Revenue from Chinese karaoke, radio stations key to music industry's survival

The head of music industry association said Wednesday that the industry doesn’t get enough revenue from karaoke royalties and radio stations in to offset losses to piracy.

"The new business model is built on the diversification of revenue streams," IFPI chief executive John Kennedy said at a music industry conference in Hong Kong.

Revenue from CD sales still represents a big chunk of the industry's overall earnings, but its share is decreasing, and record companies need to branch out into digital music, radio and karaoke royalties, especially in China, Kennedy said.

He said the industry is "enormously underpaid" by radio stations for the use of music and that in the U.S., excluding digital broadcasters, "a major league music station doesn't pay anything."

The lobbyist said if the industry can get royalties from radio play in the U.S. it will gain "many" hundreds of millions of dollars of revenue, and that it is seeking to do the same in China.

Kennedy said the industry has secured a deal that requires karaoke bars to pay royalties for the use of music videos. He said fees average EUR1 (US$1.30) per day per room, with an estimated 50,000 karaoke bars in China.

Digital music is also a promising field, with a predicted US$3.1 billion (EUR2.3 billion) digital business this year from the Internet and mobile phones, a 45 percent surge from the previous year, Kennedy said.

However, he said record companies aren't cashing in on the boom enough, pointing out that China Mobile, the world's largest mobile carrier by subscribers, earns US$1 billion (EUR740 million) in revenue from music but that the music industry pockets less than 5 percent of that figure.

London-based IFPI, which represents the recording industry worldwide, estimates that sales of pirated music products worldwide were worth US$4.5 billion (EUR3.3 billion) in 2005 and that nearly 20 billion songs were illegally downloaded that year.

China is a serious offender, with pirated CDs or tapes accounting for more than 85 percent of the market, according to IFPI.