Taylor Swift’s ‘Midnights’ is the priciest digital album Tencent has sold

Taylor Swift’s latest album “Midnights” has dropped, and it might be setting a new standard for China’s digital music industry.

Within a day of its release, the 13-track album, priced at 35 yuan, or $4.83, has racked up nearly 200,000 copies on Tencent’s QQ Music, one of the largest music streaming platforms in China. While $4.83 doesn’t seem like much — the album starts at $11.99 on the artist’s own online store — it’s the highest price ever set for digital albums in the market, which could indicate two things: the upstream cost of making albums has risen, or Chinese users are increasingly willing to pay for online music.

China’s digital music industry has taken quite a different route from the Western one. For a long time, music piracy was rampant across online and offline media, so streaming platforms like QQ came up with a variety of perks to get people to foot the bill. A lot of QQ Music’s paid users are in effect signed up for bundle deals that give them access to other Tencent-affiliated products, such as video streaming, manga, or membership to Tencent-backed JD.com’s online mall. Subscribers get all sorts of value-added services within QQ Music’s platform as well, such as hi-fi streaming, access to online concerts, and customized app layouts.

It’s hard to say whether the $4.83 pricing is the new pricing norm or simply a reflection of the fandom for Swift in China. After all, the American artist is one of the few foreign celebrities who reach 10 million followers on Weibo, China’s answer to Twitter. So far only Jay Chou, the mandopop (Mandarin pop music) king whose songs are known to everyone from my generation, has matched Swift’s pricing power at 30 yuan per album copy.

In the wake of Beijing’s crackdown on internet monopolies, Tencent’s bargaining power on licensing deals might have weakened. For years, Tencent Music Entertainment, the firm’s music arm, bled money on securing exclusive rights from UMG, Warner Music, and Sony Music Entertainment. That’s no longer the case. Swift’s latest digital release is also available through QQ Music’s archrival NetEase Cloud Music, for instance.

The good news is an increasing number of users are paying for Tencent’s music offerings, though the penetration rate remains modest. In Q2, TME reported 82.7 million subscribers across its three music streaming apps, up 25% year over year; a total of 593 million people use these services every month, meaning only 14% of them are paying. In comparison, 188 million, or 43%, of Spotify’s 433 million users were premium subscribers in Q2.

Spotify also has a more profitable product. Looking strictly at their music services (TME is a more profitable business overall thanks to its more lucrative live streaming platform that lives off virtual gift sales), Spotify’s premium average revenue per user (premium ARPU) from Q2 was €4.54 ($4.48). TME’s average revenue per paying user (ARPPU) was 8.5 yuan or $1.17.