A competition between two masters: A strategic comparison between Tencent Music and Taihe Music

In 2017, the domestic music copyright landscape underwent a major change, and the music industry continued to undergo a major reshuffle. According to Tencent Technology , on May 16, Tencent Music Entertainment Group (TME) has purchased the digital copyright distribution rights of Universal Music in mainland China. When talking about Tencent Music (QQ Music, Kuwo, Kugou), we must mention Taihe Music Group. Previously, Taihe Music Group announced that it had become the exclusive partner of The Orchard, the world's largest pop music library; in April, Baidu Music, a subsidiary of Taihe Music, announced that it had acquired the copyright of Rolling Stone Records; in the recently released "China Performing Arts Competition Data Report " by iMedia, Taihe Music even won half of the TOP10 of the iMedia Concert Index by managing the concerts of Jacky Cheung and Joker Xue .

If Tencent Music is the young representative of the development of digital music platforms in the past decade, which has attracted friends and expanded the music streaming team and led the online music; then Taihe Music Group, as a representative of traditional music companies, has not only witnessed the growth of Chinese music for more than 30 years, but also embraced Baidu Music in its prime, and seized the opportunity to enter the Internet, and its music unicorn image has been fully revealed.

At this point, the two main development models of the domestic music industry, represented by Tencent Music Entertainment Group (Internet company DNA + music) and Taihe Music Group (content company DNA + Internet), have become clear. Observing the development history of these two schools is like studying the fist, palm and foot techniques of the two masters, which combine hardness and softness and each has its own unique skills. The competition among masters in the world of music and martial arts requires not only a 300-round battle, but also a game of competition and cooperation, so that there will be no hurt feelings after the fight, and they will go into the world together again. The smoke of the copyright war has not yet dissipated, so let us study the two internal skills of the masters of Tencent Music and Taihe Music.

Tencent Music's big streaming strategy VS Taihe Music's "six sections of sugarcane" strategy

Tencent Music’s Big Streaming Strategy

If you are familiar with the development history of Tencent Music, it is not difficult to find that Tencent Music’s large-scale streaming media strategy is essentially a traffic strategy.

The story begins in 2016, when Tencent's QQ Music business merged with China Music Group (CMC) and became the major shareholder of the new music group through asset-for-equity swap. Soon, the New Music Group was officially renamed Tencent Music Entertainment Group. Currently, Tencent Music Entertainment Group's business lines are mainly composed of QQ Music, Kugou Music, and Kuwo Music, with a music library of more than 17 million resources. The streaming media services on the platform have different focuses. QQ Music focuses on digital music and live concerts, while Kugou Music and Kuwo Music focus on live shows, karaoke and other services in addition to digital music and audio-visual services. Relying on three major streaming media service platforms and heavy investment in copyright resources, and backed by Tencent's large product matrix, Tencent Music has developed online music services such as digital music albums, Green Diamond membership, live broadcasts, concerts, etc., and has gained more than 600 million monthly active users and more than 15 million paying users , and has firmly established itself as the number one in China's digital music field.

Tencent Music intends to become the "leader in China's online music services", and its "ambition" is not limited to the field of digital music and audio-visual services. Last year, Wu Weilin, vice president of Tencent Music Entertainment Group, mentioned in an interview: "The new group will still focus on music, but we won't make products from the perspective of listening. For example, for live broadcasts and concerts, we want to use Tencent Music to package peripheral things. You know that Tencent is best at games , and we may make some music games in the future. So it's best to name it 'Tencent Music Entertainment'." In terms of breadth, Tencent Music attracts more paying users and musicians to cooperate with it through rich and effective copyright resources and optimized user experience , and provides digital services such as digital music albums, O2O live broadcasts, and concerts, repeatedly creating impressive music payment results; in terms of depth, Tencent Music, relying on Tencent Group, will continue to carry out strategic upgrades and integrations with products such as Tencent Video and Tencent Interactive Entertainment at the "pan-entertainment" level, and the prospects are also promising.

Having firmly established itself as the number one player in the domestic digital music sector, why is Tencent Music still spending money relentlessly to buy copyrights? This is determined by their genes and patterns. Unlike traditional music companies, Tencent Music has Internet genes in its bones and is engaged in traffic business. Its business model relies on cultivating the payment habits of C-end users and tapping their consumption potential, including but not limited to purchasing digital music albums, paid memberships, online concerts, etc. User loyalty to the platform shows a strong positive correlation with the quantity and quality of music copyright resources. Therefore, it needs to continuously expand its size, collect more copyright resources, and attract C-end users to pay for their feelings. The more users participate in the use, the more revenue the paid services for users can generate. It is not difficult to see that traffic is the core lifeline of Tencent Music.

Taihe Music's " Six Sections of Sugarcane " Strategy

Different from Tencent Music’s big streaming strategy, Taihe Music adopted the “six-section sugarcane” strategy. The so-called "Six Sections of Sugarcane" actually interprets the expansion space and profit distribution of the business model from the perspective of the music industry's industrial chain. This approach is somewhat similar to that of JD.com , which "eats up more sugarcane nodes" by building a music ecosystem. That is, Taihe Music is not only aiming at the traffic business of the online music platform, but also wants to take on services in multiple fields such as content, performances, and fans, intending to allow resources to circulate in the entire industry at the lowest cost and most efficiently.

First of all, from the perspective of positioning, Taihe Music aims to build a "global leading music service provider", breaking through the word "online" and providing music services from multiple levels of the industry. Secondly, from the perspective of product resource structure, this huge music unicorn owns a music library of 22 million songs and reaches over 500 million users across all platforms. It not only owns the "Whampoa Military Academy" of the music circle (Taihe Music, Ocean Butterflies Music, Dashi Copyright, and Heliang Yin), but also interactive service platforms such as Baidu Music, Baidu Musicians, Baidu Music Player, Showdong, Heliang Yin, and Vae+; it also owns copyright service platform "Chengcheng Technology", well-known ambient music radio station LavaRadio and many other holding companies, and has strategically invested in fan service platform Owhat and online entertainment brand "Don't Want Music". In addition, Taihe Music Group has reached various forms of cooperation with hundreds of well-known artists, including Jacky Cheung, Zheng Jun, Faye Wong, Li Jian, etc., and has attracted strong participation from famous musicians such as Kit Chan, Joker Xue, Xu Song, Khalil Fong, and Angela Chang. In Taihe Music's three-dimensional and multi-dimensional ecosystem, there are various combinations of molecular products and artists, resources and traffic are shared, and data is connected, and the strategic vision is obvious. It is this large ecological strategy of casting a wide net and deeply interconnecting that has created today's Taihe Music Group.

Taihe Music extends its roots and deeply penetrates all upstream and downstream links of the music industry, including content production, copyright operation , audio-visual services, performances, fan communities , etc., to seamlessly provide comprehensive music services to P-end, B-end, and C-end users, which greatly enhances the scalability and diversity of its profit model. As a content producer and copyright operator, Taihe Music Group's revenue from its own copyrights and agency copyrights can strongly support more than 50% of its revenue.

At the same time, compared with up-and-coming companies (such as Internet music companies), Taihe Music will also have a better understanding of how to build and operate a music content system and copyright distribution path, directly addressing the most urgent needs of content companies and musicians. Taking copyright operation and distribution services as an example, Taihe Music Group's global multi- channel copyright operation and distribution system not only integrates exclusive agency, authorized distribution, publicity and promotion and other businesses of music copyright, but also its copyright cooperation customers cover many fields such as the Internet, mobile terminals, games, videos, film and television music, karaoke, etc., and the regions also cover China, Japan, South Korea, Singapore, Malaysia, Europe and the United States and other global areas.

The dangers and opportunities after the copyright war still require cautious optimism

The copyright war at the beginning of spring has been temporarily settled. The intervention of capital, the emergence of giants, the active users, the introduction of favorable policies for legalization, and the formation of development models of two music companies, Tencent Music and Taihe Music, have all made the industry feel the vitality of spring. However, the music industry still faces both dangers and opportunities. Below, we will focus on the two models of Tencent Music and Taihe Music.

For Tencent Music, the high copyright costs will greatly increase operational pressure and may push up the price of music copyrights to new heights. It is said that in the copyright war surrounding Universal Music, the seller who offered the lowest bid also had US$240 million in cash (approximately RMB 1.65 billion). Assuming that Tencent Music only spent 1.65 billion yuan this time, the music copyright is valid for 3 years, and the annual fee for QQ Music paid membership is 178 yuan. So to offset the copyright costs, if we just sell QQ Music, we need to find about 9.28 million paying users. Tencent Music has officially announced that the number of paid membership users has reached 15 million. Given that Chinese music users' payment habits have not yet been fully formed, the difficulty of this operation can be imagined. Finally, will Tencent choose to bear the high copyright costs silently or will users pay for it? It is foreseeable that under the pressure of profit, "copyright sharing" will be an inevitable result.

In addition, through this cooperation with Universal, Tencent intends to help Universal's artists such as Lady Gaga and Taylor Swift expand the IP industry chain in China and even the global market, and comprehensively upgrade the value of these star artists by deploying publicity, channels, and operations across the entire industry chain. However, since it is not a veteran content company, Tencent Music is relatively unfamiliar with areas such as content production and distribution, artist training and brokerage, and it will take some time to learn how to cross the river by feeling the stones.

As for Taihe Music, with the development of digital music, giants such as Tencent Music and Alibaba Music have already made layouts in the fields of copyright resources, streaming media services, and performances. It has become a top priority to accelerate the transformation of traditional music companies + Internet, enhance the competitiveness of products in a single field, and integrate industry chain resources. At the same time, Taihe Music Group has many labels, digital platforms and artists, so it is also very important to connect all links to ensure the smooth flow of resources and more effectively utilize music big data to serve users.

Some thoughts on the music industry

Finally, I would like to share a few thoughts on the music industry for your reference:

1. Although there is a certain degree of competition between Tencent Music and Taihe Music, there is cooperation between the two parties in areas such as mutual copyright acquisition . It is not a hostile relationship where both sides will be destroyed, but rather they compete and compete in completely different modes in competition and cooperation, and jointly promote the development of the music industry.
2. To find a breakthrough in the business model of online music, we have to go back to the music industry and think of a solution. The development of the music industry includes artist management, content production, planning and promotion, digital music, copyright operation, performances and activities, fan communities and other aspects, and is not limited to online music.
3. Online music platforms are unleashing enormous energy in the war for exclusive copyrights. Exclusive copyright is certainly of great importance, but copyright should not become a bottleneck hindering the development of the industry, but should be a basic and essential asset for the development of the industry. On this basis, everyone should calm down and think about how to build new data standards, copyright protection, business models, user experience, etc., so as to truly benefit themselves and the sustainable development of the industry.

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