China is a difficult market for Apple Music

Apple Music may have priced its China launch Wednesday at a steep discount to what it charges in the U.S., but the music streaming service may be a tough sell. Analysts note that Apple’s offering of its catalog of millions of songs as well as access to iTunes Movies and iBooks may not be as appealing to consumers in China as the company’s snazzy smartphones and tablets given language barriers as well as differences in tastes.
“China is more of a difficult market to penetrate, especially for global companies. China tends to prefer local companies,” said Karissa Chua, a consumer electronics analyst at Euromonitor International. She expects language differences may prove a sticking point on music offerings. But she added, “one good strategy was to launch [the service] in both Apple iPhone and Android,” as Android smartphones are more popular in China, which is the world’s largest smartphone market.

The pricing of the Apple Music service, at 10 yuan ($1.57) a month, is significantly below the U.S. fee of $9.99 and the around $5.00 in Indonesia, but it isn’t too far from the around $1.80 charged in India. Movies on iTunes will start at 5 yuan for a high-definition rental and 18 yuan to buy a new release.

“Customers in China love the App Store and have made it our largest market in the world for app downloads,” said Eddy Cue, Apple’s senior vice president of Internet Software and Services, in a statement. “One of the top requests has been more great content.”

However, like its U.S. launch, Apple Music is also a somewhat late entrant into China’s market, with Tencent’s QQ and Baidu Music already active.

“There are lots of local players already,” with many local music streaming services offered at no charge, said Sandy Shen, research director for mobile devices and consumer services at Gartner. “Unless they have exclusive content craved by local users, it will be difficult to establish [the service] in such a crowded market.”

China’s difficult relationship with intellectual property may also dog the Apple Music launch.

“Consumers are used to downloading illegally for free,” Chua noted. “They are very price sensitive. They want it priced very low to drive them to take up online services.”

But Chua does expect Apple’s strong brand recognition in China can help smoothen the launch.

Gartner’s Shen, however, isn’t as certain that brand recognition will help much.

“People definitely buy its phones and tablets, but it’s not such a big brand in media,” Shen said. “People already have local services installed on their Apple devices.”

It’s not terribly surprising that Apple is entering the streaming business: Streaming services are quickly gaining ground as a preferred method of media consumption. In 2014, according to the Recording Industry Association of America, revenue from streaming music services jumped 29 percent to $1.87 billion. Meanwhile, sales of digital downloads fell 8.7 percent to $2.58 billion.

But it’s not clear yet how popular Apple’s streaming music service will be even its home market of the U.S. Apple said in August it had signed up 11 million trial members in the five weeks since its launch but the introduction included a three-month free trial period. It isn’t clear how many of these users will stick around.

In August, rival Spotify had over 75 million active users, 20 million of which were paying subscribers.

A large number of media outlets ran articles this week to remind Apple Music users that now is the time to cancel their subscription to avoid being charged. In August, Apple said 21 percent of people who signed up the trial weren’t continuing to use the service, countering claims from research company MusicWatch that 48 percent weren’t continuing the service.

That followed a somewhat rocky trial period, with some users reporting bugs and with one pop superstar, Taylor Swift, loudly objecting to Apple’s payment policy, forcing Apple to back down.

But users of China’s popular social media platform Weibo appear enthusiastic about the service’s launch on the mainland.

“Today I wake up to news that Apple Music is available in China! For just 10 yuan every month, I can watch movies on iTunes too! Though it doesn’t seem like I can purchase music yet, but it’s still awesome,” said a user by the name of “nijiandanshu.”

Another user going by “Hantaiketaodexiaohei” wrote, “Apple Music finally! First thing I’ll do is to follow Taylor [Swift]!”

An Apple representative didn’t answer a phone call or immediately return an email message seeking more information about the launch.

Source:  CNBC