Ringtones and downloads, not CDs, are the way for European music to make money in China, says European music representative Judith Merkies

In Beijing and Shanghai recently attending the first EU-China Music Industry Working Session, Judith Merkies, executive manager of the Brussels-based lobby group the European Music Office (EMO), which represents professional music industry organizations within the EU, met with Chinese authorities and record labels and weighed the feasibility of opening a permanent EMO China office.

Isn't the EU's involvement in China all about politics and economics? Where does music come into the picture? The EMO wants to see an EU music program to match Media Plus, the successful financial support program for films which are co-produced by several EU states. Music is less national than films, therefore there are international possibilities for the music industry, but the EU needs a support program to bolster the mobility of European artists outside the EU. Artists are touring more than before, therefore they have to put up more money.

What kind of music does your organization represent, and do you support the musicians or the record labels? We represent more than 600,000 people from all music genres and sectors. That means we promote performers, authors and composers as well as publishers, producers and managers and music teachers. We promote the diversity of European music at the European level and worldwide, but we do tend to focus more on popular and contemporary music.

Why did you come to China? Are Beijing and Shanghai ready for French electro-pop or Greek alternative rock? The EMO and the music export offices of nine different European countries wanted to get a better understanding of the Chinese music market. The EU expects to have a presence in the emerging Chinese music market. We have some experience in foreign offices since we have one in New York that's been successful in representing and branding the European name. That office creates demand for European music through showcases and tours. We have the same intention for China. We are trying to look closely at what the demand is and who is present here and what are the opportunities to present our artists.

So what will be the business model for European music in China? We have to think in a different way. CD sales will not be dominant here. Downloads and ringtones are big here. Innovation has such a pace here that as soon as you get a decision on 3G, China will be out in front. Technology is used differently here. Compared to Europe where we only use mobile phones to call, Asians use all the applications. We must first present the European music industry to Chinese tastes but we must be aware that by the time we have introduced it the technology will have moved on. We're thinking about different business models but first we have to introduce ourselves. We can't come and expect to recoup the investment immediately.

How big do you expect downloads to be? The 15- to 25-year-old age segment is the target market and that's huge in China.

Currently there is no legal platform for downloading songs onto wireless technology such as mobile phones. There is now a new law from the Chinese government, and we await a prototype for the law to see how it's expected to work. The big decision is on how they can control downloads, and then the big challenge is how the telecom market adapts to thirdgeneration (3G) wireless applications, and later, to 4G. We expect a decision on 3G licensing could be announced early in 2006. The music industry would like to work with the mobile market. But there will have to be traceability in control and payment for the tunes downloaded. Currently, only 20 percent of music content downloaded is legal.

Will European artists be able to make money from live shows here? In the short term we're only interested in bringing European DJs to Chinese clubs.

We'll first introduce the product and then see how we can make money. CD sales are not the way, so it will have to be a package of live shows and downloads. But we don't have any tracking system so we are not able to control or track sales. We'd like to know who buys, and are they then willing to go to live shows, and what are they willing to pay Who did you talk to during your week in China? We talked to local labels and distributors like Jingwen and Polo Arts. We looked at the music scene in Beijing and Shanghai and saw clubs and venues there. We also talked to the government on policies and their intentions. The China Ministry for Culture was very interested to talk about exports of cultural products. We learned that there is a fund created to help exports of Chinese producers. We came to see the possibilities for European products but we know this can be a portal both ways.

What conclusions did you draw from your talks on the Chinese music scene? It's a huge market, but whereas in Europe you can make money through sales of CDs and DVDs, piracy and price setting mean you can't here. The music industry here works more through adverts and sponsorship.

Even concerts in China have different economic value. In the West concerts are very important to make money, but in China they're very different and are profitable only through sponsorship. There's huge potential but European music is not really present.

And if people here don't get acquainted with the music, demand has to be created.

So what's next? We will decide if it's feasible to have an office here and, if so, then it's a funding issue. In the meantime, the French Music Office, being the ad interim representative of EMO in China, will continue its task of observation of the market and networking with various local executives to provide answers to the growing demand of EU music professionals. It's very important for us to have a vision for the future here; but that vision can't be as in Europe, this is the key.

What about the venues - does China have good venues for European artists who might want to tour here? Here there's not much diversity in the scale of venues. Not every artist should be playing in a stadium. Relatively successful artists in Europe play in clubs. There are few services that can service a real live music industry here. There are also security issues ¨C in the West there's more sophisticated crowd management. In Europe, tours and venues are planned for in advance, and sales and security issues settled far in advance.

Here it seems things are on a different time setting.

There's so much choice, how do you know the Chinese will be interested in your music? Our music fits into a niche market but that niche is very big. When you have 5 percent of the market that's a lot of people in China! We need communication with the target audience, but we need good artists for the Chinese. European record companies need to understand it is not always your most popular artists that will do best.