Higher revenue in tune with growing mainland market

Howard Kwong

A8 Digital Music Holdings, one of the mainland's top integrated digital music providers, recorded a significant revenue growth of 147 per cent to 706 million yuan (HK$800.89 million) for last year thanks to the widespread introduction of third-generation mobile music. Total revenue for 2007 was 286 million yuan.

The group listed on the Hong Kong stock market in June last year, and is attempting to overcome the global economic meltdown with rapid developments in music content, better technology and enhanced marketing and distribution channels.

Alvin Liu Xiaosong, the company's chairman and chief executive director, said: 'I don't feel that the global financial crisis has had a negative effect on our business because the mobile music industry is developing well in China.'

The company's gross profit doubled to 266.1 million yuan and the balance sheet was strong with no debt, and a cash balance of 315.6 million yuan at the end of last year.

Mr Liu said a successful combination of integrated marketing strategies using new media and conventional media spurred the group's revenue.

A8 expanded its marketing channels to more than 1,000 internet websites to increase awareness and promote songs through self-replicating viral processes. The company developed the A8 music-playing software, which can be downloaded to mobile phones on the innovative user generated content (UGC) platform for personalising music-playing settings of the handsets.

The UGC platform has a repertoire of more than 60,000 original works of music by independent artists. Revenue increased by 270 per cent to 182.8 million yuan last year and one of the most popular songs - Ji Mo Cai Shuo Ai - was downloaded more than 18 million times.

The group co-operates with original Hong Kong musicians and bands such as Green Coffee to enrich its content base.

The company will focus on 3G-related music, services and products. The 3G-compatible A8 Box has the latest 'shake control' technology that enables users to select the next song by 'shaking' the handset.

Betty Ho, the chief financial officer, said: '3G technology could bring a new experience to the users because the phone will have stronger processing capacity and access to more material in the music library,'

There is also a touch-screen version of the box which supports the most popular music phone platform - Nokia S60 5.0. The company sold about 6 million A8 Boxes last year.

The company expanded its music library through conventional promotional channels, such as television and radio, and organised special events such as concerts and the 2008 Annual Original Music Competition. The original artists of the major hits, Ji Mo Cai Shuo Ai and Qian Wan Bie Shuo, performed 20 concerts last year. A8 organised more than 40 concerts across the mainland last year and intends to organise more than 60 this year.

The company is aiming to boost its position in the booming mobile music market on the mainland. Mr Liu said: 'We believe the economic stimulus packages announced by the central government will continue to keep the Chinese economy buoyant.'

He said the packages could help the group develop by creating a macroenvironment favourable for growth of high technology with the aid of tax reductions.

This Shenzhen-based digital music company was identified as a leading provider of digital content under the Eleventh Five-Year Plan (2006-2010) for the development of Shenzhen industry. The municipal government encouraged the group to build a 'digital culture hub' in Shenzhen.

The firm intends to make the A8 Box more personalised through an auto-generated play list and more user-defined functions on the UGC platform.

'If you want to listen to some light music, for example, the play list can show all kinds of light music in the music library,' Mr Liu said.

The restructured telecoms sector and the deployment of 3G on the mainland would create new profit growth drivers for the digital music industry, he said.

Mr Liu said while this year would be a challenging one, A8's unmatched strength in music content, channels and innovative technologies could maximise returns for shareholders.