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    China’s Media Regulator Admonishes Music-Streaming Services

    Exclusive rights deals between Chinese internet giants and Western record labels are bad for the domestic music industry, says SAPPRFT.

    Once chastised for supporting digital music piracy, China’s tech giants are now zealous copyright crusaders, vying against each other for exclusive deals and stamping out smaller competitors, much to the chagrin of the country’s media regulator.

    On Sept. 12 and 13, the State Administration of Press, Publication, Radio, Film, and Television (SAPPRFT) called together the heads of internet companies and record labels, and ordered them to stop signing exclusive content deals, driving up prices for song rights, and using artists’ work without authorization.

    According to online notices, SAPPRFT issued its warning to Tencent Music Entertainment Group, Ali Music Group, NetEase Cloud Music, and Baidu Taihe Music — all owned by enormous companies — as well as to over 20 domestic and international record labels, including Universal, Sony, Warner, and Emperor Entertainment.

    They all received the same message: that their business practices were “not conducive to the wider dissemination of musical works, or to the healthy development of the industry,” because artists whose rights they secured were often being limited to just a single platform — pop star Jay Chou on Tencent Music, for example. They were also told to resolve any copyright disputes that might arise through negotiation rather than litigation, and to better handle complaints from copyright holders.

    The meeting follows years of lawsuits surrounding music copyright infringement, including a 2014 feud between NetEase and Tencent that devolved into a litigious free-for-all when Kugou and Alibaba joined the fray.

    China’s music industry once had a well-earned reputation for piracy and weak enforcement of copyright legislation, which has been in place nominally since 1990. In recent years, however, the government and major industry players have taken steps to better regulate the sector. In August 2015, over 2 million unauthorized songs were taken offline as part of the government’s “Sword Net 2015” internet policing campaign. The same year, major tech companies were obliged to sign a declaration promising to uphold and enforce copyright regulations.

    Lately, Chinese corporations have even come to seeing copyrights as a source of profit, gobbling up as many as they can get their hands on. “It’s not because [these companies] feel sorry for the artists; it’s because they want to make money for themselves,” said Marco Pearman-Parish, president of Yingke Global law firms and CEO of Corporation China, which provides legal services to foreign companies entering China. Pearman-Parish told Sixth Tone that another reason Chinese companies have started to take intellectual property seriously is to improve their image as they enter international markets.

    Tencent was among the first companies to cash in on the tide of stricter copyright enforcement, inking exclusive deals with Warner, Sony, and South Korean label YG Entertainment as early as 2014. The following year, rival Alibaba signed a licensing agreement with German label Bertelsmann Music Group.

    Philipp Grefer, a DJ and the owner of Beijing-based record label FakeMusicMedia, told Sixth Tone that China’s status quo of exclusive content deals between music providers and foreign record labels ultimately hurts the artists.

    “If you’re an artist manager, like we are, you would like to have your music distributed on all the platforms, so it has the widest reach,” Grefer said. Without pressure from managers, major international record labels would have little incentive to ensure that their clients’ music gets played, having already received their “huge advances” from the Chinese companies, he explained.

    China’s music industry is growing fast, with streaming and revenue up 30.6 and 20.3 percent, respectively, from last year, according to the IFPI Global Music Report 2017. And Tencent — whose products QQ Music, Kugou, and Kuwo boast a combined 530 million monthly active users — currently dominates the market.

    This large user base, however, remains largely unexploited. Although platforms provide subscription services for users who demand higher-quality music, most songs can be accessed for free, with the platforms generating most of their revenue from advertising. Pearman-Parish points out that Chinese pop stars, too, generally make their money from marketing and promotion, with their music serving merely as a vehicle to fame rather than fortune in a direct sense.

    A recent report from the Communication University of China in Beijing found that 52 percent of the country’s respondents were opposed to paying to stream music on apps. It also noted that China’s per capita spending on music amounted to just $0.15 in 2016 — compared with the $21.67 the average Japanese person spent on music the same year.

    But China’s music industry may look very different in future. During an interview this year at Midem, a four-day music industry conference, Tencent’s vice president, Andy Ng, said that subscription services may soon find a market among China’s younger generation, though he conceded that the older generation might be out of reach and “too used to piracy.”

    “The youngsters in China are really getting a lot more educated than the older guys,” Ng said. “They know content has a value, and they respect that, so they are willing to pay for the music services.”

    Tencent might soon be putting Ng’s theory to the test. Following their Sept. 12 meeting with SAPPRFT, Alibaba and Tencent announced a years-in-the-making agreement to share rather than hoard the rights to music from major international labels, including Sony, Warner, and Universal.

    The deal represents a big step toward making Chinese consumers pay for their music, Pearman-Parish explained. Platforms that continue to offer free streaming, for example, could be sued into oblivion by the two deep-pocketed players, who now hold all the cards.

    Pearman-Parish predicts that after initial resistance, Chinese listeners will eventually come around to the idea that music should be paid for, much the same way other countries did with iTunes.

    Editor: David Paulk.

    (Header image: Zuo Dongchen/VCG)