Music 2.0 - Exploring Chaos in Digital Music

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.

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.

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.]

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!

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.

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

China’s rogue search engine Baidu has recently come under intense attack from a large swathe of the music industry including government appointed bodies like the Music Copyright Society of China (MCSC), the China Audio-Video Copyright Association (CAVCA) and domestic labels joining forces with international major labels and publishers in an unprecedented alliance against it calling on advertisers to refrain from advertising on Baidu.With its advertising lifeblood under threat, Baidu has attempted a divide and conquer strategy against the labels by announcing a partnership with 3 labels – Ocean Butterflies, Emperor Entertainment Group and Shanghai Huayi Group wherein it will be sharing advertising revenue on streaming music and music videos with them, though significantly, revenues from controversial mp3 downloads are not part of the equation. For dramatic effect, Baidu claims to have lined up an advertiser willing to put up a pool of more than RMB 10 mil (US$1.5 mil) which will be used for this revenue share, but has not even mentioned the advertiser’s name – and it is open to question if this advertiser even exists. In all probability, this announcement seems like a blatant attempt to deflect the music industry alliance’s call to advertisers to boycott Baidu.

It is most likely that Baidu is actually dipping into their huge revenue pool and taking out a small portion to give to these 3 labels, but this very act acknowledges the fact that they do realize that labels are due their cut and contradicts their previous claims to the contrary. So if they are only limiting it to just their so-called Baidu Digital Music Alliance including the 3 labels, surely that implies that they are hoarding the remainder of their ill-gotten revenue pool which belongs to other labels. So the manoeuvring and timing of this announcement shows that Baidu is clearly buying off 3 labels in an unsustainable manner with expensive advances rumored to be in the seven figure region (in Chinese yuan) each, simply to boost their position in the impending legal cases and to subvert public opinion - with no positive motivations towards the music industry at large. In fact, unless they extend similar revenue share deals along with compensation to all other affected labels for the sustained acts of infringement over the years, the true significance of this announcement is that their advances to these three labels have instead just created a precedent for suitable compensation claims for each label suing Baidu currently!

The following is the English translation of a great analysis of this latest development in the Baidu saga with kind permission of Beijing Digital Music Consulting, first published on the Sina Blog in Chinese:

Original article by Zhang Zhi Yuan (translated below)

(My last article “Labels Finally Strike Baidu’s Vital Points” had been blocked by Baidu but is still available via Google, Soso, Yahoo, iask, Sogou and other search engines)

News announcement: Baidu recently revealed that it has received the first RMB 10 million plus advertising payment for Baidu’s “Digital Music Alliance “, which will start from July implying that over 70 labels in this alliance will get over 8 to 10 times of the previous revenue share. Also, Baidu claimed that if all goes well, in a few years the revenue earned by this alliance will exceed that of the alliance of major Chinese websites (RMB 40 million per year)

Baidu’s ploy to sow mistrust amongst labels based on the “Kill 3 Generals with 2 Peaches” strategy
This news is quite timely as it seems to have come about as a result of the legal action against Baidu initiated by the recent music industry alliance. However, such a response from Baidu against the three major music associations - MCSC, CAVCA & IFPI - is unwise. It merely seems to be a public relations tactics and not a strategic solution – and will only serve to increase the conflict between two sides.

Baidu’s reaction can be likened to toothpaste being squeezed out of a tube in reaction to pressure from the labels’ actions. Before the music industry alliance collectively sued Baidu, it had no motivation to attract greater advertising revenue. Now it seems that in reaction to the alliance’s efforts, Baidu has somehow easily extracted a portion from their pool of over RMB 100 million ad revenue, and with even more effort, they claim that RMB 1 billion is possible too.

Till now, Baidu has not acknowledged the magnitude of the problem, and marking their lack of sincerity, they have resorted to the strategy of sowing the seeds of mistrust among labels in “Kill 3 Generals with 2 peaches” fashion.
Baidu’s practiced logic has become,

“I stole one billion yuan from all of you, but since I am a rascal/ scoundrel, no one can do anything about me. So I will take out 10 million out of 1 billion yuan and whichever label gives in first by surrendering and promises not to accuse me, I will give them some money, but whoever insists otherwise, not a cent will be given out to them.”

Such a move by Baidu is bound to frustrate the music industry. As a dominant player in the online music industry, Baidu certainly needs to show greater social responsibility. A more sincere way for them to deal with the labels is to provide a solution that will satisfy all copyright owners’ needs instead of providing limited scraps of money for a few labels to fight for. This kind of treatment of the labels can be likened to teasing a monkey. It can only serve to make most labels angry and force those who are insisting on legal content distribution more determined to sue for further compensation. Otherwise, those pursuing justice will get nothing, which is very much against the concept of a harmonious society as well.

The labels are not satisfied that Baidu offers revenue share of ads for streaming music webpages only
Let us suppose that the labels accept Baidu’s model of “ad revenue exchange for copyright”. Then, all music companies should ask for a share of all of Baidu’s mp3 channel ad revenue, in addition to all key word searches related to music in other Baidu pages and channels, instead of only the ad revenue from the streaming pages assigned to the digital music alliance. The scope of revenue share is now a major point of dispute between Baidu and the labels. The labels generally think that the money offered to copyright owners is only a small fraction when (it is known that) the whole amount is at least a hundred times this.
Of course Baidu likes to say that “although the mp3 business brings huge page view traffic, the scale of revenue is still not big”. However the music industry response is that, if this were case it shows up Baidu as not only failing to attract advertising, but also emphasizes their limited ability to run the music business too. This excuse cannot be accepted and theoretically it can be described as,

“You stole my money, but when I ask you to give it back, you say that you have used the money to run a business and you are running a loss now, so now you claim that you only can give me a small sum of money.”

To earn profits from the music business is not an easy task and taking into account the (illegal) circumstances, it is possible that Baidu has been constrained in this area. Otherwise, given Baidu’s platform reach, if they were more focused on running it more effectively, they could possibly earn more profits for the greater benefit of the music industry. For example, they could open up their whole platform and integrate services like Baidu Post Bar, music Zhang Men Ren , Baidu blog etc. The record labels can then have their own promotions on these pages with event or activity marketing which will be able to attract much greater major brand ad revenue than having just simple display ads.
Only when Baidu solves this dispute regarding copyrights will advertisers who have a comparatively greater sense of social responsibility feel assured enough to place their ads on Baidu. If Baidu can improve for the better, with its platform advantage, it should not be difficult to share several hundred million yuan with the music industry each year.
However, Baidu’s current calculation on (traffic and revenue) data with regards to the labels is surely not very scientific, and a necessary solution would be to find another trusted company who can monitor this data fairly.

The revenue from music on Baidu could be derived from the following areas:
Bidding for music related key words for search ranking, and key words matched with text ads are two major areas - with the other sources being image ads, text link ads, streaming player ads etc.
However, the most dissatisfactory aspect is Baidu’s offer to share only the ad revenue on music streaming with labels. Even though the streaming revenue share is offered, critically, the fee for music downloading is not solved. Streaming is streaming, downloading is downloading - the two rights are not the same. The key problem remains the monitoring of the frequency of music streams listened to by users. Most labels (belonging to Baidu’s digital music alliance) only receive less than one hundred yuan per month which is unlikely to be true revenues, so they do suspect that Baidu is cheating in the accounting. So Baidu also needs to make their revenue accounting more transparent and public, by opening up its back-end data access to a third party to monitor in order to earn the public’s trust.

Legalization doesn’t necessarily mean that consumers have to pay
Many consumers mistakenly assume that the argument between Baidu and the labels is about whether music they consume should be charged to them or remain free. In fact, legalizing Baidu’s mp3 doesn’t necessarily mean asking consumers to pay. Consumers in future could still have a free legitimate music download service, with a better quality of downloaded music than the present system.

The labels think that Baidu has profited enormously using their songs, but has not shared any of this money with them and copyright owners. They are willing to try out new methods but Baidu does not have any sincerity. Baidu’s piracy has damaged the interests of copyright owners and legal web sites and especially dampened the enthusiasm of music creators, which will eventually lead to the shrinking of the music industry. This is also the reason why everyone feels that good songs are becoming fewer in number in the market now.

For consumers, music could possibly be consumed in various ways in future. Some can choose to view ads in order to listen to music for free, and bigger fans can opt to pay for better quality service. What the labels want is for the market to develop in an orderly and healthy fashion, but not by sacrificing the interests of general consumers. Instead, Baidu’s only interest now is for quick returns, and consumers simply cannot fathom the struggles the labels’ are undergoing in this situation, with many enthusiastic musicians putting in great effort towards music production but getting nothing back in return. This should not be tolerated in a harmonious society. It can be likened to protecting a rare animal from extinction, failing which no one will work on music production earnestly, with a discontinuation of investment in this area which could tragically result in the Chinese music industry dying off.

Other References:
Baidu Bites Back - China Music Radar
Silk Street Divides and Conquers Foreign Brands - Danwei

Credits:

1. Image courtesy of Chinamengzi.net
2. Kill 3 Generals with 2 Peaches Story courtesy of the book “More Than 36 Stratagems: A Systematic Classification Based on Basic Behaviours” by Douglas S. Tung, Kenneth Tung
3. Baidu’s Multi-Million Yuan Ad Payment Offer is a Ploy to “Kill 3 Generals with 2 Peaches” by Zhang Zhi Yuan
4. Translation by SQ & Maths

With Guy Hands ringing in the changes at the helm of EMI and as a follow-up to the announced huge layoffs - reported to number as many as 2,000 - some of it will manifest itself with the closure of a significant number of EMI offices in Asia including their regional office in HK but excluding their better performing publishing arm.

Though no official announcement has been forthcoming and the final body count for Asia is still being worked out, an unnamed source has indicated that this will likely happen in June as previous reports from Billboard and One Two Music indicating March 26 as D-day have been proven to be wrong.

Already, EMI has effectively closed offices in Thailand and Singapore whilst those in Japan, India, Australia and China will remain to some level of direct EMI jurisdiction especially on the digital front. It is believed that EMI is currently in talks to license a partner to manage their catalogue in Asia, and rumours have Warner Music as the front runner.

Looking at the balance sheets from a purely financial viewpoint, it probably makes sense for Guy Hands to close any unprofitable operations as they currently exist, especially as overpaid label executives who cannot pull their weight in drawing the required revenues from the market combined with the now legendary ‘fruits and flowers’ expenses serve to impede his aim of expediently flipping the company for a quick profit. A cursory examination as reported by One Two Music confirms the troubles that EMI has been experiencing in Asia, with a reported monthly sales of only 15,000 units of international product per month in Indonesia, one of the world’s most populous nations. At the same time, it might also be a good move to rid the music industry of deadwood who are totally inept and unable to keep up with the changes brought on by technology, but unfortunately, the theoretical justification hasn’t borne out in real life as sites like the Velvet Rope noted that many of those culled in the US in similar exercises were unfortunately, the wrong people.
But it is also wrong to judge operations in Asia at face value based on the balance sheet as the picture has been fatally flawed due to head office straitjackets and dictation of global policies which were applied insensibly to the Asian markets.

It’s also all too easy to blame digital music piracy for the revenue drain as the fall guy especially for the ruinous digital Mechanical & Performing Royalty Rate War which raged on since 2002 for the best part of the development of the broadband and mobile explosion in Asia and which not only paralyzed major labels and publishers in Asia, but left them with restricted leeway in negotiating deals, and damningly resulted in easy pickings for unscrupulous Service Providers and carriers to use unlicensed content at will. While the War was being fought in the courts in the UK, the unenforceable and easily abused silly interim escrow systems and gentleman’s agreements which were observed in Europe and the US were scoffed at in the cut-throat Asian markets (excluding Japan) and was a contributory factor to the continued digital looting of major label and publisher content.

Despite this, the more innovative label executives in Asia tried to explore new revenue streams and business models via mobile applications but often had to contend with head office restrictions, much of it initially borne out of American and European ignorance on the potential of developing mobile opportunities in Asia (ex. Japan) – and also, the need to maintain control over their empire. Major label contracts with retailers were often filled with alien sounding head office lingo, unrealistic DRM restrictions, clauses and conditions that made no sense in Asia, and often Asian major label executives were driven to making quiet deals on the side with partners on the condition that as little be publicized about the deal as possible “so that my (head office) bosses will not ask me questions about it”.

For example, the unprecedented popularity of first, monophonic and then polyphonic ringtones in Asia gave music publishers in Asia, especially China an opportunity to their very own goldmine. However, as major music publishers themselves were ultimately reporting to old school label chiefs at the top of the pyramid who didn’t understand the potential of these newfangled ringtone thingies, licensing approvals from the head office were slow and laden with impractical constraints for partners. Once record label executives themselves realized the revenues that polyphonic ringtones were raking in while they sat on the sidelines with envy, they quietly made threats to publishers to seek their pound of flesh for the use of artist images and artist names in the sale of polyphonic ringtones. It was only when the master ringtone market boomed in the US, did the major label head office properly yield to the potential of mobile applications and then made it easier for their underlings in Asia to license rights.

It is thus frustrating to note the column inches devoted to so-called innovative concepts in the US and Europe like Spiral Frog, Q-trax, Imeem and last.fm and their courting of major labels when Asian label executives themselves had been rebuffed for years by their head offices to approve similar deals in their home countries.
Calvin Wong, Senior VP of Warner Music Asia in an astonishing and frank public tirade at Music Matters 2007, lashed out at his international colleagues for not understanding the needs of Asian markets and instead putting barriers in front of their Asian counterparts.

Major labels’ luddite tendencies are legendary but their slowness at the head office level in sanctioning the tapping of the booming mobile music market in Asia allowed faster moving Service Providers and carriers to land grab juicy revenue shares, and as a result major labels in Asia are still paying the price as they are left with the short end of the stick in deals with carriers. But this very lack of technological understanding as admitted by Universal Music’s CEO, Doug Morris in his now infamous interview with Wired, had a more profound effect in the faster developing mobile and internet markets of Asia, as more advanced and unforgiving Service Providers and websites that sprung up on the back of this new technology invariably engaged in stealthy methods of music piracy, resulting in easy-t0-use applications and products that consumers welcomed with open arms.

So with all these self-created own goals at the institutional level, major label executives in Asia are left with having to blame piracy as their convenient bogeyman to paper over the inefficiencies of their organizations. But even as digital music piracy spread like a raging forest fire in Asia due to label inefficiencies and slow technology adoption, their cries of foul play were not addressed with sufficient action in Asia - one major label global head of piracy who is located in the US is said to have visited China only once in the past few years. And more than one Asian major label executive has expressed frustration in private at the IFPI’s insistence of controlling anti-piracy actions in Asia out of London, even to the extent of running their online piracy monitoring crawlers on Chinese websites from London. As one music industry executive commented,

“It is tough enough being in China and trying to counter sneaky companies like Baidu but to sit overseas and direct anti-piracy operations whilst not understanding the language, culture, social norms and even technology in China makes it a futile exercise.”

Music industry apartheid has resulted in a few out of touch executives sitting in plush offices in their ivory towers far away dictating what the rest of the global market should be doing in a ‘charge of the light brigade‘ manner, and this ‘think global, act big brother’ attitude has been a serious major label foible even within its own ranks.

Throwing a curved ball into the system and in true ‘Good Copy, Bad Copy’ fashion, couldn’t some Asian or South American music industry executives familiar with both the American/ European model and also the developing world’s systems be better equipped to run a truly global operation as they have the innovative wherewithal and better understanding of the new economy and the developing conditions covering a wider footprint of the world? But instead, Asian label executives are now facing the cut and as some of EMI Asia’s top management are let loose, it is rumoured that they will be setting up another label or at least a music management agency – time will tell if they are simply the deadwood they were cast off as or if they have learned some valuable lessons from their erstwhile employers on how not to manage in this new economy.

Update 16 Apr 2008:
New York Post has an excellent article explaining the delay in executing the layoffs due to EU regulations and a purported cash crunch with Citigroup’s $4.9 billion in EMI debt being impacted by the delay in EMI’s restructuring.
EU regulations state that if more than 100 people are laid off, a 60 day announcement has to precede it, so there is every likelihood that the US and Asia will be the first victims of the axe.
In fact, in what could be termed as breaking news, as an epilogue to the restructuring announcements, Music2.0 has just been informed that the following major changes will be announced in the next 48 hours:
- Nick Gatfield from Universal/ Island is going to be named EMI UK Chairman or/ and in the capacity of head of A&R,
- Jason Flom, Chairman and CEO of Capitol Music Group in the US is on his way out
- Roger Ames, head of EMI North America and UK A&R man: no EMI restructuring news is complete without the obligatory “Roger Ames is under intense pressure and his head is still on the block”

On 2 Mar 2008, Bjork performed at a concert in Shanghai, including a song called “Declare Independence”, allegedly unauthorized by the Ministry of Culture, and once done, uttered a few controversial words meant to incite, and then probably collected her cash before making the hell out of there.
In fact, speaking for the first time about the incident on The Lipster, she said,

“When I said ‘Tibet, Tibet’, I whispered it three times. There was no fuss in the room. It happened afterwards on websites.”

It is interesting to note how Bjork cunningly turned an oh so quiet whisper to a scream, hypocritically using the very media channels that she claims to hate in order to amplify her own agendas. This is the very same person who laid down draconian media conditions for playing in Shanghai and in her own immature and byzantine way, threatened to cancel her show if any reporter was present at the airport in Shanghai, not to mention that she’s violently happy to use fear and intimidation to keep reporters at bay at the threat of bodily harm. Touche…Army of Me in repressive regime impersonation?

Anyway those ‘whispered’ words then spawned the many subsequent reports in the Western media supporting Bjork’s stand, which were diametrically opposed by the Chinese viewpoint on the street which is best summed up by a commenter named Adam on the Global Voices Online website as he called her out:

“When Bjork declare(d) Tibet in her Shanghai Concert…Yeah, it is pretty good for her edgy image. But have (has) this singer thought any consequence that might be caused to those who invited her to China? Has she thought anything about the feeling of her Chinese fans? I believe they are in support of a united Tibet with China.
Tibet is a complicated issue, behavior like Bjork did nothing to solve the whole situation. In retrospect, the only consequence might be that any singer with similar style will be more difficult to be invited to sing in China in the future. Of course, this is not the business of Bjork.”

Bjork is certainly entitled to her political views but by airing them in China upon invitation of her hosts and the paying Chinese fans, her conduct was tantamount to biting the hand that feeds. Not only did it flout clearly spelt out rules and laws but it was also a betrayal of the very people she used, who had strived to pave her way into China in the first place. Her concert promoter Emma Ticketmaster and the licensing agent, the Shanghai Municipal Performance Company (SMPC) now await their fate while Bjork continues smugly on her merry jaunt on her high horse, oblivious to the fact that the SMPC might even possibly lose its license for a few years. John Siegel from China West Entertainment pointed out,

“It is unfortunate that this has happened. I know artists have to stand up for their beliefs, but she can’t expect to accomplish any good in doing what she did.”

Now, it is going to be harder for foreign acts to perform in China now, with promoters “concerned that tougher restrictions will apply, when it was finally getting a little more relaxed. Also, artists may not want to comply with tougher restrictions and choose not to come to China altogether.”

As Vice Minister of Culture, Zhou Heping stated in a media conference soon after,

“Foreign artistic troupes and artists should voluntarily observe relevant laws and regulations of China when they come to perform on Chinese soil.”

The Ministry of Culture also stated that Bjork’s performance “not only broke Chinese laws and regulations and hurt the feelings of Chinese people, but also went against the professional code of an artist. We will further tighten controls on foreign artists performing in China in order to prevent similar cases from happening in the future”

There will be those who feel that Bjork was brave with her three-worded middle finger to her hosts and that the end justifies the means. But it is still unclear what objectives Bjork has achieved with this, as by appealing to a Western media using a Chinese soapbox, it seemed more misguidedly provocative than constructive. Like a cowardly kid throwing stones to break the window of a neighbour’s house after the kid and her friends have gorged at the neighbour’s dinner table, she has then run away all Nero-like leaving the friends to take the rap for her actions.

And to this effect, the Chinese blogosphere has voiced an overwhelming level of outrage to Bjork’s presence in China and subsequent utterances. A constant refrain amongst the Chinese has been the abuse of hospitality displayed by her in using the platform to further her image and her greed in the earning of what she would call blood money off those she claims to detest. The following comments were duly highlighted by Times Online with a couple of viewers on YouTube stating:

“So Bjork comes to China to earn Chinese people’s money and then insult their hospitality? Fabulous.”

“If you and your expat friends come to work in China and make Chinese people’s money and still want to separate a piece of our country, then get the f*** out of China!”

She tried to justify her actions on her website in a “garbled, typo-ridden statement” somewhat unconvincingly that it was human behaviour and emotion rather than political,

“I have been asked by many for a statement after dedicating my song ‘Declare Independence’ to both Kosovo and Tibet on different occasions. I would like to put importance on that I am not a politician, I am first and last a musician and as such I feel my duty to try to express the whole range of human emotions. The urge for declaring independence is just one of them but an important one we all feel at some times in our lives. This song was written more with the personal in mind but the fact that it has translated to its broadest meaning, the struggle of a suppressed nation, gives me much pleasure. I would like to wish all individuals and nations good luck in their battle for independence.
Justice!”

There are those who use their music platform to embrace and further political and social causes for the common good by offering more than cheap lip service to the cause, and then there are those who use scandal, sex, politics and controversial views to embellish their image and further their careers – an interesting article in the Showbiz blog and first highlighted on p2pnet here seems to suggest that Bjork belongs to the latter.

In her stated capacity as “first and last a musician”, the self-promotion and ‘pleasure is all mine’ values that she has derived from her Army of Me antics has already done more harm than good to the music scene in China as Harry Connick Jr experienced first hand in the immediate aftermath.

For his concert in Shanghai on 13 Mar 2008, he was forced to play off an old song list consisting of solo jazz piano standards mistakenly submitted by the concert promoters to Chinese authorities. And in the wake of Bjork’s shenanigans, the authorities as expected insisted that Connick play off the approved set list - and it has to be realized that it would have taken a very brave Chinese man to have allowed a last minute change to the set list and risk his whole career. But the only problem was that Connick’s band did not seem to have the scores ready for the approved set, and as reported by Associated Press quoting J.T. Whitcomb a musician living in Shanghai, it was indeed a bizarre sight with “Connick playing piano by himself, with the band sitting on stage doing nothing”.
In a statement issued by Connick, he explained,

“Due to circumstances beyond my control, I was not able to give my fans in China the show I intended.”

In addition to that, in a new development as reported by the music promoter-focused Chinese Music Radar blog, based on a behind-closed-doors discussion on March 18 by officials, additional measures to be imposed as proposed (but as yet not finalized) by the Shanghai Cultural Bureau with regards to foreign performers in China include the following:

1. Organizers must sign additional guarantees that performers will not comment on political issues from stage, etc.
2. A 50% of the total potential box office must be paid as a deposit on the show to the Cultural Bureau. Should performers break the law, this deposit will be retained by the government. Additional fines may be levied.
3. Artist performances will be closely monitored to conform to the government pre-approved set-lists.
4. Artists will not be allowed an unapproved encore.

“This will make it a whole lot harder for us, particularly number 2. For bigger shows, this may be near to impossible…”

In retrospect, the local reaction to Bjork’s behaviour in China might possibly, maybe serve as a lesson to other foreign performers on the boundaries they have to adhere to, but more significantly, what positive role can they play in China? China Music Radar gives some sound advice:

“As to Bjork, my view is simple. As music promoters in one of the most closely monitored societies in the world, we have a duty to ensure that international artists buy into the belief that the long term benefits to this country are better served by increasing exposure to external influences, rather than soapboxing and risking complete shutdown. One of the things that we do here is bring real diversity and choice to young people. Artists coming into China will leave a longer lasting legacy to their fans and newcomers alike by encouraging the Chinese kids to embrace creative thinking, diversity and individuality within the confines of both positive thinking and rhetoric. Having the chance to see role models week in, week out, from dubstep DJ’s to self funded Belgian turbo folksters can only be good for a youth obsessed with money, celebrity and materialism.”

Promoters like Emma Entertainment, SplitWorks, China West, Syndicate, YGTwo, BaiCai, Rock For China, Red T Music, Midi Festival, Modern Sky Festival and the many clubs that bring in foreign performers and DJs are working within known and well observed parameters but at the same time, they are striving to introduce and feed foreign music to the Chinese. Last year, Rock For China’s Beijing Pop Festival successfully brought in potentially controversial acts like Public Enemy, Nine Inch Nails and uber punk legends New York Dolls and Marky Ramone - who would qualify as political and social banana skins in a lot of other countries and not just China - but all exhibited mutual respect and maturity in return for the opportunity to perform in China.

For foreign artists, digital music revenues from China will remain nascent unless more efforts at marketing are embarked upon including concert performances, which remain one of the few revenue sources and publicity vehicles for them to reap the greater benefits.

One can only hope that foreign performers will continue to spread the universal language of music with fans in China without tainting it in any way, and even Bjork herself claimed in her Lipster interview that she “was desperate to point out that she wasn’t a political spokesperson.”
But unfortunately, controversy and contradictions define Bjork and while on the one hand she says,

“Perhaps after what’s happened, people will find that difficult to believe. But I’m still working from an emotional core, and my songs come from private and personal experiences.”

she goes off the other end with,

“It shows more than anything that China has become the next superpower in the world. And the issue is: how are they going to deal with Western moral issues like freedom of speech?”

And this is where it gets tricky – for a musician to demand of another sovereign state to placate Western ideologies not only moves it into the political sphere, but as an outsider, it also borders on arrogance. Instead, it is the right and responsibility of the government in power to, in practice, limit unbridled speech - within reasonable grounds - that can be a murderous weapon used to incite hatred, disturbance of peace and other acts that could possibly make governance an impossibility.
It is a complex world we live in that cannot be summed up in sound bites…but China Music Radar gives it some perspective with regards to the music promotion business in China:

“In short, there are problems in China as there are in all countries, but especially so in one undergoing such an enormous development in such a short time. Problems are not sorted (or even helped) by high profile rants that frighten a government whose primary concern is an orderly society. This causes renewed repression and a reversal of many of the positive changes that we have seen recently in our industry. Change has to initiate from the ground up, with China’s citizens starting to understand the problems they face and taking account for these themselves. Change comes from education and increased enlightenment. Shouts of Tibet at a concert for the privileged (tickets were US$50 - $250) will turn back the clocks on our industry and make it harder to facilitate this change, which would be tragic in its own way.”

Recommended Reading: Bjork Backlash by China Music Radar

Credits: Image Courtesy of Spiked Humour

The World Trade Organization has granted the Caribbean nation of Antigua the right to pirate American goods and services like films and music until the U.S. government either permits Americans to gamble over foreign-based sites or eliminates its own exceptions for remote betting on horse and dog racing, including over the Internet.

It is a rather bizarre situation that seems to expose the duplicity exhibited by the US, which does not waste any opportunities to evangelize and impose its holier-than-thou moral views on gambling and music, film and software piracy upon other countries often for the purposes of simply aiming to protect its own trade interests spurred on by powerful internal US lobby groups.

A quick summary of how things have come to such a dramatic head:

BACKGROUND

Earlier this decade, powerful US casino groups with their own vested interests in preserving their gambling businesses lobbied the government to prevent access to offshore gambling in the name of protecting public morals - and the US government subsequently banned Internet gambling while still sneakily allowing other forms of cross-border gambling and betting services like horse-racing.

In 2003, Antigua then complained to the WTO about this as a violation of free trade treaties. A WTO panel then ruled against the United States in 2004, and a WTO Appellate Body upheld that decision a year later. In April 2005, the trade body then gave the United States a year to comply with its ruling, but that deadline passed with the US feebly claiming that it was in compliance, while it was obvious to all that even as the US pushed other nations, notably China to comply with other WTO regulations, it was itself defiantly refusing to comply.

In 2006, the US then went a step further by ordering U.S. banks and credit card companies to stop processing payments to online gambling businesses with the Unlawful Internet Gambling Enforcement Act. This then had the dramatic effect of cutting off a lucrative overseas online gambling market valued at $15.5 billion that was heavily dependent on the US which accounts for at least half of the world’s online gamblers.

This dramatically impacted Antigua, a former British colony of about 80,000 people which was seeking to wean itself off its reliance on tourism - which had been affected by a series of devastating hurricanes in the past – and focus on online casinos, which at one point during the good times in the past even generated annual incomes of $1 billion. Not only did the US continue to refuse to comply, but in May this year, it even attempted to rewrite its trade rules to remove gambling from the jurisdiction of the WTO. It then bought off influential WTO members from the 27-nation European Union, Japan and Canada by agreeing to compensate them while notably ignoring Antigua, Costa Rica, India and Macau amongst others. However, until the US gains the approval of all 151 members of the WTO, the US online gambling ban is deemed to be illegal, but with the more powerful member nations out of the way, the US could impose its will by brute force against the remaining lesser nations.

THE AWARD

Seeing that the US had no intention of complying, Antigua then claimed damages of $3.4 billion a year from the US with the latter countering that its actions only caused $500,000 in damages to Antiguan commerce. As the WTO panel agreed with Antigua that it had no effective way to sanction the collection of damages or impose effective trade sanctions against the US, it then allowed Antigua to suspend its WTO obligations to the US in respect of copyrights, trademarks and other forms of intellectual property including industrial designs, patents, protection of undisclosed information up to the value of $21 million. The Register pointed out that:

“Repeated violations of WTO commitments in the face of contrary WTO rulings allows a victimized member country ultimately to suspend its own WTO obligations to the offending nation - a form of restitution much more punitive than tariffs alone. America runs a steady and hefty trade deficit in virtually every category of international trade other than intellectual property.”

The awarded amount is still being disputed by Antigua as being lower than their expectations but both the US and Antigua cannot appeal this final decision as unlike other WTO rulings, “awards of arbitrators are not subject to review by the WTO Appellate Body. Antigua would however retain the right to have WTO reassess the damage award should online gambling in the US expand and generate even more revenues beyond the WTO’s current estimation.”

It has to be noted that the WTO Appellate Body concluded that the US had the right to prevent offshore betting as a means of protecting public order and public morals but since the US was not applying the rules equally to American operators who were notably offering remote betting on horse and dog racing, this was a clear violation of trade laws.

IMPLICATIONS

Legalized piracy
It sounds like a contradiction in terms but there we have it, the tiny Caribbean nation of Antigua is now allowed the right to distribute music, movies and software produced in the US without obligations to pay US rights holders. As Antigua has now been given carte blanche to distribute music as such, this has major implications globally in that companies registered in Antigua, can distribute US copyrighted music for free or for their own profit and would be to some measure, operating legally based on this latest WTO ruling.

Free Music, Movies, Software
As a result of the US wanting to protect the billions of dollars in local gambling interests above all, we now have a situation where the WTO has officially deemed it fair game for US musicians’ (and film and software producers’) products to be distributed and consumed by Antiguan businesses without any recourse to revenue. Musicians are certainly going to be thrilled that their own government has allowed a situation to arise where they are just a mere pawn in the game resulting in the fruits of their labor being given away for free to a foreign government.

Morality & the Political Economy of Intellectual Property
There does not seem to be any more morality in the rights or wrongs of gambling or movie, music or software piracy. The next time the IFPI, RIAA or some other self-serving organization spouts the morality bullshit, let’s examine further to see who’s paying them and what is the bigger business agenda at play. The exercising of copyright or gambling restriction laws are usually accompanied by rhetoric about compensating the creators of original content or protecting public morals respectively but if one looks closely, we will find that legal actions and public policies are often enacted and lobbied for by large corporations, in order to preserve their own profitability

Schoolyard Bully
The United States Trade Representative Sean Spicer warned Antigua from proceeding with “acts of piracy, counterfeiting or violations of intellectual property rights” while they try and negotiate further. Ominously, he warned that continuing with any such planned actions would “undermine Antigua’s claimed intentions of becoming a leader in legitimate electronic commerce, and would severely discourage foreign investment” in Antigua. With the US wielding undue power with regards to financial services critical to global e-commerce like Visa and Mastercard, and not being hesitant to withhold these essential global services from not only Antigua but as we have seen in the past, renegade Russian music site Allofmp3.com also, we have to ask ourselves if the US should continue to be allowed to be in a position to use these essential services as a means to browbeat those that don’t comply with its wishes and own laws. (As a point of contention, the local Russian courts subsequently deemed Visa’s and Mastercard’s withdrawal of service to be based on areas of law not within their jurisdiction and hence illegal)

False Valuation Tactics
Notwithstanding the Americans’ might to strong-arm its companies into witholding services from Antiguan related enterprises, lawyers state that it will still prove difficult for Antigua to execute this ruling. As reported in New York Times, Brendan McGivern, a trade lawyer with White & Case in Geneva pointed out,

“Even if Antigua goes ahead with an act of piracy or the refusal to allow the registration of a trademark, the question still remains of how much that act is worth. The Antiguans could say that’s worth $50,000, and then the U.S. might say that’s worth $5 million. The U.S. is going to dog them on every step of the way.”

As proof of this in action, we have seen how the RIAA has constantly inflated the valuation of damages to its member companies in previous litigation efforts against consumers. But I can’t help but also note that how when it suits its purpose, the US sought to place a grossly reduced valuation of a measly $500,000 in damages to Antigua for the US cross-border gambling ban.

China
The US continues to complain to WTO about China and even goes to the extent of almost interfering with China’s internal laws in its effort to obtain greater control of music, movie and software distribution in China while seeking to reduce the levels of piracy of US content that exists in the country. However, it will be rich irony if the US itself sees it fit to ignore this recent WTO ruling allowing Antigua (and offshore companies from all over the world registered there) to legally pirate US music, but then use this very same body to seek sanctions against China on charges of piracy of US copyrighted products. As Lode Van Den Hende, an international trade lawyer with the firm of Herbert Smith in Brussels put it,

“The U.S. is not behaving as one would expect. One day they’re out there saying how scandalous it is that China doesn’t respect W.T.O. decisions, but then the next day there’s a dispute that doesn’t go their way and their attitude is: The decision is completely wrong, these judges don’t know what they’re doing, why should we comply?”

With this latest ruling, Antigua has now set a precedent for other countries to sue the United States for unfair trade practices, and in retaliation be within its rights to withdraw its recognition of US intellectual property rights.
It will certainly be interesting to observe the next roll of the dice.

Update:
As reported by CasinoGamblingWeb.com, in a conference call on Friday the successful lawyer for Antigua, Mark Mendel pointed out that “Antigua cannot be vilified by the United States government as criminals as they will not actually be breaking copyright and piracy laws”. He insisted that “Antigua was not aiming for this judgement, rather, they simply would like for the US to follow the rules of the WTO by allowing Antiguan gaming operators to offer horse race betting to Americans, just as American gaming operators are currently allowed to do. Until they do meet the legalities of the WTO rulings it will be legal to sell copyrighted materials.”

Although the online gambling industry would see the $21 million per year limitation as a setback, Mendel highlighted that for a start as of now, they can cumulatively add the amount for 2006 combined with that for 2007, and the sanctioned amount will add up to hundreds of millions of dollars after a few years. More worryingly for the US music industry, as this will also include the right to distribute digital music and as anyone who deals in this will be only too aware, there is no reliable recourse to monitor revenues, and for all practical purposes it seems that Antigua is basically getting an unlimited free pass to gorge themselves silly on US copyrighted and trademarked products.

This article was also reproduced in Gambling911.com and also P2Pnet.net

References:
WTO Arbitrator Decision, New York Times, The Register, Associated Press, Techdirt

Credits:
Pirates of the Caribbean image: Courtesy of Disney Pictures
Antigua Ancient Map: Courtesy of Grace Galleries
LEGIT design: Courtesy of Rumor Reporter