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Wednesday, May 04, 2005
If pirating grows, it may not be the end of music world...

USA Today posted an article about CD piracy...

"...Just picked up a CD by Yu Quan, a duo that is one of the hottest rock acts in China. Danceable. Very dramatic. As if Justin Timberlake had joined Journey and the band sang in Chinese. I bought the CD in a legitimate music store on one of the busiest corners in Beijing, a few blocks from Tiananmen Square. The CD came shrink-wrapped, complete with a slick insert of photos and lyrics, and cost the equivalent of $4. Yet despite the retail setting and packaging, the CD is most likely a pirated copy. The pirates are so good, hardly anyone can tell the difference. Yu Quan, like every music act in China, gets almost no income from CD sales, even though millions of its CDs have been sold. As soon as a CD is made, the pirates are on the street, offering them for a fraction of the retail price. Stores sell pirate copies. Legitimate CDs all but vanish. So artists have to regard CDs as essentially promotional tools, not as end products. Yu Quan makes money by performing concerts, getting endorsement deals and appearing in commercials. If people hear and like Yu Quan's songs on pirated CDs, at least they'll be more likely to come to the concerts and buy what the duo endorses. It's possible that this is the future of the global music industry. And even though that sounds dire for music and musicians, surprisingly it might not be. This all started to become clear with one comment. I was riding through Beijing in a car with Calvin Quek, a Beijing-based vice president of Silicon Valley venture-capital firm Global Catalyst Partners. Quek knows Chen Yufan and Hu Haiquan, the two guys who make up Yu Quan. We were listening to Quek's iPod, plugged into his car stereo. I asked Quek if there was an equivalent of iTunes ? a legitimate music download service that charges for music ? in China. With no hesitation, Quek answered: "No, and there never will be." Music pirating is so rampant and so entrenched in China that it's unlikely to ever be eradicated. Chinese consumers have come to believe that music is worth, at most, a few cents a song, and that copying and sharing music are totally acceptable. In all probability, no company will ever be able to sell $15 CDs or 99 cents-a-song downloads in the world's most populous nation. The International Federation of Phonographic Industry, which tracks music copyright issues worldwide, agrees. It figures 95% of music sales in China are of pirated copies. Instead of predicting that China will change as it engages with the global economy, the federation warns that China is, in fact, the leader. The federation's chairman, Jay Berman, has been quoted as saying, "The business model for the record industry worldwide is moving toward resembling what we see in China today." In the USA, free downloads of copyrighted music are driving the recording industry to sue teenagers and holler about the morality of obtaining songs for free. But if China is the future, that's all in vain. The genie is out of the bottle. Eventually, recorded music will no longer make money. That would be nice for consumers and really bad for record companies and retailers. But the biggest concern is that this will be terrible for artists. If artists can't earn money, economic logic says they might stop making music, which would be a major loss for society. But is that equation true? While visiting USA TODAY last week, Roger McGuinn, who led the Byrds in the 1960s, said he earned just 0.0007 cents on each early Byrds album sold. He adds that although Arista Records sold 500,000 of his solo album, Back From Rio, McGuinn never got a penny. In other words, thanks to the machinations of the recording industry, McGuinn has never made any real money on even his most popular recorded music. Yet he's done OK and now has a forward-thinking business model. He has a Web site,, where he posts free songs. McGuinn made his most recent solo CD by recording it on his laptop and paying to have copies produced and packaged. He sells the CDs online and at concerts and says it's the first time he's ever made a profit on an album. The online music, the CD and a stalwart Byrds fan base all fuel interest in his live performances, which often sell out small venues. That's where he makes his money. McGuinn is apparently not lavishly rich, but he seems comfortable and is still making music. Yu Quan and most other Chinese pop artists similarly find ways to make money other than through selling CDs. A lot of it comes from sponsorship. Clothing, shampoo and computer brands pay to advertise at a concert. A bottled-water company put singer Wang Lee Hom on its products. Chinese rock stars aren't getting as wealthy as, say, Michael Jackson, but Quek raises an interesting question: Why should they? Only a relatively few American rockers ever sell enough CDs to get fabulously rich. Should society care if rockers can't afford to build their own backyard amusement parks? The vast majority of music artists bob along in the middle. They don't sell enough CDs to earn out their advances. They earn a living on the road and maybe from publishing royalties if they write songs. Such artists would benefit if the industry shifted to a model that includes more ? and more innovative ? ways for artists to make money. In that sense, the Chinese and/or McGuinn model could help artists. Thankfully, not everything about the Chinese music business is likely to come true in the USA. All of Yu Quan's songs are apparently about love. Actually, just about all Chinese rock music is about love, because government lyric sensors won't let artists write about much else. If that were true in America, McGuinn would've done jail time for co-writing the Byrds' satirical I Wanna Grow Up to Be a Politician. Bob Dylan would no doubt be serving a life sentence. Let's hope that the new business models can keep those and other creative voices making music..."

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