China and India – The sleeping music giants?

By Emmanuel Legrand

[This story was initially commissioned by the UK’s BASCA. Here’s an expanded version of the story published in the winter issue of the organisation’s magazine.]

China and India have been catching the attention of the British music community for decades. But while quite a few British artists could claim to be “big in Japan”, few can pretend to be “big in India” or “big in China”. For how long? The ambition to crack the world’s two most populated countries in the world should come a normal career step for any act, since they are extremely attractive markets.

It is easy to see why China and India may look like ideal playgrounds for British songwriters, composers, artists, labels and music publishers: both countries have an impressive population (1.3 and 1.2 billion inhabitants, respectively), with a large share of under 25. Despite remnants of poverty, they have booming economies and a growing middle class counting hundreds of millions of people with purchasing power and an eagerness to consume; plus they are the two largest markets in the world for mobile phone usage.

But the conditions for a thriving music market have not been achieved yet in both countries - although they offer a lot promise, they certainly have their own market idiosyncrasies to deal with. On the positive side, both India and China have made efforts in the past decade to bring their copyright regime in line with that of other countries.

“Generally speaking, the Chinese copyright law in itself is adequate enough to build a sound business, and like in China, India’s Copyright Law in itself is generally speaking adequate,” says KT Ang, the Singapore-based Regional Director & Regional Counsel of the International Confederation of Societies of Authors and Composers (CISAC) for the Asia-Pacific region. But, added KT Ang, in China the problem stems from the “implementation of the law” that has been “less than desirable,” while in India “the difficulties are the market practices and interpretations being made of it by the courts.”

Taste Media's
Safta Jaffery

For Safta Jaffery, Managing Director of London-based Taste Media, one of the key issues in India is the “lack of philosophy of paying royalties and no culture of respecting copyright”. Jaffery spent the most part of three years, between 2008 and 2010 focusing on the Indian and Chinese markets. He was working on a project together with ‘Slumdog Millionaire’ score composer A.R. Rahman and an established music publisher, with the ambition to create a credible publishing company in India, but the project was stopped because, in Jaffery’s words, “nobody believed we were going to get paid”.

“I think we were blindly optimistic,” explains Jaffery, who adds that it is unlikely that the system would change in the foreseeable future. “It is a system that has been working for a long time and which benefits all the main players, who are incredibly powerful and who have no interest at all in changing the way it works,” he continues. “If you have a good song, film producers will take it, pay a flat fee and that’s all. Who is going to break this mould?”

Bollywood legend Javed Akhtar
speaking at the World Copyright Summit

One who has tried and still does – with some success – is Bollywood legend Javed Akhtar. The Indian lyricist, poet and screenwriter is the most prominent figure in the fight to try to get the government and legislators change the copyright regime in the country. Thanks in part to his efforts, the Indian Parliament is about to debate and, hopefully adopt, this autumn a new Copyright Act, which will amend the Copyright Act of 1957. One key amendment in the bill proposed by the government asserts that authors of underlying works and those to whom they assign their works are each entitled to an equal share of the royalties received for non-film uses, including for performing rights.

This will mark a radical transformation from the previous regime, which was centred on the “work-for-hire” philosophy and transferred all ownership of works from composers, lyricists and performers to film producers. In his keynote speech at the World Copyright Summit in June in Brussels, Akhtar noted that even the greatest composers in the country such as A.R. Rahman did not earn royalties from the use of their works in India, but ironically did so when their works were played outside the country.

“Historically, India’s songwriters have not been able to exploit performing rights,” explains Karen Buse, MD of International at PRS for Music. “The major change in the new proposed Copyright Act is that it prohibits composers from waiving all their rights. We believe this is a good thing.”

For Universal Music Publishing Group Executive Vice President for International, Andrew Jenkins, the proposed changes in the Indian copyright law, introducing a non-cessible performing right to songwriters will be a game changer. “Songwriters and composers will not be able to assign all their rights, so this will change the situation significantly,” he explains. “Indian songwriters will enjoy an ongoing right to royalties when their songs are used in future. At the moment, there is not much incentive for [non-Indian] composers to write for Bollywood movies if they have to give up all their rights.”

Jenkins believes that the Indian government “is determined to bring India’s copyright practices in line with the rest of the world; it will create a level playing field for both local and international songwriters from the world in India.”

Most industry executives agree that India presented opportunities in the music field. “There have been three quite welcomed developments in India in the past 10 years: they have reduced significantly the level of piracy in the country, there is the beginning of a retail structure, and commercial radio is emerging as a sector,” comments Dominic McGonigal, Director of Government Relations at performers’ and record companies’ music licensing organisation PPL.

Deep Emotions's
Achille Forler

Universal Music Publishing was until recently the only major publisher operating with a stand-alone company in India - Mumbai-based Deep Emotions Publishing, a joint venture initially set up by BMG and a French expat, Achille Forler. Meanwhile, in September, Sony/ATV announced a joint venture with Sony Music India to administer and develop the company’s publishing catalogue. “This is good news,” says Forler, Managing Director of Deep Emotions Publishing. “The more the players, the better.”

Forler, who has been working in the music business in India for almost 20 years, has been focusing, alongside Akhtar, on the status of local collection society, IPRS. For historical reasons, the society has been controlled by record companies and the current situation is challenged by Akhtar and a few other authors and composers who are pushing for changes and more transparency. “Our idea is to simply say that authors’ societies must be controlled by authors,” says Forler.

PRS for Music's
Karen Buse

“There are challenges in certain areas,” PRS’ Buse says, rather diplomatically. For her, revenues collected by IPRS are growing and progress has been made in many areas and there are potential benefits for UK songwriters/composers with new satellite channels that could play international movies. “We are seeing double digit growth with public performances this year,” she explained.

However, the level of revenues remains low: PRS for Music PRS regularly receives about £5,000 per year from China and is expecting £50,000 in 2011, while streams from India should reach £50-60,000 for 2011. On the flip side, she said, PRS does collect significant amounts of money that go back to Indian and Chinese songwriters.

On the question of performance rights for recordings, PPL’s McGonigal, reports some progress in India, where revenues from performance rights for recordings grew from $26.2 million in 2009 to $40.1 million in 2010, according to the IFPI. “Revenues in India are still low but they are there and they are growing,” says McGonigal, who was the signatory of the reciprocal agreement between PPL in the UK and its sister society PPL India in 2006. He attributes most of the growth to positive developments in the mobile sphere.

Mobilium International's
Ralph Simon

According to local data, Indians bought roughly 150 million portable devices, in 2010. The mobile market reaches over 800 million consumers in India. Ralph Simon, Chief Executive Officer of Mobilium International, believes that a lot of progress has been made in India thanks to what he describes as “the mammoth rise of mobile and the delivery of all kinds of IP and copyrighted content to phones – including audio content from Bollywood movies”.

Simon notes that with “the rise of the Indian ‘underground’ music scene, more artists and writers are opting for their own control and holding all digital rights” but admits that Copyright laws in India “are vastly outdated and urgently in need of addressing digital developments of all kinds”.

In addition, the country only opened up its radio airwaves about a decade ago. However, even though about 250 stations operate in the country, very little revenues go back to songwriters and publishers in terms of rights, according to Forler. But despite administrating over 2.7 million works, Deep Emotions receives a mere $40-45,000 per year from IPRS. “Public performance rights barely exist,” he said. For Indian songwriters, it was not that there were no performance rights, but they were not getting a penny of it as they had relinquished their rights to Indian film studios, according to Forler, who wants the system to change.

Not only do radio stations pay very little right, but many of them challenge in court the validity of performing rights. To make matters worse, IPRS and authors recently suffered legal setbacks. “A couple of Indian High Court decisions that effectively held that when a composer or author agrees to have his musical work included onto a sound recording, he thereafter loses his exclusive right of public performance or broadcast to the producer of the sound recording,” explained CISAC’s KT Ang.

But even is the situation was to be rectified, western artists would not stand to gain much as there is a very limited amount of non-local music played by Indian radio stations. “There is very little pop on Indian radio – it’s mostly Bollywood music,” confirms Buse.

The same applies to China, where local repertoire dominates the market and where MCSC, the Music Copyright Society of China, is in charge of collecting and distributing royalties. PRS for Music CEO Robert Ashcroft went recently to China to meet the key players, including sister society MCSC, and assess the importance of the market.

For Buse, at best, western music accounts for 10% of the total music played in China, and PRS could claim 2 to 3% of that amount. “In China, the biggest challenges are the still rampant piracy and the very low tariffs,” explains Buse. “Up until last year, broadcasters were not paying performing rights and the new tariff is so low – 0.2% of their revenues – that it will not generate much revenues.”

CISAC’s KT Ang confirmed that British songwriters could potentially generate revenues in China, mostly through covers of songs. “If a UK work is being covered or used in China, it would be perfectly possible to make money,” he says. “However, it is important to the writer to have a good representative in China who knows the market and has the right connections in the industry.”

MCSC was established in 1992, in the wake of the country’s first Copyright Act, implemented in 1991, which established the framework for authorship, ownership of works and copyright regulation. The copyright law was amended in 2001 and the main issue for rights holders has been the slow pace of its implementation and enforcement. In addition, for Ralph Simon, “There is still a lot of teething that both countries and their collection societies have to overcome to be fully cognisant with the digital and mobile age and its new demands.”

UMPG's
Andrew Jenkins

UMPG’s Jenkins agrees that, “China is a difficult place to do business because it does not fit any rules that we are used to working with”. “But the Chinese government is slowly moving forward to try to make things easier [for foreign businesses]. We ourselves must adapt to fit in there just as much as we look for changes in the Chinese market,” he adds.

For all those who have worked with China, one of the factors to take on board is that the political system is centralised with decisions made by the ruling Communist Party. MCSC, for example, is under the supervision and management of the General Administration of Press and Publication of China (GAPP) and its offshoot, the National Copyright Administration of China (NCAC).

 “Everything goes through the government and no company eager to do business there wants to damage the relationship with the government,” says a music industry executive, pointing out to the recent difficulties of Google in China, which have shown that no matter how big the company, trading is China can be hazardous.

One industry executive suggests that the pace of change in China is likely to be slow as the current status quo benefits local artists, and that the country will open up when it will also have guarantees that revenues will come from the foreign exploitation of Chinese repertoire. “They have no advantage in speeding up the process,” says the executive.

Yet, many executives also believe that China is a land of opportunities. Stuart Watson, founder of Singapore-based music company SWAT, has organised several trade mission to China and India for western companies. “It is very exciting to be in Asia at the moment and China epitomizes the excitement,” says Watson.

He notes that many encouraging changes have taken place in China recently. Until recently, he explained, karaoke bars did not pay royalties in China, although they were by law supposed to since 2006. It is estimated that over 3,000 establishment (out of an estimated 100,000 in the country) will be licensed in 2012 and start paying royalties per booth rather than as a percentage of their turnover. “This could be huge,” says Watson.

Thanks to a rise in karaoke and sync revenues, Jenkins reported that UMPG “has seen an incredible growth in revenues year on year in China and expects the trend to continue.” Jenkins mentions, for example, a recent $100,000 sync deal based on a Bee Gees song to be used in an advertising spot. “If a Chinese company wants to use a certain type of music, they are prepared to pay for that,” he says.

Jenkins also points to a deal made in July 2011 by major labels and China’s leading online platform Baidu, for long considered a rogue site. In July 2011, Baidu announced an agreement with One-Stop China – a joint venture formed by Universal, Warner, and Sony – to distribution their catalogues and the launch of its music online platform Baidu Ting. “This is a breakthrough that will monetise key areas of digital music use in China,” says Jenkins.

Overall, most executives appear to believe that there is potential in both countries. Forler is buoyant regarding the future of the music market in India. “Very few countries have such a passion for music like India, so that’s why I am optimistic,” he says. “We need to fix a few things, and I do expect that in the near future, it will not be $45,000 a year that I will get from IPRS, but rather $400 or 500,000!”

SWAT’s Watson advises to adopt a strategy of localised efforts. For example, he suggests to pitch Indian film producers and try to work with them, and also advertising agencies, both in China and India. But for that strategy to work, “you need people on the ground,” he explains. “In Asia it is all about knowing the right people and establishing long-term relations.”

Mobilium International's Simon considers that India and China are both “in the middle of a tussle and a transition between the pre-digital view and the post-digital cross platform era”. However, he seems more confident about building digital business in China than in India. He explains, “One can build a sound business [in India], but the waste of money, time, productivity and energy on non commerce producing administration – vital as it is – saps a lot from growing young new age companies. In China, there appears to be an earnest attempt at safeguarding creative rights – as this is also in accordance with the WTO rules that China has signed up to.”

Universal’s Jenkins believes that both India and China will become in the next 5-10 years Top 10 music markets, with India perhaps leading the way. “Undoubtedly these are the two most exciting and challenging markets we operate in, both of them with huge potential,” he said. “If you plan to invest in China, you should take a longer term view. In India, we are already seeing double digit annual growth in the music business and you might see a more immediate result.”


[Update (08/03/2012): MCSC has signed early march 2012 an agreement with Chinese broadcasters' organisation CRTA that will see domestic and international creators receive remuneration for the use of their works by Chinese public TV and radio channels. In a statement, international trade body CISAC notes that the tariffs paid by broadcasters in China are very low compared to those in other markets but the streams of revenues to songwriters and composers should increase in the long term. However, only a very small portion of these revenues will go to international creators since most of the music played on Chinese airwaves is domestic.]