Kugou Music is caught in huge contract dispute, producer pulls banner to defend rights

Kugou Music is caught in huge contract dispute

Blue Whale TMT reporter Xinyue

One month later, the storm of Kugou Music's "Dream Realization Plan" has not only not subsided, but has instead hit in a more violent situation, revealing more inside stories in the music industry.

According to Kugou Music's previously released dream realization plan guide, anchors receive "funds" through gifts awarded by fans in a way similar to crowdfunding and use them for the production of digital music albums. On Kugou's mall page, the anchor can select songs at different price points, wait for the target raised amount to be reached, buy them and contact the music production company to record and produce them. In April this year, it was reported that the plan caused losses to musicians of more than 100 million.

A number of music production company people pointed out to Blue Whale TMT reporters that Kugou began to fail to settle on time in February this year, and issued a notice in April stating that the music mall was suspended. Because Kugou interrupted transactions and could not settle fees on time, the production company, anchors and users suffered losses, of which the production company suffered particularly severe losses. In the WeChat rights protection group where the reporter belongs alone, nearly 30 production companies are carrying out rights protection.

"We have paid out all the money, and some of it was borrowed from usury.""We spent it, borrowed it, and our credit cards were empty. I haven't eaten much this month. The day before yesterday, a friend took me to eat steamed dumplings made from Sha County snacks. I finished the eight dumplings in three seconds." the other party said. What's more, a person in charge of a production company told a reporter from Blue Whale TMT that the studio was small and if Kugou did not settle the bill in the end, it would bring huge debts of hundreds of thousands of yuan, forcing him to jump off a building.

Regarding the above issues reported by the music producer, the Blue Whale TMT reporter asked the person in charge of Tencent Music's public relations for confirmation, but the other party had not responded as of the release of the draft.

Kugou bought out the music copyright but was in arrears. More than 3000 songs had not yet been settled.

Li Fan comes from a music production company. They mainly make customized songs for anchors on Tencent Music's Kugou Music live broadcast platform. First, upload the song Demo to the Kugou 5sing Music Mall. The Kugou anchor selects and purchases it before recording it into a song. From Kugou's perspective, such a business model can not only cultivate and reserve excellent artist anchors for its live broadcast business, but also acquire a large amount of copyrights for its music business.

According to a contract exclusively obtained by Blue Whale TMT reporter, the cooperation matters stipulate that the music company, as Party B, will transfer all copyrights it owns except the right of authorship to Kugou's Guangzhou Qigu Culture Communication Co., Ltd.(hereinafter referred to as "Qi Drum Culture"), and this transfer form is an exclusive buyout by Kugou and is irrevocable. Industrial and commercial information shows that the shareholders of Qigu Culture are Guangzhou Kugou Computer Technology Co., Ltd. and Beijing Huaqiang Zhiyuan Technology Co., Ltd., the latter is a subsidiary of the former; in other words, Qigu Culture is a wholly-owned holding company of Kugou.

In Wang Fang's memory, Kugou began to default on payments in February 2019, but it was the Chinese New Year and the production company he worked for had just joined the Dream Realization Project, so he did not pay too much attention. But in March, things began to get more and more wrong in his eyes.

Under normal circumstances, upload the finished product to the website, fill out all forms for making songs during this period, and mail a copy of the creator's ID card and other materials to Kugou. They will settle the bill to us within 15 working days after receiving it. 70% down payment, and no company I know has yet received the remaining 30%. And starting from March,(Cool Dog) will not settle. "Wang Fang said.

The current situation is that the works of many music production companies have not even passed the review, let alone subsequent settlement and refund.

In this regard, Kugou stated in an internal notice issued in April this year that due to objective factors, the music mall was suspended and the music producer was given two options: 3000 yuan/song to transfer the song copyright, or 10000 yuan to transfer the song copyright plus the recording copyright.

But such a clause almost caused public outrage. Music producer Li Fan made a calculation and used songs with a minimum production cost of 30,000 yuan as a standard. First of all, Kugou will require the company to issue a value-added tax invoice and pay the tax at a rate of 3%. For annual income exceeding 3 million yuan, the income tax needs to be deducted by another 25%. That is to say, before the song started, there was only 21600 yuan left.

"The average cost of writing lyrics and composing exceeds 5000 yuan, the average cost of arranging and mixing is several thousand, and the recording costs 1000 to 2000 yuan. Including harmony, Demo, labor, rent and electricity, it's not bad to have 5000 yuan in real hands." He said that doing this business can only rely on volume.

"From the perspective of music producers, Kugou was chosen because they had cooperation and trust, and did not know much about Netease Cloud Music or Douyin. The second is that through the anchor, you can get more exposure to your songs." Producer Zhang Xin told Blue Whale TMT reporter.

Many people question that Cool Dog deliberately lowered the price on the grounds of song quality. "Cool Dog thinks that we did it with a quality of three to four thousand yuan, but did not reach the standard of 30,000 yuan. The cost composition of Kugou is calculated based on the popularity of the producer, including the songwriter. If it is given to a high-traffic anchor like Feng Timo, the production fee they will pay will be particularly high. If it is unknown, they want to buy works at a low price."

Among the rights protection group, many people told reporters that the number of songs for which the amount has not yet been settled exceeds 3000. If all are calculated based on the minimum standard of 30,000 yuan, the total amount will also reach 90 million yuan. This data cannot be verified, but Bingbing said that her company has 2.3 million yuan in expenses that have not yet been settled.

Anchors are stuck in the cracks to survive, and the music crowdfunding model urgently needs supervision

. Nowadays, the anchor's situation is also very awkward. The current situation has become that the user blames the anchor and the anchor blames the production company.

"As an anchor, I am also very wronged." Anchor Aya told Blue Whale TMT reporter,"The actual situation is like online shopping. The buyer paid the money and the seller also shipped the goods, but the goods were withheld by the e-commerce platform and said you couldn't send them to the buyer."

Although Kugou's dream realization plan may seem gorgeous, Aya is an ordinary anchor on weekdays: performing, singing, or finding people to PK in the live broadcast room. The problem she is facing now is that from March to the present, the commissions for fan gift rewards and crowdfunding funds have been received, but the crowdfunding songs have not passed the review.

"In the live broadcast room, we will first make sure to choose tens of thousands of songs before they will start to reward. My fans spent thousands of yuan to buy gifts for me through crowdfunding. You must give a designated gift called Dream Notes." Aya said.

According to reports, every time a fan rewards the anchor with a dream note gift, the anchor will not only receive a commission, but also receive a Star Wish Fund worth 1000 star coins. Kugou will provide song production fees based on the total amount of the Star Wish Fund. Taking a song with a minimum production cost of 30,000 yuan as an example, the anchor needs to crowdfund a total of 60,000 yuan, which translates into a platform unit of calculation that is 6 million yuan.

What embarrassed the anchor was that fans paid out of their own pockets for crowdfunding the anchor's songs, and the anchor and the platform received a commission, but the original intention of user consumption was not resolved.

According to people familiar with the matter, the ratio of cool dog live broadcast is 5:4:1, which means that the platform gets 50%, the anchor gets 40%, and the union gets 10%. However, it cannot be ruled out that some trade unions draw a slightly higher proportion, and anchors can only get about 35%. According to people familiar with the matter, based on the double reward required by Kugou, the minimum song production fee of 30,000 yuan for the song can be drawn from the user's crowdfunding amount of 60,000 yuan. Even if some of the hidden costs are removed, it will still be an approach for Kugou to obtain music copyright empty-handed.

Li Min, senior partner of Shanghai Hansheng Law Firm, pointed out that first of all, from the perspective of crowdfunding, consumers must be informed of the actual use of raising 60,000 yuan before raising funds. Finance must be transparent and funds must be used strictly. If money is raised in the name of crowdfunding, users can sue for a refund.

"It can only be said that there are many non-compliance areas in this industrial chain, which cannot be defined as illegal. Because the supervision of crowdfunding in my country is a relatively vacuum state." Li Min also pointed out that whether the platform has the qualifications to engage in crowdfunding business also needs to be considered. However, from a policy perspective, the current supervision in the crowdfunding field focuses more on equity crowdfunding financing.

Today, the paid digital music market is still a blue ocean. Tencent Music's financial report released in Q1 of 2019 showed that the average revenue per paid user (ARPPU) dropped from 8.7 yuan in Q4 of 2017 to 8.6 yuan in Q4 of 2018; while in the online music market, the proportion of paying users among monthly active users is only 4%.

In the past two years, various online music platforms have made efforts to copyright in an attempt to make greater profits from it. Judging from the frequent copyright disputes in the online music field, this barbaric competition for music copyright has just begun.

(At the request of the interviewees, all interviewees in the article are pseudonyms)