Alibaba Group introduced Tuesday that it’s going to shut down its streaming platform Xiami Music on Feb. 5, because it struggles to maintain up with rivals Tencent Music and NetEase in China’s aggressive digital music sector.
Xiami Music will stop operations resulting from “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 all China’s hottest and taste-making music streamers, nevertheless 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 Might 2019 and April 2020, in line with native studies.
Its closure highlights the extent to which Alibaba miscalculated its cost into the music house by failing to leap on the bandwagon of shopping for up music IP early, when it nonetheless had a preventing probability in opposition to its tech big rivals.
“We are able to’t ignore that we missed some key alternatives in our growth course of,” Xiaomi employees wrote in a separate letter of farewell. “The failure to fulfill the various wants of our customers when it got here to acquiring music content material copyrights is our largest remorse.”
It’s value trying again at Xiami’s historical past through the years to get an image of the place the foremost gamers in China’s music streaming house stand immediately and the way they received there.
A “Planet” Gone Awry
Xiami Music started in 2006 in Hangzhou as an internet site known as EMUMO, or EARN MUSIC & MONEY. Founder Wang Hao, a former Alibaba techniques analyst, dreamed of making a web based platform that will 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 positioning spun off into Xiami, a P2P sharing platform.
The app had a popularity for being extra music-focused than its rivals, and attracted extra discerning music listeners eager to find new sounds by its indie picks. “Inclusivity and its participatory nature had been its magic components to draw followers,” the Beijing Information reminisced in a report, remembering how customers liked to share track lyrics and commentary.
Xiami’s advice algorithm was significantly well-respected, and targeted extra on serving to customers develop their style by recommending lesser recognized works as an alternative of pushing what was already common in the direction of additional virality. Whereas extra social networking-focused apps like NetEase Cloud Music had been inclined to suggest tracks based mostly on what customers’ pals appreciated, Xiami promoted extra area of interest teams and indie acts, giving artists uncommon publicity. Whereas different apps ranked songs in line with streaming reputation, Xiami insisted songs be displayed inside albums within the order they had been meant.
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 instructed the China Enterprise Community that whereas negotiations initially went easily with smaller and mid-sized Chinese language labels, it grew to become exhausting to bear the excessive charges requested by international file firms. By 2012, he felt it more and more unlikely for an unbiased music platform like Xiami to outlive with out huge capital behind it. Nonetheless, by 2013, the platform was one in all 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 appeared upon favorably by the business on the time — customers had not but cultivated the behavior of paying for content material, and copyright-related laws had 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 cellular 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 meant to be a Taobao-like music ecosystem the place listeners might stream songs, purchase merchandize and observe livestreams and stars, and business practitioners might entry assets and providers. As an alternative, it tanked inside a 12 months.
Left Behind within the IP Wars
China’s tightening IP safety coverage was a serious 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 concentrating on the up-and-coming streaming house.
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, in line with knowledge 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 Entertainment, which blossomed sufficiently to record 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%, in line with the Beijing Information. The previous started putting 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 common actuality present “The Voice of China.” As not too long ago as this previous summer time, it struck up a brand new strategic partnerships with a serious 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 “modern enterprise group” sector. Simply three months later, NetEase Cloud Music introduced that it had raised $700 million from traders that included Alibaba.
Analysts considered 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 at present 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, in line with the corporate database Tianyancha.
As of Tuesday, Xiami has ceased most core providers, 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 numerous app shops and solely retain the flexibility to course of person account knowledge — refunding members and permitting them to entry the server to export playlists, for instance — and cope with artist payouts. By March 5, servers will likely be shut and customers will now not have the ability to log in once more.
Of their letter, Xiami employees wrote: “Going ahead, we consider in and stay up for the emergence of even higher types of music content material providers.”