China’s Mini KTVs land in Singapore

Mbar, One of the leading operators of mini KTVs in China, has launched its business in Singapore.

Mini KTVs are telephone-booth-like soundproof kiosks where people can isolate themselves from the noisy environment to sing karaoke. Their singing is usually recorded with ‘semi-professional’ quality and uploaded to the cloud where users can share on their social media.

Each mini KTV kiosk typically accommodates up to two people at the same time.

Mbar is owned by Beijing Ubox Online Technology Corp, a listed company which is known as the largest smart vending machine operator in China.

Initially, 5 Mbar kiosks are placed in locations such as shopping malls and university campuses. Consumers can pay via Ezlink or Nets, two electronic payment methods available in Singapore. Each song costs S$2 (US$1.5); and users can choose to pay based on time spent: S$6.5 (US$4.8) for every 15 minutes or S$24 (US$17.6) for one hour.

MW Comment:

Mini KTVs are hot among VC investors in China this year, with a few leading players raising tens of millions of dollars each. The belief is that: 1) people loving singing; and 2) people want to sing during their fragmented time, whereas going to a traditional KTV will usually require at least hourly booking.

Assuming the use case is valid, there are three key success factors of this business:

1. Location: that determines how much demand you can generate, and whether the unique economics make sense.
2. Copyright: we understand from Mbar that their Singapore roll-out was delayed significantly because the copyright associations did not know how to price: this is not traditional KTV or beer garten, and they didn’t have a pricing category for this.
3. Payment: a smooth payment experience reduces consumer friction (thus encourages more spending), and reduces management cost. Installing a cash unit and a NFC unit will increase the kiosk’s manufacturing cost by 50%.

Let’s do a simple P&L calculation based on pricing in Singapore:

We understand that each kiosk (without payment units) costs about US$4000 – plus payment unit, shipping and instalment it should be no more than US$6000. The monthly rent for the real estate & maintenance add up to US$800.

Assuming that an average booking is 15 minutes (thus roughly US$5), and average of 8 bookings a day (thus daily revenue of US$40, and monthly revenue of US$1200). It will take 15 months to breakeven.

We can play with the variables above. Getting 8 bookings a day is a aggressive target – it really depends on the traffic flow and demographics of the traffic. On the other hand – the more machines there are the lower maintenance overhead; and ideally the operator should share revenue with the real estate owner rather than paying a fixed rent. Nonetheless, we believe the pricing is low but of course it needs to be validated by real consumer test.

From a consumer demand point of view, we think Southeast Asia, especially countries like Philippines and Thailand with trendy and playful youth, can be a good market. We’ve had experiences of dealing with copyright associations in these countries – they are more flexible than their counterparts in Singapore. Reliability of 4G network could be an issue and payment is a particular bugger – While there are so many digital payment methods available, in most of these countries people still use cash.

We know the Mbar Singapore very well and we will keep you posted about its progress in Singapore and beyond.