Going For A Song
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Ever since Internet connections became fast enough to share music， record companies around the world have been struggling to protect their profits from websites offering free downloads. In China， where copyright law is notoriously weak， this challenge has been particularly tough.
In late 2012， rumor had it that as of January 1， 2013， free music downloads would be a thing of the past. The rumor later turned out to be false. Then， earlier this year， Gao Xiaosong， a prominent musician in China， quoted anonymous sources high up in the legal and entertainment circles， who had apparently assured him that from July 2013， China’s music industry would move into an era of full copyright protection. His comments sparked a public discussion about whether or not it was time to start paying for music again.
Previous reports had quoted industry insiders as saying that a series of basic agreements had been reached between major online music sites， such as Baidu， QQ Music and Xiami Music， and international record companies， such as Warner Music Group， Sony Music Entertainment， and Universal Music Group. According to these reports， Chinese music websites plan to pay royalties and share a percentage of the profits with the international music companies.
Yet by July， the hype once again turned out to have been false free music download sites were still up and running， and only a tiny proportion of total music downloads are being paid for. Sources told NewsChina that discussions between industry players to begin charging in July had stalled musicians， record companies， Internet service providers， and government authorities continue to argue over the issue， and charging for online music has once again been postponed.
Fees Feasible？
Over the past few years， the number of Chinese websites offering free music downloads has shrunk significantly as a result of tightened regulations. Many music websites still offer free downloads， but now require users to complete various tasks on the website in order to access them. Most users simply stream music rather than downloading it.
However， this will probably not be the case for long. Facing pressure from all sides， music websites are adjusting their services in preparation for implementing large-scale payment schemes.
Xiami and QQ Music， two of the largest online music service providers， offer online streaming for free， and charge for downloads. Kugou Music has monthly packages that cost five or ten yuan （80 US cents or US$1.60）. Baidu and Duomi are still offering free downloads for songs of average audio quality， but charge for high-quality downloads.
Music producer Song Ke， who is also managing director of domestic record company Evergrande Music， told NewsChina that it will take time to implement large-scale fee-paying systems for online music in China. He added that lawmakers needed to step up regulations on intellectual property rights， but website operators also need time to get used to these regulations. He thinks that implementation may not be straightforward， but that it is the direction in which the industry is heading.
Song said that since downloadable music files are relatively small in size and easy to make available， it is difficult to safeguard copyright. However， he believes that netizens are slowly getting used to paying for online music and movies. Thanks to the development of the music industry and discussion of copyright law in the media， consumers are coming to understand that good music may not come for free.
At the end of last year， an investigation into 500 online music websites by the Ministry of Culture found that 237 of them were unregistered and illegally allowing online music streaming and downloading. Many music companies saw this move as an indication of the government’s intention to crack down on music piracy.
Last April， Yan Xiaohong， deputy secretary of the National Copyright Administration， said charging for music downloads was an inevitability. Insiders like Song Ke believe that the general environment is maturing.
What Websites Want
Yan Xiaohong also said that websites can waive user fees， as long as they themselves have paid for copyright. In other words， website operators are faced with two options： charge users directly， or use advertising revenue to foot the bill themselves.
Currently， the latter model is more attractive to websites， since many have already been paying large music companies copyright fees for years. Websites can buy extensive song libraries for an annual payment of around 200 million to 300 million yuan （US$33m to 49m）， which users can download and listen to for free.
But since copyright royalties are continuing to rise， the sustainability of this model is being called into question. Wang Hao， general manager of Xiami Music， told NewsChina that royalties have been skyrocketing for all websites both those who charge customers and those who don’t. Free music websites are facing a greater challenge， as they hope to do away with the current system， in which websites pay a lump sum to a record company for the use of its library， and thus precipitate a fee-paying system
Wang Hao does not agree with the package payment model， since the payments that websites make to record companies are not proportionate to the popularity of the songs they pay buy. A drawback of this method is that releasing a hit song will not necessarily earn any more money for the artist. Wang believes this model does not encourage originality.
Charging users has always been a thorny problem many websites are hesitant to introduce small all-access fees， for fear that their hit rates will suffer， as free alternatives will likely remain available.
Universal Music has been perhaps the most ardent proponent of charging. Its marketing officer， Lin Na， believes that profits will in- crease for both websites and music companies when online songs are no longer free. Lin told NewsChina that the cumulative length of time that a website’s customers listen to music is longer than the length of time they spend watching videos， and that if online music can go above-board， it will be a bigger market than online video.
Music companies and websites remain in constant negotiations. Lin Na implied that while the general relationship between the two players will remain the same， many details will be changed. In recent years， the rapid growth of mobile Internet has encouraged Universal Music to grant permissions to more websites， and Lin claims that Universal’s profits have grown as a result. She believes the online music download market will grow in the future， and that legalization is inevitable.
The massive music libraries of Universal， Sony and Warner are a huge bargaining chip for these companies and give them leverage in dealings with small and medium-sized websites.
Songwriter Cui Shu also operates a small music company. However， he is usually denied royalties from music websites， who argue that they are promoting his music for free since websites rely primarily on music from big companies， they prefer to stop hosting songs owned by small companies rather than pay royalties. This is a common practice for large websites， and has forced small and medium-sized companies to give up begging for money.
So how can small and medium-sized companies receive revenue for the music they produce？ Lin Na admits that major artists and companies must lead the industry in forming regulations， but at present， she is not confident that such regulations would help the development of the industry. She believes there must be a cost for downloading songs， and that the rights of recording artists must be respected.
Still Distant
Although negotiations over the minutiae of fee-paying music download schemes are underway， it is still unclear when charging will become a reality.
Wang Hao told NewsChina that by June 2013， Xiami had been providing fee-based services for five years， attracting users with highquality music streaming and a personalized recommendation system. Now， Xiami has 18 million users， but the proportion of fee paying users is only 1 percent far from the minimum 5 percent Xiami claims to need to break even. So when will music downloading and streaming be charged services？ Optimistic analysts say three to five years， but others say this is unlikely.
Lin Na told NewsChina that change will have to be initiated by websites. Even though record companies are unanimously pushing for a change， websites still need time to adjust their payment systems， profit models and website frameworks.
Currently， the Chinese music market is valued in the hundreds of millions of yuan， but insiders agree that if the transition to fee-paying services is implemented， it will be a billion-yuan industry.
”CDs are dead，” Song Ke once said， “but music is eternal.” “Pagers are now dead， but phones are alive， and telecommunications will never die. It is pretty much the same in the music industry. Whatever form it takes， music will not perish，” he said.