Rock in a hard place

Jin Menghui looks tired. The label manager for China's biggest independent record company, Modern Sky, has just returned from Shanghai where a few of his bands played. The show, he says, was mildly successful but as opposed to Beijing, "Shanghai is not really a rock town". Jin has a reputation for working long hours and in a previous interview, he saw the reporter to a cab at 11pm before returning to run yet more tasks.

And there's a lot to be done, particularly at Modern Sky. While its Western counterparts continue to make money via conventional methods, such as album sales, Modern Sky has been forced to explore other avenues. The 10-year-old company has learned to adapt to a Mando-Canto pop saturated music market, which has yet to embrace indy rock music with the same fervor as the West. Modern Sky also serves customers who have never paid much (if anything) for their music.

"If the records can't make money, you have to think of something else," he says.

And that something else is what many in the worldwide music industry is waiting for someone in China to devise. How do you sell something to people who are used to getting it for free? How can labels make money in China?

For Modern Sky, it supplements its revenue through offshoot businesses, such as an in-house design company and corporate alliances. Instead of gaining income solely from music, branding partnerships are becoming the breadwinners.

Modern Sky has partnered with youth-orientated brand names such as iPod, Carlsberg and Levis, which pay to be linked to the label's underground-chic image.

"Apple, for example, doesn't want to work with pop idols. They want something cool, something special," Jin says.

Englishman Ed Peto is the managing director of Red T Music, an offspring of the Red T Gallery situated in Beijing's 798 art precinct. Like others in the West who assumed that China's economic growth would inevitably trickle through to the rock music industry, Peto made his way for the capital last year with the intention of exposing international artists to the Chinese market.

So far, he says, his initial business model has had to be completely overhauled.

Red T Music is now focusing on a regular live night show for local underground rock artists called Dong Li, which is supported by corporate sponsors.

"It's kind of a frontier town; the rules are being made up as people go and there are no winners yet," Peto says.

The former UK label scout says that despite his experience, the ways of doing business here are very different. "The idea of dealing with brands and marketing departments is something that I never would have done in the UK, over here it's all about that.

"It's the only source of real income. Branding and corporate association is to be all and end all here."

Peto has just finished a report commissioned by UK industry body, British Underground, and the UK Trade Ministry. Titled Access China: the Beginner's Guide to the Chinese Music Industry, the report discusses rampant CD piracy, ticket prices alienating young audiences, the difficulty of securing publishing royalties and the proliferation of illegal downloads.

The report concludes that labels in China, and anyone else looking to establish a foothold in the music industry here, must be flexible in their business approach and adopt alternative methods for sourcing revenue, such as selling ring tones and securing corporate partnerships.

"The battle here has already been lost to the pirates and so a new business model has to be found," Peto says.

Peto also argues that the Beijing rock scene, although touted by local and foreign press as a buzz city for new talent, is so unorganized that it may be some time before marketers can target specific consumer groups. He says a lack of band genre classification makes it almost impossible to cater to specific tastes.

"When I first arrived over here I met a Chinese girl at (Beijing live venue) D-22, some Goth with big black eyes and boots, who looked like a proper scenester. I asked her what kind of music she was into and she said: 'Backstreet Boys'.

"People adopt themes and they turn up to venues for this or for that but no one really subscribes to one scene.

"It's a real problem for music marketers over here because there is no way of focusing in on a crowd at all."

Tag Team Records, run by American Matt Kagler, was founded for the sole purpose of promoting indy rock.

"I had been talking to my brother in the States and he worked for Rhino Records and said it's such a brilliant idea to take these bands over here because no one had done it before and these bands are of such a good quality," Kagler says.

"We hooked up distribution and I worked for Sub Pop records before so I had some connections in the States. About six months ago we really caught stride but it's an enormous learning curve."

Such lessons in this learning curve included discovering that making CDs costs just as much in China as it does in the United States (with other expenses factored in).

"Your overhead is actually not as low as one would think, the costs are still pretty high for manufacturing," Kagler says.

Nonetheless, Tagteam are still making money off CD sales (about 35 percent of their income, Kagler estimates), but most of those sales are in the US, not China. Tagteam, like Modern Sky, have an office in the States and while foreign record companies are curious as to how to infiltrate the Chinese market, these two Beijing-based indy labels are pushing their wares West.

Two Tagteam bands, Lonely China Day and Retros, both recently toured America, prompting interest including a write-up in The New York Times.

Locally, however, the decline in revenue from CDs for Modern Sky can be best summed up by the sales of one of their flagship bands, New Pants. Back in 1998, the band sold 200,000 copies of its debut album but their most recent effort only sold 20,000.

Is it just that the band has fallen out of favor with the public? Not so, says Jin, who blames the slump on illegal downloading: "If you check on the Internet you'd think that this band sells millions of records."

In order to make money from the domestic market, Kagler says that Tagteam - although initially skeptical of corporate alliances - are now engaged in branding partnerships. Lonely China Day, for example, recently aligned themselves with sportswear company Converse.

"There's just no way to do it unless you make some sort of compromise. You want to be interested in the brand and you want to feel comfortable working with them, but it's all relative to what you want to do," Kagler says.

But it's only early days for the local scene, which is still in its infancy, says Modern Sky's Jin. He argues that in comparison to the West, where generations were raised on guitar bands, Chinese audiences are still catching up.

"In the '50s in the West you had Elvis and the Beatles but here the scene is emerging little by little. Rock 'n' rock is a brand that we are giving to young people."

(China Daily 08/07/2007 page18)