Can we see the future of the music industry in China? I hope not.

We could read in the latest Economist edition that the worse-case scenario of the music industry has already come to pass:

Chinese consumers “won’t pay a penny” for recorded music, says Gary Chen. The music promoter turned digital entrepreneur ought to know. In 2006 he launched, a website which offered a choice of à la carte music downloads and monthly subscriptions. Its prices were low—but not low enough. Chinese music fans were raised on knockoff CDs and are now accustomed to getting hold of music for nothing on file-sharing websites. China will soon have the world’s second-biggest economy, but its legitimate music market is tiny (see chart). So Mr Chen changed tack. Last year Top100 began to offer Chinese internet users free MP3 music downloads, supported by advertisements. This year Mr Chen reckons he will sell about 10m yuan ($1.5m) in advertising. That would be a trivial sum in America or Britain. In a country where sales of recorded music amounted to just $75m last year, it is not at all bad.”

In the case of the monetisation of music, looking to China could be a bit like looking into a crystal ball. At least, the development of the Chinese music industry is certainly worth keeping an eye on. Here, because of the rampant piracy, they may be forced to innovate to make money off of their music. This means China might function as a test market, a place where music business models are experimented with, tried and tested, before the music markets of the West are desperate enough to do the same. Hence, perhaps they’ll find a solution that works and that can be replicated in Europe and US?

The British music business, on the other hand,  was recently reported to have finally begun growing again. However, this growth is almost only on the back of spectacular live concerts, merchandise and new, innovative partnerships between brands and artists. This probably points to the future of the music industry. Through marketing agencies (not record companies) or the likes, acting like middlemen, the musicians will create a range of different revenue streams by tapping into their enormous abilities to affect and inspire people. These channels musicians have into people’s hearts and minds are a match made in heaven for branding and advertising purposes. This is well exemplified by the band OK Go and its viral video hits online. They have been sponsored by for example the insurance company State Farm, in a case where the record company EMI were the ones fighting evolution by limiting the possibilities of online sharing. Don’t sell music, use music to sell.


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