Revel Lever®

Solid article in the New York Times yesterday on the vast burgeoning entertainment market of China. Once largely closed to foreign music, the country has gradually loosened restrictions and — at a time when record sales here in the West continue to plunge, and new sources of revenue have become essential — emerged as a crucial territory on pop’s global map.

Summary here:

To no surprise, there is rampant piracy of CDs and a minimal touring infrastructure. And many services taken for granted elsewhere, like the collection and distribution of recording royalties, are not fully established. But despite these obstacles, the broad commercial potential is making the country an irresistible draw, with money to be made from live shows, merchandise and technologies like cellphone ring tones.

But many Chinese labels, nimble and unencumbered by tradition, have adapted to the contaminated marketplace in ways that Western companies are struggling with. Viewing CDs as a loss-leader, they routinely sign groups to all-encompassing contracts that allow the label to share in revenues from touring, merchandise and endorsements.

The labels say that piracy has made the effort futile. The International Federation of the Phonographic Industry, a trade group, estimates that 85 percent of the CDs sold in China are counterfeit. Leong Mayseey, the federation’s regional director for Asia, says the piracy rate for downloaded songs is close to 100 percent.

“The Chinese music industry will be the model for the world’s music industry one day,” said Shen Lihui, the founder of Modern Sky, a small company that has released around 100 albums — most money losers, Mr. Shen said — but also has a host of auxiliary businesses, producing books, videos and Web sites.

So hey, it’s the next frontier and they are already accepting of music as the loss-leader to fuel other revenue streams. Very exciting, forward-thinking stuff. But, it should be noted that sponsorships are already comfortably the norm in today’s Western music festival culture and leveraged to keep ticket prices at a reasonable rate - just look at all the sponsors of major festivals like Lollapalooza, Bonnaroo, Coachella, and Austin City Limits.

And for the record, I did check out Lonely China Day when they toured here in the US last winter and they were very cool. Regrettably, Rebuilding the Rights of Statues did not perform that night.

On a side note, and although it’s not exactly China (rather South Korea), I always thought this blurb in Wired (September 2006) was really great example of the how an artist’s music will be monetized going forward: 403 Ways To Slice A CD

For All The Rock In China - New York Times