KTV pioneer Qiangui gradually declined and closed stores to survive; apps such as Changba began to rise

Mobile karaoke, which has been booming in recent years, is becoming more and more profitable. From online business that is not restricted by time and location to offline cooperation with physical KTV, the closed loop of O2O is gradually taking shape. The small but experience-oriented Changba Maisong KTV has made a small return. The turnover of 280,000 in 14 days may not be worth mentioning for mainstream KTV, but it has recovered the cost for this emerging store with Internet genes. KTV Revolution: The ancestor Qiangui closed down, and Changba played the "cabinet" to set up KTV rooms

The splendid era of Qiangui is slowly coming to an end, and the stores stationed in the centers of major cities are slowly shrinking, carrying the youthful memories of many people.

There are reasons for external competition and internal management factors. KTV, one of the pillar industries of domestic entertainment, is rolling and changing in the market's selection of survival of the fittest.

In recent years, the boiling mobile K song is getting wider and wider on the road of realization. From online business that is not restricted by time and place to offline cooperation with physical KTV, the closed loop of O2O is gradually taking shape. The small and experience-oriented Changba Maisong KTV has already made a small return. The turnover of 280,000 in 14 days may not be worth mentioning for mainstream KTV, but it has recovered the cost for this emerging store with Internet genes.

Singing programs such as "The Voice of China" and "Sing My Songs" are launched one after another, which shows the domestic demand and people's enthusiasm. In order to gain a place in the market, whether traditional or emerging, cross-border and transformation are taking place.

Qiangui gradually declines, while Changba begins to rise

Recently, Qiangui Beijing Chaowai store stopped operating, which is a pity. This means that Qiangui only has one store left in Beijing. As early as April 2014, its Fuxing Park store in Shanghai had closed down, and now there are only three stores left. Before we can feel sad, the news that the branch in Quzhuang, Guangzhou was acquired has been confirmed. In addition to the first-tier cities of Beijing, Shanghai and Guangzhou, Changsha, Wuhan, Hangzhou and other places have also reported closures or business contraction.

On the other hand, at the end of 2014, Changba APP officially landed in physical KTV, and together with its holding company Maisong, it created a new offline KTV. Currently, there are two stores in Beijing. Changba CEO Chen Hua said that he hopes to reach 2,000 franchise stores in the next five years, and also admitted that it is very difficult.

With ups and downs, the domestic KTV industry is undergoing changes.

Peng Zhiping, a cultural industry analyst at the China Business Industry Research Institute, believes that the KTV industry is currently facing a reshuffle. He analyzed: "There are many reasons for this situation, such as reduced official expenditure, rising rents, rising labor costs, equipment maintenance, the impact of online KTVs, and customer loss, which have reduced the profit margins of traditional KTVs to a certain extent. Under such a big situation, KTVs such as Qiangui have chosen to close stores to survive. It is a helpless move."

Although the market share of the old brand Qiangui is gradually decreasing, other large-scale KTVs in China, such as Taipei Pure K, KTV, Melody, and Baoledi, are all increasing their investment and expanding cities and stores.

According to data provided by the China Business Industry Research Institute, in recent years, the number of Chinese KTV companies has maintained rapid growth, with an annual growth rate of about 20%. In 2013, the number of mass-market KTVs nationwide reached 9,920. The corresponding market size of related markets such as alcohol, snacks, consumables, and audio equipment is about 400 billion yuan.

Investing in KTV is still popular. How to break through this red ocean is a question that traditional stores and emerging forces need to consider.

Competition in the KTV industry is fierce

As an entertainment industry, traditional KTV faces a series of problems due to fierce competition. First, there is serious homogeneity. In addition to the income from entertainment projects such as singing, the main profit point of traditional KTV is the additional business market such as alcohol, snacks, consumables, and audio equipment provided by KTV. But there is not much improvement in user experience.

Second, although there are many KTV merchants, there are still very few stores that really make users rely on them and have brand effects. User stickiness is low, brand value has not been established, and it is also very common to increase traffic through price wars. Industry synonyms such as "money cabinet" are slowly disappearing.

Third, traditional KTVs are basically built in large business districts, and their rents are already unattainable. The rent of a store of 8,000 square meters in a prime location in Shanghai is not the same as it was ten years ago, and small businesses are also deterred by the high rent.

Fourth, it is understood that the age of KTV consumers is concentrated around 30 years old, and there are relatively few young people born in the 1990s and 2000s. For target customers, traditional KTV decoration tends to be luxurious, and store renovation requires huge funds.

Does this mean that traditional KTV is on its way out?

Peng Zhiping said, "According to the data we have learned so far, the profit margin of individual KTV operating companies has dropped from the original 50-60% to 20-30%, but the profitability of branded KTV companies has not been significantly affected, and the profit margin has continued to grow year by year. It can be seen that in the next few years, the KTV industry will develop in the direction of a brand chain operation model."

The overall number of large-scale chain KTVs in the industry is still relatively small, and there are no particularly prominent giants. The fall of old brands such as Qiangui also provides market space for other companies.

Chen Hua believes that the closure of Qiangui stores is a good thing for the industry. He told the reporter of Financial Weekly that this shows that the old business model cannot adapt to the current market and can no longer support the high costs when public spending is reduced.

Mobile Internet subverts entertainment trends

The Internet has not let go of the KTV market segment, and mobile KTV is gradually shifting from online to offline.

Yao Haifeng, an analyst at Analysys International, said that there are several main business models for mobile KTV. First, it makes profits by providing value-added services to members, and buying virtual goods to give gifts to singers. Second, it pushes advertisements to places, builds an online K song competition platform, and lets sponsors sponsor it, which is also the main source of income at present. Third, some large mobile K song platforms like Changba use the method of "making stars" to first make a singer famous internally, and then use the star effect to drive the rich to get rich later to achieve commercial interests. Fourth, it serves as a channel to divert traffic to online games to obtain income. Fifth, some mobile K song applications have tried the O2O marketing model that combines online and offline.

According to Analysys International data, Changba has more than 200 million users in the field of mobile K songs and shows. In the A round of financing in 2011, it received millions of dollars of investment from BlueRun Ventures, and in 2013, it received a B round of financing of 15 million US dollars from Sequoia China. Chen Hua said that there is no financing demand at present, and its physical store has a turnover of 280,000 in 14 days, which is basically in line with expectations. KTV is only about 50% of Changba's business, and it will expand online and offline services in the future.

Compared with large-scale traditional KTVs, Changba pursues small and exquisite emerging KTVs. Chen Hua said that Changba follows the "people's way" and wants to build a daily consumption place like a cafe, providing users with a small space where they can sing, watch movies and rest. The store has a low consumption threshold, the frequency of users' re-consumption is high, and the store is small but easy to fill up. It can be said that the investment is low and the return is fast.

According to the marketing department of Changba, its advantage also lies in the fact that through the background big data, it can analyze which area the users are most concentrated, which has a guiding role in the site selection for future store openings. Secondly, Changba users have a large multi-brand effect, which is much higher than the recognition of re-establishing the KTV brand. On the other hand, the gameplay is more youthful, and various interactions are carried out through mobile phones to meet the needs of the post-90s and post-00s.

In addition to Changba, the Yiqichang APP mainly focuses on the development of the song ordering system. 9158 also cooperates with mainstream KTVs to establish model stores to attract other KTVs to join. This emerging force is seizing market share and trying to maximize the experience of this industry. Traditional stores are also stimulated to move online and make more integration and transformation.