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TMCNet:  The Behind-the-Scenes Story of Japanese Avex Group's Tie-Up with Chinese Platform NetEase Cloud Music

[March 02, 2017]

The Behind-the-Scenes Story of Japanese Avex Group's Tie-Up with Chinese Platform NetEase Cloud Music

HANGZHOU, China, March 3, 2017 /PRNewswire/ -- China has become gripped by Japanese music fever. On February 27th, leading Chinese online music platform NetEase Cloud Music and Japan's biggest entertainment firm, Avex Group Holdings Inc., jointly announced the signing of an agreement forming a strategic partnership granting the Chinese platform an exclusive license in mainland China to the copyright of Avex's entire inventory of Japanese music. The entire music collection from several of Japan's top acts, among them, Ayumi Hamasaki, Every Little Thing, Koda Kumi, Ai Otsuka, AAA and the Wagakki Band can be found in the massive portfolio. Every one of the songs can already be streamed on the NetEase Cloud Music platform.

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Chinese music industry insiders said that after years of talks between the two countries' many firms involved in the music trade going nowhere, this "breakthrough" agreement between NetEase and Avex could start a new era. Fans of Japanese music in China are celebrating the signing while also calling for more Japanese digital music to be added to Chinese platforms.

Interest in Japanese music grows in mainland China.

The Chinese market has developed an active interest in and is witnessing a rapidly increasing demand for Japanese music. According to usage data from the music platform, there has been an explosive increase in the number of times that a Japanese song has been listened to, especially songs associated with Japanese animation, comics and games (ACG), with the number of music streams from Japan increasing 80% over the previous years, while ACG-related music saw its streams soar a whopping 280%. Among these users, it is mainly the youth segment that dominates, especially fans born after 1990, signaling a major shift in the making in terms of China's music culture.

Before NetEase Cloud Music and Avex announced their partnership, none of the music platforms in China had anything amounting to a sizeable Japanese album collection with proper copyright protections, limiting access for Chinese audiophiles who were developing an interest in the music. The growing interest created a need for a legal platform with a healthy inventory through which the music culd be enjoyed.

The findings created a win-win opportunity for NetEase Cloud Music and Avex Group

The rapidly growing market for Japanese music and the lack of a legal framework for consumption provided a perfect opportunity from which the partnership between NetEase and Avex was born. Released in April 2013, NetEase Cloud Music, the on-demand music-streaming service of Chinese internet technology giant NetEase, Inc., has enjoyed rapid growth coupled with a good reputation in the mainland Chinese market, while becoming one of the leading channels through which Chinese music lovers discover and enjoy new music. By July, 2016, the platform boasted a fan base of 200 million users. Backed by a sophisticated and highly customizable recommendation system, an inventory with tens of millions of songs, the full music catalogs from more than a thousand of China's leading acts, coupled with massive song lists in addition to commentary from Chinese music critics with the largest followings, NetEase Cloud Music has become one of the top music social platforms in China.  

Avex Group, the holding company for a group of entertainment-related subsidiaries based in Japan, is the largest of its kind in the country as well as one of the biggest independent record companies worldwide. Avex has dominated the market in terms of record sales in Japan for years and manages many of the country's leading acts, including Ayumi Hamasaki, Every Little Thing, Koda Kumi, Ai Otsuka, AAA and the Wagakki Band.

The exclusive distribution rights for mainland China that NetEase gains as a result of the cooperation assures the Chinese platform access to Japan's biggest music database, and, beyond the fact that it makes NetEase one of the platforms with the China's largest song inventories, creates an environment that is expected to accelerate the interest in Japanese music among Chinese audiophiles. To Avex's benefit, the partnership, in large measure, smooths the way for entry into the Chinese market for its artists and their music. With a further deepening of the cooperation expected in due course, Avex and NetEase Cloud Music foresee the co-hosting of offline events including concerts and fan meet-ups with Japanese acts, creating even more opportunities for the acts to broaden their fan base in the Chinese market. As for music fans in China, by creating a legal framework through which a massive inventory of the music can be consumed, the cooperation further satisfies the increasing demand for Japanese music, which is a great news for the fans.

Chinese government policies create the necessary legal framework for the importation of copyrighted Japanese music

Over the past several years, the rise of internet platforms put the majority of China's traditional record labels out of business. The ease at which music could be sampled, streamed and downloaded from the internet, via downloadable apps and on video platforms proved no match for the physical media -- vinyl, cassettes, even MP3 players -- through which music had traditionally been consumed. This disruption of the market coupled with a lack of understanding about the importance of copyright among Chinese audiences led to an environment where piracy became rampant. The Japanese record companies were keenly aware of the market situation in China, and, until this deal was struck, simply refused to consider any kind of collaboration with Chinese music platforms.

Since July 2015, China has put in place mechanisms creating stricter supervision over digital music copyright, creating an environment where music backed by such copyright could develop a market. As the room for pirated music keeps narrowing, Japanese music with proper protections, under the aegis of Avex Group, supported by government policies and the newly-signed cooperation with the NetEase Cloud Music platform, will, for the first time, have its biggest opportunity for expansion in the market. The deal between the two entities will create access to the broadest range of fans across China. Music from Japan can be expected to become a part of what audiophiles across the country sample, listen to and fall in love with on a day-to-day basis.

This change in environment, and the deal between the two players, sends the right signals to the global music entertainment industry and opens the door for them to engage with the Chinese music market that they had so long ignored. Especially for companies who seldom cooperate with mainland China on digital music, the partnership of Avex Group from Japan and Chinese music platform NetEase Cloud Music provides an excellent model for future deals.

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