China’s big streaming shift: Paying instead of pirating


Not so long ago, China was an oasis for pirated music and videos. CDs and DVDs were easily copied and sold for cheap at roadside markets. If you had a computer and an internet connection, top selling albums and Hollywood movies were widely available for free online.


That’s changing. And as is the case with many tech trends in China, it’s changing fast.

New technologies and a long-running crackdown on pirated content mean members of the country’s growing, smartphone-wielding middle class are increasingly willing to pay to stream videos and music online.


“When you have to spend two-to-three hours digging up pirated content, users are willing to pay a [small] amount of money to get non-pirated content,” said Karen Chan, an analyst with research firm Jefferies.


Workers in China earn far less on average than their U.S. counterparts. But for the better paid inhabitants of Chinese cities, streaming content is pretty affordable.


Across major Chinese video platforms, the monthly fee is about 20 yuan ($3); streaming music is even cheaper, ranging from 8 to 15 yuan ($1-$2) per month. Compare that with a basic monthly Netflix (NFLX) subscription in the U.S. at $8, or a Spotify one at $10.


‘It became really easy to pay’


The rapid spread of digital payment platforms like Tencent’s WeChat Pay and Alibaba-affiliated Alipay has also played a role, according to Xue Yu, an analyst with research firm IDC.


The platforms created a market of young Chinese consumers comfortable with buying goods and services for a few yuan online, Xue said.


Amber Zhang, a 27-year-old office assistant in Beijing, told CNNMoney that WeChat Pay was one of the key reasons she started spending money on music and video subscriptions back in 2013.


“It became really easy to pay,” she said.


Like many other parts of China’s cloistered tech industry, domestic companies are reaping most of the profits from online content while foreign firms have faced difficulties.


The video market is dominated by Tencent Video and iQiyi, a subsidiary of internet company Baidu (BIDU). The country’s top ecommerce company, Alibaba (BABA), is also a big player with its video streaming platform Youku.


Tencent (TCEHY) also has a near stranglehold on the streaming music industry through its QQ Music, KuGou and Kuwo platforms.


“These services are good enough now, it’s very convenient, you can download an app on your phone, you can stream all the videos or audio that you want,” said Kevin Chang, a 28-year-old engineer who lives in Beijing.


China’s big tech companies dominate


The competition for paying customers like Chang is intense.


Tencent has a virtual monopoly on the streaming of mainstream western music in China. It struck a deal with Sony Music, Universal Music Group and Warner Music Group for the exclusive rights to stream their music in China. Under the deals, Tencent also gets to decide which songs rivals get to stream.


The hope is that by holding the keys to such a vast catalog, Tencent will get more users to sign up for subscriptions on its various music platforms. At the moment, it has around 15 million subscribers. It sounds like a big number, but it’s only about 2% of the company’s total active user base.