The embattled music industry is changing its tune in China as it prepares a lawsuit against YahooChina for illegally making copyrighted songs available for download, a move that will place Yahoo in the now-familiar crosshairs of international commerce.
Interrupting the flow of glowing remarks about the promise of China’s music industry, the International Federation of the Phonographic Industry (IFPI) said Tuesday it is taking the necessary steps to sue Yahoo China.
London-based IFPI, which represents music companies in 75 countries, fired a warning shot at Yahoo China in April 2006 in the form of a “cease and desist” letter, but said it has not received a response.
“Yahoo China has been blatantly infringing our members’ rights,” said IFPI CEO John Kennedy. “We have started the process and as far as we’re concerned we’re on the track to litigation. If negotiation can prevent that, so be it.”
Internet portal company Yahoo owns about 40 percent of Yahoo China. The Chinese portal is a joint venture with China’s Alibaba.com.
Yahoo has been under fire from human rights groups for aiding the Chinese government in the prosecution of alleged dissidents.
The company did not return calls by press time.
Yahoo shares fell $0.39 to $32.91 in recent trading.
Rampant Piracy
The music industry sees immense potential in China, a country with 1.3 billion people, representing one-sixth of the world’s population. The four largest music companies have established their presence in China.
Universal Music has partnered with the Shanghai Media Group, while Sony BMG has created commercial links with Shanghai Audio and Visual Press. EMI has a joint venture with Shanghai-based Push Sound, while Warner Music Group has created Warner Music China.
But not everyone in China is dancing to the same beat. According to the IFPI, music sales in China last year amounted to $86 million, ranking the world’s most populous country at No. 20, well behind the far smaller Asian countries of Japan, Korea, India, and Taiwan.
Illegal sales of music in China are valued by IFPI at about $400 million, with about 90 percent of all recordings being illegal.
“No creative or knowledge-based industry can hope to survive in such an environment,” said Mr. Kennedy. “Pirate operators never incur those costs and will always be able to charge their product for close to free. And that makes fair competition by legitimate producers impossible.”
In comparison, the Chinese Audio-Video Association (CAVA) estimates the Chinese digital music business generated about $450 million in 2005 and has projected it will grow to $1.6 billion by 2010.
International Partnerships
Warner Music Group, the smallest of the Big Four music companies, has been particularly active in Asia lately. Two weeks ago the New York-based company announced it struck a wide-ranging deal with China Unicom, the world’s third-largest mobile operator (see Warner Music's China Beat).
The agreement, which covers the entire catalog of Warner Music China, Warner Music’s five-year-old Chinese business unit, came on the heels of a similar deal WMG signed with SK Telecom, one of South Korea’s largest mobile service operators (see Warner Tunes Korean Cell Music).
The two firms created a joint venture that will combine SK Telecom’s distribution expertise and its ownership of a roster of local talent, along with Warner Music Korea’s content, roster, and marketing skills.
Contact the writer:CMedford@RedHerring.com