*Whatever happens to musicians will happen to everybody, except in China, where it will happen with Chinese characteristics.
Article really gets into the tall musical weeds here
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Music Piracy in China
Up until 1990, the copyright legislation simply didn't exist in China, as it was considered unnecessary for the communist state. Throughout the 1990s, as part of China's economic reform, the copyright law was gradually developed, and by 2001, it included even the right to stop users of P2P networks from sharing copyrighted content. However, while the copyright law was fully established by 2001, the governmental structures weren't all that interested in actually enforcing it (at least when it came to the music copyrights). As a result, throughout the 2000s, the pirate services freely roamed the Chinese web.
Even Baidu, the Google of China, had a hugely popular MP3 search function, which aggregated hundreds of pirate websites. Baidu was brought to court multiple times by the global right holders, but the attempts were mostly ineffective. Baidu was found innocent most of the time, raising the King Kong defence, or found guilty — and charged laughable fines of 60,000 RMB, or about $8,800 (split amongst the Big Three, so around $3k each). The lack of copyright enforcement yielded predictable results — by 2011, 99% of all music downloads in China were illegal.
In 2011, things started to change. Baidu stroke a deal with all of the majors: the tech-heavyweight licensed 500,000 songs worth of catalog and agreed to revoke its MP3 search feature, replacing it with the country's first semi-legal streaming service Ting, now known as Baidu Music (which wasn't very successful). However, the real shift came four years later, when the Chinese government decided to intervene and enforce the copyright. It was called "operation Sword Net”, and in the course of one week, more than 2 million unlicensed songs were taken off the digital platforms. (((That must have been a remarkable experience for Chinese music devotees.)
From that point on, the government kept a close watch over music piracy, and in just seven years, China went from the most piracy-heavy market in the world to the point where96% of consumers listen to licensed music.
So, in a way, legal digital music was born just four years ago — which explains the low revenues of the recording industry that we see today. Illegal services have turned the consumer to digital services, but also cultivated an environment of free music access — the general population just not used to pay for music. As a result, Chinese streaming platforms have trouble monetizing the freemium streaming model. Users tend to stick with ad-supported versions, so the conversion rates remain extremely low across all streaming platforms, at just 4%. The local streaming services interpret the low subscription rates as the sign of the market potential. However, if we look at the data, the current growth of the market is powered by the flow of new users, while the 4% subscription rate remains stable since 2015. So, the question of whether the Chinese DSPs will be able to change users minds, and get to Spotify's 46% remains open. One can be said for sure, though: even if it will work, turning Chinese consumers to premium subscriptions will be a long game.
However, paradoxically, Tencent Music Entertainment (TME), the biggest player on the local streaming market (and a subsidiary of Chinese tech giant Tencent, the company behind QQ and WeChat) is already turning in a profit — which is something that Spotify achieved only on its 10th year on the market. However, how do you monetize music consumption in the country where music is thought to be free of charge? Well, Tencent takes a roundabout way to the wallets of its users....
