Analysis

Roadmap to China: tips for music success in 2017 (#midem)


Tags:

China has long been a market of huge potential for music, but also considerable challenges for western artists and labels: from piracy to regulatory headaches.

There is more optimism about its prospects in 2017 than ever before, though, with encouraging signs for China’s legal digital-music market, and a sense that local companies are open for business with western partners.

A panel at Midem today discussed some of the trends. It included Cherry Chunfei Guo, intellectual property and corporate affairs lawyer at Tiantai Law; TC Pan, CEO of Ultimate Music China; and Billy Koh, founder of Amusic Rights Management. The moderator was Ed Peto, MD of Outdustry.

Copyright and the impact of commercial – rather than government – interests to reshape copyright protection and exploitation ran through the session in a number of ways.

First, some context. The 1990 copyright law in China was revised in 2001 when the country joined the WTO and so had to move to synchronise with that. This update effectively covers all web content. “All digital licensing is done on the basis of transmission via information network,” explained Peto. “From a publishing standpoint, that is really the only right that is available.”

While enforcement of rights online was difficult in the past, that seems to have progressed enormously in recent years. “Having a law is one thing and being able to enforce the law is the next thing” explained Peto. “China, famously, is a difficult place to protect rights – even though they have been in law.”

Chunfei Guo gave an example of a case she worked on last year for Peermusic that shows this in action. “Last year I represented Peermusic – a foreign rights owner who had 100% of the rights – and the defendant was a famous local live streaming platform,” she said.

This platform had created a new work – using Peermusic’s copyright. They used a new work [recording] to make an MP3 and then uploaded it online. There was also public performance in a live show. This was an infringement activity. The judges in the first decision gave the equivalent of $10,000 in fines. This was a good result.”

Peto described China as “increasingly policeable as a rights owner” as takedowns requests – processed via the IFPI – are not just happening; they are happening swiftly. A request for a takedown can now be implemented in a matter of hours.

“Things have been changing very fast in China for the past two years,” said Koh. “Two years ago, you could not have imagined that piracy could be taken off the internet. Now it can.”

Peto added, “We have one or two people on our team full time finding links and sending takedown notices to IFPI. It’s very difficult to emphasise how much the market has flipped in that way.”

The panelists suggested that as recently as 2010, China was seen as a 99% piracy market (for recordings) but this has now slipped to under 20%.

“The Chinese government is protecting music copyrights as they want to develop IP as whole as part of economic reform,” said Koh. Peto, however, said that it was commercial, rather than governmental, interests that were really driving the change here.

“It is not the big narrative of the government deciding to shut down piracy in China,” he said. “It’s really more about the private commercial interests of the major tech companies and the major platforms who are accumulating copyrights to beat each other up with and to carve out the market – to then stamp out piracy for their own commercial interests. Obviously the government is supportive of that, but it has very much been driven by the platforms.”

The country is seeing a battle between half a dozen music portals run by major tech companies and the feeling was this could soon see only four left standing. As part of this, the portals are buying up copyrights to shore up their position in the market and gain huge legal and commercial advantages over their rivals.

The reason why they want to pay so much money to the labels and publishers is because they want to acquire the copyrights so they can sue their competitors,” said Koh. “In this case, they are keener to acquire masters [as they have a higher percentage value that publishing].”

The size of market is staggering – with estimates of upwards of 300m people streaming music every day and double that number playing digital music (they have downloaded or cached).

The vast bulk are on ad-supported tiers, but this is deemed unsustainable in the long term.

All the big portals like Tencent, Alibaba and Baidu are investing heavily to buy exclusive copyrights from even the three majors,” argued Pan. “As they invest so much money in these copyrights, they have got to make it back one way or the other. Ad-supported is just not the way. It takes too long and the money is not coming in as quick as just getting people to pay for it. The big platforms will definitely push for the paid market to be even more mature.”

The big opportunity, it appears, lies in converting fans into hardcore fans and also seeing the digital gifting market explode.

Peto said consumers can sometimes buy multiple copies of an album “People are clicking for multiple copies and you end up with people buying 20 or 30 copies of an album they are only going to be able to download once as a digital album [themselves],” he explained. “They do this for social media bragging rights. This is a phenomenon that only exists in China, as far as I am aware.”

Pan added that messaging app WeChat was a huge driver here. “People buy multiple copies to give to their friends [via WeChat],” he said. “It’s definitely on a positive rise.”

The rise of the hardcore fan is also seeing a new type of windowing take effect, where the fans download new albums on release but have to wait for them to appear on ad-supported streaming services.

“If you are a hardcore fan, you have no choice – you have to buy the whole album if you want to listen to it now,” argued Koh. “If you are not a hardcore fan, it’s fine; you wait until two or three months later and then get it on the subscription services if you subscribe.”

This is not, however, a panacea for the entire industry. “This seems to only work for the major acts as they have enough fans,” he said. “People don’t buy CDs so how we count the value of an act is using the number of hardcore fans. If you have a good conversion rate [from fan to hardcore fan], the artist can make money in China.”

The panel ended with an optimistic note for international acts looking at China as the great boom market in waiting. Currently, 15-20% of consumption of recorded music in the country is Anglo-American. This, the panelists agreed, is only set to grow.

Music Ally’s Midem 2017 coverage is supported this year by Music is GREAT, the British government’s campaign to promote UK music exports.

The UK and British Music are represented through the British Music at Midem stand, with the Department for International Trade joining forces with music industry associations AIM (Association of Independent Music), BPI (British Phonographic Industry), MPA (Music Publishers Association), PPL (Phonographic Performance Limited) and PRS for Music.

Together, they will support over 150 UK music businesses and member delegates as they seek to pick up on the latest trends, connect with international companies, sign deals and develop trading and export opportunities.

Eamonn Forde

Read More: Analysis News
Leave a Reply

(All fields required)