Gary Chen, a serial entrepreneur in China’s music industry, never believed digital music content could be a significant revenue source for musicians.
But fans who’d buy anything related to stars they like can be a huge revenue stream. So Chen wants to help musicians worldwide bytaking advantage of the mobile Internet and smart hardware trend to engage the willing payers.
China, piracy, music, & money
Although Chen isn’t a believer in digital content sales, he once had confidence in online advertising.
He is well known for managing, after two years of effort, to convince the major global labels to offer free digital music downloads in mainland China through Google China’s music search service, which was launched in March 2009.
The search results returned by the Google music search would direct users to Top100.cn, an online music site run by Chen’s team and funded by Google China, to download authorized digital tracks. Top100.cn, in return, shared advertising revenues generated from Google AdSense with labels or other music rights holders.
Top100.cn, launched in 2006, was one of the first in mainland China to offer legitimate digital music — and so far, the only one with such a business model. The deal with Google China was remarkable back then, when digital music piracy was the norm here. Google China’s direct competitor, Baidu, now the dominant search engine in China, would continue to deliver pirated digital songs for several more years.
Google China retreated from mainland China in 2010 and pulled the plug on music search in September 2012. Top100.cn suffered drastic decline in both traffic and advertising revenue. The site was closed in 2013.
Many Chinese online music services have been, since they started paying digital music rights not very long ago, struggling to survive with advertising as a major revenue source. We saw a wave of consolidation in the past year or so. But Chen doesn’t think his model has proved a failure given Google’s moves.
Post-Google: New apps, new hardware
Many online services have tried to help musicians reach users directly so as to get rid of all the distribution channels and pocket all the money that used to go to those channels. Xiami.com, a Chinese online streaming and download service, built a peer-to-peer marketplace for digital music transactions. Xiami struggled to pay music rights before it was acquired by Alibaba Group about one year ago.
Chen thinks the problem with service like Xiami is users wouldn’t pay for music content at all in China — a fact that holds true in many other markets.
So the whole idea of the StarChat app is to help musicians reach fans directly and make money from somewhere else. The direct communication with stars, Chen reckons, must encourage fans to purchase all kinds of goods, physical or virtual, created by stars or just sold by them.
The idea actually, to some extent, has been proven to work. Purchases of virtual gifts to singers on online singing services contributed about half of the total revenues in China’s online music market in 2013.
It works like the WeChat Subscription Account system. Fans are able to subscribe to a musician’s account and receive messages of various formats from the musician.
StarChat will support Alipay in mainland China and Paypal outside China for mobile payments. StarChat also includes a feature that shows metrics of fans and income. The the iOS version is waiting for Apple’s approval and the Android one is about to launch.
The goal of VOW, according to Gary, is to provide higher sound quality than Beats headphone and be smart.
Today, it’s really not difficult to find the best manufacturers in such a manufacturing country in order to beat Beats in sound quality (Beats headphones are made in China) or build a hardware product loaded with Android. VOW, nevertheless, is the first of its kind.
VOW’s Android-powered brain is a separate part that can be attached to one side of the headphone. There are four pre-installed apps: VOW settings, a music streaming app (Douban FM for mainland China and Pandora for markets outside China), WeChat, and StarChat. With these, you can listen to streaming music, chat with WeChat friends, or interact with your fans or musicians. When WiFi connection isn’t available, you’ll also be able to use it by putting in a SIM card or loading songs an 8GB drive can hold.
Like on most Android-powered small screen devices, apps on VOW are not customized for a smaller screen but are half-size versions of them for average smartphones.
VOW lands on Kickstarter today and will begin taking pre-orders in China on April 28. Already, Chen has sold some 200 pieces to Amazon China. When it comes to prices, it will be a little bit more expensive than Beats outside China but less expensive in China.
VOWs are now available in ivory and light gold. More custom designs will be made for certain celebrities later on. Gary plans to get those celebrities sell the headphones on StarChat, promising to share a percentage of sales revenues with them. Their adopting StarChat will encourage fans to sign up for the app, too.
Chen said he’d develop more music hardware products if this one performs well. The combination of StarChat and VOW gadgets seems like an ideal model — and near to where the iPod started.
Last week, Li Yuchun, one of the most famous pop singers in China, debuted her latest single on Weibo, the most popular microblogging platform here, charging 2 yuan ($0.30) for a download. It’s similar to StarChat’s model in that fans can follow her and are able to purchase goods directly provided by her.
Chen doesn’t think it will last because, he says, the user experience isn’t good. For one thing, users have to visit a third-party website, the artist’s business partner, to download and make payments.
This story originally appeared on TechNode. Copyright 2014