transmitchina - shanghai day 2
// by Louise Upperton, photos by Tobyn Ross / Jun 4, 2010

Eight full days of programming, 36 showcases, four roadTALKS and three B2B sessions later… The word on the street is that this is one of the busiest schedules most of the delegates have ever experienced. It's not over yet…

This morning we are fortunate to be hearing from Wu Jun, CEO of R2G – a company that has established an efficient and reliable delivery system of digital music content with proper accounting as well as a process for licensing digital music in China that protects copyright owners and curbs piracy. Jun is regarded as an IT visionary and a leading Internet entrepreneur in China.

Jun's highly informative presentation is called 'Value of IP in China.' He breaks everything down clearly and precisely, stating right off the top that it's difficult for people to reach a consensus if conversations are too abstract. Jun explains that R2G was founded six years ago and specializes in the digital distribution of music in China. The reason we are all here today is because of the market potential here: 384 million Internet users and 700 million mobile users as of the end of 2009. There are an estimated 7,200 music websites in China and that number is growing.

To date, R2G has been involved in nine legal cases against seven companies in China with successful conclusions in terms of protecting the interests of copyright owners. The cases resulted in CNY 60,000 each (which is about CAD $9,000) – CNY 5,000 to 7,000 per song. However, this also resulted in a revenue of CNY 3 million from subsequent licensing to five of the companies. "So this gives you an idea of what intellectual property is worth if you decide to fight for it," states Jun. "There is regulation in place in China where artists can demand what is rightfully theirs." He says it's simply a matter of valuing your intellectual property and working in a disciplined manner.

Looking at China's digital music revenue last year, Jun explains that the consumer spend on music is USD $2.74 billion, but only about 1.57% (approximately USD $31 million) is actually collected by labels, publishers, artists and some service providers. The potential user base in China is massive, but Jun claims it's a symptom of 'dog eats dog.' He says, "Every label is willing to undercut the other label in trying to be the next big hit, which devalues the market further." He says if we concede, it will only push the value of the entire music industry down further. As a result, a large part of the consumer spend on music goes to the major carriers in China while there is another part that doesn’t seem to be accounted for properly. Why are people giving up on intellectual property management in China? The two fallacies that Jun cites are: piracy is human nature and especially intrinsic to Chinese culture; and secondly, Internet is technology and should be tolerant to piracy.  Instead, it has to be noted that piracy in China is mostly driven by commercial operations.

But there is no reason why piracy can't be reduced, it will just take more time. "The basic logic is in place," says Jun. "It just takes a lot more effort and a lot more commitment to make that happen… In the west, the onus is on the company using the content to ensure that licenses are cleared. In China, the onus is on copyright owners to enforce their IP, otherwise companies (especially the big ones) try to get away with profiting from unlicensed content." He says we can't expect the government to provide a perfect world as the Internet is always changing, but it's moving in a direction in which the content providers will get more and more bargaining power.

Jun's message is clear, "unless you protect your IP today, no one will value your content. This is the key to any business negotiation with any channel in China." He stresses that the discipline and commitment need to be there – protecting intellectual property provides value to your partners. "Should I do this now? Shouldn't I come back when everything is perfect?" which Jun claims is the common hesitation. "Unless you start to protect your IP today, you are encouraging the pirates in China to steal."

Jun notes that it is difficult to do business in music in the digital age. "We are so used to the old way of doing business as there is little consensus on how to do business going forward, but it is in the interests of the entire value chain to move into a structured environment." he says. Whether that be the pay-per-download model, the free-to-stream model or the subscription-based model. All of these forms can co-exist provided the structure is in place.

"A new product cycle is emerging in the music industry. In the new environment that is developing, it's very important that IP owners should offer partners a value proposition: the latest content, marketing and anti-piracy support." Jun brought up the example of the online video market in China which is starting to assert its IP rights. He mentions the recent Youku versus Sohu legal spats and argues that it is in the best interests of providers such as Youku to protect its content from being misappropriated by the biggest search sites in China, like Baidu.

Baidu is currently the largest Chinese search engine for websites, audio files and images with over 50% of the market share. Its revenue for 2009 was greater than USD $650 million and it's been included in the NASDAQ-100 index since 2007. The company also proactively censors content according to China's government regulations.

Jun admits he is not in agreement with the practice of Copyleft, as proposed by Kevin Leflar yesterday at the conference. "if you do not help your partners, your business will not be sustained." Jun says. The way that companies can help with piracy support is to provide letters of notice and certification, as well as notarized letters from the artist. "R2G will be able to make sure it's a financially viable business for you… One song will make a huge difference. Some cases will last 18 months, but we get it to work." Jun says there needs to be a consensus among content providers. It's important to partner with social networking sites to help promote content, but the infrastructure comes first. To be more specific, Jun says, "we work together on particular projects to make a case against certain portals that have violated IP the most… Baidu is the worst pirate in the Chinese Internet community. The significance of such a case would serve as an example for the industry. The laws are very clear – you will win your case."

Jun says they are gathering more and more support from content providers because R2G truly believes in what it is doing and how long it will take to achieve. IODA founder and CEO Kevin Arnold is still struggling with the overall environment. In the question period following Jun's presentation, he comments, "IP copyright enforcement is not something that can be easily achieved. We need to look beyond that to other solutions enticing consumers to do the right thing and by creating compelling user experiences and products."

Jun noted that Spotify seems to be on the tip of everyone's tongues here at transmitCHINA, but Chinese Internet users are already familiar with free streaming music on demand – some of services have decent usability too. Google's music service is sanctioned by the major labels in China and other search sites such as Tencent, Sina and Baidu as well as telecom operators including China Mobile, China Telecom and China Unicom all have their own music online streaming portals.

Jun concludes that there is no particular functionality between the different portals that can draw people away from piracy, and ad revenue share hasn't really worked in China, but some sites are much more transparent to their content providers and work within an IP framework.

Before lunch, delegates participate in a third set of roundtable discussions – the theme is 'Leadership and Innovation.' All of the discussions have touched upon this theme – what will define successful leadership in the music business in China over the next 10 years? It's clear that creative industries are in a transition period and a sustainable music business model will require fluidity combined with technological innovation and a defined legal framework. The key attributes to a healthy ecosystem that continue to resurface are: conversation, collaboration, support and patience.

The afternoon wraps up with an intimate interview with Seymour Stein by Yang Haisong of P.K. 14. Stein says that recorded music is dying and he'll do anything to help see it live. He believes recorded music and live shows go hand-in-hand. "Breaking a Chinese artist in America is key," he says. "The Chinese will become champions of the music business if they see this work."

As a conclusion to this year's transmitCHINA conference, the managers of Flash Lightin', The Racoons, Ohbijou and Parlovr take to the stage to provide their thoughts and feedback on touring in China for the past week. Closing remarks came from Tyl van Toorn, followed by a final reception on the second floor of the beautiful River South Art Centre.


This evening, the final showcase (presented by the Province of Ontario) features Ohbijou, illScarlett and Flash Lightnin'. There is a large crowd at Dream Factory tonight and everyone is in the celebrating mood. Thoughts are being shared and experiences are exchanged.

Many people have a long journey ahead of them tomorrow to get back home, but they are leaving inspired, full of information and new ideas, and with fond memories of China. Until next year… 健康与幸福 (Jiànkāng yǔ xìngfú).


To see the full Gallery for Shanghai Day 2, please visit Tobyns site HERE.

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we are looking for promotors tour organisators for top west artists and bands


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