Digital Media in Asia Blog

The following is an exclusive interview I had on 12/06/05 and 12/07/05 via e-mail with Mr. Jun Wu, President and CEO of R2G. R2G is a relatively new Chinese company that is in the forefront of piracy prevention in China. Most recently, R2G has through legal action successfully compelled major websites Baidu.com, the9.com, and 21cn.com to remove their links to unauthorized music content.

CHEN: How does R2G plan to reduce the impact of rogue BT
websites, rogue P2P file sharing software, and FTP servers that do not
distinguish between legal and illegal copies of songs?

WU: We will track each individual BT or P2P site down to
make sure that they do not distribute content that had registered with us.
According to the new Internet copyright bill that was introduced by the Chinese
government earlier this year, once we have notified these sites with the list
of illegal content, they will have to delist these content immediately. Our
tracking software is developed in house, and specific to each individual site.
It will be difficult for me to go into details one by one in an email.

CHEN: When a typical user is presented with a legit and
illegal venue, what will R2G offer to persuade him to pay more money for the
same song/movie? We’ve seen from the US that suing individuals for copyright
infringement alone isn’t an effective deterrent. Of course, offering a legal
venue will attract some users, but as long as a cheaper venue is available, how
does R2G plan to drastically convert users to legit methods?

WU: Our strategy is to focus on the service provider, be it
a search engine or a P2P service provider， making sure that it will be
increasingly difficult for an average consumer to be able to find illegal
venues to download pirated content. We believe that if we are able to cut the
current piracy rate from 95% to 50% (a ten fold improvement), it is more than
significant enough to make a big impact on the overall market.

CHEN: I understand that R2G has experienced success in
convincing large websites to de-list links to illegally distributed music. How
successful has R2G been in convincing smaller websites to become legitimate
distributors? What are the differences in strategy when dealing with smaller
websites, as opposed to larger sites?
 
WU: Even though we had not been focusing on the smaller sites very much,
generally we feel they are relatively easy to handle. Our experience so far had
been that the medium sized websites are the most difficult ones to deal with.
The logic is quite simple. In converting ones website from pirating to legit,
there is always this issue of timing. So these medium sized sites are always
afraid that they will loose traffic during the process of turning legit,
therefore loosing the possibility of ever competing against the big ones.

CHEN: Regarding P2P file-sharing, how does R2G plan to track and curb P2P
file-sharing? Are there any estimated percentage breakdowns of where a typical
Chinese person gets his music, movies, and other digital entertainment? (Legal
physical copies, legal online downloads, illegal websites, illegal P2P, illegal
physical sales, etc) Does R2G have any plans to turn P2P into a profitable mode
of file distribution?

WU: Yes, we are indeed working on the P2Ps as well. We hope to bring some good
news to the market around the Chinese New Year. The plan is to install a layer
of filtering function with our P2P partners so that R2G registered content may
not be pirated in amongst these P2P site/communities. The first batch of these
P2P sites all has a centralized server. We are working on ways to offer similar
functions for the Freenet like P2P community.  We believe that once one
can control what can be distributed amongst a P2P network, then there are many
ways to turn this into a profitable business. However, I don’t have any info
regarding the distribution at hand. My estimate will be, most of the younger
generation download their music from the Internet either through a search
engine or a P2P site.

CHEN: What demographics do the Chinese entertainment industry view as its
greatest asset and liability? What actions are entertainment companies taking
to maximize revenues from these assets and limit losses from the liabilities?

WU: The young generation (15-35) is clearly the main market for entertainment
content (especially in the case of digital distribution). In a way, they are
both asset and liability.  If the collective service offering is
acceptable to this segment, then there is enormous potential, otherwise it is
going to be an uphill battle.

CHEN: How does R2G and the entertainment industry plan to
scale their business model to serve college students, who typically have less
expendable income?

WU: Currently it is not on the top of our to-do list. Once
the overall piracy rate in the public network is reduced to a certain level we
will start addressing these niche market too.

What are Chinese companies doing to protect their intellectual property online?

To supplement governmental enforcement efforts, private companies, like R2G, have formed to help protect their clients’ intellectual property. According to Jun Wu, CEO and founder of R2G, via an e-mail interview, their strategy is to “track each individual BT or P2P site down to make sure that they do not distribute [their clients’ copyrighted] content.”  R2G will try to persuade these service providers to adopt a business model that compensates the copyright holders or else face lawsuits. The reason websites offer links to free media, Wu says, is mainly to attract traffic. Therefore, the hardest sites to convert are the medium sized ones because they are “always afraid that they will loose traffic during the process of turning legit, therefore loosing the possibility of ever competing against the big ones.”

Wu’s philosophy is that as R2G converts rogue websites to legitimate distributors: “It will be increasingly difficult for an average consumer to be able to find illegal venues to download pirated content,” and thus, users will switch over to legal sources. Of course, R2G is hoping that they can convert existing websites faster than new ones appear. R2G plans to focus on tracking public sites first, leaving potent niches like university networks and private FTP servers unexamined for the moment.

R2G has generally received favorable court opinions when suing websites for copyright infringement. They successfully forced China’s most popular MP3 search engine, Baidu.com, to remove thousands of links after filing an infringement lawsuit against the website. Shortly following the Baidu case, R2G sued similar websites, the9.com and 21cn.com, both of whom soon removed their links to pirated content.