Music on the move
Wang Zhongjun has had trouble making money from his record company. Piracy has been a problem, and less people are buying records than ever before, says the president of Beijing-based Huayi Brothers. The company owns a number of entertainment firms, including a film production house and a record company.
Huayi Brothers' contract singers, such as popular duo Yu Quan, usually struggle to sell more than 500,000 records. They make money through sheer hard work, Wang says, adding that singers usually must almost solely rely on national concert tours.
So when Wang found "Super Girl" Zhang Liangying, he imagined his record company would soon be selling songs over mobile phones, which would less susceptible to piracy. Zhang placed third in an "American Idol"-type knockoff on Chinese TV last year.
Zhang is definitely popular, and tens of millions of Chinese viewers regularly tuned into the live "Super Girl" programme. The three finalists received more than 8 million votes by SMS (short messaging service) in August. Wang is a big fan of the attractive Zhang, who does an impressive take on US superstar Mary Carey.
"Zhang is really talented and will be a big money maker for Huayi," says Wang.
Huayi Brothers and NASDAQ-listed Hurray! Holdings Co Ltd, a wireless value-added service provider, signed a contract with Zhang last October. Wang hopes Zhang's fans will be willing to pay for song downloads on their mobile phones.
"Wireless communications could really help the record industry," says Wang.
"And I expect the vast majority of our revenues to come from new media."
Hurray! signed a deal last December to acquire a 51 per cent stake in Huayi Brothers' record production firm. In January it worked with Yahoo! China on the release of Zhang Liangying's first EP, "Jane - Love." Fans can buy the songs on Yahoo! China's website or Hurray!'s mobile platform.
Hurray! has the exclusive rights to distribute songs through wireless access protocol (WAP), colour ring back tones (CRBT), interactive voice response (IVR), multimedia messaging services (MMS), and SMS before Zhang's EP is publicly launched.
"This is a new multi-channel focused business model that releases music through the combined power of the Internet, mobile Internet and traditional the EP/CD format," says Hurray!'s Chairman and Chief Executive Officer QD Wang. "We believe that this business model will not only help us effectively control piracy problems, but also promote digital entertainment in China."
Chinese mobile phone subscribers usually pay between 1 and 3 yuan (12 to 36 US cents) to download a song.
Music downloads on mobile phones offer better digital rights management (DRM). Some singers have already profited by releasing their songs through new technologies. A Mandarin pop song called "Mice Love Rice" was solely released for CRBT services, for example. It has been downloaded to more than 10 million handsets since it was first released. At its peak, the song was downloaded 6 million times in one month, generating revenue equivalent to the sale of about 700,000 CDs.
These successes have spawned several "Internet artists" who only post their songs on the Internet and make money from downloads to mobile phones.
Last year MTV Networks formed an alliance with China Mobile, the country's largest mobile operator, to deliver MTV's offerings through phones. The deal helps China Mobile's subscribers download music ringtones and ringback tones, or watch entertainment, news and popular song clips provided by MTV, the cable TV arm of media giant Viacom. MTV says the partnership introduces a new, piracy-free medium for TV broadcasters and record companies.
Beijing-based research firm Analysys International says the traditional music market was worth 1.65 billion yuan (US$206 million) last year. Sales of pirated music reached 4.36 billion yuan (US$545 million), and digital music surged to 2.49 billion yuan (US$311 million) last year from 176 million yuan (US$22 million) in 2003.
It is clear that new technologies such as the Internet have been significantly changing consumption habits in the record industry. More than 7,000 websites now provide music download services in China, but very few are legal. Revenues from downloads of copyrighted music are less than 1 million yuan (US$125,000), Analysys says.
Even NASDAQ-listed search engine firm Baidu.com was sued by leading record firms last year for providing Internet users with links to pirate music downloads.
Mobile music is also a big opportunity for record companies. An increasing number of Chinese mobile phone subscribers, especially young people, are willing to pay for music downloads on their mobile phones. Fancy ringtones and CRBT have become symbols of individuality.
A report by Shanghai-based iResearch shows the mobile music market was worth 2.6 billion yuan (US$325 million) last year, compared to 1.58 billion yuan (US$197.5 million) in 2004.
The sector is expected to grow to 7.26 billion yuan (US$907.5 million) by 2008.
Content providers like record firms generated 1.04 billion yuan (US$130 million) from mobile music last year, compared to 300 million (US$37.5 million) in 2003.
Record firms and wireless service providers are not the only players in the market. Leading mobile phone makers have also been aggressively promoting mobile music strategies to boost handset sales. Two top mobile phone makers, Nokia and Motorola, have opened online music stores offering downloads to mobile phone users. Sony Ericsson also has a similar website with China Mobile, the country's largest mobile operator. Sony Ericsson has even introduced its flagship Walkman phone, the W800c, to China prior to its worldwide launch.
Nokia's online music store has signed up 25,000 registered users since it started in December, says Colin Giles, Nokia's senior vice-president for customer and marketing operations in China. The site now offers 6,800 music downloads. The company is in talks with leading record firms such as Universal Music, Sony BMG Music Entertainment, Warner Music Group Corp and EMI Group Plc, to expand its offerings. Nokia is also expected to sign contracts with Chinese record firms soon.
Dan Wong, vice-president of Nokia China's multimedia division, says the company does not intend to sell music, despite its big push into the mobile music sector. Nokia hopes music downloads will boost sales of mobile phones with digital music players, which are popular items in the mobile telecoms industry, he says. Nokia sold about 10 million mobile phones with built-in MP3 players worldwide in 2004. "Nokia is the world's largest MP3 music player manufacturer," Wong says.
The company estimates it sold about 40 million MP3 phones last year. In 2005, it launched 15 models with MP3 players, accounting for 30 per cent of total MP3 device sales.
Zhao Yuewang, an analyst at Analysys International, says China's MP3 music player market is already in decline, but the market for mobile phones with music players is getting bigger. Statistics from Analysys show sales of these phones tripled last year from 2004. In the fourth quarter of last year, music phone sales hit 15 billion yuan (US$1.86 billion).
Giles expects mobile phones with digital cameras and music players to spur the replacement market in China. "Replacement mobile phone sales will represent 60 per cent of the total market (this year)," he says.
"We expect many Chinese consumers buying their first MP3 music players or digital cameras to turn to Nokia."
Yet Wong says the mobile music markets is still developing in China, and phones with music capabilities still need to improve. "Many mobile phones that can play music are not actually music machines yet," he says.
"And they are simply not as good as MP3 music players (in terms of sound quality)."
A true music mobile phone should support stereo, have an expandable storage capacity, and be compatible with PCs, Wong says. "A one-button control feature, that helps users directly access the music player (menu), is also a necessity."
Nokia has launched the dedicated XpressMusic brand in China for its portfolio of music-optimized mobile phones. The company is expected to soon start selling its N91 and 3250 XpressMusic models on the mainland. The N91 has a mini-hard drive capable of storing up to 3000 songs.
Nokia has partnered with leading audio equipment manufacturers such as Bosea, Harman Kardon(R), JBL(R), and Sennheiser. With accessories from leading brands in the audio industry, mobile phones users will have access to a premium mobile music experience, says Wong.
China Mobile is reportedly considering setting standards for customized music-oriented mobile phones. These phones will have a shortcut key that will go directly to China Mobile's music download website.
This emphasizes that mobile music will become a major revenue contributor for China Mobile. Wireless music download revenues for it and its smaller rival China Unicom tripled to 390 million yuan (US$48.75 million) last year from2003, according to iResearch. That figure is forecast to hit 1.09 billion yuan (US$136 million) by 2008.
(China Daily 02/21/2006 page6)
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