Bmg Eyes Long Term In China Pub. Expects Slow, Steady Growth

BMG Music Publishing Asia is taking a long-term view of the profits to be made from its pioneering push into China.
The company's opening of a representative office in Beijing makes it the first major publisher to enter the country (Billboard Bulletin, Nov. 12, 1997), but the company says this should not be seen as a sign that it believes the Chinese market is going to mushroom overnight. However, executives do expect the market to develop healthily.
The move comes as part of a larger Asian expansion affecting existing operations in Taiwan and the company's regional music library business, the largest in Asia.
BMG's China representative office will invest in local catalogs and writers, with plans also calling for the purchase of master recordings.
The publisher's Asian activities are under the direction of Hong Kong-based David Loiterton, VP of Asian operations, who says the new office will try to benefit from what he views as the prospect of an improved regulatory climate for doing business in the country.
'It's not because we think the record or publishing market is going to explode; it's just that we think it's important to be there,' he states. 'The sooner we get in, the sooner we can develop our own business there.'
In 1993, multinational independent Cherry Lane Inc. became the first Western publisher to establish a representative office in the country. However, progress for China's music infrastructure since that time has not been at a pace Western companies would have liked. While no mechanical royalties of any significance are claimed or collected, the collection of performance royalties is becoming more common and is responsible for generating the most significant revenue.
'Still, I'm glad to see the majors coming,' says Cherry Lane chief representative/managing director Michael Primont. 'The more majors that are here, the better.'
Primont welcomes the move as the likelihood of China's long-awaited inclusion in the World Trade Organization (WTO) draws closer, an event that publishers want to coincide with the music business entering the Beijing government's agenda as a world trade issue.
'It will be positive,' says Loiterton of China's ascendency to WTO status, 'in that it will encourage certain minimum standards for copyright protection. If China is part of the WTO, things are going to be more of a standard for the industry to go forward.'
'For now' notes one publisher, 'royalties are only being paid in token measures in conjunction with major deals. Except if you are the local publisher of Michael Jackson or Celine Dion, mechanicals are not being paid.'
BMG has appointed Zhu Mei as the company's first director in China. While Zhu's background does not include music publishing, it was emphasized that her abilities and personal contacts should prove valuable in establishing the company.
Elsewhere in the Chinese region, the company has expanded its Taiwan office under the direction of its first GM there, Lobo Lo, an established producer, recording artist, and composer. He will work with other regional BMG Music Publishing companies to expose Chinese composers across national boundaries in the pan-China region.
Andy Wong has also been named production/music library manager in Hong Kong; BMG's music library is the largest in the region. Wong will work closely with production music library managers in Singapore, Malaysia, and Taiwan. He previously spent two years as creative/A&R manager at EMI Music Publishing in Hong Kong, where he was involved in the operation and development of the company on a regional level.
In China, without any significant mechanicals, synchronizations, or other income, Loiterton says, the company is looking to the development of recording projects and making some music of its own. 'But we're only exploring that right now,' he says. 'I'm not sure that publishing will develop in the short term in the traditional way.'
Loiterton says China will more likely evolve a hybrid of Japanese and Western publishing methods, 'the chief difference being that Japan publishers are much more concerned with owning original masters and spend money to acquire and develop them.'
'In Japan, you can invest in master recording and own at least part of the publishing,' Loiterton says. 'We haven't made any, but we believe at this stage (it) is an area we might get involved in.'
While no one knows at this point the time scale required for the development of the Chinese market, Loiterton emphasizes that BMG is investing now so that it is in a good position to exploit development when it does come.
'You've got to figure that the record market in China is going to have very vertical growth eventually,' he comments. 'Do I have a forecast for when? No.'
Currently housed in a suite at a downtown hotel in Beijing, the publisher is starting small. However, Loiterton says BMG China Inc.--the Chinese representative office of the group's record company BMG Music Asia--may soon have new offices that may house the fledgling publishing arm.
The expansion into China fits neatly into BMG Publishing's regional strategy, according to the man in overall control, BMG Music Publishing Worldwide president Nick Firth.
He states, 'In spite of the fact that in the last few months we have seen the financial contortions in the Far East, in the next 10 years we think Asia is still going to be the area of fastest growth.'
Firth argues that development of the Chinese market may be at a pace some companies are not expecting.
'When I first went to Japan in the 1960s, it had no developed music publishing industry. Now it is one of the biggest in the world. I think the Japanese model will be followed in China.'
He adds that BMG's experience in other parts of the world is also encouraging it to invest early in China: 'Not many years ago, people regarded South Africa as a joke. Today we make significant profits in South Africa.'
Such a philosophy is also driving the company into the fledgling capitalist economies of Eastern Europe, with new, wholly owned subsidiaries in Poland, the Czech Republic, and Hungary.
Assistance in preparing this story was provided by Jeff Clark-Meads in London.

(c) BPI Communications, 1998 ALL RIGHTS RESERVED