Asia Still Faces Challenges in Digital Music Monetization
Monetizing music in both digital and physical formats in Asia has never been easy. Taiwanese mobile device manufacturer HTC agrees, which is why the company has not yet offered music services even with its own smartphone business and Dr. Dre headphones in the market.
HTC’s Head of Global Content Division Phil Chen explained few things in an interview at the Digital Matters 2012 conference, particularly focusing on why the company has not music services, even if they are heavily marketing the multimedia capabilities of their Beats by Dr. Dre Headphones.
Beats has dominated the mobile headphone market with a 53% share in 2012. The brand was founded by hip-hop artist Dr. Dre, with HTC as the majority shareholder, followed by Dr. Dre himself, Jimmy Iovine and Universal Music Group.
HTC has conducted studies that divided music junkies into two types of users. First includes people who have more time than money, mostly youngsters. This demographic would rather get pirated music rather than buy from legitimate sources. Second group includes those who have more money than time, and who have been music lovers in school (from high school through college).
Some of us might still remember that music piracy in the world’s largest continent has been a global concern since the 1990’s. At that time, pirated compact discs from Southeast Asia have flooded these markets, and have even been exported to South America at a total of 10 billion CDs per year.
China in itself is a concern. An April 2012 report from The United States Trade Representative (USTR) indicates that only 1% of music downloads in the country is legal. It’s quite hard to imagine the world most populous country with only a very small ratio of legal music downloads.
Other Asian countries are likewise challenging, in terms of marketing legitimate music in both CD and digital formats, such as South Korea, Indonesia, Vietnam, Cambodia, Pakistan and Thailand. The situation is getting a little better for the movie industry, though. Three major dotcommers there have agreed to buy TV and music rights for distribution.
To give you an illustration on how big the global (and digital) music market is: the market has experienced an 8% growth from last year, which amounts to US$ 5.2 billion. Digital channels account for 32% of recording company revenues. Now, several markets see a majority of their revenues deriving from digital content, with 52% in the U.S., 53% in South Korea and 71% in China — which are the top countries in terms of revenue.
Even though music is ranked second after games in deriving industry revenue from the digital space, it has successfully hit 3.6 billion downloads globally as of end 2011, which is an increase of 17% from 2010, according to IPFI.
Observers have noted that HTC may be postponing its Video-On-Demand (VoD) services equipped planned for release with its Watch app due to these factors. However, Chen says the company is facing logistics and implementation delays. To date, the Watch app is only showing movie trailers.
Will people watch full-length movies on their mobile devices? Obviously, screen size is an issue that may limit enjoyment of a full-length movie. Tablet computers may be more appropriate for this application.