Music 2.0 - Exploring Chaos in Digital Music

July 22, 2008

iTunesless iPod Faces Music Piracy in China

Filed under: Music Industry — maths @ 3:45 am

After much anticipation, Apple opened its very first Apple Store in China on Saturday. The store will sell the usual array of enticing Apple products which have already been available in China via authorized and as expected of the China market, unauthorized dealers.

Apple Store - China

It will serve as a focal point for Apple in China from which it will not only lead the sales of its dazzling products but also prepare it for its foray into the potentially hugely lucrative mobile phone market via its upcoming iPhone.

In the meantime, consumers in China can still feast on the iPod and iPod Touch but without access to its integral other half, the iTunes Music Store (iTMS). For years, Asians have wondered aloud as to when Apple would make iTMS available in this part of the world, none more vigorously than Chin Wong of the Philippines Manila Standard in an open letter to Steve Jobs two years ago when he stated,

Where are Asian iPod buyers supposed to get their music? Limewire? Other file-sharing sites?
We don’t blame Walmart for NOT selling us a whole bunch of stuff, but being able to buy songs on iTunes is arguably part of the iPod experience - or at least Apple sells it as such. So, if they’re going to sell us a product here that only works part of the way, they should at least level with us and say why they have to do it, don’t you think?

It is true that officially, Apple has enigmatically never clearly addressed the iTMS issue for Asia, while it still continues to hawk - and profit from - its iPods in Asia. Business Week noted that China is the only country where Apple has a brick-and-mortar store but not a local edition of its iTunes online music store - however, again Apple’s Senior VP, Retail, Ron Johnson refused to comment on the continuing iTunesless anomaly.

And then in the other corner, cue the fanboys, techies and Apple apologists who would immediately deflect the blame for the absence of iTMS in Asia to the antithetical twin prongs of piracy and major labels. It is likely that the labels are to blame too but though there are others who have held back from building music repositories due to major label restrictions, foibles and anachronisms, Apple’s pursuit of an iTunesless iPod strategy inevitably feeds off piracy.
As Chin Wong further noted,

Ironically, by not selling (music) to large swathes of Asia, Apple is indirectly encouraging piracy because iPod owners wouldn’t be able to buy songs online even if they wanted to.

Even though Apple did launch iTMS in Japan, Australia and New Zealand, these are music markets more akin to Europe than Asia. It is a known fact that piracy is prevalent in Asia, and in 2004, Steve Job himself addressed the piracy issue stating,

Let’s understand piracy first: I found you get really unreliable downloads. You have to try several times to get the song, and then you get it and find it was encoded by a ten year old with four seconds missing at the end. You don’t get to listen first, you don’t get artwork, and it’s stealing. We (via iTMS) offer fast, reliable downloads from our vast server farms “we are very, very good at this. It’s not stealing, it’s good Karma. Website music stores suck - they don’t work.

The IFPI and other analysts have already cited that China has a piracy rate of about 90%, with paid online music barely managing 11% share - and it is certainly not Apple’s responsibility to rectify the piracy rate. But by claiming the higher moral ground and invoking the theories of Karma against piracy and merits of the iTMS as an important complementary platform for the iPod, it is disconcerting to note that Apple then proceeded to market and distribute it in China based on the Winona Ryder-esque advertising platform of having a “1000 songs in your pocket” when the source of the music is clearly dubious - especially in the absence of iTMS. Even though there are other device manufacturers that operate similarly in this environment, Apple is held to a higher standard of their own choosing and thus seem to be courting bad karma in China.

Online Music Access - China 2007

As seen on this chart, unlicensed music search led by Baidu, combined with P2P downloads dominate with its accompanying supply of pirated music in China. With physical CD piracy also around 90%, it cannot be claimed that most users in China are ripping their CDs into mp3 for legitimate use on their iPods. So if one strips away the reality distortion field, without a doubt the iPod in China is not only a repository of pirated music but one that is purpose built to organize and play this pirated music - with few non-infringing uses in China. Granted that in China, Apple itself is victim to piracy of their products, but just as the warehouse or shopping complex owner who makes a killing by knowingly being the primary repository or channel by which these fake products are consumed is complicit, the iPod itself echoes a similar role.

In 1984, Sony Betamax defended its case against Universal Studios successfully when it was absolved of any contributory copyright infringement for the potential uses by its purchasers, because the devices were sold for legitimate purposes and had substantial non-infringing uses - and personal use of the machines to record broadcast television programs for later viewing constituted fair use.

As such, much as the iPod is a beautifully engineered and designed device while arguably having a case for substantial non-infringing uses in the US and parts of Europe, it has to be acknowledged that its primary use by purchasers in China involves the infringement of music copyrights.

Analogically, let’s say the iPod was a gun allowed for use in the US primarily because its main purpose was for hunting, with Apple also providing access to the majority of hunting grounds in the US. But if this same gun was being sold in China which not does not have any suitable accompanying culture or hunting grounds, then its primary use would inevitably be for killing people! To cross metaphors, the iPod could be considered as an exquisitely designed double-edged sword which when used in another legal context, environment and culture, becomes a weapon with substantial infringing uses.

Yes, it is heretical by the book of Jobs to describe the iPod as such, and in 2004, Steve Ballmer of Microsoft albeit with vested interest, called a spade a spade with his biting observation that, “The most common format of music on an iPod is stolen,” and in the process he earned the ire of the fanboy clique.

Even if we were to give Apple some Brownie points and cut them some slack for trying, it is only in 21 countries where it has launched the iTunes Music Store as opposed to the many more countries where Apple has seen it fit to expend energy and resources to distribute the iPod. The map vividly shows that in huge swathes of the world where the iPod is distributed, there are no iTunes Music Stores or in the case of China, barely any viable legal music stores currently. [It has to be pointed out that though Apple added 40 additional countries for limited access to the new iTunes Apps store last week this did not include music access.]

iTunes Music Stores Map

So one can’t be faulted when inferring that the iTunesless iPod is the pipe that delivers the opium for the masses in many parts of the world, with the realization that the opium is illegal especially in China.

It is especially galling for Chinese consumers to note that Chinese songs albeit in limited quantities are available to US & European iTMS customers but not in the country of origin of the music!

Pure Audio MP3 Sales by Volume - China 2007

In China itself, the pure audio MP3 player has undergone major consolidation in the last year and now 3 major brands having risen to prominence leaving numerous other smaller brands on the sidelines who will probably fade away - while Apple currently has a promising 10% volume share and considering that its devices are priced higher, there is revenue to be had here. At this point, it would only be proper to highlight that leading mp3 player manufacturer, Samsung has not conducted itself responsibly with regards to music marketing by aligning itself closely with Baidu’s pirate music search

Noting that the total revenue for 2007 for the pure audio MP3 player market in China was RMB 4.26 bil ($600 mil) and projected to rise to RMB 5.67 bil (US$ 800 mil) by 2012 which carries synergies with the developing music and smartphone market, and one can see why both Samsung and Apple are willing to battle it out for supremacy in this sector.

Pure Audio MP3 Player Revenue - China 2007 to 2012

So the launch of the new Apple store does seem to be a perfect platform for Apple to renew its efforts to dominate the MP3 Player market in China

However, the conundrum for Apple in China is that the pursuit of this goal can only be achieved by feeding on the very piracy that Steve Jobs himself labelled as “stealing” and without an iTMS or at least working with a legal online music store in China, it is incongruent to Apple’s stated philosophies.

Credits:

  1. Pirate Image courtesy of Gearlog
  2. Apple Store China Image courtesy of David Feng of Techblog86
  3. Map courtesy of Google Maps
  4. Good Evil Apple Image courtesy of Gizmodo

4 Comments »

  1. […] iPods which have yet to dominate China as it has in Western markets. As mentioned before here on Music2.0 even though Steve Jobs has spoken out against piracy by describing it as “stealing” and […]

    Pingback by Music 2.0 - Exploring Chaos in Digital Music » Will the Real Apple Please Stand Up in China? — September 1, 2008 @ 12:30 am

  2. very informative article. It’s more of an advocacy towards piracy. China’s repuatation hasn’t deterirated from the past years. This is because is been the strength of their economy to manufacture products from original design and export them to diffrent countries. i wouldn’t mind buying cheaper phones but still it has to be creatively branded. because the impression of poor qualiy is being held so low with this thing. i’ve been a user of iPod and i can’t help compare the vast differences between the fake and the original one. Ipod Download Music

    Comment by Allan Mitz — February 10, 2009 @ 11:32 pm

  3. Even though there are other device manufacturers that operate similarly in this environment, Apple is held to a higher standard of their own choosing and thus seem to be courting bad karma in China.

    Comment by ugg — November 18, 2011 @ 2:47 pm

  4. We don’t blame Walmart for NOT selling us a whole bunch of stuff, but being able to buy songs on iTunes is arguably part of the iPod experience

    Comment by ugg — November 18, 2011 @ 2:51 pm

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