Media companies worldwide are struggling with ad sales and budgets, desperately trying new business models like online pay walls to scrape by. But what if they moved into selling something other than journalism — like, say, music?
Enter China's KKBox, which takes the unique approach of working as a streaming music service that happens to give away music journalism as a bonus. It sort of flips the Spotify model on its head, too. The music streaming isn't free. Users pay about $4.50 a month to access to a huge, Spotify-style library of the latest songs, available on the computer and mobile devices like the iPhone and Android phones. As a bonus, they get an online music and entertainment magazine.
KKBox has its own editorial staff of 30 or so editors, interviews Chinese pop stars, has columnists, hosts its own awards show and so on. Embedded in artist profiles and other places throughout the site is music, which listeners can preview a la Amazon's MP3 store or the iTunes preview feature or, presumably, go find and stream from KKBox's catalog if they're paid subscribers.
In other words, they come for the music, stay for the music coverage, says Stanford-educated founder Chris Lin. He says the site has about 200,000 paid subscribers but 6 million non-paying visitors. "They're here because this is a fun music destination. We've grown into a very popular media outlet" outside of selling music, Lin says.
KKBox is the largest digital music service in China—and it's profitable. Lin says there's no magic secret to profitability, just common sense. "Per-stream royalty costs is what's going to suck you dry. You're giving your best service out for free, then asking people to pay later. That's awkward. If you can get all the music for free with ads, the willingness to pay for it is not very high."
Right now the service is mainly focused on Hong Kong and Taiwan, but later this year, KKBox plans to roll out a North American version, targeted at the 8 million ethnic Chinese living here. "They are hungry for information about artists and entertainment news from home," says Lin. "We want to be a sort of entertainment Chinatown for them." Lin expects the North American service to run a little more expensive than its Eastern brother, but says the price will definitely be less than $10 a month, depending on negotiations with the labels in Taiwan.
After the North American rollout, Lin wants to move the company's efforts to greater China starting in 2011, when 3G is more widely spread. "Smartphones and 3G have helped us in converting visitors to paid users," he says.