“If pirating grows, it may not be the end of music world”–that’s the headline of Kevin Maney’s Cyberspeak column in USA Today, May 3, 2005. He uses China as an example of a country where a failing copyright system, which engenders piracy, could also be engendering the prototype 21st century music business model.
In China, the reality for artists is that CDs are essentially promotional tools, not revenue generators, since the vast majority of CDs sold there are illegitimate. Part of what they lose through CD sales is made up through monetizing the fame they gain through piracy, which amounts to free advertising for them.
Maney suggests that this might provide clues to the future of the music business in the US and elsewhere in the Internet age, which has created new piracy issues, but also offers opportunities for artists and consumers. The Internet puts tremendous distribution power in the hands of artists, which can be a valuable promotional tool. How would artists earn income in a system where recordings are promotion, and songs are freely (or inexpensively) traded on the Internet? If the Chinese example is any indication, it would largely come through corporate sponsorship and live performances, but I predict other sources of revenue are likely, as well. There are reasons to be wary of such a model, but it certainly has attractive possibilities, like more equal distribution of revenue among artists, more money going directly to artists (rather than record companies), and less record company influence over what makes it on the market.
Granted, this is not breaking news. But since this blog and the Digital Media in Asia Project at the Berkman Center seek to explore how the Internet is impacting the development of the media and entertainment industries in Asia, I think Maney’s article provides food for thought and discussion. Most importantly, it’s an example of how what happens in Asian entertainment/media markets is relevant to what is happening in the US, UK, EU and elsewhere.
A fun personal aside: I worked with Rock Records, the former label of Yu Quan (the band Maney mentions in the article), to help develop the band early on in its career… Now they’re among the top bands in China. Not saying I had anything to do with it. 🙂 I will aver, however, that I definitely had nothing to do with their Journey-meets-the-Backstreet Boys sound!
Interesting post. I think that the music distribution model that labels would prefer for Asian markets is a subscription-based system using DRM technology along the lines of Rhapsody, that moves away from CDs. In China the videogame industry is already moving in this direction, with subscription-based, massive multiplayer online games that cost a few RMB per hour to access.
I completely agree. The Napster 2.0 or Rhapsody-style subscription model is considered by many to be the holy grail of entertainment industry business models in China. It would provide copyright owners with lockdown protection over their content, and would allow them to provide content to users at relatively low prices.
But the big question is, what incentive do consumers have to pay for online music subscriptions when music and movies are freely available to be downloaded on the web. I think the video game business model analogy is useful to some extent (I’ve made it myself in a forthcoming article–see http://ssrn.com/author=475274), but there are important differences between the online video game market and the music market. First, video game companies hold monopolies over their game worlds that have no real analogues in the music/movie world. If World of Warcraft is the game I love to play, I have to get a subscription because that’s the only way I can access the online world where I want to be–I can’t buy a copy of it on the street or download it from a P2P service and have the same experience. Also, video games have an addictive quality that entices people to keep paying; that level of addiction just doesn’t exist in the case of music and movies.
So, while on paper subscription music/movie services look like perhaps the best music/film business distribution models for China, I question whether entertainment companies will be able to attract enough consumers, and charge them enough money, to enable significant growth of the Chinese music and film industries.