Shanghai - Can global music companies make money by giving away songs in China, where piracy is rampant?
They certainly hope so. Last Monday, the world’s biggest record labels, including EMI, the Warner Music Group and Vivendi’s Universal Music, said they would seek to profit here by working with Google and offering free downloads of music to anyone inside China.
Google, which has no plans to offer the service elsewhere, hopes to build traffic and win new advertisers by allowing the Chinese to search for free music on its site.
Record labels say that instead of earning money from each download, they will share advertising revenue with Google’s partner in the deal, a Chinese company called Top100.cn.
The partnership, analysts say, could help determine the future of how valuable content is distributed in China, which has already overtaken the United States as the world’s biggest Internet market.
Until now, China has been a hotbed of online piracy and free downloads of music, film and even television shows.
According to the International Federation of Phonographic Industries, which represents the global record makers, 99 percent of the music downloaded in China violates copyrights.
Lawsuits by major music labels and promises by the Chinese government to crack down on Internet piracy have failed to deter the practices.
But now, the music industry says that, at least in China, it can live with giving away music.
“The level of online advertising in China is quite mature, so we’re willing to try this out,” said Sandy Monteiro, a senior vice president at the Universal Music Group.
The deal creates a powerful tandem — the world’s biggest online search and advertising engine, paired with powerhouses from the music industry —aiming to take on China’s leading search engine, Baidu, whose Web traffic has grown partly because of its links to free, unlicensed music.
Global record labels have sued Baidu, trying to force the company to stop linking to unlicensed sites. But Baidu, which declined to be interviewed for this article, has said it is simply a search engine and does not engage in piracy.
With its popular searches, Baidu has managed to keep far ahead of Google in China, with a search market share approaching 65 percent.
But analysts say Google could be significantly aided by the new music partnership.
“It’s a smart move for Google,” said Ma Xiushan, deputy director general of the China Intellectual Property Society in Beijing. “Google has realized the point: they have to open the access for downloading so that they can compete with Chinese competitors and attract more users.”
Google executives say they acted because a music search function was one of the few elements they did not have in China.
According to government figures, about 84 percent of China’s nearly 300 million Internet users download music over the Web, and most of it is used for cellphone ring tones.
Google hopes that by offering free, high-quality music — giving consumers fewer worries about viruses or damaged tracks — it can cut into Baidu’s lead.
For the music industry, which believes it has lost hundreds of millions of dollars to online piracy, the deal promises to deliver a steady stream of revenue and could also put pressure on Baidu and other Chinese Internet companies to distribute legitimate tracks or risk being locked out of future deals.
Not everyone believes it will work.
“Google’s move is just burning money to compete with Baidu’s dominance,” said Guo Chunlong, founder of yobo.com, a music and entertainment Web site. “Sharing ad revenues with music companies — this business model is not sustainable. How many page views could generate the money both Google and the music companies expect?”
Music executives dispute that. But they say the China deal is not a model for the rest of the world. They say different regions call for different approaches — some that charge for downloads, some that stream music for a single subscription price and some that are supported by advertising.
In China, they decided an advertising-supported model was best.
“China was a curious place,” said Mr. Monteiro at Universal Music. “It was the one market we couldn’t crack. And then Google approached us about this model.”
Erik Zhang, one of the founders of Top100.cn, said advertising-supported free downloads were just the first of several stages in the proposed deal.
The partners say they could broaden offerings to include paid V.I.P. memberships, free concert tickets or backstage passes and other benefits.
But one thing is clear: Google and its partners want to limit this experiment to China.
For instance, the site — which will eventually offer about 1.1 million tracks — is in Chinese, and only Internet addresses based in China can download free music. Could China’s clever pirates download this music free and then swap it or sell it in other parts of the world, possibly undermining the system?
Last week, for example, a user downloaded a music track in China and easily shipped it to a friend in London.
Music producers said customers might try this, but they are trying to put up legal and technical hurdles to such ploys.
“We’ll definitely need to watch it,” Mr. Monteiro, of Universal Music, said.
1 comment:
Google and Music Labels Bet on Downloads in China
By DAVID BARBOZA
6 April 2009
Shanghai - Can global music companies make money by giving away songs in China, where piracy is rampant?
They certainly hope so. Last Monday, the world’s biggest record labels, including EMI, the Warner Music Group and Vivendi’s Universal Music, said they would seek to profit here by working with Google and offering free downloads of music to anyone inside China.
Google, which has no plans to offer the service elsewhere, hopes to build traffic and win new advertisers by allowing the Chinese to search for free music on its site.
Record labels say that instead of earning money from each download, they will share advertising revenue with Google’s partner in the deal, a Chinese company called Top100.cn.
The partnership, analysts say, could help determine the future of how valuable content is distributed in China, which has already overtaken the United States as the world’s biggest Internet market.
Until now, China has been a hotbed of online piracy and free downloads of music, film and even television shows.
According to the International Federation of Phonographic Industries, which represents the global record makers, 99 percent of the music downloaded in China violates copyrights.
Lawsuits by major music labels and promises by the Chinese government to crack down on Internet piracy have failed to deter the practices.
But now, the music industry says that, at least in China, it can live with giving away music.
“The level of online advertising in China is quite mature, so we’re willing to try this out,” said Sandy Monteiro, a senior vice president at the Universal Music Group.
The deal creates a powerful tandem — the world’s biggest online search and advertising engine, paired with powerhouses from the music industry —aiming to take on China’s leading search engine, Baidu, whose Web traffic has grown partly because of its links to free, unlicensed music.
Global record labels have sued Baidu, trying to force the company to stop linking to unlicensed sites. But Baidu, which declined to be interviewed for this article, has said it is simply a search engine and does not engage in piracy.
With its popular searches, Baidu has managed to keep far ahead of Google in China, with a search market share approaching 65 percent.
But analysts say Google could be significantly aided by the new music partnership.
“It’s a smart move for Google,” said Ma Xiushan, deputy director general of the China Intellectual Property Society in Beijing. “Google has realized the point: they have to open the access for downloading so that they can compete with Chinese competitors and attract more users.”
Google executives say they acted because a music search function was one of the few elements they did not have in China.
According to government figures, about 84 percent of China’s nearly 300 million Internet users download music over the Web, and most of it is used for cellphone ring tones.
Google hopes that by offering free, high-quality music — giving consumers fewer worries about viruses or damaged tracks — it can cut into Baidu’s lead.
For the music industry, which believes it has lost hundreds of millions of dollars to online piracy, the deal promises to deliver a steady stream of revenue and could also put pressure on Baidu and other Chinese Internet companies to distribute legitimate tracks or risk being locked out of future deals.
Not everyone believes it will work.
“Google’s move is just burning money to compete with Baidu’s dominance,” said Guo Chunlong, founder of yobo.com, a music and entertainment Web site. “Sharing ad revenues with music companies — this business model is not sustainable. How many page views could generate the money both Google and the music companies expect?”
Music executives dispute that. But they say the China deal is not a model for the rest of the world. They say different regions call for different approaches — some that charge for downloads, some that stream music for a single subscription price and some that are supported by advertising.
In China, they decided an advertising-supported model was best.
“China was a curious place,” said Mr. Monteiro at Universal Music. “It was the one market we couldn’t crack. And then Google approached us about this model.”
Erik Zhang, one of the founders of Top100.cn, said advertising-supported free downloads were just the first of several stages in the proposed deal.
The partners say they could broaden offerings to include paid V.I.P. memberships, free concert tickets or backstage passes and other benefits.
But one thing is clear: Google and its partners want to limit this experiment to China.
For instance, the site — which will eventually offer about 1.1 million tracks — is in Chinese, and only Internet addresses based in China can download free music. Could China’s clever pirates download this music free and then swap it or sell it in other parts of the world, possibly undermining the system?
Last week, for example, a user downloaded a music track in China and easily shipped it to a friend in London.
Music producers said customers might try this, but they are trying to put up legal and technical hurdles to such ploys.
“We’ll definitely need to watch it,” Mr. Monteiro, of Universal Music, said.
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