Music pirates enter paradise
2008-07-22 14:49
Hong Kong, China - Terry McBride is not afraid of pirates.
The Canadian best known as the manager of pop megastar Avril Lavigne said the music industry's obsession with stemming the flow of illegally downloaded material is futile and short-sighted.
"I do not believe that the record label owns the song, the publisher does not own the song, even the artist does not own the song," McBride told AFP in an interview.
"It is the emotion that a fan attaches to that song, to that lyric that makes it popular. What the record business needs to do is to monetise the behaviour of that fan."
McBride said record companies need an alternative to what he sees as an outmoded business model that relies on a few mega-selling artists and copyright protection.
In almost every global market record sales are plummeting as people turn to the Internet for music, increasingly downloading it for free.
At least 77% in illegal music downloads
A recent survey by MTV of consumers in 12 Asian countries found that 77% of people aged between 15 and 24 had illegally downloaded music in the past month, while 59% had also made legitimate purchases.
The rampant piracy - particularly serious in China where the rate of illegal downloading was conservatively put at more than 80%, - has led to aggressive legal action.
China's largest search engine, Baidu.com is currently being sued by major labels for providing free links to illegal material, and then taking the lucrative advertising revenues for itself.
The Baidu model may also be the template for others as earlier this year the Wall Street Journal reported that Google wished to partner with major record labels to release free music in China.
McBride said this approach is much more effective than the fervour for litigation, and cited the example of Napster, the hugely popular US music sharing site that was sued into oblivion instead of being harnessed as a new revenue stream.
Give part of the copyright away for free
For him, the solution has been to hold copyright in one place, on the artist's own record label or "imprint", and while he welcomes free exchange of music, copyright remains at the centre of his strategy.
"If you have collapsed copyright sitting in one place it has more value than if it is fractured," he said on the sidelines of the recent MusicMatters conference in Hong Kong.
"(Then) you can give one part of the copyright away gratis in order to monetise another part of the copyright."
In this way, the song becomes a loss-leader that advertises other selling opportunities, he said.
Success follows from innovative use of the song's long-term value - as background music for advertisements or television shows; sales through protected technology such as mobile phone ring tones; or website advertising.
McBride said this business model, which he set up three years ago, has already begun to work for his company, Nettwerk Music Group, with seven of the eight "imprints" he started now showing profit.
Business is shrinking
Artists on his roster, including singer-songwriter Sarah McGlachlan and the band Barenaked Ladies, are making as much money as they would selling many more records, he said.
"We are layering year after year of valuable copyright on top of each other and creating a very good model," he said. "We are signing more artists while the rest of the business is shrinking."
McBride said he hopes that Lavigne, one of the few Western artists with a high profile in China, will help him crack the world's biggest market.
"Avril is the spearhead of what we intend to do over the next 10 years," he said. "She is by far the biggest Western artist to hit China."
While the 24-year-old is signed to recording giant RCA, she controls much of her output as well as money spinners such as her website.
Record labels need to learn
She plans to tour China later this year and McBride's company is setting up a Chinese-language website for her, based in Canada, which he said will take advertising from China.
McBride said she sold 225 000 CDs in China - significant in a market where piracy often overtakes legitimate sales - and 2.5 million callback ring tones which replace the ringing sound when a mobile phone is called.
McBride regards free downloads of Lavigne's music as advertising for other revenues - something he says the major labels need to learn.
"Every major label record exec has broken the copyright law. When they were a teenager they recorded a song and gave it to a girl," he said, pointing out that record labels originally tried to ban their songs from radio, fearing they would never sell again.