Rock 'n' roll band Rustic performing in Beijing. With limited income from their records, many bands are turning to touring. [Photo/China Daily]

Producers struggling as they face challenges of piracy, 'unfair' revenue distribution

In January, Song Ke, arguably the most popular music producer in China, announced he was quitting the business to run a roast duck restaurant. Five months later, he made an equally surprising return.

Song, the former deputy general manager and production director of Warner Music China and founder of Taihe Rye Music Co Ltd, was hired in June as the general manager of upstart Evergrande Music. But though the news about the producer's return made waves across the industry, it was his departure at the beginning of the year that revealed more.

As Song put it in January, "China's music industry is at a crossroads. We all need to think about what to do".

What his abrupt departure showed most of all is that the Chinese music industry is struggling badly. With piracy and the rise of digital media, the industry and its music producers, both domestic and foreign, are trying to find their way in the nation.

China's music industry accrued $82.8 million in total sales last year, according to the International Federation of the Phonographic Industry. But 76 percent of that total revenue came from digital sales. Sales of media, which include compact discs, records and cassettes, totaled $19.9 million across the country.

Although China is the world's second-largest economy and has a population of more than 1.3 billion, its music sales ranked 22nd in the world last year.

The main reason? Piracy. In the age of the Internet, technological advance and the rise of new media, record sales are dropping globally. In China, record sales reached $55.5 million in 2006, but dropped to $19.9 million last year, according to the IFPI.

In 2010, more than 70 percent of the revenue from China's music companies came from digital music sales, although the IFPI said that 99 percent of the music in China was pirated.

And although China has twice as many netizens as the United States, per capita digital music sales in China are just 1 percent of those in the US.

In addition to piracy, there is another factor harming China's music industry - revenue distribution.

If a song generates 100 yuan ($15.7) in revenue, only 2 yuan goes to music producers in the form of royalties, according to industry insiders. The remainder goes to telecom operators such as China Mobile as well as Internet service providers such as the search engine company Baidu and Web portals Sina and Tencent.

In many other countries, music producers take a bigger share of sales. In the US, the world's largest music market, music companies can get up to 70 percent of music sales, while in Japan, the second-largest market, 90 percent goes to producers, said Zhan Hua, CEO of Taihe Rye Music.

"When talking about the music market, people always say the business is very bad. But actually, it is not bad at all. Music makes enormous money. It's only that we producers don't get much," Zhan said.