Douban Keeps Trying to Do Something for Music, but It Seems Further Than Ever From Doing It Well
The advantage Douban built up in users is fading, and its music company does not have much time left.
The advantage Douban built up in users is fading, and its music company does not have much time left.
At the end of last year, Douban gained a new label, Dafu Records. It does what its name says: what a record company does. It finds the right musicians, signs them, produces their records and arranges their tours. A sister operation, Dafu Music, handles distribution, both of music made by its own label and, as an agent, of other people's work.
When an internet company takes on work that looks both offline and old-fashioned, the first impression is that it is pushing upstream in the industry chain. That is not what is happening. Outside analysts mostly see it as a way to save money.
Put simply, after its 2014 restructuring Douban kept the "entries" for its books, film and music product lines, meaning the database. Besides the familiar Douban website for PCs, there is also a Douban app. The remaining "new products" and "new businesses" were spun off into new companies.
After ten years, Douban's business model still draws doubt. Whether it goes public or keeps raising money, it needs better financial results, and until it finds a better way to make a profit, cutting costs is its best option.
Against this background, two of Douban's "new products" were spun off: Douban Read and Beijing Pianbei.
The Douban Read team came straight over from the Douban Books team. With the Douban Books entries taken away, they began working on e-books and short-form reading.
Beijing Pianbei took over the Douban Music side. On top of the musicians' platform, it added Dafu Records for producing content and Dafu Music for managing copyright, so its industry chain looks more complete.
1.
Musicians and music lovers alike tend to feel warmly toward Douban, and much of that goodwill comes from what Douban has put into music.
Music was one of the first services Douban offered. In July 2005, four months after the main Douban site officially launched, it added music. It was also one of the first websites to offer streaming music, launching "Douban FM" in November 2009.
These services drew large numbers of musicians and music lovers to Douban and gradually formed a musicians' platform alongside its UGC (user-generated content). That made users more loyal, but it also brought new and unpredictable costs for producing and maintaining content.
Douban did other things for music too. It held the Abilu Music Awards to honor outstanding musicians. It started the Golden Fleece Program to help musicians charge for online streaming of their music. And from time to time it picked Douban musicians with few fans and little attention to play in a concert series called "Beyond the Billboard."
Look closely and most of Douban's ventures in music started from the idea of serving musicians.
Now the musicians' platform has moved to Beijing Pianbei. In user base alone, backed by Douban's users and the data it has gathered, Beijing Pianbei starts from a higher point than the average music company.
But as things stand, that is also the only advantage this music company has.
Competition in the music industry now takes place entirely among internet companies. Tencent and Alibaba are the most conspicuous players, and the fight is over copyright. The music industry, which has always scraped by, now competes on capital as well: how much money you can put up to buy expensive music rights.
By conservative estimates, Tencent will spend more than 100 million yuan on copyright in 2015, including the exclusive Greater China agency rights it won for music companies such as Warner and Sony.
Douban gave Beijing Pianbei only 5 million yuan. More than half a year later, Liu Jin told QDaily: "All I can say is that the money hasn't run out yet." Liu Jin was formerly Douban's senior director of operations; he is now general manager of Beijing Pianbei Culture Co., Ltd.
2.
Douban Music, or Beijing Pianbei as a company, knows perfectly well how much copyright matters. But that assumes you have money and are willing to spend it.
For a while Douban FM was Douban's star product and China's most popular streaming music app. In last year's reorganization, though, it became the biggest burden, a unit nobody knew where to put.
Its problem was precisely copyright fees. "No music service earns enough in a year to cover its copyright fees. They all lose money. Whether you count user fees alone or add advertising, they all lose money. It's only a question of how much," Liu Jin told QDaily. "Everyone in the industry knows this perfectly well. Some people say it and some don't."
Douban FM is a "users listen to whatever I push" product. Its core is recommendation by algorithm and human curation, not entirely the size of its song library. Yet it loses money all the same. It lost less when copyright fees were lower; now that rights prices have risen tenfold or more, its losses have grown tenfold or more as well.
So Douban FM was caught in a bind. If it bought none of the expensive catalogs from Universal, Sony or Rock Records, the station would have very little music to recommend. If Universal was too expensive, it could skip Universal and buy only Sony and Warner. Could it survive that way? They had to count every penny.
Before the reorganization, that was Liu Jin's predicament. "At that point there was a choice to make: should we keep running it like this? There are investors, shareholders and founders, so it has to follow some business logic rather than just stubbornly holding on."
Douban FM was not alone. Xiami Music held on for seven years before losing to copyright costs. Its founder, Wang Hao, chose to sell the company to Alibaba, or rather, he had no choice. "Selling the company was the only way to keep it alive," Wang Hao told us ruefully not long ago.
Douban could not "sell" the business the way Xiami did. In the end Douban FM stayed inside the wider Douban group. A colleague who had been in charge of its algorithm stayed on as product lead, while the copyright side of the business was left in Liu Jin's personal care.
Dafu Records is something of a workaround. Douban hopes that by serving musicians it can generate new copyright income.
Dafu Records has now signed 11 musicians: Yao, Huazhou, MHP, Mimi Xingdong, nara, Soviet Pop, iimmune, Wanderlust, Late Troubles, SoulSpeak and Xiao Laohu. All of them were already Douban users, and most of their earlier promotion and gig announcements reached their fans through Douban.
Under the plan, these musicians will release seven or eight albums this year, each in a run of about 1,000 copies. Four have come out so far. After each release, Dafu also organizes a road tour for the musician.
A thousand copies looks tiny, but in the neglected world of physical records it is still something a musician can show for the work. Liu Jin stresses that peers plan one or two albums a year, so Dafu Records does far more.
These records and road tours may not cost much, but either way, 5 million yuan of "ammunition" is far too little for this market. Alibaba has just brought two music industry "big shots," Song Ke and Gao Xiaosong, into its fold, and plans to merge its Xiami Music and TTPod and go all out, spending "hundreds of millions" a year.
Even Modern Sky, a relatively small player, has raised a new round in the tens of millions of yuan. It too puts out records and organizes tours for musicians, and it runs China's most successful music festival, Strawberry. For many independent musicians, that already counts as a big stage.
All this leaves Liu Jin little room to move. Asked whether Beijing Pianbei has a clear direction for the future, he said flatly: "No." As he sees it, consolidation in the music industry has not settled and the market is full of variables, so fixing a big direction too early would be pointless. For now they do not even know what to change, or how.
3.
Even leaving aside the competitors' lavish spending, and even without a big direction, every problem on Liu Jin's desk comes down to money.
On the website, there are too few engineers and product staff, so any redesign or new feature takes a long time. If a new round of money came in, they could very likely speed things up by hiring and outsourcing.
Production is the same. If he could get approval for a team of three or four people, enough to handle two or three records a year and the day-to-day liaison at each stage, output could grow.
For the wider ecosystem, there are two obvious options. One is an offline music festival under the Douban brand, or a Douban independent-music brand. Once running, it could drive both music content and the platform's community, and might bring in some revenue.
The other is a live house. Compared with expanding tours, owning and running a live house would give the ecosystem certain advantages: Dafu's signed musicians would have a stage of their own to show their work.
For an internet company, physical venues are a "heavy" business that takes time, energy and people, and involves rent, fit-out, lighting and daily operations. None of this is ground Douban knows.
Another performance-related idea is overseas exchange. "We hope more of China's best independent musicians will be accepted by overseas markets and broaden their horizons. That looks quite likely to lose money, and the returns may only come in the long run. And could we bring overseas musicians to China to do things here, whether performances or music training?" Liu Jin told QDaily.
Every one of these needs resources. If clear investment arrives, and if the investor also has hopes for streaming products like Douban FM, Douban's music product line could even be reorganized again.
In fact, Beijing Pianbei is already in talks to raise money. The investor is not Douban but an outside company. Liu Jin says that if Douban were willing to put more into Beijing Pianbei, that would be fine too, because what Beijing Pianbei wants is an investor who sees the direction the way it does.
4.
Moving from user-generated content to producing music itself has in fact come late. Many of the musicians with influence on Douban have already signed elsewhere; Song Dongye, for one, joined Modern Sky. Making records does not look like a way to free up productivity, and if the goal is copyright, producing your own is surely the slowest route.
Douban's squeeze reflects a confusion shared by many UGC companies. Early on, user-generated content lets a company grow big at relatively low cost. But once it reaches a certain size and needs more good content to keep users loyal, it tilts toward producing content itself.
At that point, a UGC company feels as if it is returning to a traditional industry. Of course, to use today's fashionable phrase, you could also call it "Internet Plus." Liu Jin defines Beijing Pianbei in much the same way: an "internet company plus record company," or, more precisely, in their view, an internet company that performs the functions of a traditional record company. In building Dafu Records, they believe their internet DNA is their biggest advantage.
The internet allows things to be customized and personalized. Where things used to be standardized, each of Dafu's deals with a musician is different. Liu Jin says a traditional record company signs you to one management contract and one recording contract for eight or ten years, binding together what the company does for you and what you do for the company. The details of the terms may vary, but the basic method is the same. Bound so tightly, musicians produce less, and worse, work.
Dafu does not want to bind musicians like that. Its approach is to supply whatever a musician lacks, tailoring specific services to each person. Dafu believes there is no real value now in making money from endorsements and gigs; what matters is building up content, in both quantity and assured quality, with an eye to the long term.
In their view, traditional record companies declined for many reasons, most of them already well aired, but one important reason is people. "Individuals inside a traditional record company may be connected to the internet, but the company as a whole is cut off from it." When the internet hit the industry, those companies did not respond; they went on packaging artists and staging shows as before.
"Dafu doesn't have that obstacle." They gave an example. When their act Mimi Xingdong was about to release a record, they built a dedicated web page where users could leave an email address and receive a high-quality preview of the album. "That's common abroad but rare in China. We just wanted to make it easier for people to get and hear the work, rather than follow the traditional record company model," Liu Jin said.
It is hard to say that any of this amounts to a moat for internet companies, and equally hard to say that traditional record companies could not play the "new" promotional game of "build a page, collect emails." Either way, Dafu has drawn on Douban's users and data experience to do something a little different.
In digital distribution, for example, they have extended the original Golden Fleece Program by partnering with Believe, a French digital distribution company, to add a global digital music distribution program. Through it, musicians can get their songs onto music services abroad and share in the revenue.
Of the more than 30,000 Douban musicians on the platform, several hundred have licensed their music to Dafu Music, covering several thousand songs. More than 2,000 have joined the Golden Fleece Program.
Building up content for the long term means, put more bluntly, copyright. Dafu now has a catalog of 10,000 songs, though most of them are fairly niche.
5.
Internet plus records is no easy job for this internet company. Although the team includes people from independent music, when they set up the new label they knew little about the upstream end of the music business.
Xu Bo, Beijing Pianbei's deputy general manager, is the guitarist of P.K.14, a fairly well-known post-punk band, yet making records still left him with blind spots: how to apply for a publication number, which pressing plants to deal with, how to talk to record stores and distribution channels, which studio to record in, where to do post-production.
Some of this they knew in outline but had never done in practice. Some they did not know at all and had to look up on the spot. Touring was the same. They knew the promoters already, since the promoters post events on Douban, but nobody had ever dealt with them offline. Digital distribution was the same too: how to get songs onto iTunes and Spotify all had to be worked out by trial and error, one step at a time.
The 5 million yuan has been in use for more than half a year, and Beijing Pianbei is now negotiating new funding. The investor in talks is not Douban, though Liu Jin says Douban may also put in more. In truth, Douban itself needs new money. It has been four years since its last funding round; otherwise it would not be cutting costs so aggressively.
But they do not have long. The platform value they rely on most is being eroded. The music market now teems with competitors whose algorithms and recommendations keep getting better, who have deep pockets and who control the copyrights.
Translated from the original QDaily article. Original publication date retained.