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Royalties from China

John Robert Brown

'Do I get a royalty for speaking to you about this?' asks Joanna Lavan, Director of ConnectChina, a private consultancy working with British businesses and organisations. Lavan has just returned from leading a delegation to Hangzhou, south of Shanghai, one of the seven ancient capital cities of China. Lavan's mention of a royalty is a tease, of course. 'Chinese manufacturers don't see anything particularly wrong in copying and avoiding payment of royalties,' she says. 'China is now in the World trade Organisation (WTO), therefore they've got to be seen to comply with the rules and regulations.'

I first encountered this Chinese blindness to intellectual property rights when working in China a few years ago. Over a post-concert supper, after attending an excellent performance of Daphnis and Chloe by the Shanghai Symphony, I asked the conductor where he obtained orchestral parts. 'I photocopy parts borrowed from the local public library,' he confessed. When I enquired about performing right payments he asked: 'What are performing rights?' He has since been told, of course!

The world hears about Chinese knock-off Louis Vuitton bags, fake Breitling watches, and even a pirated version of the BlackBerry wireless handheld device, cheekily called the RedBerry by its Chinese manufacturers. Steve Greenall, boss of Warwick Music, shows me a Chinese collection of piano pieces which includes Leonard Bernstein compositions. The pages carry no copyright details. Presumably no royalties are paid. The widespread non-payment of performance royalties and mechanicals from China constitutes an enormous challenge to Western publishers and royalty collection agencies. For this reason at least one British Library Music Company I contacted refuses to trade with Chinese broadcasters.

'Embedded in Chinese society is the notion that copying someone else's work is the best form of flattery,' says Simon Roodhouse, Professor of Creative Industries at the University of the Arts, London. 'The Chinese have a very different view of what copying actually means. By copying, they are holding that work up in esteem; it's a great compliment. You've only got to look at their skill in the carving of miniatures. They copy things absolutely perfectly.'

'I think that performers and composers have got to think creatively and imaginatively about ways in which they can protect their interests. I don't know what the answers are, but there should be some thinking going on. You either ignore China, or you join them to find ways in which we can work together for our mutual benefit.You've got to start from a different perspective. The Chinese lump interactive games software and media all together and describe it as a copyright industry. This already gives you an indication of different cultural interpretations.'

Roodhouse sees China as treading the same path that the Japanese did after World-War II. 'We've only got to look at Hong Kong,' he says. 'Earlier in my lifetime, cheap and nasty plastic goods came from Hong Kong and Taiwan (then Formosa). Now, they certainly don't. If you look at Taiwan, it has an incredibly sophisticated economy. Most of the laptops in the world are made in Taiwan. All the ABS systems for all the cars in the world are made there. Let's not kid ourselves; China will follow in the footsteps of Japan, Hong Kong and Taiwan.

'In order to do that, China is investing in its educational infrastructure,' says Roodhouse. 'China is sending lots of people abroad to study in British universities, to do PhDs, and all the rest of it. Now, you don't do that unless you've got a view that you are going to take advantage of the initial capital investment in the country that the foreign companies are pumping in, and take it on forward. The Chinese are already beginning to do that, to invest in research centres in their own universities. We have to be very clear that this is not going to stand still. China is not just going to sit there and be a manufacturing centre based on cheap labour. The process takes quite a while, because they've got a lot of people. At a conservative estimate, China has to generate new jobs for the 15 million people a year who come on to the job market. How do you generate jobs every year for 15 million people?'

More to the point, how do Western music publishers and composers tackle the problem of royalty payments? 'They've got enormous problems' says Roodhouse. 'The traditions in China are not traditions that we have in the UK or North America. The Performing Right Society in London hasn't got a hope in hell of imposing anything in China. The only way is government-to-government, just as the Americans have done to protect Hollywood and their intellectual interests: they've had high-level conversations with the Chinese government, and have done deals. You've got to find something they want, then there's a trade off; "You want this; we want that."'

British Music Rights (BMR) was established in 1996 to speak on behalf of the Performing Right Society (PRS), the British Academy of Composers and Songwriters, the Mechanical-Copyright Protection Society (MCPS) and the Music Publishers Association (MPA). According to a recent BMR report, in 2005 the PRS received only £8,100 in payments from the Music Copyright Society of China (MCSC), a tiny amount from a country of 1.3 billion people. And nothing at all was received in previous years! Again, compare this with the £335,000 collected from Hong Kong (population 7 million), during the same period.

However, Brandon Bakshi, Chief Executive of the London bureau of BMI, says that the situation is getting better all the time. 'Several societies have been set up. The Chinese want to adhere to international copyright law, and play the game. So it's a new thing, but it's definitely an optimistic view, onwards and upwards.' Bakshi points out that Hong Kong has the Composers and Authors Society of Hong Kong (CASH), Taiwan has the Music Copyright Intermediary Society of Chinese Taipei (MUST), while the umbrella organisation is the MCSC.

Ben Selby, ABRSM Publishing Director, has recently returned from Music China, a large music trade show based in Shanghai and organised by the same people who organise the Frankfurt Music Messe in Germany. He is convinced that Music China will become the Asian Frankfurt. 'They have an office in Hong Kong, and set up this fair a few years ago,' says Selby. 'Music China is growing enormously now, with five halls, primarily of musical instruments, but increasingly it includes print music as well. They had nearly 38,000 visitors this year, of which 35,000 were Chinese, up 14% on the previous year. Visitors came from 91 countries around the world. By far the biggest of those is China, but they also had visitors from Taiwan, Korea, Hong Kong, Japan, the USA, and so forth. There were three UK publishers there: ourselves (ABRSM), Faber Music, and Music Sales. That will increase. All of us intend to return next year. I was there two years ago. I noticed the difference in two years.

'The organisers put on a seminar on intellectual property, with a panel of local Chinese publishers and Chinese academics, plus European publishers, all talking about the issue of intellectual property. There's no question that the awareness of intellectual property has increased in China. We've gone from a situation where there was no understanding of intellectual property rights, to one where China is now being signed up to the Berne Convention. There are copyright laws there. But the big issue is respect for those laws, and making sure that those laws are enforced. Comparatively, there are far fewer lawyers per capita in China than there are in the USA, and the number of people around to enforce those laws is much lower.'

Selby laughs. 'At the Music China fair, every five minutes there was someone trying to sell you a fake Rolex! So there's a long task ahead for all of us in changing the understanding and increasing the respect for the amount of work that has gone into something. Of course, the same problem exists here in the west as well, but the problem is a much bigger one in China.

'Even in the UK, people will say: "Your music book is 36 pages; I can buy a Jeffrey Archer novel of 600 pages for the same price." They compare the number of pages, when the bulk of the work is not in the printing. Because music is a much smaller industry you are dividing those costs between far fewer copies than there would be with a Jeffrey Archer novel.

'People's ability to pay is sometimes surprising. If you go round Chinese music shops and look at Chinese editions of piano works, the prices are very low. For example, you can buy one of three volumes of Beethoven piano sonatas there, in a local edition, for a retail price of about two pounds. That's a massive difference, about a tenth. What I was interested to see were the teachers who come onto our exhibition stand in Shanghai asking about products and prices. You quote a UK price, and they are not surprised by that any more. They know that a western product is more expensive. There's an ability to pay, which is not what I expected.

'The big debate that all UK publishers are having is about how to get into China,' says Selby. 'If you license to local publishers, the publication is sold at a Chinese retail price significantly lower than the UK price. As the original publisher you then only get a small percentage of that. The income you are going to make is very little. You have to ask yourself why you are doing it. The danger is that you devalue your product. I was expecting the Chinese market to be very piano-oriented. Yes, piano is a big element, but I was also surprised to see how keen Chinese teachers were to get hold of non-piano publications. For example, our jazz publications were hugely interesting to them. I was selling ABRSM Real Books off the stand at the equivalent of £26, which is a huge amount in Chinese terms. That's partly peculiar to Shanghai, because the city is much more cosmopolitan.

'Selling into China is complex, and not easy,' says Ben Selby. 'You can't sell to a retailer, as you would in Britain; there are certain licensed important agents. Any retailer who hasn't got their own import licence would have to work through one of these intermediaries."

Richard Morris, Chief Executive of the ABRSM, points out that the Board undertakes a great deal of work in Hong Kong, and has done so for fifty years. 'We also examine to a relatively small extent, but still quite significantly, in mainland China,' he says. 'The Chinese are, as you know, a very regulation-bound society and, in the case of education in particular, anything to do with education goes right to the top of the Chinese political hierarchy. There are still many debates going on in China generally, not just about music, but about the whole question of foreign educational institutions being involved in China.

'Until that is further clarified there is a limit to the amount that the Associated Board, or any other UK educational institution, can do in China. Now, in the short term, that process has been further set back by recent significant changes in the Chinese leadership. When that sort of thing happens in China, right at the very top, it means that there is liable to be change right through the political hierarchy. The outlook in the short term is that major political developments are unlikely. I expect that we are looking into next year.'

Two hundred years ago Napoleon Bonaparte warned: 'Let China sleep, for when she wakes up she will shake the world.' Now, at the beginning of 2008, China has five of the world's ten most highly valued companies, while the United States only has three. Are we about to be shaken?

First published in Classical Music magazine. Used by kind permission.
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