Big Labels Go Mobile in China

The music business has been truly stirred and shaken, and nowhere more so than China, where a handful of state sector of labels are having to co-exist with international majors who have snapped up most of the bankable stars. But everyone is being screwed by piracy. Now, into the gap has stepped Access China Media Solutions, a Chinese company specializing in developing music and gaming technology for mobile phone. Formed as a joint venture between Japan-based software developer Access Co., Ltd., and Seattle-headquartered Melodeo, Inc, in early 2006, the company develops technologies and solutions designed to enable the secure delivery of music and video for the Web and mobile phone.

 Melodeo’s success at delivering music content to mobile users in the US, and its credibility in the music world – the company’s Senior Director of Media Content is Dave Dederer, founding member of rock band The Presidents of the United States of America - probably helped Access China to land an unspecified injection of cash lately from both Sony BMG and Warner. The deal means Access China Media Solutions builds a “platform” of secure technology through which the labels can sell their music downloads to PC and mobile phone users in China.

So Chinese music fans get a more cool, user friendly experience that other providers don’t offer. And music companies get “a secure, economically viable way to distribute their content in China and throughout the world,” as the press releases announcing the deal suggests they’ve been desperately seeking. “Piracy of both physical CDs and online digital music has made these efforts difficult over the past decade.” No surprise there.

Mobile phone networks are, goes the logic, more secure, and have a built-in payment system – you pay for your downloads in your monthly phone bill. Approached yesterday at a technology conference in Beijing Wayne Zhang, the bespectacled, quietly spoken CEO of Access China Media Solutions said the team-up will unleash a “new wave” in the world wide music business. “Together we have the content, proven technologies, and network operators' support to ensure that wireless customers can get their music and multimedia entertainment content the way they want it, whenever and wherever.”

Yet for all Zhang’s promise of nourishing “a vibrant, legitimate digital music business in China” and helping “…recording artists and songwriters by ensuring that they are properly compensated for their work,” the new Access deal seems to be mostly about building the advantage of the global players in China. Both of the big labels are already licensing music to web portals and mobile content providers in China.  

Sony BMG has said in a few thousand interviews and announcements that it’s “excited” about the market for distributing its international and Mandarin repertoire on mobile phones in China. The first of the major labels to open a Chinese representative office (in 2000) Warner was also the first to strike a deal with a Chinese mobile operator to distribute its whole catalogue – it struck an agreement with China Mobile in 2006.

Given Access and Melodeo’s software know how and the vast content banks of the two labels, the deal could be the key to the regional music market. China after all boasts the world’s largest mobile subscription base – almost 500 million users. Delivering digital music and entertainment safely and making money hasn’t always been easy though. While the country boasts nearly 500 million mobile subscribers it’s been a real headache to get everyone onboard: the operators China Mobile and second player China Unicom are often greedy about their slice of the fee from each play. Most mobile phones are made in China but handset and device manufacturers have proven stubborn and slow on innovating since low cost phones sell fastest (and are easiest to make) in China. Content providers, application developers and artists meanwhile have all got their own issues over slices from the pie. Content providers have been accused of ganging up to force lower prices on to labels and musicians.

Using a strategy that we’ve seen here before – China as a “potentially huge market” and a cheap testing ground (talent and business costs are cheap here but consumers’ incomes smaller) - if the arrangement is successful here it could be rolled out to other territories. But success is a big ‘if’ in China, where concepts like copyright and intellectual property remain foreign to many. Sony BMG and Warner will no doubt also be talking to the dozens of websites offering downloads for free and the thousands of Beijing shops jammed with bootleg CDs and DVDs will first have their say.

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