Internet & Tech

Tuning out

Google exits yet another Chinese business, this time music downloads

Tuning out

Imagine a service that provides instant, high-quality music downloads similar to Apple’s iTunes but without the $0.99 per song fee. That’s precisely the gift Google delivered to its Chinese users three years ago. But, perhaps surprisingly, the offer doesn’t seem to have been popular enough, and Google pulled the plug on its music search business last month.

“The product’s influence never quite reached as high as our expectations for it. Therefore, we have decided to transfer its resources to other products,” Google’s senior engineering director Boon-Lock Yeo wrote on his blog. That’s bad news for, the Chinese music site that Google partnered with to provide the online music service. It worked like this: when a user entered a song title or artist name on Google’s search page, the results included direct links to licenced downloads from Top100, which had signed deals with labels like EMI, Sony and Universal.

The two firms started their partnership back in 2009 in a deal orchestrated by Google’s China boss at the time, Lee Kai-fu. Under the agreement, Google was in charge of technology, promotion and ad sales, while Top100 offered a catalogue of 3.6 million copyrighted musical works. The two companies reckoned on making money by selling banner advertising as Chinese internet users searched for songs.

But three years on, the site was still bleeding cash and Google’s initial $8.9 million investment in Top100 was almost fully utilised.

Google’s withdrawal from the music search business now means that Top100 will now operate as a standalone entity. The company, which counts former NBA player Yao Ming as one of its early investors, had high hopes for its collaboration with Google. Industry observers also took heed because the service was pioneering a new business model for online music at a time when most users were downloading pirated songs over the internet. According to Forbes magazine, 70% of China’s 538 million internet users download songs – most of them illegally.

“This is the first licenced music service in China,” Gary Chen, chief executive at Top100, claimed at the time. “We are very excited that Google wanted to build a music search service that could completely change China’s music piracy landscape.”

So what went so wrong? Few could have foreseen Google’s sudden withdrawal from the China search market two years ago (see WiC69). As Google drove most of Top100’s traffic, the loss of support meant that traffic to the site dropped precipitously (Google now controls only 5% of China’s search market, compared with Baidu’s 74%). Top100 tried to form new partnerships with other websites, including social networking site Kaixin001, but traffic continued to slide. Its business model was also plagued by the wider prevalence of pirated music. “Users have no loyalty because where they download the song makes no difference to them,” says Xie Yin from Sogou, Sohu’s search division.

Top100 also found it difficult to court the larger advertisers. Industry insiders say the major advertisers have often avoided music streaming sites because they don’t want to be associated with potentially pirated music, says Southern Weekend.

With its music search business now in question, Top100 plans on shifting focus to areas like China’s mobile internet space. The change of direction also points to the difficulties of making money in an industry still so shaped by illegal downloading. But Chen insists the collaboration with Google did have an impact in helping to stop some online music piracy in China by providing an alternative business model. Last year, Baidu also began paying record companies to offer their music online, after years of criticism for hosting links to pirated songs, and the China Daily reported this week that both Baidu and Tencent’s QQ service are planning to begin charging users for music downloads early next year.

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