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Music Industry's Future Foretold in China?
sapphire writes "An article today in the International Herald Tribune provides a look at music piracy from the point-of-view of pop stars in China. China is a country forced to deal with the reality of unchecked piracy of digital media products. Will their experience lead to new business models for the world-wide recording industry?"
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Copyright © 2003 The International Herald Tribune | www.iht.com
Pop stars learn to live with pirates
Thomas Crampton/IHT International Herald Tribune
Friday, February 21, 2003
SHANGHAI Dimpled good looks and saccharin-sweet love songs may have made him an idol to millions of teenagers in China, but dark passions emerged at an album-promotion party recently when Wang Lee Hom brandished a sword to slash an oversized compact disk marked with the Chinese character for "theft."
In case anyone missed the point, the normally demure Wang announced that his favorite track on the new album was "Why," a pop-music diatribe against piracy.
"Pirates have already killed China's music industry dead," Wang said. "It frustrates my life and destroys China's creative future."
That may be an overstatement. Record companies say that what piracy has really done in China is to cause fundamental shifts in the way the country's music industry operates. It has simply forced Wang and his fellow stars to change the way they live, work and play. ''There is no income from the royalties, so artists in China record single songs for radio play instead of albums for consumers,'' said Lachie Rutherford, the president of Warner Music Asia-Pacific. ''Stars need to look elsewhere to finance the rock-star lifestyle.'' Industry executives say this reality also is beginning to draw attention in Europe and the United States, where music companies face falling revenue from compact disk sales as Internet piracy increases. ''The financial effect is the same for record companies whether people get illegal compact disks for $1 on the street in China or download a song for free from the Internet in Europe,'' said Jay Berman, chairman and chief executive of the International Federation of the Phonographic Industry, a London-based group representing 1,500 record companies worldwide. ''Record companies everywhere find that they not only need to fight piracy, but also develop alternate revenue streams.'' Piracy -- which accounts for 95 percent of music sales in China, according to Berman's organization -- has forced multinational record companies serving the world's most populous country to abandon classic-style album contracts, drop development of formal distribution channels and eliminate any possibility of a top-40 list based on sales. ''China is the ultimate example of industrial-scale piracy and its impact,'' Berman said. ''The business model for the record industry worldwide is moving toward resembling what we see in China today.'' Alternative sources of income tapped by top Chinese stars include paid appearances, sponsorship deals and extended concert tours through the nation's vast hinterland. ''In the United States and Europe, stars have it easy if they make a hit record,'' said Han Hong, named best female artist this year at Channel V's China Music Awards, and whose renditions of Tibetan songs have become nationally popular. ''In China, we have to give so many concerts that we do not have time to rest our voices.'' To add to the concert revenue and combat piracy, Hong slashed the price of compact disks sold at her concerts to 15 yuan ($1.80), compared with 5 yuan for pirated disks and the 70 yuan that she formerly charged. ''You cannot fight piracy, so there is no point in even getting angry,'' Hong said. ''We must adapt to the environment.'' For Wang Lee Hom, that involved advertising campaigns and an intensive series of personal appearances. ''Until they pirate my body, I can rely on personal appearances,'' Wang said. ''I am forced to view albums only as a promotional tool.'' Concerts themselves have also become pure promotions, with corporate sponsors underwriting the entire cost and passing out tickets for free. Several singers usually take to the stage to maximize the revenue from sponsors. In China's mixed-up musical world, Wang considers his big break to be the day a national bottled water company, Hangzhou Wahaha Group, put his face on its products. ''They sent my face to every corner of China,'' Wang said, adding that other sponsorship deals soon followed for sneakers, sunglasses, shampoo and clothing. ''These deals support my fame, but they do not pay for my music.'' Fame may finance Wang's designer clothes, but the lack of revenue from music sales cripples record companies. ''Our survival strategy required switching to a talent-management business model,'' said Zorro Xu, managing director in China for Warner Music. ''As piracy increases in other countries, this is what record companies elsewhere may have to try.'' While classic record-company contracts are built around albums, record companies in China now sign up to manage all aspects of an artist's career. In exchange for a percentage of the earnings, the record companies arrange promotional events and negotiate product endorsements. Berman of the phonographic industry federation cited a groundbreaking deal made late last year between the British singer Robbie Williams and EMI Group PLC as an example of China-style recording contracts moving westward. The record company signed up to take a share of all profits linked to Williams's next six albums, including merchandising, touring and music sales. In China, the scramble for sponsorship often results in the pre-selling of songs to finance production costs. The hard-edged Beijing-based singer Pu Shu, for example, wrote a theme song for the launch of Windows XP. Payment for the song, ''Out of Your Window,'' covered the cost of album production, and each time he performed at Microsoft Corp.-sponsored events, Pu and Warner collected a fee. Epson Corp. selected a song by Zhou Xun, a singer and actress, to promote color printers in a deal that financed the song's music video. ''Sponsored videos and songs must not be too obviously commercial,'' said Xu said. ''They need to fit a concept and set a mood.'' Warner Music soon plans to begin a talent search for members of a five-girl band to be called Mei Mei, with the winners signed up for a two-year contract to promote M&M candy. Reliance on advertising and the inability to measure consumer response through sales figures makes it difficult for artists and record companies to determine hits. ''China's music industry is driven by institutional sponsorship instead of consumer preference,'' said Andrew Wu, head of Sony Music China. ''Piracy prevents record companies from properly reaching new consumers through in-store promotions.'' Although pirates offer an efficient means of distributing hit albums, the thousands of pirate stalls across China discourage record companies from promoting new artists. ''These stalls are poorly lit, difficult to find and mostly run by old ladies totally out of touch with modern China's music scene,'' Wu said. ''There is no way for record companies to connect with consumers in order to promote new artists.'' As a result, Wu said, there are fewer than 20 professional-quality albums produced per year in China. This lack of large-scale music production inhibits the entry of talented newcomers. ''I know I have the talent and ability,'' said Wang Jue, the son of one of China's first pop stars who studied music at the prestigious Berklee College of Music in Boston. ''Since the record companies just don't have any money to invest, I had to put up the money myself.'' Relying on investors rounded up by his mother, Wang spent 100,000 yuan promoting his album by plastering posters along a fashionable Beijing street and paying to have his song played as the hourly jingle on radio stations. Wang's rhythm-and-blues-style album, largely self-financed but released under the Warner Records label, became a radio hit thanks to the song ''Tomorrow'' and won him the award for best hit and best new artist at the Channel V China Music Awards last month. ''Not everyone can be so lucky as to have the support of a famous mother,'' Wang said. ''I just hope this album will bring enough sponsorship deals to pay for the investment from her friend.''
Copyright © 2003 The International Herald Tribune
So people can't get rich playing music anymore. I guess they'll have to find another reason to play.
You pirate music!
Which means that
In Capitalist America
Music pirates you!
Calling Hillary Rosen and the RIAA, we've cracked your code...
I think that quote sums it up best. They must "look elsewhere to fund the rockstar lifestyle".
I don't fucking pay artists to fund their 'rockstar lifestyle'. I pay them to make music. If they get the intense rich/famous shit going on because they sell loads, well, that's a bonus. If they make enough to live on and keep producing, then they're with the rest of the population.
To me, that keeps what they say in their lyrics all the more relevant to me.
Pop stars learn to live with pirates
The sooner we can get some of our 'pop stars' off shore onto pirate ships the better. May I reccomend the vicinity around Bermuda as a suitable anchorage.
Do not try to read the dupe, thats impossible. Instead, only try to realize the truth
What truth?
There is no dupe
Sorry, but it really gets to me when a "band" only does their stuff for the money.
I know plenty of bands that just thrive to hear a live audience, no, they're not big and they don't have a flash Porsche but they enjoy what they do and get to pay the bills.
All pirating means is that people that expect that when they get into music that their life is sorted and they can go round smashing up hotel rooms and stuff.
Bah! They don't even usually write their own songs.
Talent-management? You mean, for an artist in China to actually be successful, they have to have some form of TALENT?! Yes, I DO hope other record companies elsewhere try this, yes indeed!
One of the interesting results of the Chinese experience is that consumers no longer pay for the music. This would seem on the surface to be a good thing, after all informationm wants to be free. Of course the musicians are still paid - but by a few large corporate sponsors rather than individuals.
This is certainly a different business model than the one in Europe and the US. Is it better? Perhaps: the artists still get paid and consumers get free or very cheap music. But it may have a downside. Instead of the economic power being in the hands of the people who want the music it is transfered to large corporations.
Are we just trading one set of large corporate interests (the RIAA) for another (corporate sponsors)?
Sailing over the event horizon
The worring thing is the vision of a future of excessivly maketed pop drones designed to build a valuble brand...oh, wait...
"To any truly impartial person, it would be obvious that I am right."
Where CD's only cost a few bucks instead of $13-15.
If you really look at the article all you really get out of it is that some artists expect to make a few hit songs and be able to live in luxury for the rest of their years off the millions they supposedly make. Whenever I hear artists complain about how they are suffering from the effects of piracy, I just laugh. They are making lots of money doing something they supposedly love to do and they get made when they aren't making millions?
This article deals mainly with music theft, but in reality, all manner of digital information is finding ways to slip through industry fingers as media becomes cheaper and the internet becomes popular.
I once spoke to a Russian programmer on Odigo who claimed that he had never met anyone in Russia who had paid for windows; according to him, all copies he had ever seen were pirated.
Though I don't have anyone to bear testimony, a similar trend seems to be occuring in China as well. Not too long ago I remember an article posted right here on /. about Microsoft offering the Chinese government large sums of money to use Microsoft products (primarily in eduction, I believe) as well as attempt to crack down on high levels of piracy. Did China ever accept that money; was the deal even real? Though I never heard the end of that tale, the "Chinese government officially adopts linux" announcement came, ironically, shortly thereafter.
The bottom line is that people just won't pay for something if they can get it for free, be it software, music, or what have you. While piracy is not as blatant in America (ie you can't just walk into your local supermarket and buy pirated Windows CDs), the problem continues to escalate.
However, there is economic light being shed on the subject. As the article points out, it isn't destroying musicians, but just changing the way they operate. As record sales decline, artists need new sources for revenue (god forbid anyone should have to go out and actually play their music).
In software, there have always been little tricks to combat piracy, but they don't always work as well as intended. I believe that the software industry will be hurt by, and therefore change more drastically as a result of, piracy more so than the music industry.
The real question is, what changes are going to come about as a result of this fact? To me, only time will reveal the answer.
- keep all of the money and give none to the artist
- have an efficient distribution system, but one that does not promote enough new talent
- make it so that the musicians have to make most of their money by concerts and commercial sponsorships.
This is clearly not fair. In the United States, artists are protected by the member companies of the RIAA, whoyo.
I think your point is excellent! It's the very same thing that leads to the bancrupty of NHL teams (too high salaries, tickets too expensive, etc.): the league is getting out of touch with the market. Who can afford 4*$100 tickets + parking and burgers to bring the family to a hockey-game? This might seem off-topic, but my point is this: a "rock-star lifestyle" is ridiculous any way you look at it. Also, why on EARTH do the Friends "actors" make ~$1M per episode?? This is what I'm talking about: overpay. Get real and be happy with a couple of hundred thousand dollars a year. That's many times more than what most of us make.
While I would be filled with glee to see the RIAA and it's parasitic minons take the fall they so richly deserve, there are severely negative aspects to a culture that pirates everything, and pays for very little. The Chinese situation is a unique one in that the primary form of piracy is commercial - I perform a song, and tommorrow my work is being sold on the roadside for a slight markup over blank media. It's the situation before copyright existed - when musicians (like Beethoven) would write knockoffs of their own work at a fever pitch to beat out the guy down the street who was copying his stuff.
Basically, the scenario is diminishing returns where grubby knockoff businessmen with better promotional/distribution networks get to make money off the creative people... which is pretty much exactly the same situation witht the RIAA here, except that here it's legitimized in restrictive contracts that forbid competition.
What's the main difference? With the RIAA, they have an incentive to take care of their master works (master tapes, for film, master negatives) in order to profit from them in the future. The grubby merchant on the corner could give a rat's ass about preserving art/information - he's just out to make a buck, just like those bootleg T-shirt merchants you find at sporting events, and in downtowns everywhere.
In the end, what does this mean? It means that monopolies as we know them would be broken under the Chinese scenario. It also means that the focus would be on production, rather than milking assets. It also means that assets would be worth less than they would under the current system, which might make licensing information easier (faced with making something vs. making nothing, and losing control of the material anyways, I'd think they'd choose making something.)
This poses problems in that a devaluation in the asset means you can't borrow against it (one way companies expand is to leverage their existing library to buy other properties.) If your star dies (ie, Elvis), you can't bank on that property, because of all the ripoffs that will devalue any records/products you put out. This means a big shakeout in terms of overhead - no longer can you support lawyers on staff, etc.
It also depreciates intellectual capital - if you can't bank on the performance of a particular group, then they're worth less to begin with. Instead of getting $250,000 to do a deal, they get $25,000 to do a gig. I can't decide if this means that they'll use more or less marketing to sell product in the face of all that piracy... I'd say at a certain point, they'll just cut back and go local. If that's the case, then they have nothing to lose by opening up their back catalogs, because that material is no longer competing with their big acts, because there won't be any big acts anymore.
Arrgh. Basically, if the Chinese model happens here, a shitload of people will be laid off (some for the better - ie, bloodsucking lawyers and parasitic promo/marketing people, some for the worse - ie, recording engineers and packaging people.) For that reason alone, expect both artists and the existing business interests do whatever it takes to make sure widespread COMMERCIAL piracy stays illegal. As for widespread downloading, that's another issue entirely...
To be honest I don't listen to pop music at all. It's the auditory equivalent of "My Mother the Car". I am far more interested in music as art - and from what I've seen here China is failing miserably in producing anything that I would want to listen to.
I couldn't give a rat's behind whether or not the latest Devo album cost $2 or $20. But I do care if the music industry and where it is headed is going to make it impossible for me to get a DVD-Audio recording of the works of somebody who actualy making a real contribution music.
The prediction that the music industry is heading towards the current situation in China does not please me at all.
Chinese people might be free to copy and share music they enjoy with their friends? Unless it's political, then they shoot you and the band. Here they just put you in jail. How's that for killed dead?
Someone in China was complaining about having to work so hard? Say it ain't so! ''In China, we have to give so many concerts that we do not have time to rest our voices.'' It must be true.
My fingers are sore, and so are my sides.
Friends don't help friends install M$ junk.
And the music just gets worse. There hasn't been much original music released since Nirvana and the Smashing Pumpkins broke in the early 1990s. It's not because the artists suck. It's because the record companies only invest in sugar-pop acts that are too watered down to be interesting. Is there a band that has artistic ingenuity or a political point? They won't get a contract, because the record company won't take a risk.
I'd pay about a dollar per song for a CD today. If I could find one I was interested in.
The whole music thing is overrated anyway. It's all just entertainment. In the end, you can get too much entertainment.
The big record companies have dug themselves into a deep hole. They're too big to release innovative or strongly artistic acts. They're too large and bulky to move nimbly. The giants are going to fall. Both music and art in general will be better for it.
"In the United States and Europe, stars have it easy if they make a hit record," said Han Hong, named best female artist this year at Channel V's China Music Awards, and whose renditions of Tibetan songs have become nationally popular. "In China, we have to give so many concerts that we do not have time to rest our voices."
Am I supposed to feel sorry? Since when is it news that musicians, for the most part, have always been largely poor? It's those "posers" and "fakes" that somehow strike it rich are now bitching. They've been a part of the "corporate pop" machines for so long that they've forgotten what it meant to be creative in the first place. They've been given songs to sing and now get paid to sing a song that someone else wrote just because teens these days need to hear a new song from the same old cookie-cutter pop star.
Let's get real people. Music is good this way, honestly. We want to be able to choose for ourselves who is and who isn't "in". I'm tired of the radios force-feeding me the same old shit. I want something new, fresh, or maybe not-so fresh. Something raw but honest is way better than a "polished" whore/hottie who can sing. It's about time the fans demanded honesty in a musician's musical expression. After all, music isn't about honesty, it's about one's unique interpretation of a song, genre, or otherwise. Music is about allowing those who truly love it to choose what they love. The musician is the one who must also love music enough to effectively stress how much appreciation he or she has for music. Let us all live well together and with music, we can all continue our sanity.
Not completely. The magic word is "recoupable." The record label gives you X amount of dollars to record your album, to hire outside players, to live on while you dedicate your life to music, etc. Usually they will say that this money is "recoupable." Recoupable how? Through record sales, mostly. Basically, whenever a record sells, the record companies takes your cut and puts it back toward your "debt."
However, this debt is not like a loan from the bank. If you end up never making enough money to pay back the full costs that you owe through record sales and the ilk, then that's it. Some guy in dark shades won't show up on your door asking you for more money, no bankruptcy, etc. The company eats the loss.
The real debt comes with long term deals. Let's say Band A records album 1. The album costs $20K to make. The band ends up making a cut of $15K on record sales. They're $5K in the hole. The record label could drop the band and just eat the $5K loss, but they tell the band that they want to do a second album (generally, the label has the option to force the band into another album or drop them at their free will). However, this time, since the band did ok last time, the label decides to spend a bigger budget on the band with hopes of a bigger return. Even though it has to eventually come out of the band's pocket, the record label will have a lot of say in how much gets spent. So Album 2 has a budget of $50K. The album goes out, the band recoups $30K back in record sales. So that's another $20K in the hole.
Since the company took an option for the second album, now they have to do a third album (options often come in pairs). They say "We're not wasting anymore money on this band than we have to since they're not recouping." They make a back-to-the-roots Album 3 with a $10K budget. The album is technically a hit. The band recoups $40K in record sales. But guess what? You still owe $5K from the first album, and $20K from Album 2. From your first hit record, you get a grand total of $5K. And now that you're a hit, the record label may not let you leave...
This starts a vicious perpetual cycle in which an artist can potentially NEVER see cash back from selling albums. If I had to personally say that there was a way to fix this system, I would say: spend less money on albums. Only sign naturally gifted talent and cultivate grassroots appeal rather than hiring talentless hack pairs-of-breasts and spending millions on their production fees. I'll bet John Mayer, who writes his own stuff and performs fairly simple music, saw some profits from his MTV hits, though I can't say for sure.
BTW, performance royalties for getting your song on the radio or performing live can never be used to recoup expenses for the album, partly because these are paid out by a different organization. This is why musicians usually need to perform to see any money for themselves. It's quite possible for a musician to make a half-decent living playing music while the label is losing money on him. If you walk up to a musician and tell him you paid to see his gig because you downloaded his music off the net, he may not be too peeved at you.
Libertarians somehow believe that private businesses should be stronger than governments but weaker than individuals.
Of all the record companies out there, do any of them have the wherewithal to really skirt the problem? Specifically, do you think anyone will actually start to work towards a virtual star?
It's certainly not inconceivable now. You hire (on salary) an actor to provide a body-motion template for the mocap; you also hire (salaried) vocalists and songwriters to provide the music. Never let any of these people meet, keep their contracts separate. Real human backing bands are easy enough to hire. Also get yourself a floor full of Dicreet Logic stuff, and a fully outfitted music video soundstage, and you could basically render yourself a rock star.
It's funny - we talk about how backwards and tech-challenged the record companies are, because they cannot deal with the likes of P2P... it's almost inconceivable to imagine one of them taking the initiative like this. Well, one of the old ones, anyways....
If Jesus wants me it knows where to find me.
get your ass out to your local bars and clubs, and support local music!!!
The record companies could make much more money from this method than their current model, which is probably why they aren't doing it yet. Easier to complain than change.
Ahh yes... the miraculous money making machine. It's amazing:
-a
If you sell your records at $20 a copy, you will not sell a million of them. Anymore. But if you sell your records at $10 a copy, you might. And if you sell them at $5 a copy, it's that much more likely.
So, yes, you can get paid. But in the current economic environment, the substitute goods (Economics 101 terminology) mean that you can't charge monopoly rent for it anymore. That is to say, music downloaders would rather have the convenience of an audio CD than the poor audio quality of MP3, as long as the audio CD isn't priced too high. The current price of 15 to 20 dollars is too high.
As an alternative, put out a mega-album with 2-3 CDs, a big booklet filled with lyrics, photos, art, and interesting notes. Put it all in a quality sleeve/jacket/jewel case. If the music is decent, you could probably charge 35, 40, maybe 50 dollars for it.
The days of easy money for musicians, groupies, executives, and the rest are over. Period. No more cutting a record for five weeks that makes millions. From now on, if you want to be a musician, you're going to have to work for your money.
As for the musicians who still want unlimited money, furs, diamonds, private airplanes, giant mansions, and all the illegal drugs they can inject in their ears, from now on they're going to have to work a lot harder to get all that dough.
The real winner in this will be that art form known as music.
Having spent some time in Vietnam, Philippines, Thailand, China and India, I believe the model for young artists to follow in these countries is the Grateful Dead model. More and more kids are going online in Asia. China already has a good broadband infrastructure. Give away your music. Join with other artists to set up local gigs. I have seen some of the campus gigs in these countries. They are so much full of life. This region has such a large population (and geographically large). I am sure the artists can sustain themselves. All we need is some entrepreneurs to come up with localised event management companies.