Lost in Translation; Making Sense of the Far East Through a Western Prism

By Hal Bringman and Elias Bustos, November 1, 2011

We’ve lost track of the number of trips we’ve taken to China at this point. One thing that remains the same, however, is China’s ambivalence about the web. Between the many meetings with the Shanghai Media Group spanning the last several years, to the most recent TechCrunch Disrupt Beijing, it seems we take one step forward and two steps back, as China grapples with the Internet. Just as the historic inaugural TechCrunch Disrupt in Beijing wound down, rumors of a tightening of the Internet began swirling.

Indeed, within days, China’s IT chiefs agreed to tighten their clamp on the web even more. With various Western startups struggling to get off the ground to bring music into China in an effort to both create a music industry, and further bolster an IP economy in the region, the government’s moves creates more uncertainly for investors in the West.

Financial Times reports the heads of China’s leading information technology companies have pledged to censor Internet content more strictly as the local government tries to tame a boisterous online media.

The chief executives of 39 Internet, telecom and computer groups have reached a “consensus” that Internet companies “must strengthen self-control, self-restraint and strict self-discipline”, the official news agency Xinhua said on Sunday.

“[They must also] determinedly contain the tendency of spreading online rumors, pornography, fraud and other illegal, harmful information on the internet,” it added.

The government has made gestures to open up in the past and use the same censorship tools to combat piracy and bolster the sale of content, especially through the mobile ecosystem where nearly $3b is collected annually in mobile music revenues.

Next week, the preeminent Mobile Asia Congress event takes place in Hong Kong. From mobile money to mobile applications, the executive level conference examines the growing app-shaped world and how to adjust to it as quickly as possible.

As divergent senior level executives from Facebook to China Mobile and the Chairman of the FCC deliver keynote speeches at the event, the future of mobile in China, and around the world, will be a trending topic.

At TechCrunch Disrupt Beijing last week, Google’s John Lagerling, Director of Global Partnerships, Android at Google, wouldn’t give any insight as to when the company’s application store, Android Market, might be launched in China (currently, Android phones shipped officially in the US have application stores from handset makers or third parties pre-installed instead).

When asked at Disrupt whether Google is making an effort to launch Android Market in China, Lagerling would only say the company is always working with its partners, without elaborating. Google, as many other Western corporations, has retreated from China in the past due in part to government interference and partly caused by their own misunderstanding of how business is done in the world’s second most powerful economy.

Ultimately, speakers on the panel agreed that many opportunities are being explored on how to make more money in the world’s largest mobile market, and that things may change dramatically as advertisements in applications are rolled out, and cheaper tablets (1,000 Yuan or less) begin to sell in China in 2012, reports WSJ.

One hopes that China’s desire to squash rumors, pornography and other undesirable content doesn’t also squash investors’ zeal to help startups emerging from the East’s rising sun.

HARNESSING THE WILD, WILD EAST THE MAKING OF A MUSIC INDUSTRY IN CHINA

Unlike the U.S., where copyright conundrums abound, China has a chance to create a music industry with a completely fresh approach to copyright consumption.
I was recently invited to join the American delegation attending the International Creative Industries Summit in Shanghai, China.  The intensive two-day summit, which occurred April 21-22, 2009, was   poised to be a historic event to witness.  For me, it was rife with irony and provided a fascinating contrast to the “established” western music industry.
For perspective, one only needs to study the rise of the Shanghai skyline to understand the marked difference between its humble past and burgeoning future.  As recent as the ‘90s, the Huang Po River, which dissects downtown Shanghai, wasn’t much more than the embankment of a shantytown; whereas today, Shanghai boasts skyscrapers that rival anything Manhattan has to offer.
Similarly, the would-be music industry we were there to help shape, could have the same kind of meteoric rise.  In fact, it could quickly become the largest music market in the world.  After all, it has nowhere to go but up, and China itself is the world’s largest start up.
I was among a handful of digital media and traditional music industry experts who came to listen to, and help steer, the first steps of a Chinese music industry where, despite infrastructure and a booming population, no music industry exists to date.  Massive piracy, however, is readily rampant.
This point was driven home by Mr. Xiaofeng Xu, Researcher, Peking University, Institute of Culture Industry, who made a forthright presentation entitled “The New Money-making Model within the Culture Industry.”  Poignantly, as his presentation began, he commented, “I am supposed to come here and speak with you about the new business models in the music industry here – but I am not even aware of an existing, old model.”
Having attended more conferences, summits, courtroom show downs, and symposiums on copyright in the digital realm than I could ever recount, it sometimes felt like a déjà vu hearing the same issues addressed repeatedly. I kept thinking, “Whatever you do here, don’t replicate the mess created in the western world” where copyright conglomerates have stymied innovation since digital music came onto the scene with the launch of MP3.com in 1998.
In an earlier column this year, I explored how at MIDEM in January there were many examples of how this is finally beginning to change – after a decade lost to mindless litigation and DRM dogma.
Moreover, as Jingming Qu, General Director of the Music Copyright Society of China pontificated, “Innovation is being driven here by a developing economy.” He illustrated the primary challenges to their agenda to build a music industry include piracy, a perceived lack of value for music despite mass consumption of it, and the potential for monopolies to be created that would ultimately be unfair to artists.
Mr. Qu argued that — without music — everything from discos and radio stations to search engines, wouldn’t exist, or would have significantly less value.
Thomas Reemer, CEO of CUGate, explored this point during his presentation where he demonstrated that Google’s recent digital music foray in China, in partnership with the major labels, is supposed to include a revenue share from the MP3 search activity at its search engine. One only needs to go experience it to realize his point that the experience is completely absent of any potential revenue sharing and, furthermore, there are no ads to click or albums to buy.  Google’s partnership with the major labels in China was widely dismissed as a misstep by most attendees, though some argued it was better than nothing.
Mr. Reemer added that studies show P2P users actually possess a high level of respect for copyrights, but not for the business models in place to date.
CUGate’s offering, he asserted, affords the “feels free” experience but still monetizes the frenetic energy associated with file sharing. CUGate shares the Chinese government’s inclination towards an ISP based solution to monetize the feel free model, which is finally gathering momentum in the Western world, if only philosophically.
At the recent hopping, San Fran Music Tech Summit, this topic was hotly debated on a panel aptly titled “Monetization – Idealism in Practice” where long time advocate Jim Griffin was pimping Choruss, a major label backed approach aimed at the college market initially and  – potentially – to ISPs, if successful.
Regardless of the rhetoric, what’s clear is that nearly 40% of Asian youth are listening to even more music than they were a year ago, according to Synovate Music Matters Survey, and there are more than 300 million broadband internet users in China – a 42% increase in only two years, as cited by China Internet Network Info Center.
In 2008, China Mobile reported US$2.4 billion in revenue from mobile music downloads and ringtones alone, according to JLM Pacific Epoch.
Hopefully, China will embrace the unique opportunity that it is faced with in a timelier and more progressive manner than the Western world did, especially since our futures seem inextricably tied.
The International Creative Industries Summit will occur again next year and this month, Music Matters will host a unique Asian forum for uniting the world’s creative and technology industries.
Just as the music industry in the West begins to intelligently grapple with digital in a meaningful way, the East is recognizing that the potential for an industry even exists.  It’s an astounding paradox and an amazing opportunity that I look forward to being actively involved in for years to come.

About the Author: Hal Bringman, founder of NVPR, is a communications strategist and digital media expert. Long before Steve Jobs ever figured out what an MP3 file was, the firm has been guiding the digital music revolution since launching MP3.com, Napster, and many other major digital media brands. The company has launched and built many of the biggest or most talked about brands in mobile entertainment and digital media. Based in Los Angeles and Buenos Aires, the team is actively dedicated to launch global PR/marketing campaigns, accelerate business development and revamp websites.  Reach Hal Bringman at hal@nvpr.com, or follow on Twitter @halbringman.