Jason Ji has almost all the recordings of his favourite singer, Zhou Jielun. But he seldom, if ever, enters CD stores.

The 19-year-old college student has his own way of collecting music without spending money.

How? Downloading.

"It's just a simple click, and I can find almost all his songs on the websites," Ji says. "For free."

Ji is one of the many youths who are "enjoying" the benefits of the Internet, including free downloading.

It is little wonder, then, that the global music industry is suffering constant tumbles in revenues, despite the increasing numbers of fans.

Sony officials said global CD vendors lost US$7 billion in the past two years due to sales of pirated music. Illegal websites have contributed significantly to the situation.

There must be a way out, apart from legislation and regulation. And R2G, a little-known Chinese company founded by a young engineer in the wireless communications technology, seems to have the business model.

"The key lies in the absence of a third-party, between the service providers (SPs), downloading websites, and content providers (CPs), singers and CD companies, that conduct supervision over SPs and charges rational fees for CPs," says Wu Jun, R2G's founder and chief executive officer.

"And we are playing the role of the third-party."

Currently, when granting copyrights, CPs charge high fees to SPs to prevent possible copyright infringement.

After an agreement is signed between the two, the CP has no idea how it should share the returns with the SP, as it is not able to track the download services that actually take place, Wu explained.

Meanwhile, the SPs face huge risks when signing such deals, as the CPs' offerings may not become popular. Also, the operating costs of SPs could be extremely higher, since the same song is available for free downloading on many illegal websites, he says.

As a result, CPs are unwilling to grant their copyrights to SPs, and they only offer online streaming services on some websites, whereas SPs feel great pressure and are worried about the revenues, Wu notes.

Now, R2G has worked out an Internet-based platform, which tracks all the downloading services for a certain song, and then calculates the frequency of such services on authorized websites, said Li Dai, the firm's chief operating officer.

Downloading of the same song in different formats, either individualized ringtones, colorful ring-back tones or MP3, is under supervision.

"And, by signing agreements with singers or CD companies, we will instantly know if their copyrights are infringed by any websites," Li says.

"Moreover, we can help them collect fees from the SPs based on the frequency of downloading. And the fee required will be reduced, due to the fewer risks involved."

R2G signed, late last month, a deal with Universal Music Group, one of the world's four major CD companies, on copyright services. Under the agreement, R2G will provide supervision, charging and promotion services for Universal.

"We are glad, with the help of R2G, our authors and publishers will have an accurate copyright income based on actual business volume," says Ye Zhanhua, general supervisor of Universal's Asia-Pacific region.

R2G signed similar agreements last year with more than a dozen domestic CD companies, including major players such as Zhengda Music. It has also reached deals with some SPs including sina.com, tom.com, mtone.com and linktone.com.

"The most important point in our business model is SPs offering unauthorized downloading are encouraged to get copyrights from CPs," Li says.

"It is just like controlling the flood. Blocking the flood with dust does not work. You have to dredge it.

"And that's exactly our business. Once pirated downloading is tracked, we will contact SPs offering such services and see if they are willing to join us."

SPs fall into different categories based on how the downloading is provided: SPs that offer direct downloading, those offering search engines for downloading, and P2P (peer-to-peer) websites, often set up by individual music fans.

R2G has developed different supervising technologies to monitor providers in the different categories.

"We are the first company to offer such copyright supervision and charging services," Li says.

She says the technology involved is not complicated, yet it takes great effort to persuade singers, authors, publishers and SPs to adopt the platform.

R2G, she adds, has an excellent team.

"We hope more competitors will join us and help the market grow," Li says.

"We are confident our services will bring profits to both CPs and SPs, in a very short period of time."

While seeking more business from China's vast music downloading pools, R2G is also co-operating with the government in attacking online piracy.

So far, the company has signed an agreement with China's Copyright Protection Centre. R2G will help the centre improve the registration process of music copyrights, and provide data records services as legal evidence in copyright-related lawsuits.

Moreover, R2G convinced the second session of the 10th Chinese People's Political Consultative Conference to present a proposal on attacking piracy on the Internet and mobile terminals.

The proposal has received support from the Ministry of Information Industry and the State Copyright Bureau.

"Nobody knows how much of the global music market goes to pirated downloading each year, as people have not taken measures to track it down," Li says.

"We expect our efforts will contribute to anti-piracy in China."

The Chinese Government earlier this year launched a campaign against online piracy to attack pirated downloading services. But the government lacks the technological platform needed for such supervision.

Specific data are not available regarding online piracy in China. But without piracy, the country's annual revenues generated from online music downloading and relevant wireless value-added services is expected to exceed 6 billion yuan (US$722 million), indicate statistics released by Chinese market research house iResearch.

(China Daily 05/09/2005 page10)