Andrew Wu - Managing Director of Sony Music (PRC) & Shanghai Epic Music Entertainment

As a senior manager who knows the music industry well, Andrew Wu stressed intellectual property rights (IPR) have always been the core of the recording industry.

"It is an industry that depends on the creativity of human beings," he said.

According to Wu, an album with 10 songs usually costs nearly 1 million yuan (US$120,000) to produce, including the cost for recording, payment for the song writers and investment in two or three music videos.

Besides the above cost which is easy to comprehend, there are more invisible efforts made for the album, such as choosing only 10 from several hundreds of songs and other hard work to make the album better.

"An industry will develop and prosper only when people see room for making profit and thus pour money into it," he said.

Intellectual property development has been given heightened attention by China's leadership. However, to respect and protect IPR cannot remain just a slogan and must become a reality, he said.

Therefore, the media and the public both have a responsibility to correctly focus on IPR issues, he said.

Referring to the legal efforts made by recording companies in June, Wu said the legal solution they sought was not really a "solution."

"The important thing is to invoke media discussion and arouse the consciousness of every one," he said.

As for being sued by karaoke venues in Shanghai, Wu said it is fully understandable since business people wish to minimize costs and maximize profits, but it is a bigger social issue to improve respect for intellectual copyrights in China.

"The music industry or the record companies will of course benefit from getting paid for IPR from karaoke venues, but getting paid is the basic need for any industry's survival," he said.

Despite the size and influence of the Chinese economy today in the world, China's music or record industry represents less than 1 per cent of the world industry, Wu said.

However, the karaoke industry in China is so strong and gigantic that in fact it has turned out to be the largest entertainment industry in China, generating multi-billions of US dollars revenue on a yearly basis, he said.

"Against a meagre music industry in China which is in desperate need of help, does anyone think that this Chinese karaoke industry is in any position to play 'Robin Hood' against the Chinese music industry?" he said.

Liu Bolin, Copyright Law expert

As the dispute goes on, many karaoke venues have doubted whether music videos can be called copyrighted works.

Liu said the key issue here is whether music videos are cinematographic works or video recordings.

According to the Copyright Law of China, cinematographic works, which are required to be "innovative," are protected by copyright law.

In the case of music videos broadcasted in karaoke venues, Liu Bolin said it depends.

Karaoke venues in China usually play music with either the music video produced by recording companies, or a segment of video repeated again and again as a fixed background for all songs, or scenes of a concert or an activity.

"According to China's laws, not all audio-visual products that have images or have been shot by camcorders can be called cinematographic works," he said.

Those music videos which are not innovative can only be regarded as video recordings, and recording companies cannot demand royalties to be paid for these video recordings, he said.

In the case of an innovative music video, which is regarded as a cinematographic work, both the song writer and the music video maker are copyright owners.

"It is reasonable for them to ask karaoke venues to pay. However, paying how much should depend on the profits made by karaoke venues using it," he said.

He suggested that when it is unable to count earnings of karaoke venues, two parties can agree on the way of counting payment by floor space or facilities in karaoke venues.

Because not all music videos are cinematographic works, it is unjust for music video makers to ask for payment counted by the number of music videos, unless they adopt a low payment standard which is acceptable for karaoke venue owners, he said.

At last, Liu said a single case of dispute over whether karaoke venues should pay for using music videos can be solved through prosecution.

"But the problem concerning an industry can only be solved through patient negotiations between relative industries," he said.

Wang Ju, secretary-general of China Audio-Video Association (CAVA)

When asked about the dispute between the recording industry and karaoke venues, Wang first mentioned the news about the draft of rules on collective management of copyright.

He said the draft has been finished since mid-September and will very possibly be handed over to China's legislators for discussion before the year end.

The draft includes detailed stipulation on collective management of copyright.

According to Wang, one industry usually has only one collective management organization, which needs to be approved by the National Copyright Administration, and whom the organization collects copyright royalty from and how much to collect, will all need to be approved by the administration, he said.

"If the draft is adopted, the dispute between the recording industry and karaoke venues in China can be avoided," he said.

Wang seemed assured the copyright collective management organization to be established will collect copyright royalties from karaoke venues for recording companies.

"Because it is routine for the global recording industry," he said.

According to Wang, the recording industry usually earns money by taking advantage of their three rights: the right of duplication and publishing, the right of licensing, and the right of leasing.

Three rights will form three parts of earnings for recording companies.

"So far, the recording industry in China gains money mainly from the first part," he said.

Because of a number of reasons, the other two rights have not contributed to the development of the music industry.

"But along with the establishment of collective management organizations in the future, it is definitely a trend for copyright owners to benefit from licensing their works to be broadcast in radio and television and used in a commercial environment, and the leasing business as well," he said.

Concerning the right of licensing, he predicted that the right will play a more important role in the current era of so-called "information age," and the recording industry should follow the steps of the times.

The revenue that Japanese recording companies have gained from licensing people to download music through cellphones has almost reached the sale revenue of traditional records so far, he said.

Recording companies in many countries are now confronted with dropping revenue.

"Recording companies may complain about piracy and illegal downloads for the drop in sales, but the cause under the surface is that the means of communication have changed now and pitifully, our copyright owners have not caught up with the changes," he said.

China's cellphone service companies have talked to some recording companies about licensing of music downloads, but they were turned down because recording companies worried the licensing will influence the sale of records.

Karaoke operators

Chen Xiaoming, deputy general manager of Melody, a company which owns three karaoke venues in Beijing, agreed to pay 360,000 yuan (US$43,000) to recording companies, becoming the first in the dispute.

"We were wronged," Chen said in an interview with Beijing Daily Messenger. "We noticed the problem long ago. We are willing to pay the royalty of the video part, but we do not know whom to pay."

He stressed that the three karaoke venues of Melody have paid 70,000 yuan (US$8,400) each to the Music Copyright Society of China annually for using the audio part.

But China does not have a collective management organization to take care of the videos.

"As legal business people, no one would like to arouse trouble," he said.

KTVs and recordings companies should be in a relation like that between fish and water, he said.

On one hand, after recording companies produce more refined songs, more customers will go to KTVs; on the other hand, broadcast of these songs in KTVs will help promote the sale of records, he said.

Li Haoyin, deputy general manager of Cashbox KTV in Shanghai

Going to court is not the original intention of karaoke venues, Li said in an interview with Shanghai Youth Daily.

But the action of the recording industry has already threatened the survival of karaoke venues, he said.

The karaoke venues wished to further communicate with the recording industry and solve the problem in a win-win deal, he said.

(China Daily 10/11/2004 page5)