Multi-level marketing: A new radical online distribution model to Tell Your Friends

Social media is the way to go, it seems, as a tool to promote and market one’s music. With streaming platforms such as Youtube, many artistes have found fame online, with close to a million hits or subscribers on their Youtube channel. Most of them, however, have yet to have found fortune, or are still unable to monetize the strong support from social media. A proportion of these artistes still depend on performance fees to generate the bulk of their income, and not through the sales of their music. Tell My Friends (TMF), a new online music distribution model, aims to change all that, says CEO Mr Ben Looi, by providing tools for artistes to get people to go from interest to conversion.

At first, this writer thought that TMF was an online music store like iTunes, but on closer look, we couldn’t find anything that resembles a store on its website. So how is the music sold? Apparently, after an artiste or publisher inks the distribution deal with TMF, they are given unique links for each song that is being sold, and the client would have to market the link themselves by posting it on their own social networks such as blogs, websites and Facebook pages. Their fans will get to purchase the track by clicking on the link, and payment can be done via paypal or credit card. Buyers of the track will in turn, be given another unique link of their own, and if they share it on their social media networks and someone else buys the track from their link, the buyer now also earns a commission for sharing that link. 



Sounds like MLM (Multi-level marketing)? Yes it is. Then is it a scam? Well, during the interview, Ben openly admitted that he knows that MLM has had a bad name, and so he did his due diligence to ensure that his model is legal, and to clarify things further, he even went through the effort to state the distinction between a fraudulent MLM model and a legal one on his website. He also explains that TMF is simple, as you do not have to hit a minimum number of levels in order to get your credits.

We drilled into the ex-SAF officer on how he executed his mantra: “Consume digital products responsibly and get rewarded for it.”

Ben Looi, CEO of Tell My Friends Pte Ltd

Q: What exactly is the business model of Tell-My-Friends? How much does your company make from each sale of a song copy?

The business model is network marketing, also known by other terms such as direct selling and multi-level marketing. The twist is that it is integrated with social networking, hence a more appropriate term is social network marketing. Tell My Friends make 20% from each sale of a song copy.

Q: Who is your core target audience?

As a platform, we are targeting those who currently download stuff for free, either via torrents or illegal file-sharing. As for content, there really isn't a core target audience, because practically anyone, whether you are a social network user or a smartphone user, can be an audience. Tell My Friends is a platform to augment content owners' sales and marketing, so the core audience of our clients differ. For example, if an artiste that sings pop ballads, then the core audience for us would be working young adults. If it's Mandarin oldies, then the core audience will be retirees, housewives etc. If it's Christian worship songs, it would be Christians. The core audience depends on the content, not Tell My Friends.  We also target young people like teenagers and students by facilitating cash payment using prepaid cards.

Q: How did this concept come about? Why the MLM model? What is your company's vision and mission?

I've always enjoyed music, and I have great respect for those who chose to make music their livelihood. Believe me, it's not a very well-paying job, but the passion for the craft is what keeps most musicians going. I was wondering how can I help musicians make a living AND keep the passion, and a big pain point most musicians face is that of online piracy. It's a very pragmatic view if you ask any consumer  "Why would you pay for something when you can get it for free?" and the answer is obvious. The industry has tried to beat piracy using technology like DRM and we know that doesn't work, because anything that is encrypted can be decrypted. It then tried to fight based on price and convenience, driving prices down to the ground at $0.99 plus minimal clicks. That has some positive outcomes, but musicians aren't the ones making money - it's the megastores that does. Then they tried to use legislation and enforcement such as SOPA, which is totally against what the Internet is all about - freedom of choice and expression. Hence, I reframed the problem of piracy - not as a technological or enforcement issue - but as a behavioral problem. Working as a military psychologist for the past 2 years gave me the experience and insight that positive reinforcement of a desired behavior is more effective than punishing or negative reinforcement of an undesired behaviour. With that, I then needed to think of a way to sustain a reward system. After much research of various business models and laws, the solution was found in network marketing or MLM.  My company's vision is summed up as such: Help People. Save Music. Be Rewarded.

Q: How long has TMF started? What is the response so far? What kind of investment costs did you incur in setting up such a business? How long do you expect to break even?

We've started full-time for about 7 months, and we have broken even. The response is good, judging from the interest generated, and conversion is slowly happening. We are still in beat testing, and already we have 210 users and 394 paid downloads - and we haven't even started marketing yet. We will expect a spike in both numbers soon, as we begin our marketing efforts. The investment costs is confidential, but suffice to say we have been very prudent in getting things done with a limited budget and lots of innovation. And of course, goodwill from supporters of our vision.

Q: What is your current catalogue like? Are you working with major and independent labels?

We know we are very new, and no one has an idea of what we are doing! We have met up with a major label as well as industry bodies, and while the local HQ is interested, the inherent legacy corporate structure may not allow major labels to use us at the moment. The independent labels, however, have more autonomy, and are very keen to be on board. We now have mainly independent artistes, both local and overseas, mainly friends, and friends of friends, like Chen Huisi, Matthew Quek, Ko Sherman, Eric Chiryoku, Jai, Jessica Irawan, The Glad Stones, Phoebee Ong, Gilbert Baldoza, Nat Ho and Thomas Ong. The catalogue includes Chinese pop, New Age, English pop, Christian worship, classical, jazz, musicals, Malay pop, Japanese. We also have ebooks lined up.

Q: Could you explain more about the partnership with Music Galaxy Records and Music Publishers Singapore? How does the one-year blanket license work?

Music Galaxy Records is a subsidiary of Tell My Friends. We had to start a content creation arm so that there are songs to sell on Tell My Friends! When we started TMF, we spoke to local industry bodies and societies to understand about royalties and industrial practices. Music Publishers Singapore (MPS) is a society formed by music publishers like Sony ATV, Universal Music Publishers Group, EMI, Warner-Chappell, Touch Music and many more. We know that there are many local artistes who do very good covers of popular songs, but they do not know how to clear the rights to sell them online. Many pop songs on radio today are also covers, thanks to successful shows like Glee, American Idol, The Voice etc. There's always a fresh and new way to interpret the same song. We have made an arrangement through a license from MPS that any cover song submitted by independent artistes and labels will automatically be cleared for mechanical rights licensing as we will apportion the royalties due to publishers have claims to those songs.

Q: How can artists and writers benefit from this? 

Artistes can go ahead and record their songs, whether it's original or a cover version, and sell it via TMF as a one-stop service. The artistes will have the sound recording royalties if it is a cover song, and both sound recording and mechanical royalties if it's an original. Artistes and composers/writers can also collaborate to do a song, and work out an agreement between themselves what portion of the royalties they share, and let TMF know who to pay when the song is sold. It's that simple.

For a cover song, out of a dollar for royalties, a certain percentage goes to the owner of the sound recording, while the remaining is paid to MPS for the song royalty. This is a blanket rate, so the recording artiste will simply have to decide how much they want per song to set the final price of the track. Each song is uploaded by Tell My Friends so that we would have control and this is why we are taking the 20% commission to manage all this for the client. The distributor contact will have a list of songs that they want to sell as a client, and from there the tracking will be done by Tell My Friends to pay MPS. They would have to sign to declare that they are not the composer in the distribution contact. In this way, all administration is taken off artistes’ backs and settled by TMF.

Q: How do you compare yourself with other major online music stores like iTunes? How is your business model different? Ultimately, what does it mean for labels, publishers, artists and writers?

We are different from major online music stores in that we give buyers something that online music stores don't give - cash rewards. Online stores are very much single level market models built with convenience and low price as the selling point. For artistes, there is a fee involved in putting our music on those stores, and will be catalogued in a large, virtual store together with thousands of other artistes and products. Consumers can choose to go spend $0.99 on your song at the major store, or get it for free somewhere, somehow via torrents, or even via USB or email. 

Tell My Friends is not a store, as we do not sell music directly on our platform. We do, however, send out weekly newsletters as a catalogue of songs, and members can buy them. Now, here's where TMF makes the difference. Anyone who buys any song, ebook etc will have a unique link for each product, and you can share the link with your friends, via social networks, email, and even SMS and Whatsapp if you have a smartphone. For those who have a blog, you can even insert the link within your blog, and even create your own music store. Each time anyone buys the song from your link, you get a reward. Even if the person who bought from your link copies what you do and set up his own store, you will still get a reward when someone buys from his link - for up to 10 tiers. You can't do that with iTunes, can you?

What it means for labels is that, while labels generally own the sound recording rights to the song, the artistes under the label will also get a commission each time the song is sold, provided the first link is given to the artistes to seed the market. For example, if MGR paid for and produces a song, and therefore owns the rights of a song sung by Ben Looi, and because the first people to buy the song would be Ben's fans (assuming he has fans...hahaha), Ben earns a steam of commission, while the label earns royalties. It's a win-win for both.

Q: Are there any listing fees in the distribution contract?

TMF does not act like a retailer, so there are no upfront fees to list songs, but clients are required to take a consignment of at least 50 prepaid TopUp cards with a downpayment of 10% of RSP to be sold for a period of 3 months. The artistes can make $0.50 per card. They can also customize the Topup card with an additional $300 for the mould.

TopUp cards are priced at S$8 for 600 credits. 1 credit = US$0.01. Users can cash out via paypal or cheque. Clients would however have to accumulate a minimum of $15 before cashing out, and can only cash out commissions earned and not topped up.

TopUp Cards from Tell My Friends

Q: What if the artistes’ fanbase does not use Facebook?

TMF has put in a total of 320 social media platforms on which the links can be shared on, so even in a country like China which does not use Facebook, artistes are still able to reach out to that market through other popular local platforms like Weibo.

Q: According to your website, each song is selling for US$1.84. How did you arrive at this price?

No, the song price is not fixed for every song. It depends on what our clients set

as royalties. The principle is nothing less than 50% of retail price goes to royalties, so we first determine what our clients want as royalties for sound and mechanical rights.  Supposing our clients want $1. This would then form 50% of selling price before taxes and transaction fees. 30% or $0.60 will be allocated as commissions for buyers, spread over 10 tiers. The amount per tier is shown on every purchase page you land on selling each song. The remaining 20% goes to TMF for admin costs. So, in this example, the retail price, inclusive of taxes and transaction costs of about 13-15%, will be close to $2.30. Most of our clients set their royalties at about $0.90 to keep the final selling price inclusive of taxes and transaction costs below $2.

Q: Tell us more about the Secret Angel function in your website. Is it a direct donation? Why would consumers choose to donate in this way instead of directly to the charity of their choice? Will the donation be tax deductible for consumers? Do you charge any administrative fees for the donations? How is the charity cause increased the affiliation between the consumer and the artist? Is there supposed to be any deliberate connection?

We are finalising the MOU with a major charity entity who will be partnering us in this Secret Angel function, so the details can't be discussed at the moment, but suffice to say we are doing this as part of our vision - Help People. There will not be any affiliation between the consumer and the artiste under normal circumstances because the artiste is just selling his/her song. Whoever buys that song can choose to direct all future commissions from that purchase to the charity of choice, so it's not the artistes' call or decision to support the charity, but that of the consumer. However, if an artiste DOES want to support a charity through the sale of the song, he can direct TMF to apportion a certain percentage of royalties accrued to the beneficiary, and consumers who buy the song can choose to still keep their share of commissions for own use, or direct their portion of commission to ANOTHER charity. As to the other questions about whether it is tax-deductible and admin fees, we will have to wait till the MOU is signed, as these points are covered in the MOU.

Q: Your site claims that at least 50% of revenue goes back to royalties and about 30% of revenue to go back to consumers in the form of commissions. How do you intend to ensure transparency in reporting in terms of sales and donations?

Each purchase landing page has the breakdown of commissions at each tier. Each time you buy a song, it goes on to your Purchase History. When your link you share generates referral purchases, the commission earned is displayed for each song. Clicking on it will show the breakdown of commissions, i.e., how many and who bought the song that earned you $0.21, $0.11 $0.05 etc etc. The identities of the buyers are partially masked for confidentiality. As for donations, whenever someone donates HIS level to charity, the purchase landing page will highlight the respective tier of commission with an indication of which charity is receiving that share. On the Secret Angel list of charities, it will also show the amount raised and how many "secret Angels" each charity has.

In terms of accounting, we can arrange to have a credit note be given every three months or even every month to the artiste or publisher.

Q: Tell us more about yourself and who makes up the team at TMF. How did you get yourself involved into the music business and why?

I served in the Singapore Armed Forces for 13 years before calling it a day to start Tell My Friends. In my 13 years as an Army officer I've served in various capacities, ranging from direct command in the Infantry, law enforcement as a Military Police, doctrine and capability development for homeland defence, training officer cadets in OCS, and as a defence psychologist. I'm currently the Ops Officer of an Infantry Brigade in NS. The prospect of doing something totally different, challenging and never attempted before was the change I needed, because the notion of staying on for another 13 years in the same environment is not for me. The TMF team is growing day to day, and I guess it's the vision that attracts the right people to my team. We are entirely self-funded at the moment, and we are able to sustain the business to profitability because everyone in the team contributes and value adds. Pearly, my sister, takes care of business development for TMF and our subsidiary music label, Music Galaxy Records (MGR). Huisi manages the production of music that MGR produces, Chris takes care of the technical development, overseeing and coordinating with my vendors who do the programming. Andy markets Tell My Friends to international artistes to put their content with us, and a few friends who are helping out with the user experience design and other stuff to make us look pretty. Justin is taking care of the PR, and we work with an IP lawyer as well as a patent lawyer for the legal mumbo jumbo stuff. We are currently developing an arrangement with a music marketing manager in the Netherlands to cover Europe and a few potential partners to bring Tell My Friends to the Philippines, Malaysia, and Taiwan.  We got involved in the music business because music is very important to everyone - it represents the soul of life, and we all need music to be with us all the time - to celebrate life's finest moments, and to comfort and sooth the pain and sorrows. We need to keep music alive.

Q: How much do you think digital sales would make up the music market in the next three to five years in Singapore? How about in Asia?

Increasingly with smartphones, personal media devices and other gadgets converging, products will be consumed in the digital form - videos, books, music. Singapore is a small market with high computer literacy, online banking and credit card subscription, which is not representative of other Asian markets. Digital sales will increase at least 10 to 20% year on year in Singapore if piracy wasn't so rampant. That said, there isn't really a music industry in Singapore today, although there is a vibrant music scene. Most major labels have moved operations to Malaysia as the local market is many times bigger than Singapore. Digital sales in countries like Malaysia, Indonesia, Philippines still has not been significant as credit card subscription is low. For example, 70% of mobile phone users in Malaysia and Indonesia are on prepaid plans, unlike Singapore where most are on postpaid plans. Cash will continue to be the preferred payment method regionally, and unless you have a complementary system other than just Paypal and online banking, people will continue to buy music in its physical form of a CD, go home and rip it to digital format, and since it's already ripped, they might as well share it with friends.

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Ben is optimistic on the potential success of this model. His target is to have five major artistes to be on the catalogue by the end of the year, and as long as he has some success stories, he’s confident that the floodgates will open.

“It’s a chicken and egg thing, currently I have no customer base, and no content, it’s just a platform. So now it’s a matter of building content and getting buy in from artistes. It’s a challenge but I love the challenge because it’s something so new. So far the response has been positive, and people have been keen in coming in, like Nat Ho, who recorded the song with us. I need content. I tried talking to some labels, but because I’m so new, so nobody wants to bother with me, so I created a label to create content. We actually commission songs for private investors. Songs are intellectual property and we sell the intellectual property. We, as a label, get the singer, band, audio engineer and producer to create the recording. Because the investor bears the financial risk of paying everything upfront, they own the intellectual property for 70 years. They are actually creating jobs. Roughly we are selling the package for about $15,000, and the royalties generated will all be returned to the investor. MPS still gets paid if it’s a cover song.

Eventually, how I measure the success of TMF would be to enable at least one artist from Singapore to make it big overseas.”

This entrepreneur has big dreams for local artistes, and we hope that he makes it big too.

COMPASS CEO says, "It's almost impossible to monetize music from new media."

During the 90-minute interview with Dr Edmund Lam, CEO of The Composers and Authors Society of Singapore (COMPASS), he was candid and forthcoming. As much as one hopes that a successful and more equitable business model will eventually emerge to monetize music in the new media age, he has seen a fair share of hopefuls that came and left the market, and what remains now are existing models that are still require improvement in many areas.

"It's almost impossible to monetize music from new media," he says. "But what new media has done is to provide more access for consumers to discover different types of music, which will encourage more artists to come to Singapore for live performances. New media has also helped artists save on marketing costs.”

                                         Dr Edmund Lam, CEO of COMPASS

Indeed, how artists and publishers earn their keep has continuously been a challenge, and Dr Lam shares how COMPASS, playing the role of Singapore’s sole copyright administrator, has evolved over time. He also talks about what he thinks will be the future of the music industry in Singapore.

Q: Based on COMPASS’s experience, what have been the best sources of royalties and other revenue in the 1980s, 1990s, 2000s? Has this changed over the years?

The bulk of the current copyright law is based on the 1989 Copyright Act and prior to (that) was the Imperial Copyright Act dated back in 1911. When the Copyright Act in 1989 was passed, COMPASS started around the same period, although we had not started administration then. Prior to that there was the Performing Rights Society, a subsidiary of the Performing Rights Society in UK has been operating here for a number of years based on the Imperial Copyright Act, but that Act granted limited rights to music writers. It was only applicable to situations where live music was performed; so the British Agency only licensed pubs, nightclubs and the like. But the new Copyright Act was a fundamental change, because overnight, it granted a number rights to creators and our composers, and that gave us a room to start our business and COMPASS commenced operations in 1991.

One of the most important rights then was the Broadcast right, which upset the radio and TV stations because they had to pay royalties to COMPASS, so there was a Copyright Tribunal. Under the Copyright law, there is a provisional section that allows a dispute between a collective management organization like COMPASS and the user to have the tariff arbitrated. And that was the first Copyright Tribunal hearing. Unfortunately, the decision from the Copyright Tribunal hearing in 1991 did not grant us attractive rates for traditional broadcast, but that was how we started our operations, and the revenue comes from TV and radio stations, which provided an unprecedented source of revenue. Back then, the users were upset, but over the years, we built up a very good relationship with the radio and TV stations and they do play a part: we sponsor programs and we jointly organize programs to promote the music industry. So the relationship has changed quite dramatically over the years. Now, traditional media understand and appreciate the need to compensate music writers for using the intellectual property of the songs, because without those songs, they wouldn’t have existed.

Resolving with the major broadcast stations was a major establishment in the 1990s; and the other was the licensing of live concerts, and the breakthrough came only in 1993 when Michael Jackson had a big concert for 3 nights at the National Stadium. Tickets were priced at over a hundred dollars each. The organizers of the concert refused to pay because he claimed that Michael Jackson had granted him all (musical) rights, and because of that dispute we had another major case heard at the Tribunal, which was covered by the media daily. It was a tough fight, but COMPASS won at the end of the day. The Tribunal agreed to the rate we have established at 2.5% of gross ticket sales, which translated to quite a sum for the Michael Jackson concert, estimating to be about over a million dollars. After this case, revenue flows included those from live concerts. After Michael Jackson’s concert, there was also a booming trend in live concerts, and even today, live concerts by major artists are on the rise, and this source of revenue has not diminished over the years. (Revenue from) broadcasting has also not declined over the years, but they faced competition from cable TV, which has also become our major source of income since 1995-6.

Traditional broadcast (radio and TV), live concerts and cable TV have become major revenues of COMPASS until today. In addition, the other major revenue source is from the entertainment industry – we managed to penetrate nightclubs, karaoke operators (karaoke is something probably only common in Asia), and so composers who compose songs that people like to sing in karaoke will earn more royalties.

In the late 1990s-2000s, there was a rise of the popularity of ringtones. COMPASS does not normally administer mechanical rights (reproduction rights) of a musical work. COMPASS started off with performing rights (i.e. broadcast rights/ live performance rights), and in the olden days of CD printing, COMPASS has historically not been involved in that line of business. The publishers themselves administer that particular right. So a composer will assign the musical rights to the Society but he will negotiate with the publishers to have his or her work to be recorded in a CD (sound recording) and this mechanical right is being administered by the publisher themselves, which was then licensed to the music labels for retail sales. But as we grow more established, we started to represent more independent writers who assigned those rights to us to administer. There was a short boom in ringtone, however the collections were not that attractive, because a ringtone supplier needed two licenses: one from COMPASS, which is a Communication right that we grant to them (when a ringtone supplier communicates to a handphone user, he requires this license from COMPASS). On the other hand, after the phone user receives the signal and makes a copy of it, that copy requires a reproduction right and requires a license from the publishers, and COMPASS does not have all the rights in this area. Some service providers took advantage of the confusion and did not pay the royalties. So although the ringtone business was doing very well (selling $1 each at its peak), we could only charge about 6-7 cents against a dollar, which translated into about $1-2 million of royalties out of a $20-30 million dollar ringtone business in Singapore. We didn’t manage to get much out of it because of the confusion, but in the end we all came together, because the publishers realized that it would be better to do it collectively, for the convenience of users. But by the time we got our act together, the ringtone business already went down. So the music industry was a little slow, and we couldn’t see the opportunity in time and was unable to catch up with trends quickly.

Q: What were some of the business models that worked or did not work for the music industry and why?

Similarly, for new upcoming business models, there’s some disunity amongst the different stakeholders in the industry, but hopefully we can get our act together to license the music to service providers. However, we realize it’s quite a challenging business because the Singaporean consumer does not purchase on a song-by-song basis. Consumers do not bite when you offer them $1 or $0.80 per song, as compared with markets in US, Japan and Australia.

One of them that failed was Soundbuzz, as the per-download model did not take off in Singapore. The telcos had the upperhand because they owned the platforms.  So some of them wanted a 50% margin if music was to be retailed through their platforms. Later, when the buffet-styled eat-all-you-can models was launched, it took off but in the process, music has become worthless. Nokia’s Comes With Music (product bundling model) also pulled out, because music has become too cheap and in the end we all don’t make any money.

The iTunes music service is not available in Singapore yet, but even if they launched it here, it will be very challenging for it to sustain because from the experience of the Nokia’s Come with Music business model, they used music not to make money but to use music to sell the phones. After they launched the service, Singaporeans downloaded several millions of songs but only for that small amount of money.

I think it is almost impossible to monetize music from new media. But what new media has done is to provide more access for consumers to discover different types of music, which will encourage more artists to come to Singapore for live performances. New media has also helped artists save on marketing costs. If you look at it broadly, artists can now promote their works more easily through YouTube and digital media. I observe that the cost of marketing Lady Gaga would be lower than marketing the Beatles, because with digital media, overnight, everyone will know about Lady Gaga, say in South Korea whereas in the past it would have taken months. Everything that happens now is instant and news spreads instantly. Marketing through new media is very massive and cheap. The labels and recording industry don’t benefit from all this, it’s more of the concert promoters and artistes themselves who are actually making the money now.

People are spending on music in a different way. People are willing to spend money on concerts to have a live experience and you’ll see the same artists coming back. One concert ticket is over a hundred dollars, and that, in the past, is worth 6-7 CD albums a years, so an average person is definitely spending more in music. Executives spend more time in bars, and more at karaoke sessions to have some kind of musical experience, as compared to previously.

Q: Could you elaborate more about COMPASS’s partnership with Youtube?

The license granted to YouTube is based on revenue collected from advertising. YouTube is also a place for our members to promote their works. More importantly, our license with Singapore YouTube allows the setting up of a Singapore domain. That’s the main motivation. We want YouTube to have a Singapore domain so we can track what kind of music and videos that Singaporeans or people in Singapore are viewing.

Q: What do you think would be the future of the music industry be like in Singapore?

In recent years, Opennet, the new generation of broadband, has started to roll out. It allows high quality streaming, which will connect our TV to all other devices in our homes. Once this is established, there are many services that can be provided to consumers. With Opennet, I could see changes in entertainment such as Xbox. Currently there are still limitations to Xbox with regards to the number of simultaneous multi-players because of limitations of bandwidth, but with Opennet, it will change the whole entertainment business. When you watch a football match, the resolution will be extremely clear. That will transform Singapore. Not many countries will have this – optical fibre. So I would see that the next kind of devices, such as the mobile phone, will be used as the interface to Internet TVs. Internet TV has not really picked up yet, but I think it will pick up after everyone has access to optical fibre broadband, and with that you can place your phone as a remote control to view YouTube on TV. That is already possible now, but currently it is still quite a cumbersome process to set up. In future, consumers will access their music through this platform, and probably people will watch programs and music using Opennet. It will be a revolution and change everything. Traditional broadcast media will be under threat, and so will cable TV. I believe that is the future.

Q: Geographically, which markets have the most potential?

Mainland China. It is a challenging market, but they would have to use a different model. They no longer make money through selling music, but once you establish a name in China, you can find other ways to milk the market. You can probably have many live performances. Just recently, I read that Eric Moo is making a lot of money, as every day he is performing at different places for those in their 40s and grew up with his music and can afford ticket prices. So he’s not doing new music but making money from all his old music. Artists can make money through touring and advertising. China has a population of 1.3billion people, and once you get an advertising right of a product, that would be more than enough for one album.

As for touring, I was told one cycle could last 4-5 years, given the number of cities and provinces that they could cover. Market size is still very important. Despite weak IP enforcement, there is still money to be made, albeit in other ways (e.g appearance fees). And so if CCTV invites you to be on their Chinese New Year show, you’d better not ask for money, because everyone will be fighting to get on it and the bargaining power will be different. Once you do an appearance like that, the chances of clinching a product endorsement deal are very high. And that’s how the industry will be involved, rather than through recorded music. Recording good music is still important, but the revenue cannot be from the sales of music.

About COMPASS

The Composers and Authors Society of Singapore (COMPASS) is an organisation created to protect and promote the copyright interests of composers, authors* (and their heir) and publishers of musical works and their related lyrics. COMPASS is a non-profit public company which administers the public performance, broadcast, diffusion and reproduction rights in music and musical associated literary works on behalf of its members. COMPASS deals specifically with music copyright and the usage of musical works.

For more information about COMPASS, visit www.compass.org.sg

17^th COMPASS Awards

The 17th COMPASS Awards Presentation will be held on 8 July 2012, 7pm at Marina Bay Sands, Sands Grand Ballroom. Event is exclusive to members.

The Record Industry in China

When I was in Secondary School, I was once offered a contract by a music publisher, but when I told Mum about my interest to join the music industry, her immediate reaction was, "玩音乐是没有前途的 (There's no prospect in joining the music industry) That was it. I never got to sign that contract but fortunately I didn't think too much about it then. Fifteen years later, as I recall her declaration, I can't help but reluctantly agree that Mum was probably right. Looking at the state of the record industry today, it's the record executives themselves who are calling it quits. During a recent Lifeweek interview with Song Ke (宋柯), the ex-AGM of Warner Music (China Region) painted a bleak picture of the Chinese record industry and shared his views for its demise.

1. Lack of a strong and cohesive ecosystem amongst the major players in the industry.

Song Ke feels that for the industry to sustain healthily, each content provider, including those from film and television, has to be able to maintain a 40% margin. In the '90s, record companies were at least able to obtain 8-12%. But today, they are struggling with less than 2%. Also, labels face the problem of a lack of negotiation power when approaching downstream e-distributors, and this problem is aggravated due to a lack of cohesiveness amongst labels themselves, resulting in a lack of standard rates to ensure the sustainability of all industry players. Song Ke himself had been lobbying for the past few years to create a united voice amongst labels to form a coalition and fight for better rates, but his repeated requests had been falling on the deaf ears of executives who merely see him as their competitor.

2. Lack of strong support from the government

Unlike film, television or the internet content industry which are multifaceted or interactive, the music industry does not seem to be able to generate the same level of buzz and media excitement, and hence there is little incentive for the Chinese government to support the industry in terms of infrastructure development or pushing for changes in legislation.

3. Lack of transparency/ dishonesty in trade dealing

In the Chinese mobile industry, Song Ke explains that the ideal business model for ringtones ("1585" service) is to have telco operators (e.g. China Mobile) receive a margin of 15%, while the remaining 85% is taken by the service provider enabler, which is to be shared equally between the enabler and the content provider (42.5% each). This model will be more equitable and sustaining. However, the common grievance from music labels is that almost all enablers are dishonest and have squeezed the share of the music labels to as low as 10%.

4. Even pirates know it better.

Song Ke laments it's ironic that even the pirate industry knows the importance of keeping a healthy 40% margin for sustainability. The cost of creating a pirate CD is about ten cents, and the typical mother who carries her child on the street to hawk pirated CDs is able to earn about $2 from the price of $5 per disc. With such an attractive margin, who would not resist?

5. Lack of innovation in the music industry

Song Ke has an interesting point of view about the lack of innovation in the music industry which has contributed to its demise. He compares this with the evolution of other media industries. In gaming, the industry has evolved from console to online; in film, movies have turned from 3D to IMAX. Such innovation has prevented pirates from keeping up. However, in the music industry, the MP3 has become accepted as the norm in place of the CD, and Song Ke considers it as a regressive and inferior format that does not improve the consumer experience. The MP3 has destroyed the need to read the lyrics. The MP3 does not allow the consumer to find joy in collecting album art. So why would the consumer want to pay a premium for an MP3? Furthermore, the MP3 format does not allow an equitable and robust business model to develop around it.

Since this blog is about the future of the music industry in Singapore and Asia, I thought it would be interesting to start off with Song Ke's pessimistic view of the music industry in China. Do you agree with his views? Is there any hope at all? Do send in your comments.