Alibaba Group introduced Tuesday that it’ll shut down its streaming platform Xiami Music on Feb. 5, because it struggles to maintain up with opponents Tencent Music and NetEase in China’s aggressive digital music sector.
Xiami Music will stop operations attributable to “enterprise development-related changes,” pivoting to change into extra of a music business service supplier, the corporate stated in an official assertion posted to social media, thanking its followers. The message concluded: “After 12 years of being collectively, it’s very exhausting to say goodbye.” The platform’s Chinese language title roughly interprets to “little shrimp.”
The announcement comes two weeks after Chinese language regulators introduced a proper anti-trust probe of Alibaba, and at a time when the conglomerate’s co-founder Jack Ma is rumored to be lacking.
Xiami was as soon as one in every of China’s hottest and taste-making music streamers, however it has fallen to the wayside because it was acquired by Alibaba in 2013. It now holding a market share of solely about 1.8%, with round 11.9 million common month-to-month lively customers between Could 2019 and April 2020, based on native reviews.
Its closure highlights the extent to which Alibaba miscalculated its cost into the music area by failing to leap on the bandwagon of shopping for up music IP early, when it nonetheless had a preventing likelihood towards its tech big opponents.
“We will’t ignore that we missed some key alternatives in our improvement course of,” Xiaomi employees wrote in a separate letter of farewell. “The failure to satisfy the varied wants of our customers when it got here to acquiring music content material copyrights is our greatest remorse.”
It’s price trying again at Xiami’s historical past through the years to get an image of the place the key gamers in China’s music streaming area stand as we speak and the way they received there.
A “Planet” Gone Awry
Xiami Music started in 2006 in Hangzhou as a web site referred to as EMUMO, or EARN MUSIC & MONEY. Founder Wang Hao, a former Alibaba methods analyst, dreamed of making a web-based platform that might cost charges and assist Chinese language musicians make a dwelling from their artwork at a time when it was troublesome for them to monetize their work. In 2007, the location spun off into Xiami, a P2P sharing platform.
The app had a fame for being extra music-focused than its rivals, and attracted extra discerning music listeners eager to find new sounds via its indie alternatives. “Inclusivity and its participatory nature have been its magic system to draw followers,” the Beijing Information reminisced in a report, remembering how customers cherished to share track lyrics and commentary.
Xiami’s suggestion algorithm was significantly well-respected, and centered extra on serving to customers develop their style by recommending lesser identified works as an alternative of pushing what was already well-liked in the direction of additional virality. Whereas extra social networking-focused apps like NetEase Cloud Music have been inclined to advocate tracks primarily based on what customers’ buddies preferred, Xiami promoted extra area of interest teams and indie acts, giving artists uncommon publicity. Whereas different apps ranked songs based on streaming recognition, Xiami insisted songs be displayed inside albums within the order they have been supposed.
To keep away from the destiny of P2P pioneer Napster, Xiami tried to go legit and purchase the mandatory copyrights to the content material it was internet hosting. Wang informed the China Enterprise Community that whereas negotiations initially went easily with smaller and mid-sized Chinese language labels, it turned exhausting to bear the excessive charges requested by international report firms. By 2012, he felt it more and more unlikely for an impartial music platform like Xiami to outlive with out large capital behind it. Nonetheless, by 2013, the platform was one in every of China’s hottest, counting 20 million registered customers streaming some two million songs on the platform a month.
Alibaba acquired Xiami that 12 months. But “this new ‘marriage’ wasn’t regarded upon favorably by the business on the time — customers had not but cultivated the behavior of paying for content material, and copyright-related rules have been imperfect, so it was troublesome for on-line music enterprise to make a revenue,” defined the China Enterprise Community outlet.
In 2015, Alibaba merged Xiami with one other acquisition, the cell music participant TTPOD, to kind AliMusic, bringing on execs Gao Xiaosong and Tune Ke as its chairman and CEO, respectively, in a high-profile launch. The transfer made extra sense by the following 12 months, when Alibaba based what’s now its sprawling leisure division, Alibaba Digital Media & Leisure Group, making AliMusic appear a bit much less alone.
Alibaba made the strategic miscalculation of going all-in on TTPOD, rebranding it as “Alibaba Planet.” It was supposed to be a Taobao-like music ecosystem the place listeners may stream songs, purchase merchandize and observe livestreams and stars, and business practitioners may entry assets and companies. As a substitute, it tanked inside a 12 months.
Left Behind within the IP Wars
China’s tightening IP safety coverage was a significant wrench within the plan. In July 2015, the Nationwide Copyright Administration issued a directive asking platforms to cease streaming and take down unauthorized music, its strictest transfer but focusing on the up-and-coming streaming area.
Within the ensuing battle to nab copyrights, rival Tencent, already China’s largest participant on the time, would emerge victorious. In 2015, its QQ Music platform held a track library of 15 million songs, whereas the NetEase, Xiami and Kugou platforms had solely 5 million, 4 million and three million, respectively, based on information from the Chinese language consultancy Yiren.
By 2016, Tencent had acquired China Music Company, bringing QQ Music, Kugou, Kuwo and different platforms collectively underneath one roof to kind Tencent Music Leisure, which blossomed sufficiently to checklist on the New York Inventory Change inside two years.
Again in 2016, Tencent Music held rights to some 90% of its content material, whereas AliMusic solely held 20%, based on the Beijing Information. The previous started placing main offers with western labels like Common Music, additional strengthening its market place. NetEase, in the meantime, additionally noticed its star ascending, with paid membership numbers rising greater than 9 occasions in 2016 year-on-year.
All through this era, Xiami seems to have continued to battle for content material rights to bolster its library of what’s now some 30 million songs. In 2014, it spent $4.6 million (RMB30 million) to amass the rights to the third season of well-liked actuality present “The Voice of China.” As not too long ago as this previous summer season, it struck up a brand new strategic partnerships with a significant Chinese language indie music rights group, the Beijing Information stated.
However beginning in mid-2019, issues began trying down. In an organizational reshuffle that June, Alibaba transferred Xiami out of its music and leisure division and into its “revolutionary enterprise group” sector. Simply three months later, NetEase Cloud Music introduced that it had raised $700 million from traders that included Alibaba.
Analysts seen the funding in a competitor as a sign that Alibaba was planning to surrender on Xiami and change over to NetEase Cloud. “On the time, there was a view that Xiami Music, which had been shedding cash for 12 months, had already been sidelined or was about to be deserted,” defined Finance World, Sohu’s finance information outlet. (Nonetheless, NetEase presently nonetheless maintains sole management over NetEase Cloud Music.)
Rumors of Xiami’s closure started to swirl final November, though each Xiami and Alibaba declined to remark on the time. The platform stays mired in 1000’s of authorized fits, largely over copyright points and disputes over the fitting to distribute content material on-line, based on the corporate database Tianyancha.
As of Tuesday, Xiami has ceased most core companies, together with halting album purchases, new account registrations, and top-ups on current ones.
By Feb. 5, it stated, it is going to be faraway from varied app shops and solely retain the power to course of person account information — refunding members and permitting them to entry the server to export playlists, for instance — and cope with artist payouts. By March 5, servers will probably be shut and customers will not be capable to log in once more.
Of their letter, Xiami employees wrote: “Going ahead, we imagine in and stay up for the emergence of even higher types of music content material companies.”