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Chinese Government and Music Tech Industry Move Towards Legal Paid Music Downloads

China-internet-cafe-candice-leah-flickrChina’s moving to limit web-related music piracy in order to develop an environment conducive to paid music services though the details are a bit confusing and not to be taken fully at face value. A big piece of the puzzle is a Government-backed shift to paid music downloads from the web following new copyright legislation that went into effect at the beginning of the year. It’s a huge shift for China and one that raises questions about whether specific bits of news are designed to placate international forces, to bring companies in line with government desires or to make it seem like companies are following the government line.

Last week a post on The Next Web reminded me that we don’t hear a lot about what’s happening outside of the States even when it can translate into substantial music sales.

According to Kaylene Hong:

“The payments model will soon arrive in China’s music scene, as the government will test payments for legal Internet music downloads by the end of this year, Wang Lei, the head of Chinese Internet firm NetEase’s mobile music app told Sina Tech…”

“Relevant authorities will soon release unified pricing standards and other regulations to govern the trial of paid downloads, though specific details are still under discussion, Wang says. He notes that the ultimate model may couple a free listening trial with payment implemented for the full download, and that NetEase has already done the preparations for such a plan…”

“In total, eight major online music services will roll out paid downloads within this year.”

China’s combination of deep State involvement in commercial enterprises, including outright ownership, and a deeply rooted history of content piracy on and offline that may well have been consciously allowed by the government as an aspect of their development process, means that China watchers are faced with shifting signals and surprise moves.

A few months ago Music Ally released a report on Chinese music sales noting that, though the web is dominated by piracy and ad-supported downloads, mobile music has been more successful with music sales, especially ringback tones. This success can be attributed in large part to carriers’ control of their content and tech. I’m not sure about the current situation but this control and ability to directly monetize content meant that a few years back many young entrepreneurs were heading into mobile rather than web development.

From the Music Ally report and related news items, my understanding is that new copyright legislation is intended to create an environment in which piracy will be eliminated and web companies will have a rationale to develop paid options. Such options are being developed but, according to Ed Peto of Outdustry:

“Most services are fairly cautious about the take-up projections for these premium tiers as there is very little precedent for people paying for music in this way….Whether they will do the bare minimum to satisfy contracts with content providers or really put all their efforts into converting users into paying subscribers remains to be seen.”

These developments will be interesting to watch unfold. Just remember, if you think Western music and tech companies are playing confusing, multilayered games that most press coverage glosses over, then you’ll be watching an even deeper game with higher long-term stakes as China transitions from slash-and-burn quick growth to long-term sustainability.

Note: some coverage and statements focus on paid downloads and others discuss premium subscription services though the government seems to be getting more directly involved with the paid download aspects. Nevertheless, if piracy is reduced, that will help support the development of both approaches.

[Thumbnail image courtesy Candice Leah.]

Hypebot Senior Contributor Clyde Smith (@fluxresearch/@crowdfundingm) also blogs at Flux Research and Crowdfunding For Musicians. To suggest topics for Hypebot, contact: clyde(at)fluxresearch(dot)com.

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