RAMBLE ON: INTELLECTUAL PROPERTY RIGHTS AND THE CHINESE MUSIC INDUSTRY (Interview/DongDong special)

As the moderator of the IPR panel, Outdustry/China Music Business boss Ed Peto was interviewed by Chinese mega portal, Sohu, by way of introduction to the panel and it’s themes. The interview is re-published here in English:

1. Before we get into what’s new in the IPR field in China, can you explain briefly some of the core IPR concepts that everyone involved in the business should know about, but do not?

In its simplest form, intellectual property (IP) law focuses on three main subject areas: trademarks, patents and copyright. These are all essentially ways of protecting human creations so the creators can be rewarded for their work, with copyright obviously being the most relevant to the music business.

Whenever a songwriter composes a song, a copyright is automatically created. When this composition is recorded, a second copyright is created. These two copyrights – the “composition” and the “recording” – are the exclusive property of the creators or producers and can be exploited in a range of ways – for example, reproduction, distribution, performance and so on. The music industry is basically built on exploiting these two copyrights. It gets very complicated very quickly, but this is the most basic explanation of it. You would be surprised how many people in the music industry are shaky on these fundamentals.

2. We are all aware of the prevalence of piracy and illegal file sharing in China. In your opinion, why are these issues particularly serious in China? Do you think there are some problems relating to IPR that are particular to China?

Piracy needs to be seen in the context of society – specifically, what stage of development society is at. China is an emerging economy, built primarily on manufacturing, exports and, increasingly, domestic consumption. Mass production is therefore, thus far, valued over innovation. The protection of IP can actually hold back development in these areas in their early stages.

As China inevitably moves from a manufacturing economy to an innovation economy – meaning that companies need to innovate to stay ahead of competitors – you will see domestic companies that once infringed IP start to use the laws to protect their IP.

This progress I have described is mainly only built on trademarks and patents – the building blocks of industry. Copyright, however, is the last part of the IP family to get any attention, as it is the least important to this kind of economic development.

The first modern copyright law in China was only introduced in 1990, and by the time the Internet arrived in the late 90s and early 2000s, society was still fairly new to the idea. The result is a digital ocean of unregulated copyright infringement in which people genuinely don’t feel there is pecuniary value to content. The consumer, in good conscience, believes it to be free and, in most cases, the platforms even believe it to be free.

We can now see the digital media economy (underpinned by copyright), however, starting to emulate the progress of the manufacturing and industrial economies (underpinned by patents and trademarks). Big digital content platforms that once infringed copyright are now starting to protect copyright to differentiate themselves from their competitors. It is very early days still, but the signs are definitely there.

3. In your own experience in dealing with IPR issues in China, what are the major problems that you’ve encountered, and have you seen any change or improvement with regard to these issues over the years?

As representatives of foreign copyrights in China, our biggest problem is actually the legal import of these copyrights. If you cannot bring your content into China legally, then you cannot a) get paid for it, or b) protect it against illegal use. There are a number of trade barriers – some visible, most hidden – that prevent us from simply representing our copyrights in China and, as a result, we are not on a level playing field.

Once the content is successfully licensed and distributed in China, however, we then have to use the existing copyright laws to protect these rights. Unfortunately, as the law is still maturing, enforcement is incredibly difficult, particularly for a foreign company. One of the most effective methods we have is working as a collective via an organisation like the IFPI who represent the major record labels globally. We actually have the head of IFPI China on our panel at DongDong so I will definitely be discussing this with him. The IFPI have done a lot over the years to lobby the Chinese government and help the development of copyright protection in China.

4. Many people seem to think that in the digital age we have to radically rethink the whole copyright situation, even rethink the entire music industry. What’s your attitude towards such opinions and why?

Honestly, I think the global debate on copyright is unduly influenced by bad blood. It’s worth framing this in the context of the Western industry first: During the pre-internet era in the West, the major labels arguably abused their stranglehold on the supply chain, dictating who could consume what, where and at what price. This would squeeze both the artists, who had no choice but to go through these bottlenecks and so signed unfavourable contracts, and the consumer, who ended up paying $20 for a CD album with only two songs they liked on it.

With the arrival of the Internet, this label stranglehold unravelled and the music industry became the worst version of itself: slow to innovate, denying certain technological realities, suing the consumer and so on. The hangover of this is that the labels are largely disliked and, perhaps worse, copyright itself gets a bad name as the labels are essentially perceived as being vast, abusive, copyright bullies. We even went through a period in the early Internet days in the West when people said “Copyright is dead…it is just a weapon used by corporations…lets destroy the old system”. In reality, it is the other way round: Copyright law is the only tool that protects the individual against the corporations. When you record one of your songs – creating those two copyrights – you are then, in theory, protected from corporations and others stealing this creation. The big tech companies are largely built on free content, and quite often on infringement of copyrights belonging to the little guy. It is pretty telling, for example, that the strongest lobbyists for copyright erosion are the big tech companies.

There is no doubt that copyright reform should be a continuous process in light of the new digital economy, but we need some perspective on this. As far as rethinking the music industry: As much as people like to vilify record labels, who else invests 20% of their total revenues into developing new talent? That’s what a label is: an investment machine – investing in new talent at its own risk. The labels are essential to the ecosystem and need to exist in some form, although some evolution will inevitably happen.

Whilst China has had a music industry in some form for over 30 years, its glory days are definitely still ahead of it. After a brief period of modest CD sales in the 90s and early 2000s, the last few years have been rock bottom in terms of trade revenues. It can only go upwards from here.

Much has been made of China being an opportunity to invent a new industry, with newly minted copyright laws and none of the Western hangovers, but I do not think we will see this. In fact, in the time it has taken for the Western industry to collapse and, to a degree, reinvent itself, the Chinese market has remained stagnant and un-innovative. While some wishful-thinking observers and anti-copyright academics have tried to hold China up as a case study in which the creative industries are “thriving” even in the absence of copyright, I think this is patently untrue. The absence of a totally mature and enforceable set of copyright laws has damaged the Chinese creative industries immeasurably.

Any progress we see in the future will largely be reliant on the maturation of China’s copyright laws. In turn, the proper enforcement of these laws will ensure return on investment for anyone brave enough to invest in the creation of copyrights via development of talent. When it pays to invest in developing music, everything changes. That’s when the Chinese music industry will really begin in earnest.

5. Can you introduce the panel participants and explain your choices? Why do you think such a panel is important within the framework of a convention like DongDong?

So far we have Guo Biao (郭彪), the head of IFPI China, as mentioned above. He is a brilliant guy who has been fighting for IP rights in China for over 20 years, firstly on the side of the government at the National Copyright Administration of China, now on the side of the record industry. He is uniquely positioned to tell the whole crazy story of copyright development in China.

We also have Cherry Guo (郭春飞), a leading IP lawyer and partner at Juntai Law Firm (北京市君泰律师事务所), who has also been involved in this fight for many years. She was instrumental in opening the karaoke market up for rights holders, which is potentially massive for the future. She also now represents enormous companies like Alibaba, as well as helping smaller companies (including Outdustry!) navigate the difficult copyright landscape in China.

There is a third panelist, yet to be announced.

I still get prominent people within the Chinese tech, media and entertainment industries who say to me “Copyright doesn’t exist in China.” As long as people are still saying things like this, then panels like this will be incredibly important. I really feel that it is most important for the little guy to understand these topics as their whole career depends on creating, protecting and exploiting their copyrights.

6. What are the main issues you will be covering at your panel at DongDong Convention? What’s new in the IPR field in China?

This will be a really good look at copyright in China – its history, its development, its future – pretty much what I have outlined above. I imagine we will discuss the current amendment to copyright law, which is a really interesting area. It can potentially affect the industry deeply in the long run.