The COVID-19 pandemic prevented the 11th Vienna Music Business Research Days from taking place this year at the mdw with its usual international audience in attendance. But despite the unfavourable situation, the entire conference went forward in the virtual realm—enabling the lecturers from South Korea, India, China, Romania, Poland, and Ukraine to give their talks and engage in panel discussions online.
In her opening address, mdw Rector Ulrike Sych spoke about the current circumstances and went on to extend her warmest thanks to the conference participants for their valuable contributions and greeted the online audience, situated throughout all time zones from Australia to America.
The first contribution was offered by Bernie Cho, CEO of DFSB Kollective, a Seoul-based artist and label services agency focussed on the worldwide marketing of over 600 K-Pop acts. In his introduction, Cho pointed out how the Republic of Korea, with a population roughly equal to that of Spain, is the world’s sixth-largest phonographic market but also its sixth-largest music streaming market and physical market (CDs, vinyl, music cassettes, etc.). This strong market position can be attributed to 6 factors:
- Technology: South Korea not only has the world’s highest Internet penetration rate but also boasts the world’s fastest fibreoptic communication infrastructure. Smartphone penetration is likewise exceptionally high, and Koreans are enthusiastic users of social media. What’s more, 84.8 % of Internet users in Korea subscribe to music streaming services—and at 17 million, the number of paying subscribers is significantly higher than in Japan or Germany.
- The central role of domestic music streaming services: South Korea is home to very large and influential music streaming services like market leaders Melon, Genie, and Flo, which command a combined market share of nearly 79 %. These Korean DSPs differ greatly from Western competitors such as Spotify, YouTube, and Apple Music. Not only do they distribute music in digital formats, but they’re also active in the creation of music and other entertainment content. They invest in domestic music acts, maintain close partnerships with labels, and act as artist and label services agencies in their own right. Furthermore, the Korean music streaming services behave more or less like allies or “frenemies” despite the competitive situation, being connected with each other via numerous cooperative agreements.
- Independence: In the Republic of Korea, the globally active music majors command a combined market share of just 11.8 %. The domestic labels, on the other hand, have a strong position on the market: they collectively hold a ca. 88 % market share and also dominate the Korean music charts (the GAON Top 100) with a share of 83 %, consisting mostly of K-pop hits. What’s more, only a few foreign artist and label services agencies are active in the South Korean market, which is dominated by large and for the most part market-listed K-pop agencies such as Big and SM Entertainment.
- An integrated business model: The Korean labels have developed an integrated business model, and their revenue mix reflects this fact. On average, 75 % of their proceeds comes from artist management while only 25 % comes from music sales (including music streaming).
- Investment policy: South Korean indie labels work together closely with the domestic music streaming services (DSPs), which not only provide financial support for the creation of musical content but also invest in other music enterprises. 2019 saw the Korean DSPs spend over US$ 80 million on music-related acquisitions, and each of them also invested US$ 17–22 million in the creation of musical content, which is significantly more than the international music majors’ artist and repertoire spending in South Korea.
- The K-Pop boom: The K-pop agencies dominate Korea’s booming music market. By marketing K-pop acts, they earn more than all three music majors combined. And the combined revenues of the two largest players, Big Entertainment and SM Entertainment, are higher than the phonographic industry’s total revenue in India.
In the second presentation, Philipp Grefer analysed the Chinese music market. Grefer is the founder of Beijing-based Future Think Tanks WISE (wisenotwise.com), which brings together leaders from industry, science, and technology in order to engage in exchange regarding future developments that will influence our lives.
With over 10 years under his belt as a music event organiser and music manager in the Chinese music industry, Philipp Grefer pointed out in his introductory statement how China, with over 1.3 billion inhabitants and a rapidly growing middle class that now numbers 550 million individuals, represents the world’s largest national music market. But despite the pace at which this market is growing, the omnipresent political influence of the Communist Party of China (CPC) must not be overlooked. This also goes for the Chinese music industry itself, which has grown in recent years to become the world’s seventh-largest. The average Chinese music consumer is young, well-educated, and exhibits a preference for music streaming. And while music streaming services in China are by now licensed and hence legal, the market for physical media still exhibits an extremely high piracy quotient of 99 %. China’s live music market, which was non-existent just a few years ago, is now established and rapidly growing—especially where festivals are concerned. Chinese music publishing, on the other hand, is still in its nascence.
Unlike how it is in Western music markets, the most important players in China are concerned not with distributing music but rather with comprehensive user data acquisition. The corporate entities that make up the Chinese music industry, which are media and entertainment conglomerates, use content for the sole purpose of growing their user bases in order to harvest ever more data. Tencent Holdings Ltd. is the industry’s largest and most influential player. Tencent entered the music business in 2016 by purchasing a majority stake of 61.1 % in Chinese Music Corporation (CMC), which had been founded in 2012. CMC had previously acquired the music streaming provider Kuwo Music as well as a majority interest in Kugou Music. Its acquisition by Tencent was followed by creation of the subsidiarity Tencent Music Entertainment (TME)—which, alongside Kuwo and Kugou, also united the music streaming apps QQ Music and WeSing as well as Ultimate Music under a single roof. The three music apps QQ, Kuwo, and Kugou are estimated to command over 50 % of the Chinese market. And in 2018, TME also acquired a 10 percent interest in the Swedish music streaming service Spotify via a stock swap, which increased TME’s market capitalisation to US$ 21.3 billion.
The second-largest corporate group in the Chinese music industry is owned by the technology conglomerate NetEase Inc., which founded NetEase Cloud Music in 2013 as a freemium music service and succeeded in attracting venture capital in the amount of US$ 107 million right off the bat. Two years later, Chinese E-commerce giant Alibaba Group took a US$ 700 million stake in NetEase Cloud Music, even though Alibaba was already running a large music platform in China in the form of music streaming app AliMusic, which was born of a merger between Alibaba Planet and Xiami Music.
The music companies owned by Tencent, NetEase, and Alibaba control the Chinese music market and leave Western competitors like Spotify and Apple Music little room to establish themselves, for which reason the latter hold a negligible market share. The international music majors Universal Music Group, Sony Music Entertainment, and Warner Music Group are therefore forced to license their rights catalogues to TME, NetEase Cloud Music, and AliMusic. Until recently, it was also typical for the majors to be forced to enter into exclusive license deals—as Sony and Warner did with TME. However, 2018 saw the indie label licensing agency MERLIN succeed in concluding non-exclusive licence contracts with TME, NetEase, and Alibaba—and this served as a model for Universal Music Group’s non-exclusive licence deal with NetEase Cloud Music in 2020.
A further important protagonist on the Chinese music market is the short video sharing platform Tik Tok, which belongs to the Internet group Bytedance. In 2017, Bytedance had acquired the US lip sync app Musical.ly and melded it with its home-grown Douyin Service, which resulted in Tik Tok outside of China. Tik Tok quickly became an international political issue when the governments of both India and the United States accused Tik Tok of threatening national security with its rampant collection of data. Bytedance is currently under massive pressure—above all in the USA, where the demand is that its US subsidiary be sold to a consortium comprised of the retailer Walmart and the tech company Oracle. Tik Tok hence represents a good example of how China’s music industry has now even taken on geopolitical dimensions.
In the third keynote, Achille Forler explained the Indian music market’s special features. Forler is the founder and managing director of the India-based sound design agency Music Curator and a long-time member of the advisory board of The Indian Performing Right Society. This native of France has been an Indian music industry insider ever since 1995, when he founded the country’s first truly independent music publisher—which was acquired by Universal Music Publishing in 2012.
Achille Forler began by pointing out that, for many decades, India had only its national public broadcaster. In order to supplement the limited music offerings, Indians would go to the movies—not only to watch the popular, dance-filled Bollywood flicks, but also to simply enjoy the music they heard. It would sometimes even happen that people would go to see the same movie ten times. For this reason, the Bollywood film studios are an influential factor in the Indian music industry. All the way into the 1990s, these film companies had maintained a near-exclusive lock on music distribution. The initial revolution in the indie music industry was touched off by the Bollywood stars themselves—who are not only movie actors but typically also good dancers and singers—when some of the biggest names began throwing off the yoke of the Bollywood studio system and recording albums for India’s small number of indie labels. It was music streaming that then touched off the second wave of India’s music industry revolution: within five years, CDs and other physical audio media disappeared from the market almost entirely and were replaced by music streaming services. In 2017, the Indian telecommunications group Jio entered the streaming business with JioMusic, a reasonably priced freemium offering. One year later, Jio acquired the music streaming service Saavn (in existence since 2006) and merged it with its own service to create JioSaavn. Another important domestic streaming service is Gaana, which was founded by Times Internet in 2010 and offers both Indian and international music content. And in 2018, the Chinese group Tencent invested US$ 115 million in Gaana in order to gain access to the growing music market in India. Despite the growing influence of JioSaavn and Gaana, it is internationally active music streaming providers like Apple Music, Amazon Music, and Spotify that currently dominate the Indian music market. However, the Bollywood film studios are still a significant power in India’s music industry, providing the lion’s share of the musical content—film music—to the streaming portals. For this reason, the international music majors are not a factor in India, either, since they play no role in film production.
In contrast to the phonographic market, India’s live music business is not well developed because concert promoters are unable to afford the sky-high rents for concert halls in metropolises like New Delhi and Mumbai. Even so, the world’s largest concert promoter Live Nation did take up business in India a couple years ago, and the future will reveal whether a live music market can establish itself in India over the long-term despite the COVID-19 pandemic.
In the panel discussion that followed, which was entitled “Emerging Music Markets in Asia”, the speakers discussed the reasons for the differences between the respective markets, describing them as born chiefly of the countries’ differing histories and cultures. In the discussion, this impression was rounded out by the contribution of Weining Hung, who is a co-founder of the showcase festival LUCfest in Tainan, Taiwan. Alongside pointing out the special features of the Taiwanese music market compared with mainland China, she also addressed the dynamic music markets in Thailand, Malaysia, and Indonesia, which will likewise be playing more important roles in the future. In contrast to China and India, these markets are dominated by the international majors—but the influence of the Chinese music concerns is rapidly growing.
The afternoon was devoted to Eastern Europe. Dartsya Tarkovska (Soundbuzz and Music Export Ukraine, Kiev), Ania Kasperek (Chimes Agency, Poland), and Carina Sava (Agentia de Vise, Bucharest, Romania) made presentations on the music markets of their respective home countries.
First, Dartsya Tarkovska shed light on the special features of the Ukrainian music market. Following the collapse of the Soviet Union, the 1990s witnessed the establishment of numerous indie labels such as Comp Music, Moon Records, and Lavina in the newly independent Republic of Ukraine. Later on, the label Best Music and (most importantly) label services agencies such as Mamamusic and Mozgi Entertainment joined the fray. And finally, Ukraine has also seen the emergence of over 60 DIY labels specialised in niche genres.
The Ukrainian music streaming market, on the other hand, is dominated by international music streaming services like Apple Music, Spotify, and Deezer—and with monthly music subscriptions being comparatively cheap at 5–6 Euros, subscription offerings have seen quick success. The most important impulse for the Ukrainian streaming market was the 2018 market arrival of Spotify, whose freemium model has since then been used heavily by music consumers. Ukrainian musicians are among those who profit from Spotify royalties, in particular because Spotify has succeeded in reducing music piracy. A current study on music consumption in Ukraine shows that 7 % of music consumers use only unlicensed online offerings, while 13 % use only legal services. 80 % of respondents indicated that they use both legal and unlicensed services.
In the next presentation, Ania Kasperek analysed the Polish music market, which weighed in at US$ 115 million in 2019. In Poland, music streaming makes up only 27.7 % of total phonographic revenues, a substantial share of which still come from the sale of physical products (above all CDs), which command a market share of 44.6 %. In Poland, it is above all the well-known streaming services like Spotify, Tidal, Apple Music, and YouTube that are active. These cooperate very closely with the numerous indie labels (Agora, Kayax, Jazzboy Records, MTJ Agencja Artystyczna, MyMusic, Step Records, Asfalt Records, and Mystic Production) and collectively claim a large share of the market. It’s therefore little surprise that Polish indie labels dominate the national charts, with above all local hip hop/rap being very popular.
Carina Sava rounded out the impression of Eastern European music markets with her presentation on Romania. The Romanian music market is defined most prominently by the big music festivals in Bucharest, Cluj, Varna, and other major cities—festivals whose line-ups include international stars. For Romanian musicians, playing concerts and festivals is therefore the most important source of income while the phonographic industry plays only a very minor role. It’s telling that of the three majors, only Universal Music Group has operations in Romania—a fact which has allowed numerous market niches for domestic indie labels to emerge. Even so, the international repertoire dominates Romania’s music charts.
The music streaming segment is also comparatively underdeveloped in Romania, for which reason YouTube is the most important platform for digital music consumption with a market share of over 50 %. However, Spotify’s arrival in 2018 brought new life to Romania’s market, as well, touching off a streaming boom similar to Ukraine’s.
The concluding panel discussion featured a review of the special features and commonalities of the music markets in Poland, Romania, and Ukraine along with an evaluation of Eastern European music markets’ future growth potential.
As in years past, the 11th Vienna Music Business Research Days were complemented by the Conference Track Day (22 September), in which music business researchers from Australia, Germany, the Netherlands, Austria, and Sweden presented current study findings on topics such as the role of fans in artist promotion, the digital transformation of value creation in the music business, and the influence of the COVID-19 pandemic on the phonographic and live music markets in Germany.
The already-traditional conclusion of this conference was the announcement of the Best Paper Award winner from the Young Scholars Workshop, which was held online on 21 September and included six master’s degree and PhD students along with their mentors. For her paper Music in the Mediatised Everyday Life of Young People, Laura Weinert of the Hanover University of Music, Drama and Media won the first prize, which includes the opportunity to publish her contribution in the International Journal of Music Business Research (IJMBR).
Even though difficult circumstances forced 2020’s Vienna Music Business Days to be held exclusively in the virtual realm, the lectures and discussions still reached an international audience from around the world, rendering the event an unmitigated success despite all obstacles.
This text is based on a music business research blog post by the author that can be accessed at musikwirtschaftsforschung.wordpress.com