SPEAKING
FREELY Ringtones may be music to
Chinese ears By
Anna-Lucille Montgomery
Speaking
Freely is an Asia Times Online feature that allows
guest writers to have their say. Please click hereif you are interested in
contributing.
Rates of music
piracy are notoriously high throughout China's
audio-visual industries, with industry executives
generally quoting piracy rates of between 75% and
95%. Disc piracy is common, particularly in
wealthier cities along China's eastern seaboard.
People living in less affluent or developed areas
still use pirated audio cassettes, which are
cheaper to copy than digital media. Cassette
players, which are capable of both playing and
copying music, are much more affordable to people
living in poor areas of China than computers. They
are also easier for less educated sectors of the
population to use: they do not require computer
literacy or the ability to romanize Chinese
characters (pinyin). Expensive hardware
investments are also unnecessary, allowing
anyone with a tape
recorder and a blank cassette to copy and share
music using this format, regardless of their
access to the Internet.
At the same time,
the development of an extensive broadband network
in China's cities and growing levels of PC
ownership among the emerging urban elite are also
resulting in high levels of music downloading. MP3
downloading is particularly common among
university students and young professionals, who
are more likely than other sectors of China's
population to have access to the Internet, an
interest in music and the skills to engage in this
activity.
Consumers have no incentive to
pay for MP3 downloads. Chinese Internet search
engines such as baidu.com and emule provide fast, free,
easy music downloading. To date, no individual
Chinese citizen has ever been prosecuted for
downloading music illegally, although action has
been taken against some websites by copyright
owners, for example, the recent high-profile
lawsuit by several music labels against baidu.com.
Music labels such as Sony have been
involved in high-profile events aimed at raising
awareness of the impact of piracy on the music
industry and on artists: in November 2003, between
50,000 and 60,000 people packed Shanghai Stadium
for the "Asia Superstar Anti-Piracy Rally
Concert".
China's central government has
undertaken a number of publicity campaigns
encouraging consumers not to purchase pirated
audio-visual products, including television and
billboard advertisements with slogans such as "be
a good Beijinger, resist piracy". In spite of
these efforts, Chinese consumers face little, if
any, moral stigma related to music downloading.
Consumers are now used to downloading music
without paying, and even if they did want to
download legally, few legitimate services are
available. According to Beaker Huang, Marketing
and Business Development Director for Warner
Music, China, it took Warner a long time to
realize that university students were not their
biggest market, but their biggest liability: " ...
as soon as they get to college the only way
[students] are going to be spending money on music
is [that] they [will] keep on spending money to
upgrade their PCs so that they can be downloading
more songs."
PC ownership and access to
the Internet Internet access is growing
rapidly and MP3 players are cheap and readily
available. According to the China Internet Network
Information Center there were 103 million internet
users in China as of July 2005, 53 million of whom
have broadband. High speed broadband networks are
being rolled out in most urban centers, and China
is expected to have 34 million broadband
subscribers by the end of 2005. This is impressive
compared with the United States, which still has
only 39 million subscribers. By the end of 2007
China is expected to have 57 million broadband
subscribers, compared with a projected 54 million
in the US. Although at present only about 2% of
Chinese households own PCs, this number is growing
fast. The BBC has estimated that by 2010, 178
million new PCs will have been purchased in China.
Also, Internet cafes still play an important role
in providing access to the Internet. This has
significant implications for the types of online
music models that new media developers might
choose to apply in China. According to Ruuben van
den Heuvel, Vice President of digital business
Asia at Sony BMG: "In China 100 million people
access the Web through Internet cafes. For them it
is not about downloading, it is about the
experience. In the US it is still all about
ownership."
Projects like Microsoft's
Venus operating system have focused on
dramatically lowering the cost of accessing the
Internet from home, a move which would help bring
millions of previously isolated consumers into the
digital realm. Venus is designed to allow a web
browser, a low-end personal computer and a video
compact disc player to be combined in a single box
that can be used in conjunction with a television,
for people who cannot afford a traditional PC.
Another, more recent development is Internet
Protocol Television (IPTV), which allows
television or video signals to be distributed over
broadband Internet connections, using Internet
protocols. Telecommunications providers are also
looking towards IPTV as one of the next major
developments in content delivery in China. Rapidly
rising rates of broadband penetration and the
launch of IPTV services by Internet service
providers will undoubtedly create new
opportunities for digital content providers.
According to IDC, although there are expected to
be less than 300,000 IPTV subscribers in China by
the end of 2005, this figure is expected to reach
nine million by 2008.
Mobile devices
and services China has experienced enormous
growth in mobile phone uptake over the past five
years. Each month about 5 million people sign up
for mobile services for the first time. Saturation
of the handset market is prompting the industry to
focus on handset upgrades and value-added
services. Mobile technology companies predict that
overall growth in the market will continue, and
expect to see sharp increases in demand for mobile
content as 3G networks expand and the content
becomes more affordable.
Mobile phones are
already providing an important revenue stream for
Chinese record labels. Consumers are paying for
mobile ringtones and ringback tones, and copyright
owners have had some success in ensuring that they
receive a portion of the money being spent on
these services. Many record industry players see
mobile content as key to the future of China's
music industry. Chinese consumers are spending a
high proportion of their income on mobile
telephones, accessories, and the content required
to personalize them.
In contrast to the
slow development of online MP3 sales, two key
factors are making it possible for a
copyright-compliant mobile music market to emerge:
first, an established billing system; and second,
the ability to control the distribution of mobile
phone content through a limited number of mobile
service providers. In general, the cost of mobile
content services is simply added to each
customer's monthly bill. Mobile service providers
are responsible for collecting payments and
passing royalties (or a negotiated fixed amount)
on to copyright owners.
Legal
protection for copyright owners and user
rights Membership of the World Trade
Organization (WTO) requires China to enforce its
domestic intellectual property laws and to meet
the obligations relating to copyright protection
set out in the agreement on Trade Related Aspects
of Intellectual Property (TRIPS). China has been
involved in a steady process of copyright reform
in accordance with international practice since
the 1980s. In November 2001, as a result of
joining the WTO, the government approved
amendments that brought China more closely into
line with TRIPS and the Berne Convention. (The
Berne Convention for the Protection of Literary
and Artistic Works is an international agreement
first adopted at Berne, Switzerland in 1886,
mostly at the instigation of novelist Victor Hugo.
It established the recognition of copyrights
between sovereign nations; previously, copyright
owners would be protected in their own states but
have no protection in others.)
Anti-circumvention
provisions Technical protection measures
put into place by the copyright owner are
explicitly protected under Article 47 of the
Chinese copyright law (1990). Civil and
administrative remedies are available for any act
of intentionally circumventing and damaging
protection measures put into place by the
copyright owner, and for deliberately deleting or
altering electronic rights management information,
without the copyright owner's consent.
Moral rights Authors have a
right to be acknowledged for their efforts (a
right of attribution) and a right to be consulted
in relation to any changes made to their work
(rights to alteration and integrity) for an
unlimited period. These rights exist separately
from the economic rights associated with
copyright, and continue to belong to the author
even after the exploitation rights have been sold
on. Copyright is protected for the life of the
author plus fifty years. Works created by
corporations or other entities are protected for
fifty years, as are cinematographic, film or
photographic, television or audiovisual broadcast
radio and television programs (Fitzgerald and
Montgomery 2005).
Fair
use China's copyright law provides
extensive fair use exceptions, including for
"private study, research or self-entertainment".
Nonetheless, copyright owners do have legal
protection against sites providing music downloads
without payment to or permission from the
copyright owner. In addition to the
anti-circumvention provision of the law, it is an
offense in China to reproduce or distribute a
product of sound or video recording, or to make it
available to the public through an information
network, without the permission of the producer.
Legal remedies According to
articles 46, 47, 49 and 50 of the copyright law,
victims of copyright infringement can seek civil
and administrative remedies, including monetary
damages, injunctions, public apology and the
destruction of the offending products. The onus of
proof rests with alleged infringers. The copyright
law requires infringers to pay compensation
according to the actual injury inflicted on the
copyright owner by the infringing act, or
according to the profits derived from the
infringing work. In cases in which it is difficult
to establish the right holder's actual injury or
the infringer's unlawful income, the courts may
award statutory damages of up to 50,000 yuan
(US$6,200). China's 1997 Criminal Law also
provides penalties of up to seven years
imprisonment for copyright related offenses.
Three channels for copyright enforcement
exist in China: civil, administrative and
criminal. Civil action requires parties to take
action on their own behalf, through the courts, in
response to infringement of their rights.
Administrative action is taken by the
Administrative Department for Copyright directly,
rather than through the courts. Prosecution of
criminal actions can only be undertaken by the
state. This means that, in addition to civil
action, copyright owners also have the choice of
working with the copyright department directly in
order to stop infringement. The Copyright
Department has the power to issue injunctions,
confiscate unlawful gains, confiscate and destroy
infringing material and the tools used to create
them, and to issue fines to punish infringers.
However, while administrative authorities have the
power to impose fines, only the courts have the
power to require infringers to pay compensation to
copyright owners.
The role of DRM, and
its alternatives The biggest challenge for
Digital Rights Management (DRM) in China is the
wide availability of unprotected content. (DRM
refers to any technical method used to control or
restrict the use of digital media content -
including music, artwork, computer games, and
movies - or electronic devices with such
technologies installed.) It is unrealistic to
expect users to pay for content that carries
restrictions relating to the ways in which it can
be copied, shared and redistributed while
unrestricted versions of the same material are
available for free elsewhere.
Current
levels of piracy are forcing copyright owners in
China to develop business models that take into
account the distribution environment. For example,
major record labels originally attempted to charge
Chinese audiences prices for CDs comparable to
those demanded in markets such as the US and
Australia. However, since 2003, all of the major
labels have lowered their prices in an attempt to
compete with pirated products. Advertising,
product endorsements and sponsorship are also
being pursued as important strategies to generate
revenue streams.
Astoundingly, ringtone
downloads and ringback tones have arguably become
more significant as a source of income for many
Chinese music industry players than royalties from
album sales. Artist management services, which
allow record labels to capitalize on advertising,
publicity and concert fees generated by their
stars, are also much more significant in the
Chinese music industry than they are in markets
where intellectual property rights are easier to
enforce.
In this environment, new
technology, which can be engineered with
controlled distribution in mind, will play an
important role in China, where existing media
formats, such as cassettes and CDs, are already
established as the center of a massive industry of
un-regulated distribution. It is highly unlikely
that the genie can be put back into the bottle
when it comes to established piracy networks.
Nonetheless, technological developments that force
content to pass through a limited number of
regulated portals may help to secure new income
streams in the future.
The success of
mobile content services in an environment where
most copyright owners are struggling to realize
the value of their intellectual property may
provide lessons for the sector more generally. The
fact that consumers have no choice but to purchase
mobile services from a restricted number of mobile
providers makes it possible, for the most part,
for copyright owners to monitor the distribution
of their products. It is conceivable that similar
arrangements with IPTV service providers may help
to resolve some of the problems associated with
micropayment for online content as the sector
develops.
Greater transparency and
accountability within China's group collection
agencies, as well as among internet service
providers and search engines, will also be crucial
to realizing the potential of China's copyright
industries. The availability of illegal online
content cannot be controlled without such changes.
But reducing the availability of free online
content will not be enough. China's copyright
owners will also have to ensure that legitimate
content is available quickly, conveniently and
easily to consumers when they want it. The impact
of DRM measures on the attractiveness of the
content being offered will need to be considered
in the context of this supply/demand equation.
The bottom line It is possible
that the copyright environment in China may force
intellectual property owners to move away from a
royalty-based system for content provision.
Advertising is already playing a vital role in
generating music industry income. It may be
necessary for record labels to consider an
integrated business model, in which content is
given away online, in exchange for audience
numbers and willingness to purchase mobile content
services, merchandise, tickets to live
performances and other associated products. It may
be time for China's music industry to accept that
the intrinsic value of their products lies in the
ability to attract audiences, to entertain, and to
spark an interest in purchasing associated
services. Consumers who are used to receiving
content for free will not willingly shift to a
system which expects them to pay. This will be
particularly true if the products they are asked
to purchase are rendered less attractive and
convenient to use by DRM restrictions.
Anna-Lucille (Lucy) Montgomery
is a doctoral candidate and researcher at
Queensland University of Technology's Creative
Industries Research and Applications Center. She
is currently completing the final year of her PhD,
titled: Copyright, Creativity and Economic
Development - Intellectual Property and the
Creative Industries in Post-WTO China.
Speaking Freely is an Asia Times
Online feature that allows guest writers to have
their say. Please click hereif you are interested in
contributing.
