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Asia’s Music Industry Seeks New Ways To Profit

Posted on: Friday, 3 July 2009, 15:00 CDT

Asia’s music industry has fallen under steep pressure in recent years amid rampant piracy and shrinking demand for CDs.  However, the industry is hoping the emergence of social media and new technologies will help compensate for the losses.

Although the overall market for music in Asia has been on the rise, the global economic slowdown has hastened the decline in sales of physical music triggered by the Internet.

"Consumers are enjoying more hours of music, they just ain't paying for it," Marcel Fenez, of PricewaterhouseCoopers' entertainment and media practice, told the AFP news agency.
 
"The recession is accelerating a migration to digital," he added.

"The consumer is also migrating quicker because of the free content."

At a recent Music Matters industry conference in Hong Kong, Fenez said Asia's physical distribution market suffered a 9.3 percent decline last year, representing the largest drop in five years.

Indeed, a survey of more than 8,000 Asians between the ages of 15 and 24 showed that just 11 percent actually paid for the music they acquired online.

Facing such bleak data, the industry is looking at ways to harness new technology to reap profits from music in an entirely new way.

Nokia’s Paul Smith said the company was now offering music services bundled with its mobile phones.  Instead of paying per song, customers can download any song they want to their phone for a 12 to 18-month period.  The cost of the music is factored into the price of the mobile handset.

The service has been launched in several European nations, as well as in Singapore and Australia.  But the “all-you-can-eat” approach is not just about selling handsets, it's also about halting unauthorized downloading, Smith said.

"We have to give the people what they want," he told the AFP news agency.

With its 1.3 billion potential customers, China represents the world’s largest testing ground for such innovative strategies.  However, experts place China’s piracy rate at more than 90 percent .

Google is trying a once unimaginable approach to the problem, teaming up with record labels such as Sony, Warner and EMI for a project that offers legally downloaded music at no cost.  The service, which works in conjunction with Chinese music site Top100, launched earlier this year, and seeks to profit through advertising revenue generated by attracting more visitors to its site.

Rival Baidu currently dominates China’s search engine market.  One of its key advantages is its ability to easily locate free music.  However, Baidu’s competitors say much of that music is actually illegal.

Some question whether Google’s venture can translate into real profits.  But the company says it is critical to first gain the visitors and then monetize that through advertising.

"We believe that by investing heavily in product innovation, the users will come and then the money will come," Google China's engineering director Bin Lin told the AFP during the Hong Kong conference.

Social networking sites such as Facebook and Twitter also hold potential as a lucrative tool, said Ayrton Zhu, general manager of Tencent, a leading Chinese Internet firm.

The company runs an online community called Qzone, in which users pay an upfront membership fee to listen to background music on the site as well as dedicate songs to others.  Qzone has grown to rival MySpace and Facebook in terms of membership numbers.

"Companies need a deep understanding of users' behavior and how to use music to get them to interact with their friends," Zhu said.

Robert Campbell, managing partner with M&C Saatchi and Sunshine, said advertisers must embrace more sophistication in how they work with social networking sites, and should move beyond simply covering a Web site with banners.

"What they're selling is not music... it's what music represents; it's the ability to share an emotion," Campbell told the AFP.

"I absolutely, wholeheartedly believe the money is out there, but you have to give people something they're willing to pay for."

Lachie Rutherford, president and chairman of Warner Music Asia Pacific, said that the entertainment industry should take comfort that the public’s appetite for music remains strong.

"We're operating in an environment of change, but one thing doesn't change and that is the need for people to be entertained," he said at the conference.    
 


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Source: redOrbit Staff

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