China's booming music scene a risk to labels

LOS ANGELES • Don Diablo does not want record labels messing up his business in China.

The world's No. 7 DJ considers the market one of his three biggest, alongside the United States and Europe. He tours there six or seven times a year and scored his first major Chinese endorsement deal with Budweiser last year.

In the past, a musician would welcome the support of a record label as he took on such a big opportunity. But China's gold rush of a music scene is not following the usual rules. 

Diablo is one of a growing number of artists striking direct deals with Chinese streaming services, upending decades of record-industry orthodoxy.

Musicians are supposed to sign with a record label because the company has offices and connections all over the world. But acts like Diablo have decided they are better off on their own in China.

"The folks at NetEase have done a fantastic job super-serving the dance market," Diablo's manager Andrew Goldstone said in an interview on one of China's two largest audio-streaming companies. That includes marketing and promotions, he said.

The DJ also works with  Tencent Music Entertainment Group, which owns the other top streaming services in China.

Not everyone is happy about this new world order.

Western record labels are in an awkward position because Tencent Music and NetEase are supposed to be their partners. Instead, the companies are competing with them for artists, a move that could jeopardise their share of one of the world's fastest-growing music markets.

Streaming has transformed a haven for song piracy into one of the 10 biggest markets. Sales in China nearly tripled in three years, climbing to US$292 million (S$390 million) in 2017 from US$105.2 million in 2014.

Record labels have rushed to cash in, granting Tencent exclusive rights to represent their music in the country and pursuing deals with local acts.

Sony Music created an electronic-dance music label with DJ Alan Walker, while Warner Music Group acquired Gold Typhoon Group's catalogue of recordings from Taiwan, mainland China and Hong Kong. Vivendi's Universal Music has touted signings with pianist Lang Lang and Chinese-Canadian pop star Kris Wu.

"This market could be a global phenomenon," said Mr Alex Taggart, who runs the international division of Outdustry, a music-industry services company that specialises in China. "It could be bigger than Korea, bigger than the whole K-pop phenomenon."

That is if the industry plays its cards right. But the market in China bears little resemblance to the US, Europe and Japan or even South Korea.

Many established pop stars already run their own businesses and the major Western labels wield less influence. Local Chinese music accounts for about 80 per cent of listening on Tencent's three services, QQ Music, KuGou and Kuwo.

Though international music grabs a larger share of listening on NetEase, which appeals to a younger, more urban audience, Chinese acts still claim the biggest share.

In the absence of major record labels, the services have proven they have the power to make or break a song by promoting it within their apps.

Tencent Music and NetEase have offered acts anywhere from a few thousand dollars to millions of dollars if the musicians work directly with them instead of through a record label.

The money on offer has shocked label executives, who say they do not have the same resources. But labels say they can offer artists better services and more attention, especially for those looking to appeal to audiences around the world - and not just China.

Direct deals between streaming services and artists in China set a dangerous precedent for labels elsewhere. Spotify and Apple Music, the two biggest services everywhere else, have been dabbling in direct deals with artists, much to the labels' chagrin.

Diablo operates his own record label and hired Dutch dance-music consultant Sarah Hildering to run it. The business used to be aligned with Spinnin' Records, owned by Warner Music.

"We can do a better job ourselves," said Mr Goldstone, his manager.

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A version of this article appeared in the print edition of The Straits Times on March 11, 2019, with the headline 'China's booming music scene a risk to labels'. Print Edition | Subscribe