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Can Tencent, Alibaba deal see Chinese streaming take on Spotify?(2)

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2017-09-14 09:43CGTN Editor: Mo Hong'e ECNS App Download

But surely it's all about potential?

Yes, potential is the keyword for China's streaming industry, and the main reason why Tencent has been able to sign groundbreaking deals with Universal Music Group, Sony Music and Warner Music – the music world's "big three" are keen to gain a foothold in China.

China's music industry grew 20 percent between 2015 and 2016 to become the 12th biggest in the world according to the International Federation of the Phonographic Industry (IFPI), and streaming platforms like those operated by Tencent and Alibaba are seen as key to fighting illegal downloads in the country.

However, Chinese consumers will need to undergo a major shift if the music industry wants to make money in the country. While the movie industry has grown to such an extent that 2016 saw China spend 45.3 billion yuan (6.9 billion US dollars) at the box office, research by Jefferies estimates that the paid music market in China will be worth just under three billion yuan (459 million US dollars) in 2017.

The IFPI found in 2015 that per capita annual spend on music in China was only 0.10 US dollars, suggesting that Tencent and Alibaba have a tough fight on their hands if they want to convince more users to pay for music in the country, especially if Tencent wants to convince investors that QQ Music really is worth 10 billion US dollars.

While details of Tencent's deals with Universal and other major labels are unclear, artists and other industry workers will expect to be paid royalties on a par with Spotify and Apple Music.

That means the pressure is on for China to transform into a market happy to pay for music – otherwise major labels will look elsewhere, and take the music industry's top talent away with them.

  

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