| A few weeks ago, stock markets in western countries experienced sharp declines as investors woke up to news that the Beijing Index had lost nine per cent of its overall value overnight. This precipitated fears that one of the world’s largest, and most rapidly developing economies was set to collapse. Throughout the week, economic analysts spoke of the crucial role that China had begun to play in the new global economy as one of the largest consumers of western goods. Worries were soon alleviated once it was revealed that the stock market decline was the result of profit-taking among Chinese investors.
Long considered the workshop to the world, a generation of so-called 4:2:1 Chinese families (four grandparents, two parents, one child) has now amassed significant levels of disposable income and increasing middle-class aspirations. Western goods, like music, are being consumed in China at unprecedented rates. Ever since Nixon went to China in 1972, allowing Henry Kissinger to broker a free trade deal with the vaunted Middle Kingdom, western corporations have been salivating over imagined markets. Now, with an estimated middle-class population of 280 million, out of a total population of 1.2 billion, the dream of China as a market for western goods has become a reality. The fears of a stock market crash made many realize just how dependent western companies had become on the Chinese consumer.
However, selling goods in China comes with difficulties. Lax intellectual property and copyright laws lead to high levels of piracy, especially in areas like the music industry. While official releases may sell for between 25 and 35 kuai, an amount equal to $2.50 to $3, pirated copies often run closer to the 10 kuai mark. Once a pirated copy hits the streets, artists and their labels are forced to decide quickly whether to lower prices, a move that can jeopardize cross-country tours. According to Kaiser Kuo, a rock musician who has experienced some success on both sides of the Pacific (and now works for the Beijing branch of marketing giant Ogilvy), it took six days for pirated copies of his 1999 album to hit the streets.
However, the music industry’s relationship with pirates is changing. Tag Team Records representative Matt Kagler noted at a recent music industry panel on China that his label was actually approached by a group of pirates looking to distribute its records. In a country where there are only 64 independent record stores, this unorthodox approach marked a new step in the growth of the Chinese music industry.
Also changing is the way in which music is bought and sold in China. Physical CD sales may still make up the bulk of music purchases but China has been investing heavily in 3G mobile technology in preparation for the 2008 Beijing Olympics, and virtually all music downloads are to mobile phones. Priced at 40 cents, MP3-to-phone downloads are quickly set to become the largest form of music consumption. The main stumbling block is payment methods. Credit cards have penetrated the market, but the faith in online purchases is low given the high levels of online fraud and piracy. Many transactions are still performed in cash, on delivery.
The view of many industry panelists who sat down to talk about the state of the Chinese market is that the Chinese music industry has been growing by leaps and bounds since 1993. In the words of Kuo, 1993 marked a whole new era in Chinese music, for prior to 1993, the largest supplier of western music CDs were international university students studying in China. However, in 1993-4, American corporations, taking advantage of federal tax policies designed to curb domestic recessionary pressures, were given tax rebates on unsold or "deleted" albums. These albums were supposedly destroyed, using a process that involved notching a hole on the inside of the CD in order to make them unplayable. These "cut-outs" were then shipped to China, where the warehousing fees were approximately 12 cents per CD, and were easily covered by the rebate monies.
The flooding of China with cheap western music created a market overnight. Not just a market for CDs, but for written music, magazines, bands, nightclubs and producers. According to Kuo, the exposure to current music, recorded at CD quality, forced Chinese rock bands and producers to elevate their craft. Unfortunately, the informal networks that helped spread these CDs are also the same ones that later helped distribute pirated music.
Kuo, Kagler and Jon Campbell of booking agency YGTwo Productions, concede that the Chinese nightclub scene has lagged somewhat behind these developments. Demand for performances by western bands is growing dramatically, however, as in Canada, the ability to find suitable venues greatly diminishes the further one goes from the major urban centres. Even within the larger cities, nightclub owners can have fickle tastes. Both Kagler and Campbell note that a really good rock club could find itself transformed into a discotheque in the space of a week. A red-hot real estate market also means that entire neighbourhoods can be suddenly slated for "development." Currently, many bands, like Sonic Youth and The Roots, limit themselves to Beijing and Shanghai, playing so-called "Chinese weekends" as part of larger Japanese tours. That all foreign bands need to apply for permission from the state censors to tour does not ease any difficulties.
However, the number of bands touring China continues to grow, and Chinese fans appear to be as devoted as western ones. Matt Kagler was similarly pleased to announce that Tag Team Records had recently brought over Chinese bands, Lonely China Day and Rebuilding the Rights of Statues, to tour the United States, initiating a process of musical reciprocity that can only pay dividends in the longrun. |
Copyright ©2007 FFWD. All rights reserved.