Mobile music app firms struggle to survive in China

September 14, 2013 Leave a comment

Mobile music app firms struggle to survive in China

Staff Reporter

2013-09-14

Mobile music apps companies, which are struggling due to rising copyright fees and limited available capital, are now looking to merge with internet companies as a way to stay in the market, reports tech.qq.com, a website operated by Chinese internet portal Tencent. Start-up companies in the sector are hindered by high costs stemming from labor and basic equipment procurement, and they must pay for copyright fees and servers that have a large storage capacity. The situation means that 70% of companies’ capital are consumed before their actual operations begin.

High costs have affected music app companies for years, but it has worsened this year, insiders said, adding that music copyright fees surged several times this year alone. Meanwhile, China is still unable to stop rampant music piracy through its copyright laws.

Mobile music apps can be divided into several categories. The first are music apps services provided by leading domestic internet giants such as Tencent, Baidu and NetEase. The second kind includes mobile music apps developed by established companies including Kugou and Kuwo, two of the first firms to enter the music app industry. The remainder constitutes ordinary mobile music apps, such as Xiami, Duomi and TTPod, as well as other radio apps including Douban, Jing and Duotin.

Chinese search engine provider Baidu purchased the music app Qianqian a few years ago. At the beginning of this year, Alibaba acquired music service Xiami, and the market has been abuzz with rumors that A8 Digital Music has been purchased by Qihoo 360. However, A8 has since issued an official statement denying the rumors.

Chen Hua, CEO of Changba, said that the majority of mobile music app companies will eventually face closure. The remaining companies can only stay in the industry via a large user base and sufficient income generated from commercials that will be used to pay the steep copyright fees.

Shi Kaiwen, founder of the music streaming startup Jing.fm, said that companies can only survive by being acquired by leading internet firms. However, some insiders are pessimistic about such mergers as Baidu and NetEase entered the sector much later than their rivals, and have only captured a small market share.

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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