Execs optimistic about Asia's music market

Ads, telcos, local artists are hot topics at Music Matters

HONG KONG -- The Asian music market -- its relative strength and its absolute diversity -- made for a loud noise recently at the fourth Music Matters convention in Hong Kong.

Conference organizer Jasper Donat forecast that the Japanese audio market would overtake the U.S. to become the world's largest inside 10 years. His prediction was soon outdone by Marcel Fenez, global entertainment practice leader at PricewaterhouseCoopers, who said that day is just six years away.

Overall, execs professed themselves more optimistic now than this time last year, despite the intervention of the global recession. The difference is the growth in the digital sector and proof of a continuing consumer demand for entertainment.

Fenez, however, cautioned the optimists about ad-funded business models. "How do we talk about ad-funded when advertising is down 18% in 2009?" he said.

In a speech dedicated to tricky relations between music and the telecoms industries, Lachie Rutherford, president of Warner Music Asia Pacific, said that relationships with handsets manufacturers was now good and that the online sector was demonstrating potential.

Rutherford pointed to Malaysia and Indonesia as Asia's two best examples of partnership between network operators and music labels and suggested that digital music has grown by 30% a year as a result.

"Some 60%-70% of promotional dollars then go to telco-delivered services. It is a virtuous circle," he said.

But he also suggested that the importance of telco branding and the importance of international acts in Asia's local markets were "myths." He instead pointed to how Asian music markets are driven by local artists and local hits.

"If you don't have a long tail, why import Western business models?" he asked, before railing against all-you-can-eat services, which offer too much choice or too much Western music -- or they intimidate customers.

Elizabeth Schimel, global head of music services at Nokia, which has introduced "Comes With Music," an unlimited consumption service that is embedded in handsets in eight countries (two of which are in Asia-Pacific) replied that all-you-can-eat models "take away the price barrier."

However, she, too, said the menus need to be rich in local content.

Underlining the local content message, a survey of youth attitudes toward music conducted by market researcher Synovate showed that most Asian artists do not rate highly in other Asian markets -- only Taiwan's Jay Chou and Wang Lee Hom appeared among top three preferences in more than one market -- and international acts fare even worse. Only Linkin Park, Avril Lavigne and Rihanna made top three performances in every country in the survey.

Fenez said that Asia is pulling away from the rest of the world by virtue of the fact that it is "the only region where the music market is not shrinking," and by its consumers' willingness to adopt digital delivery.

Fenez said that by 2013 Asia will account for 33% of global music spend, and at that point digital will likely account for 60% of Asian music spend. Already in 2008 Asia accounted for 58% of spending on mobile music, which is by definition digital.

The day also stressed diversity of technology preferences and divergent consumer behavior.

According to the Synovate survey, mobile music is strongest in India, Thailand and Indonesia, populous countries that have poor cable connections and telephone landlines and which are among Asia's fastest developing. The MP3 player penetration is at its highest in wealthy Korea, Japan and Singapore where consumers carry multiple devices, while the computer rules in Vietnam, Taiwan and Malaysia.

The region has other peculiarities, too.

While the Chinese music market appears to be vast, one speaker estimated that nearly 100% of online consumption is unlicensed. William Bao Bean, partner at the Softbank China & India fund, described a China market financially dominated by caller ringback tones -- the music clips that mobile subscribers use to entertain their callers before they pick up. That market, in turn, is dominated by China Mobile and a handful of wireless service providers, with very little revenue trickling back to music labels and artists, though 3G services and new competition from rival carriers could improve the outlook for service providers.

"Paid download and streaming models will die in China, if they haven't already done so," Bao Bean said, though he also pointed to the curiosity of an enduring physical disc market in China. That he explained by suggesting China's car-driving population is not yet used to plugging in MP3 players.

Japan, the region's largest market, was described by one speaker as an open market, but others were at pains to explain the peculiarities which make it so difficult for outsider acts to penetrate -- and so enduringly lucrative for the successful and the innovative.

Producer and talent manager at Digz, Yoshiuke Kudo, said the market is very demanding of new names and faces, while Kimitaka Kato of Universal International said that the Internet has made local acts more powerful as consumers can more easily find things to suit every taste within the Japanese language. To succeed in Japan, he advises foreign artists to team up with a local artist or writer.

Kei Ishizaka, Recording Industry Association of Japan chairman, pointed to the strength of ringbacks in Japan, where they are known as "chaku-uta," but said that they have recently and surprisingly been surpassed by full-track downloads, or "chaka-uta full." Ringtones in Japan sell for some $2.50 each, while in other counties providers such as iTunes may charge less than a dollar for a full song.

With its huge aging population, Japan is also able to sustain a healthy CD market, especially targeted at the over 40s market. That is the segment which does not download much but is still prepared to pay $30 apiece for CDs.

"The problem is that this age group don't go into stores either," said one speaker. That said, a remastered double CD of the Carpenters' hits recently sold more than 100,000 copies in its first two weeks of release.
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