Taiwan has the singing talent to compete, but its music industry needs help overcoming the impact of internet piracy on its profitability.

BY THIBAULT WORTH

Taiwan has been hard-pressed to compete with China in the diplomatic arena, and its economic growth cannot match the mainland’s luster. But one area in which the island retains the upper hand against its outsized cross-Strait neighbor is in pop music.  Stifled by censorship and cultural isolation at home, few popular Chinese singers have made a splash in Taiwan, let alone the wider world. But Taiwanese singers – looked on as far more hip than their homegrown mainland counterparts – have long been a big hit with audiences in China (as well as Chinese-speaking audiences in Southeast Asia). 

As a result, despite the huge variance in population, the music industries on the two sides of the Strait are comparable in size. In 2007 (the latest data available), total music industry trade revenue in Taiwan and China both came in at just under US$70 million.

Taiwanese music has been popular in China for decades. In the 1970s, Teresa Teng became a sensation on the mainland, despite being officially banned there. Love songs such as “The Moon Represents My Heart” became especially popular in karaoke bars. “Deng Xiaoping rules China by day,” went a popular saying, “but Teresa Teng rules by night.”

Then came Taiwanese aboriginal A-mei, who burst onto the scene in the late 1990s with her piercing vocals, energetic dancing, and close connection with fans. Her success paved the way for a new generation of stars such as Jay Chou, Wang Lee Hom, and Jolin Tsai, who all became immensely popular in China.  Many of today’s acts, such as up-and-comer Jam Hsiao, were “discovered” on TV talent shows before being groomed for the Mandopop big time.

But rather than maturing, Mandopop seems to be declining in quality as rampant digital piracy causes the music companies to invest less in developing new talent and concentrate more on wringing as much profit as possible out of promoting established stars. According to industry interest group IFPI (which stands for the International Federation for the Phonographic Industry), Taiwan’s total music industry trade revenues dropped nearly 50% from 2003 to 2007 – down to US$68.9 million – as a result of internet-based piracy.

China’s love of Taiwanese pop music has been of little help. The piracy rate is China is 99%, according to IFPI, and the music industry has begrudgingly accepted that for the time being, it is impossible to charge for music there. In March, Google introduced a free music download service in China, which was billed as signifying progress. But even though music executives backed the initiative, they were hardly celebrating. 

The Taiwanese government, after years of incremental steps to address the piracy problem, is starting to agree with that point of view. In April, Taiwan became the second country (after Korea) to pass a so-called “three strikes” law, which has been discussed by governments in at least 14 countries. The law, when it takes effect later this year, will result in first-time copyright infringers receiving automated email warnings from their internet service providers (ISPs). After a second offense, ISPs will send warning letters and rights-holders will be informed of the infringers’ identities. A third infraction will bring suspension of the infringers’ internet service for up to a year.

Though similar “graduated response” laws have faced major opposition elsewhere, notably France where civil liberties groups have raised concerns about privacy rights, the Taiwan government so far appears to have the cooperation of both ISPs and the public.  “This ISP bill aims to create a three-win situation for rights-holders, service providers, and users,” read a statement from the Taiwan Intellectual Property Office when the bill passed its third reading in the Legislative Yuan.

But stopping piracy is only one part of the government’s plan to improve the local music business. As part of its economic development program, the Ma Ying-jeou administration has given high priority to Taiwan’s cultural and creative industries. Under the Executive Yuan’s Creative Industry Development Plan, the government will funnel NT$2.4 billion into the music industry over the next five years. The money will go towards a variety of initiatives: expanding the categories at the annual Golden Melody Awards, creating the first university-level pop music departments, developing more venues for live music, supporting collaborations between local musicians and international producers, and giving grants to bands with promising projects. Among the first to receive a grant from the Government Information Office this spring was sodagreen, a well-known local band.

“The government will provide the funds for the plan,” explains Jason Cherng, director of the GIO’s Department of Publications, “while the music industry will decide how best to use them.” Notably, the money will go to support lesser known acts and such independent labels as Wind Music and HIM.

Despite having the 19th largest economy in the world, Taiwan ranks 28th in terms of physical music sales and 24th for digital sales, according to IFPI. Cherng says the plan should improve those standings, generating NT$18.6 billion worth of business growth over a five-year period.   

The digital dilemma

An often cited criticism of Mandopop is that its ballads are formulaic and peculiarly fixated on lost love, as if songwriters were convinced that tear jerking is the only way to capture an audience’s attention. The popularity of KTV is the usual explanation – that people like simple songs with easy-to-relate-to themes (who’s never suffered a broken heart, right?). But critics respond that the range of emotions reflected in commercial Mandopop fails to cover all the conflicts, aspirations, and dreams present in Taiwanese society.

It’s hard to say how much the industry’s financial woes play a role in this state of affairs (after all, similar complaints were made about Mandopop a decade ago when music CD sales were at a peak). One thing is certain though: music companies’ preoccupation with finding new ways to “monetize” music in the digital age hasn’t helped on the artistic side.  Instead of seeking out talented new artists, executive are in a defensive mode, trying to come up with the next digital distribution model or licensing scheme. The focus on top-tier performers with the star power to make endorsement deals, sell ringtones, and fill concert arenas leaves no room for attention to bands in the early stages of their careers.

According to IFPI, digital music revenue in Taiwan jumped by 68% in 2007. And while that sizeable percentage increase amounted to just US$3.2 million, similar increases occurred in other parts of the world, indicating that digital sales are on the upswing. To ensure future growth in this sector, the music industry knows it must develop user-friendly platforms to help consumers not only to buy music, but also to find it. 

But creating these new digital platforms is risky, as it seems to open the door to more potential piracy. After years of revenue losses at the hands of the internet, music companies are understandable wary. It is also why the Creative Industry Development Plan, which supports the development of better digital music platforms, also supports better piracy controls.

The two existing music services in Taiwan, KKBox and ezPeerPLUS, are holding their own. They offer music downloading as well as “tethered” connections between computers and portable music devices (similar to the iTunes/iPod system). But the services charge a mere NT$149 per month for unlimited downloading, which limits profitability and potential. Mobile phone service providers are also adding limited musical services, in the form of either ringtones or track streaming. But these remain a niche business, as music-streaming services are usually offered as part of a higher-end calling plan and track selection remains very limited.

The music industry’s challenge will to create effective partnerships with mobile service providers, and mobile phone manufactures. “There are issues with how revenue is split and issues with [mobile] services being fractured,” explains Lachie Rutherford, president of Warner Music Asia Pacific. “There is a lot of work to be done on creating better service for the user.”

For all these reasons, the local music industry will stay focused on China, regardless of the piracy challenges involved, and regardless of the potential for developing the Taiwan market. For the major labels, relentless touring, shameless overexposure of artists, and the restless search for new licensing schemes will remain the name of the game: anything to keep revenue coming in.

Majors versus independents

“In China, you don’t sell albums, you sell rights,” says Sam Chen, GM of Warner Greater China. Many of Chen’s top stars – singers such as Jolin Tsai and Stephanie Sun – must endorse dozens of products in China and Taiwan as part of their contracts. They are also expected to release albums annually and to tour constantly.

Sam Duann, president of Asia’s largest independent record label, Taipei-based Rock Record, says it takes a while to figure out how to market a particular performer or band in China. But he says it’s important to stick with your decisions and not change course. “There is nothing special about the China market. You just have to be persistent and follow through with your strategies.” 

As for the quality of the music, though, it is rare for even one of Taiwan’s bigger acts to receive international attention or critical acclaim. Those Taiwanese bands that do are often operating outside the mainstream, or at least on its fringes. Chthonic, known for its visceral advocacy of Taiwanese independence, is the island’s most famous black metal band, but remains commercially marginal. In 2007, the members brought Taiwan’s sovereignty struggle to international attention while participating in OzzyFest, an annual heavy metal music festival in the United States. The Brit-pop influenced band 1976 and lyrical sodagreen are two other groups that have garnered critical notice, if limited commercial fame.

Whether the Creative Industry Development Plan will help these bands reach a wider audience and encourage the development of new bands remains to be seen.

Nevertheless, to the music industry the government has taken an important first step by committing to the plan, which signals that the industry is important enough to spend some money on.