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The live industry in China has real potential. The annual Midi Festival in Beijing shows that there is a sizeable live audience for western derived independent music, with a crowd of 20,000 moshing, flag-waving, ironic t-shirt wearing, squiffy-hairstyled rockers per day over four days. The international bands playing were unanimous in saying they “didn’t think this was possible in China”. Those same international bands also had to find their own money to make the trip as performance fees and flights were not provided, so ‘one step at a time’.

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Digital is the hot topic in China. Due to the under-developed, pirate-dominated physical market and burgeoning mobile environment, China is on track to becoming the world’s testing ground for the digital age. The statistics are pretty staggering, with some suggesting a digital market of US$1.5billion by 2010 - With the second largest broadband network in the world, the advent of 3G later in 2007, 460 million mobile users and five million new mobile subscribers a month, who, on face value, would doubt them?

The view from the ground, however, is that all of these statistics need to be taken with a bucket of salt. All attempts by the Chinese government to combat online MP3 piracy, including all public ‘victories’ against pirates, should be seen as totally superficial - a lip service to the lobbying western majors. Internet MP3 piracy remains endemic, with less than 10% (a very generous estimate) of downloaders actually paying 14 pence/download for the privilege.

Even the big boys are at it, with market leader Service Providers (SPs) like Baidu (who allegedly see over 50 million users per day) openly hosting ‘deep links’ to pirated tracks and making money through advertising while they’re at it.

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The 90% physical piracy rate obviously puts the kibosh on your average high street retailer. FAB, the only significant legal high street chain is really out there on its own. One large distributor lists only 86 other stand-alone legitimate stores stocking independent content, servicing the whole of China - A worrying figure in a country where you literally can’t move for audio-visual outlets and CD/DVD street hawkers. None of your HMVs, or your Virgin Megastores have dared set foot over here yet.

The arrival of western product in the early 90s came courtesy of ‘saw-gashed’ CDs: Excess stock and deleted titles from western majors attempting to avoid taxation and disposal costs. These CDs had their cases cut to mark them as defective and were then shipped in to China through free-market economic ports like Guangzhou, only to end up on the black market. An end result that can be seen as a partial ‘shooting-in-the-foot’ for the western majors who then had to come in and fight against the pirate networks they inadvertently helped set up. Continue Reading »

Due to piracy and negligible airplay royalties, the western record label model simply does not work in China. In most cases, domestic companies take over an artist’s entire life - Records, management, publishing etc. There is so little money to be made from simply exploiting a master that a label has to ensure it doesn’t miss any area of income in order to survive. This obviously poses a problem to western rights owners/managers looking to make money out of their narrower areas of interest.

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Every man and his dog is looking to China as the ‘next big thing’, but should the western music industry executive also be packing Fido into air freight and de-camping to the Middle Kingdom? Before anyone considers investing energy in China, it is important to be aware of just how different the industry is over here. There are some genuine areas of opportunity but let’s start with the grim facts:

• Physical piracy runs at around 90%.
• The average gig ticket is £3 and charging anything over £7 for a concert will alienate the young Chinese music crowd.
• Publishing is a foreign idea to the Chinese and is therefore a tiny, unpredictable source of income.
• All media is government owned or heavily government monitored and, in most cases, requires ‘financial incentives’ in return for coverage.
• Despite a population of 1.3 billion people, the legitimate physical music market was only worth US$86million in 2006, making it the 20th biggest in world.
• All foreign companies must enter a joint venture in order to set up shop in China, handing over at least 51% of their company in the process.
• All music has to go through lengthy and seemingly arbitrary government censorship procedures.
• China is a black hole of statistics, quite often by design, making market research and due diligence incredibly difficult.

Kang Mao of legendary Beijing band SUBS, performing at ‘Hong Di’ : September 2007

As in most other markets in Asia, pop music has a real stranglehold over the mainstream… Continue Reading »