More Than 3 Million People Watched Tencent's TFBoys Livestream. How Good a Business Is Music Livestreaming?

Online concerts are booming. How should a company play this market? Here is what Tencent Live Music thinks.

Last August, as soon as Letv announced that it would stream Wang Feng's concert at the Bird's Nest online, the music industry erupted in argument. Fans doubted a livestream could look and sound good, promoters feared it would eat into ticket sales, and video sites worried about how an online concert could ever make money.

To their surprise, the livestream did remarkably well. It was watched live 48,000 times, and replays added another 27,000 views. According to Letv, at 30 yuan per view, the broadcast earned it more than 2 million yuan in gross profit.

"The pay model of that Wang Feng concert shook the whole industry," Yin Liang, CEO of Letv Music, said a year later at a salon on concert livestreaming, summing up what the broadcast meant. "(After that,) the big spenders, led by Tencent, piled in."

As Yin said, online concert streaming became a new line of business for many companies over the past year. In January, Youku Tudou launched concert livestreams under its U-Music brand, at a pace of one show a month. In April, Modern Sky, which runs the Strawberry Music Festival, launched the "Zhengzai Xianchang" (Live Now) app, putting music festivals on mobile phones. In July, Yema Xianchang, an app that streams live shows from China and abroad to Chinese music fans, announced a 10-million-yuan Pre-A round.

Audiences for these online concerts keep setting records. In May, Letv's livestream of Korea's 2015 Dream Concert drew 2.82 million simultaneous viewers. On August 15, Tencent Video's livestream of a TFBoys fan meeting had more than 1.21 million advance sign-ups and more than 3.17 million live viewers, the highest figures Tencent Video Live Music has ever recorded.

Soon after, Letv announced that online reservations for Li Yuchun's WhyMe concert, to be held on September 26, had passed 2 million, breaking the reservation record TFBoys had just set.

"The optimistic estimate in the market is that if payment is solved and the experience is good enough in every respect, video livestreaming could become a 100-billion-yuan market," said Li Hongjie, founder of Yema Xianchang. It was a startling answer to the question of how big the online concert market could get. For comparison, according to the China Association of Performing Arts, box-office revenue from large concerts and performance venues in China in 2014 was only 4.6 billion yuan.

Even if the market never reaches 100 billion yuan, its growth should still be considerable. The main driver is the rise of live performance as a whole. In 2007, China had at most four or five music festivals; by 2014 it may have had 200, under brands including Midi, Strawberry, West Lake, Hot Wave and Evergrande.

As live performance thrives, online streaming can carry it to a far larger audience. "In the past, first-tier cities had a natural advantage in staging concerts. As the performance market has grown, second- and third-tier cities have taken a bigger share, but supply there is thin, and third-tier cities in particular still have a very small share of the market. What online concerts do is bring concerts to everyone over the internet," said Deng Linhai, music director of Tencent Live Music.

As the market has swelled, doubts have dogged the companies running concert livestreams. Can they really make money? Can viewing fees and advertising really cover the costs of rights, broadcast equipment and bandwidth?

Then there is the question of fans. Today's hit concerts, by Li Yuchun, TFBoys, Wang Feng and others, all rely to some degree on devoted fan bases. Without the pull of these stars, can online concerts keep drawing crowds this large?

What exactly does a company have to do to win a slice of this market? We spoke with Deng Linhai, music director of Tencent Video Live Music, about how the market has changed over the past year and how Tencent thinks about music livestreaming.

Q = QDaily

D = Deng Linhai

Q: Tencent has recently bought a lot of music rights. Is concert streaming the same idea, buying the rights to a concert and streaming it online?

D: I think that view is a bit narrow. Early on it may have looked as if we just bought a license and left it sitting there, but some of the online concerts we stream now are projects we invest in jointly with offline performance companies. We put money into staging shows, and we have already begun to get fully involved. We also run performance projects together with record labels and performance companies.

Q: How do you choose which concerts to do?

D: For every project, we estimate the audience and all kinds of viewing figures. To reserve a show, people need a QQ account, and the back end gives us a great deal: users' ages, regions, gender, education, even personal tastes, what they have watched, what songs they have listened to, what news they follow. We take all of it into account. We pull this data together for every show, and we have a dedicated team to analyze it.

Q: Many viewers say the picture quality is mediocre, and the sound especially so. Why, and how will you improve it?

D: Most people watching concerts on Tencent Video are on mobile, and mobile does not demand such high picture quality, so of course we prioritize letting users see the content at all. As networks improve, if a user has a fast connection and chooses a higher-definition setting, we will push higher-quality video to them. And our livestreams are definitely already at 1080P.

As for improving the audio, we are working on 4K and trying VR, and Tencent Video has even started live broadcasts to TV. As the technology develops, we should be able to use all of it at concert livestreams this year.

Q: Will you add interactive features?

D: We already have bullet comments. We tend to think they clutter the screen, but with concert livestreams you find internet users never tire of them, and they keep inventing new ways to use them. That is the different experience the internet brings to live performance.

What we want is to discuss, from the very start of a concert project, how we can interact with online viewers during the livestream: what the touchpoints are, what they care about, and so on. All of this will go into future concert livestreams. It won't just be sending virtual flowers; you can also look forward to the concert responding to you.

Q: What advantage does Tencent have over other companies streaming concerts online?

D: We were not the first to do online concerts, so why is Live Music number one? When we set the plan, our program for the whole year was already laid out, planned like a TV series: every week, every month, even every quarter there is a star concert. That gives users something to watch continuously, and they can come back to Tencent Video regularly for online concerts.

We also believe Tencent has a bigger advantage than others in promotion. We have media platforms and video platforms, and when we livestream a concert we can mobilize all of those resources, so our promotion reaches further.

Q: How does music livestreaming make money?

D: Throughout the year, Live Music sells sponsorships to advertisers. Of everyone doing online livestreams now, we are number one in the industry in revenue and profit, and the project is growing in a healthy way.

Q: On interaction between online and offline: on other platforms, such as live-show streaming, fans' virtual gifts are an important source of extra revenue. How do you see that kind of revenue?

D: The fact that fans do this shows how keen they are. They are willing to do things for their idols. But a concert is different from the live shows you mention. I think users here are mostly consuming content. For some kinds of performance, users interact intensely and the virtual gifts can add up to astonishing amounts; for others, gifts don't matter much. It is an important source of revenue, of course.

Q: As in the video industry, content prices don't seem to have been bid up very high yet. How do you see competition for content rights in future?

D: From the start, we had a strategy for working with content owners. When Tencent negotiates these partnerships, it is not just about buying rights. Anyone doing this will calculate their costs against their revenue. Right now our ratio of costs to revenue is perfectly normal. As for how others are doing, I'd rather not say.

Fundamentally, we now also work with content owners on design from the earliest stage. It is not just moving a show onto an online platform; the Live Music project as a whole has many potential sources of profit offline and in the early stages. We hope to become a planner and organizer of performance projects.

Q: Tencent Video is currently free. If it relies only on advertising and sponsorship, people may wonder whether that is sustainable.

D: Why haven't we charged all along? Various companies have tried charging, and I know something of the industry figures, of how large the gap is between paying and free audiences. We will have paid products out very soon.

Q: So will all of Tencent's online concert livestreams be paid from now on?

D: Not necessarily. We will set our product strategy according to each type of show and the audience it suits. Some will certainly be free and some paid. There will be fully paid concert livestreams. We plan to livestream a BigBang concert in October, and for that one you will see a fully paid product.

Q: What is this new model of online concerts changing in the traditional music industry?

D: First, through online concerts, more internet users tell us which artists are drawing the most attention in the market right now. That is the clearest feedback we give record labels once we have run the data: they learn how their artists are really doing. We also learn from online viewers' messages what content we should make to better meet their expectations. So when we do a concert, we don't just buy the concert content. We also hope to work closely with the industry, so that together we can develop online performance, promote artists, and stage shows for them.

Q: Could competition lead to several platforms fighting to sign the same artists?

D: What you describe is already starting to happen. I can tell you that, for instance, we invest this much up front, and others will come up with bigger offers, but in the end they spend more money without necessarily getting the results they expected. We invest this much and get what we get. I can guarantee that, even at the same level of investment, with our whole video platform behind it, our promotion has far more effect than anyone else's.

Q: You talk of signing artists. Do you have any specific plans?

D: Next year we will do a series, and may build in something like crowdfunding. We want the online concert platform to give users a choice from the moment reservations open, letting them decide which shows they get to see. This can be closely tied to musicians, and can push more musicians to online users.

We are not trying to make someone a hit through one program; we are building a platform, an ecosystem. Live Music is not just putting concerts out there; whatever can be added before and after a livestream is open for discussion. I hope to give more musicians a stage to show what they can do. As for how the choices are made, musicians can take part and users can take part, and the platform brings musicians and users closer together. That is our core strategy for promoting musicians.

Q: In the traditional record business, live performance is the most profitable part. Now that it is moving online, how do online and offline relate?

D: Online will certainly boost offline. We mentioned user profiles earlier. If a true die-hard fan can watch your show online, he will definitely pay for that singer offline. That is certain; these are the most loyal fans. Beyond them, the biggest strength of online is that I can spread what is new in a concert to many more fans, amplifying the performance as widely as possible. That is the first part.

Many performance companies also badly want our data, above all user profiles: fans' ages and characteristic groups. That is what they want most. And it is not only the data that helps them. When a singer went on tour, the old way to promote it was just to do some publicity themselves. With online performance, I can quickly get news of the singer's whole tour to internet users across the country. For performance companies and talent agencies, that is the biggest promotional effect they see. There is promotion, and there is data behind it, so everyone can work together and play this game on a bigger scale.

Q: What does Tencent Video actually get out of these concert livestreams? You say there are many plans for next year. What is the overall strategy for the near term?

D: The plan is going ahead as originally set. In the second half of this year, the first job is to build the paid product: how payment works, plus new product upgrades. For example, when you watch a livestream now, you see a single camera angle. How do we present multiple camera angles in the product on each device, and how do we apply some new technologies? That is what Live Music will do in the second half of this year. Next year's product designs for each type of show are already in the works.

Last year, when we livestreamed our first show, a Zhang Huimei (A-Mei) concert, we saw that this many internet users would watch music on video. That is something scarce for us, and scarce for internet users too, which is why we stream concerts online. For Tencent Video, beyond its traditional films, TV dramas and variety shows, music can also become an important part of its content lineup.