longer need to fret over the choice between downloading music from NetEase Cloud Music or Tencent Music.

On the evening of February 9, the National Copyright Administration issued a notice that officially opened the “2.0 era” of music platforms in China.

The National Copyright Administration website reported news that NetEase Cloud Music and Tencent Music have agreed to share music copyrights. The amount of songs to be co-authorized to both platforms accounts for 99 percent of all exclusive songs. Both platforms have agreed to long-term music copyright sharing, and will actively authorize songs to other music platforms.

This agreement has enabled NetEase Cloud Music to obtain copyrights to music made by Seed Music Limited, H.Brothers Media, and Canxing Culture, which were exclusively owned by Tencent Music. Previously, NetEase Cloud Music had won the music copyrights of Universal, Warner, and SONY, which were also exclusively owned by Tencent Music.

NetEase Cloud Music and Tencent Music Reach Deep Copyright Agreement.

Tencent Entertainment Group said the copyright agreement between the two parties involves purchasing songs. Tencent will not disclose the specific number of songs or the cost of purchases in this agreement.

NetEase Cloud Music users can now listen to songs by Sodagreen, Wang Feng, and Youngho Lee, which were unavailable before this agreement.

Prior copyright-related conflicts among these Chinese online music platforms are momentarily resolved by this agreement.

The War on Copyright

In the last one to two years, competition among online music platforms has mostly centered around copyright protections.

This period can be regarded as the 1.0 development era, led by Tencent Music (including QQ Music, Kugou, and Kuwo Music), Alibaba Music, and NetEase Cloud Music.

Tencent Music had dominant copyright advantages during this period.

QQ Music

Tencent Music Entertainment Group was established in early 2017. According to unofficial statistics, the company now has more than 15 million songs. NetEase Cloud Music announced in July 2016 that it had 10 million songs in their library. Alibaba said it too had around 10 million songs.

In addition to its copyright advantages, Tencent Music is the exclusive agent of Universal, Warner, SONY, YG Entertainment, and Jewell. Almost half of popular songs are produced by these companies, which made average users feel that most songs were only available on Tencent Music.

Tencent Music is the exclusive agent of YG Entertainment

In order to consolidate its copyright advantage, Tencent repeatedly sued NetEase Cloud Music since 2014, accusing the latter of infringement and forcing NetEase Cloud Music to remove affected songs.

In October 2015, NetEase Cloud Music and Tencent Music reached a strategic copyright agreement. Tencent Music offered the sub-licensing of 1.5 million songs to NetEase Cloud Music. Copyright sub-licensing is similar to copyright contracts, consisting of prepayments and dividends.

At the time, Tencent Music’s copyright covered virtually all the well-known record companies, although the partnership allowed Tencent to gain rights to even more titles.

The 2017 Mobile Internet Industry App List released by Jiguang shows that, in December 2017, the market share of Kugou and QQ Music, both belonging to Tencent Music, are 32.10 percent and 24.91 percent, respectively, higher than that of NetEase Cloud Music, which was 9.15 percent. The number of daily active users of QQ Music, Kugou music, and Kuwo Music were 76.9 million, 59.62 million, and 19.91 million, respectively, higher than that of NetEase Cloud Music, which was 16.18 million.

What to Compete for in Post-Copyright Era?

The National Copyright Administration does not want music platforms to overly compete for copyright exclusivity.

As early as September 2017, the Copyright Management Division of National Copyright Administration met with the directors of Tencent Music, Alibaba Music, NetEase Cloud Music and Baidu Music. The Division stressed that exclusive copyrights to music platforms should be avoided, and the sub-licensing of music copyright should follow fair and reasonable principles.

The copyright agreement between Tencent Music and NetEase Cloud Music was a wholesome response to the Division’s requirement. After their meeting with National Copyright Administration, Chinese music platforms will now compete on the same grounds. The frantic purchasing of music copyright exclusivity became history.

In the 2.0 era of online music, the purpose of copyright protection is no longer what it used to be. Platforms now need to compete over operations, products and services.

NetEase has always enjoyed good reputation. NetEase Cloud Music focuses on their song list and music reviews, which garner user retention. “Delicacy” is the label that users attach to NetEase Cloud Music.

The various marketing strategies adopted by NetEase Cloud Music, such as displaying music reviews in subways and on bottled water labels, and offering NetEase Cloud Music on airplanes, have gained recognition from users. At the beginning of 2018, Customized Personal Music Review published by NetEase Cloud Music were shared by numerous users in WeChat Moment in 2017.

NetEase Cloud Music displaying music reviews in subways

Tencent Music has less satisfying performance in this aspect.

Tencent Music doesn’t focus as much on marketing, but instead dedicates more attention to expanding its services and becoming more vertically integrated within the music industry. By extending upstream and downstream of delivering music by providing content publishing and original content creation, Tencent allows users to directly connect with music producers.

Recently, Tencent Music Entertainment Group and SONY announced in Hong Kong their joint launch of electronic dance music label, Liquid State. This marked Tencent Music’s first launch of its own music label, setting a foundation for content production.

Earlier, Tencent Music also launched a program called Original Musicians, which aims to help original content-owning artists release and promote their music. This also allowed Tencent Music to expand into an original music content provider, gaining foothold upstream within the music industry.

Of course, Tencent Music’s products are not limited to music streaming. WeSing, Tencent’s karaoke app, has become a hit social music product.

Jiguang statistics show that the market share of WeSing is as high as 20.38 percent. In December 2017, nearly 23.4 million people used WeSing per day on average, earning substantial traffic for Tencent Music.

This multi-perspective approach requires the support of powerful resources. Tencent Music is backed by Tencent.

The 2.0 era of online music will likely become a one-on-one competition between Tencent Music and NetEase Cloud Music. When the news of the copyright agreement was announced, many NetEase Cloud Music fans said on the Internet that “we can finally uninstall QQ Music.” Of course, there are also Tencent Music fans who showed support for QQ Music.

This article originally appeared in Jiemian and was translated by Pandaily.
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