Brit Indies See Future In China

British independent music companies hope to waken the sleeping giant that is China's music market.

Through collaboration among record companies, government and business partners, an office has opened in Beijing to help the United Kingdom's independent music community tap into the market of the world's most populous country.

Managing the office is Stuart Watson, a British music industry veteran who has been active in Asia for many years as chairman of Singapore-based marketing and promotion service SWAT.

The initiative is "all about establishing a strong presence for the U.K. music industry as the Chinese market continues to open up," Watson says. "Opportunities for British artists abound in this market."

The office opened May 16. It is an initiative of the Assn. of Independent Music, a British independent music industry trade group that represents some 800 British labels and distributors, and U.K. Trade & Investment, an organization the British government established to foster international trade.

The involvement of UKTI —which includes an undisclosed level of funding—was not revealed until after Britain's May 5 general election.

One of the immediate objectives of the office is forging Anglo/Chinese business ties, AIM CEO Alison Wenham explains. It will provide a support service and "hot desk" on the ground to companies and individuals wishing to meet local promoters and potential licensees.

Watson says he will help set up any necessary introductions through his network of contacts in China. Permanent staffing details of the office were not available at press time.

"The infrastructure to facilitate increased live performances [in China] is only just developing, with most international acts currently only performing in Beijing and Shanghai," Watson says. "But it is important to bear in mind that there are 100 other [major] cities."

China's estimated population of 1.3 billion potential consumers makes it an enticing prospect for overseas businesses. But its legal music market remains relatively underdeveloped.

According to the recently published report "Record Industry World Sales 2005" from the International Federation of the Phonographic Industry, China's legitimate music market registered a 6.8% rise during 2004 to an estimated retail value of $211.8 million.

Watson argues that however small record sales are currently, the potential for income from the live sector and other areas remains high.

"U.K. companies have to take the market seriously and spend time there if they want to reap the benefits," he says.

SWAT opened for business in 1994, serving emerging markets of the Asia-Pacific region. Watson relinquished control of the company in 1999 when he joined Zomba—now part of Sony BMG—as international managing director. He relaunched SWAT in 2003 after exiting Zomba.

Watson will continue to operate SWAT from Singapore, but will increasingly commute to China under the new arrangement, according to a SWAT spokesman.

It remains unclear how many staffers will work out of the new Beijing office.



RAMPANT PIRACY

A physical piracy rate that is estimated at about 50% has long obstructed the development of the recording industry in China. In 1996, the United States was on the brink of imposing trade sanctions against China because of the rampant piracy. Subsequently, Beijing agreed to tougher enforcement, and the country was admitted to the World Trade Organization in December 2001.

As part of its commitment, China pledged to crack down on intellectual-property infringement and to open its market to foreign products.

China is also recognized as having massive growth potential for mobile music. In its Digital Music Report published earlier this year, the IFPI says the entire Asian region is "ripe for legal digital distribution of music, if piracy can be curtailed." The IFPI says mobile penetration in China is currently running at more than 290 million people.

U.K. indies have traveled the path to China on more than one occasion in recent years. AIM embarked on a fact-finding trip to Southeast Asia and Japan in May 2001, and in October 2004 to China and Hong Kong. AIM created a guide to doing business in the region for its members after those trips.

Martin Goldschmidt, managing director of London-based Cooking Vinyl, headed the trade missions. He says they identified a market ripe for entry.

"Now is the time to get in there, sow seeds and lay a base," Goldschmidt affirms. "You've got to play a long-term game. We just need to get in there and build a base before it matures. That way you'll be well-positioned to take advantage of it. The Chinese want to do business with U.K. independent labels.

"If AIM can pull off the office there," he declares, "it'll be invaluable for U.K. independents." ••••