CREATe Working Paper 2019/01

Shen, X; Williams, R; Zheng, S; Li, Y; Liu, Y; Gerst, M

Abstract

The digitisation of music and other creative industries has followed a dramatically different trajectory in China, patterned by its distinctive historical and institutional context. In contrast to the West, where established intellectual property rights holders (e.g. record labels) retained control, despite digital disruption, China has become a laboratory for sustained, large-scale experimentation with services.
Though a liberal environment initially allowed many online music services to emerge, recently enforced requirements to pay license fees provoked rapid restructuring. Through merger and acquisition, the wealthy internet platforms (BAT: Baidu, AliBaba, Tencent) now dominate the market.
This detailed qualitative study of the strategies and interactions between industry players, the administration and international business reveals how BAT competed to sign up content and establish ways to provide low-fee or free music services that would be sustainable in the Chinese context. They were compelled to pursue discovery-driven innovation, based on ‘trial and error’ learning, launching and adapting services at scale in an extremely turbulent setting. Building on their differing core businesses they developed diverse online music businesses, integrated with services across adjacent platforms (film, TV, games) and in lateral markets (e-commerce, payment systems) to create cross-platform service infrastructures, through which they can capture multiple value propositions.

Download: Digital online music in China – a “laboratory” for business experiment