Technology is the new rock 'n' roll as smartphones and digital services
transform the music industry. But for those companies helping change the
way music is consumed, Asia presents big hurdles.
Apple's iTunes
music store - which has stamped its presence in the US and Europe as
sales in traditional formats such as compact discs continue to fall - is
still a limited service in many parts of the region.
Other global
players and streaming services popular in the West such as startup
Spotify, a privately held firm launched in Sweden in 2008, are in the
process of launching digital platforms in Asia, say analysts.
But
together with the region's sprawl of very different cultural
sensibilities, complicated licensing issues between record companies,
publishers and groups holding performing rights, and piracy hotspots,
digital growth has been mixed.
"Doing business in the so-called
western world is a little simpler," Ruuben van den Heuvel, executive
director of music, media and technology consultancy GateWay
Entertainment told AFP from Brisbane, Australia.
"For western
companies coming to Asia, it's like stepping onto a brand new planet and
wondering how it works," he said. "The landscape for digital music is a
bit of a piracy wasteland."
Globally the music industry remains
in a period of dramatic change as it tries to reconcile the Internet's
ability to grow audiences with the fact that this means people can
easily get their music for free using peer-to-peer (P2P) software.
Recent data suggests the industry is starting to turn things around.
According
to the International Federation of the Phonographic Industry (IFPI),
digital music revenues grew 8.0 percent last year to $5.2 billion.
"The
music industry has grasped the opportunities of the digital world in a
way few, if any, other businesses can claim to have done," IFPI chief
executive Frances Moore said in a report released earlier this year.
"Our
digital revenues, at one third of industry income (and now more than 50
percent in the US), substantially surpass those of other creative
industries, such as films, books and newspapers."
The Asia Pacific region is set to play a bigger role in that progress.
A
2011 forecast from technology consultancy firm Ovum said the region
will account for 35 percent of global digital music revenues to the tune
of $7 billion by 2015, out of a global figure of $20 billion.
But it noted that growth in the region will be compromised by the amount of free music already available online.
One
black spot is China, which has nearly twice as many Internet users as
the US. But its digital music revenues per user are currently about 1
percent of that of the US, according to the IFPI.
An agreement
last year between Internet search giant Baidu and major record companies
Sony, Universal and Warner that saw the tech firm shut down infringing
services and set up an authorised digital music service was seen as
progress.
But China has seen an estimated 99 percent digital
piracy rate in recent years, meaning the legitimate market has operated
at only a fraction of its true potential, according to the IFPI.
At
$67 million, its overall music sales were smaller than Ireland's in
2011. It is a similar story in India, which has more than 40 million
smartphone users and 14 million broadband connected households.
"Extremely
large countries like China and India have got social issues far higher
up their to-do lists than piracy," said Van den Heuvel.
"So it
will be some time before piracy is really addressed to the point where
it is stopped and consumers are forced to buy legitimate content on the
web."
Seoul shows the way
One place in Asia seen as a
guiding light for the rest of the region is South Korea, regarded as a
pioneer of anti-piracy legislation.
In 2007 it began updating its
copyright law to account for the sprawling digital world and legitimised
pirate services by forcing them to register with the government and
implement filtering.
According to IFPI data it is now the most
successful digital music market in Asia, with an estimated three million
music subscribers to services such as MelOn and Mnet.
A
combination of legal clout and a huge repertoire of K-pop acts has
helped South Korea post steady growth, moving from 33rd to 11th biggest
music market in the world between 2005 to 2011.
Elsewhere, KKBOX, a major service in Asia, is present in Hong Kong and Taiwan, offering streaming and download services.
One
success story in Asia is YouTube, which has extended its presence in
the region with launches in Malaysia, Singapore, and the Philippines in
the past year, meaning that it translates the website into local
languages and sells advertising locally.
It has already been "localised" in Japan, Hong Kong, Taiwan, South Korea and India.
"We
saw huge growth and decided to localise in those markets," said Anthony
Zameczkowski, head of music, YouTube Asia Pacific at the Music Matters
industry conference held in Singapore in May.
"There is huge
potential," he added, citing YouTube's growth as "an example of how the
music industry could grow in the region, simplify the process, make sure
everyone understands what everyone is getting and (ensure) no
infighting between the rights owners".
Analysts agree that better
agreements on licensing and pricing to ensure any new service is not
open to litigation are crucial to future digital music sales in the
region.
"Every significant global player is looking to launch in
Asia in the next 12-24 months," said Van den Heuvel. "But they are going
through the trials and tribulations of doing so."