Propagating Media

As a further follow-up to some recent discussion about the local games industry, I’m posting the following comments on behalf of Stuart Cunningham, who says:

Malcolm King objects to taxpayers’ money being spent on the games industry, and looks to debunk the idea that it is a lively, innovative and popular industry with career prospects for young graduates.

The fact is that the amount of taxpayer support for the games industry in Australia is absolutely minuscule compared to the amounts used to keep industries like textiles, clothing and footwear, car assembly and many other manufacturing areas afloat. Huge taxpayer transfers to these industries occur because the unemployment that would flow from withholding them is politically unacceptable.

On the other hand, any public support for an industry like games is based on the policy principle of supporting innovation in emerging global fields with great growth potential. Any such investment carries risk.

What does it say about us when the closure of a footwear factory in Tasmania is an occasion for great lament over the loss of real jobs by ’salt of the earth’ people but 60 layoffs in a games company in Queensland is greeted with a gloating ‘I told you so’?

On 13th December 2007 Auran Developments Pty Ltd went into voluntary administration. Some fifty staff lost their jobs in the wake of the commercial failure of Auran’s massively multiplayer online game, Fury - a three year project costing $15 million that was released on 16 October 2007.

An article in yesterday’s Courier Mail by Malcolm King (‘Playing Games with the Hype’) suggests that Auran’s failure is a symptom of wider problems with the games industry and justifies why the Australian games industry shouldn’t receive further government funding support:

Many online game producers, supported by some large and notable universities of technology (who have developed full-fee digital games design programs) are lobbying the Federal Government for more money.

Yet, as a taxpayer, I object to spending money on projects that should be funded by the private sector. Government funding of online games with their adolescent fascination with slaying monsters or the combat genre, come very low on the agenda after infrastructure development, renewable power generation, massive water conservation projects, building more hospitals and educating school children.

If the Government uses my tax dollars to give the games industry a 30-40 per cent rebate, then the Government should seek a share or a dividend from the investment. In short, I would expect the intellectual property to be partly owned by the Government.

There are many problems with King’s analysis and he certainly doesn’t explore any of the issues and challenges that contributed to Fury’s failure. My research towards the end of 2007 included postmortem interviews with members of the Auran Fury development team (including CEO Tony Hilliam and Lead Designer, Adam Carpenter). They have been frank and open in discussing the various factors that have played a role in Auran’s current difficulties. I will post more on this soon. In the meantime here’s a brief response that Jason Potts and I have just submitted to the Courier Mail:

Malcolm King (’Playing Games with the hype’, C-M Jan 17) seems to confuse the collapse of one company with the collapse of an entire industry, casting doubt along the way on its general employment prospects. He suggests that smart young students might be better off steering clear of this industry because it is hard work and risky. But of course it is, for where there is risk there is reward. The potential upside of developing a winning product here for global markets can be enormous. Such rewards are of course not guaranteed, just as in the search for oil or new drugs.

Massively Multiplayer Online games are high risk ventures - very difficult to get right, requiring large teams working for three plus years at the very cutting edge of interactive media. Many companies are having a go and getting it wrong. But surely this is precisely what we want to see Australian companies doing, and the skills we want to develop in our creative workforce.

Furthermore, the employment implications are not as precarious as King suggests. Many of those former Auran employees have already picked up work with other games companies both locally and overseas. In Brisbane alone other thriving game developers such as Krome, Pandemic and THQ will no doubt benefit from the availability of these skilled and creative workers.

The games industry is still young and improperly characterised as essentially about dragon-slaying entertainment. The skills, technologies, knowledge and understanding of interactive media and simulation technologies are already flowing through to other fields such as interactive education, defence and health as entrepreneurs seek to exploit this knowledge base to establish new firms and carve out new industries. And some of these firms too will fail. But others won’t, and will become new drivers of economic growth and employment.

The role of government in facilitating innovation in these new industries through support of training and R&D investment, both of which contain significant knowledge spillovers, is surely a better use of taxpayer’s funds than in propping up long failing ‘traditional’ industries.

Tom Crago CEO of Australian games developer Tantalus and president of the Game Developer’s Association of Australia has now also posted a reply (’Two views on the Industry’) to the Courier article which includes observations that demonstrate King’s lack of knowledge and understanding of the Australian games industry.

The other day I had the pleasure of participating in this week’s episode of Spark, a CBC Radio One show on tech culture news and ideas. It was a lot of fun being part of such a smart show.

The full show and related info, links etc is now available at the Spark website.

I was there to provide some comments from a cultural research point of view on Dan Ackerman Greenberg’s now-notorious ’secret strategies’ for manufacturing ‘virality’. My main point really was that I didn’t think you could use the virus metaphor to simply describe a piece of content becoming very popular through word-of-mouth or peer-to-peer distribution. However I do think it is tremendously interesting to think about the ways in which ideas, recipes, and practices become available for re-use via mass replication and variation; to try to understand what these little units of knowledge actually are, and how it all works.

It’s the difference between talking about the Crank That music video ‘going viral’, and the Crank That dance steps.

Actually, moving away from video and to mix the metaphors, it is so-called ‘internet memes’ like the lolcats that are the best examples.

With those, you have a form, a set of essential elements, and a set of constantly evolving ‘rules’ for practice, producing apparently infinite lol-possibilities. These ‘rules’ are like cultural building blocks that can be re-used, remixed, and re-combined to produce new ideas, always hybrid, always - in a particular sense of the word - creative. This is far more interesting to me than the banal quest to get more eyeballs onto your piece of ‘content’.

The catch is, it seems to be almost entirely unpredictable which of these ideas will be repeated and built on to the extent that they go truly ‘viral’.

How do I know?

Chinese Journal of Communication

Special Edition
Call for Papers

“China: Internationalising the Creative Industries”

Editors
Prof. John Hartley, Queensland University of Technology:
j.hartley@qut.edu.au
Dr. Lucy Montgomery, Queensland University of Technology:
l.montgomery@qut.edu.au
 

The concept of the ‘creative industries’ was developed by policymakers and governments in the UK and Australia during the late 1990s. It has been taken up in the Asia-Pacific region, notably in Taiwan, Singapore, Hong Kong SAR and New Zealand, all of which have produced creative industries policies and strategies since 2002. The preferred term in mainland China remained ‘cultural industries’ until recently. However, since 2005 China’s policy-makers have begun to embrace the ‘Creative Industries’ which place greater emphasis on innovative and creative inputs and include areas as diverse as sports, tourism, magazine publishing and software development, as well as activities more traditionally associated with culture, such as art, filmmaking and music.

Global trade in content and culture is big business: Cultural and creative industries account for 7 percent of the world’s Gross Domestic Product (GDP).  Trade in cultural goods almost doubled between 1994 and 2002: from US$39.3bn to $59.2bn.  In 1996 sales of film, music, television, software, journals and books became the US’s largest export. Between 1977 and 1996 US ‘copyright industries’ grew three times more quickly than the overall economy.  

The shift in thinking represented by the ‘creative industries’ idea is taking place at an important time in the development of China’s economy. For despite its strength as a world leader in manufacturing exports, China suffers from a significant trade deficit in creative and cultural goods and services (it imports more IP than it exports). Vibrant local content industries exist and there is evidence that where innovative local content is available, it is often preferred by Chinese consumers. The music industry is one example: observers report that Western artists account for just 5 percent of music sales in China, and regional Asian artists for a further 50 percent.  Nonetheless, in areas of film, television, software, music, design, architecture, popular fiction there remains stronger demand in China for foreign imports than international demand for Chinese exports.

These developments raise important questions, both for policy-makers intent on securing China’s long-term prosperity, and for scholars attempting to understand the role of creativity and culture within current social and economic contexts and developments. How are China’s cultural and symbolic values being linked with economic values? How might China more effectively harness the creative talents of its population and increase the economic benefit associated with its own cultural heritage? What needs to be done to develop a thriving trade in consumer services such that people all over the world will want products that are ‘created in China,’ not simply ‘made in China’?

In China: Internationalising the Creative Industries we propose the exploration of these important questions in the context of the social and economic transformation taking place in Mainland China. This special issue of the Chinese Journal of Communication (CJoC) has its genesis in a major three-year project, undertaken by researchers in the Creative Industries Faculty at Queensland University of Technology. It explored the extent to which the idea of the creative industries that had gained a strong policy foothold in the UK, Australia and elsewhere would take off in China. Over the lifetime of that project (2003-2007) China did indeed embrace the notion of creative industries, across a range of services from education and tourism to advertising and popular media.

Arising from this experience, the current proposal seeks to explore further some of the theoretical, social, cultural and economic impacts of China’s emerging creative industries. Topics to be covered already include economic models of creative industries growth in China, the development of the mobile music industry, the role of fashion media in linking China into a global network of taste and consumption, and the extent to which physical infrastructure can facilitate creativity and innovation.

Given the significance of the creative industries for China, it is important that a special issue of the CJoC dealing with the topic covers a comprehensive range of creative industries and perspectives. We are therefore calling for focussed, thoughtful explorations of emergence of the creative industries in mainland China that will help us to advance knowledge in the field. In keeping with the interdisciplinary approach of both the original research project and of the CJoC, we welcome contributions from all relevant disciplines, including law, cultural studies, economics, policy and media studies. 

Topics for papers could include, but are by no means limited to:
- Theoretical and critical analysis of the term ‘creative industries’ and its relevance in a Chinese context.
- Legal and institutional challenges faced by the creative industries in China.
- The social/cultural and economic implications of the rise of China’s creative economy.
- Discussions of developments in specific areas of the creative industries, including film, music, television, publishing, advertising, tourism and education, online gaming and the internet, fashion and photography. 
Submissions should conform to the editorial guidelines of the Chinese Journal of Communication to be found at http://www.informaworld.com/cjoc under “Instructions for Authors.” Papers for consideration in this special edition should be emailed to: lucy.montgomery@gmail.com  Papers will undergo a double blind peer review process and should be submitted by 31 May 2008. Planned publication date is in 2009.
Informal enquiries are welcomed and both editors encourage prospective authors to contact us in order to talk through potential topics.

Welcome to the first of a series of blog entries based on some of the more interesting middle-of-the-night email conversations that occur between the various authors of this blog and some of our colleagues. I really must warn you that these exchanges tend to happen at the edges of thought (not to mention sleep), so although we hope you enjoy this peek inside our process, also don’t expect to find particularly coherent or carefully argued representations of our ‘official’ positions on these issues.

Anyway, here goes…

This one begins with a typically pithy provocation from CCI evolutionary economist-in-residence Jason Potts:

Jason: Radiohead’s give away for free pay what you like honesty box for whiny noises made him $10000000. Incredible. Might this model work with books too I wonders???

Lucy Montgomery: Lots of people I have spoken to have said that the record-label-free, direct relationship with fans model only works once an artist has established themselves as a big name… which can only be done with the help of a label. Their logic seems to be that Radiohead and Madonna can connect with fans because they have already benefited from a huge publicity machine. Artists without access to the publicity machine provided by labels can’t make a large enough connection with fans to survive.

Actually, if the theory about people paying because they feel a personal connection with an artist is correct, this model should work well for everyone from J.K. Rowling (there are millions of kids who feel like they have a personal connection with her as an author) to musicians who play pub gigs and charm the patrons.

Is this a bit like the Korean model of film funding - audiences are given a range of scripts and can choose to invest in the films they want to see made?

Jean Burgess: Yes, it’s the ‘case study’ of the moment. Although we might say that the various layers of indie celebrity capital built up in the Radiohead brand made Radiohead a good fit with the public performance of good will and resistance against Big Capital represented by their ostentatious experiment with alternative business models, and hence getting enormous amounts of publicity in the blogosphere (e.g. getting Boing Boinged early on) in addition to the move hitting the mainstream media over the subsequent week or so. This is at least part of what made them the zeroes.

And who among the people who would normally consider purchasing a Radiohead album is *not* going to feel guilty about downloading already-established ‘good’ music with indie credentials, without paying something, after all that? On the other hand, what would happen if Britney had the independence from her label to try the same thing? Pure embarrassment, I’d say.

[Editor’s note: Nothing against Britney. Poor Britney!]

PS I am ostentatiously ignoring the “whiny noises” comment, Jason

Jason: I’m intrigued by the scalability of this model. What else could it work for, even allowing that some reputational capital must precede it, as in the Radiohead case.

In game theory there is an interesting set of experiments called the public good game (or something like that). Goes like this: start with say 4 players, each of whom is given $10. Each then has the option to put some fraction of that, including all or nothing, into a public kitty. After everyone has contributed, the experimentor then doubles the amount in the kitty. This is then divided evenly between all participants. The participants also keep whatever money they didn’t put into the kitty themselves

What would you do?

The optimal solution, on the face of it, is for every one to put all their money in, thus yielding a $40 kitty doubled to 80 then divided 4 ways = $20 each.

But, if I knew you were going to do that. I would put nothing in, the kitty would be 30 = 60 /4 = $15, yielding me $10 + the $15 = $25.

Of course if every one thought that, we would each only end up with $10.

In experiments (with students, executives, amazonian tribe members, etc) the result is usually a split with people contributing about $5. For one-shot games, the average contribution is closer to $1. BUT for repeated games, the contribution rises to about $8.

What does this have to do with radiohead?
I think that this is essentially one of these games.

If every one plays one-shot, then radiohead has to eat cold soup and doen’t have the strength to pluck and whine in that soothingly ethereal way. There is a lot of experimental work on how observations of other people’s contributions strongly effect our own (i.e. helping us decide which sort of game we are playing).

So, could this be applied to other less obvious things. What about Dragon’s den style venture capital IPOs? What if you could ‘download’ a share in a new company, but then only pay what you thought it was worth, including nothing. Note however, that the resultant value of that share is the value of all donations divided by the number of shares. What would you pay? (Note google’s IPO was a little bit close to this.)

Would you raise more money this way, or less?

Logic would suggest much much less, but that was what we thought about radiohead too. Imagine if facebook was floated this way? Or some green eco polarbear oil company, i.e. something with substantial reputational capital, even if a weak business model (something that investors ethically wanted to see succeed, and thus played their part, which is somewhat analogous to the radiohead instance).

Lucy: I think the last part of your idea is the most important. People seem willing to pay for a combination of 1. something they want (music, petrol) and the feeling that they are influencing an industry/activity they value. It seems logical that if they have a choice between:

1. Just the product.

2. The product PLUS the influence.

they will choose option 2.

Actually, I think it is a scaleable model. Not everyone values the same industries/activities. But allowing people to sort themselves into like-minded groups

Jean Burgess: This is interesting.

I agree Jason and Lucy, it’s about investing in something that people ethically want to succeed. Jason I’m sure there’s been examples of floating ’shares’ among the user community, but I have a feeling that was more anti-business open source communities – so a really collectivist model, not a rational-maximising-individual model. I can’t think of examples right now but will get back to you if I think of them.

I’m interested in the ‘observation of what other people are doing in order to understand what game we’re playing’ thing. There’s also the way the game is discussed, which shapes our understanding of it as well – that’s why getting the Boing Boing stamp of approval transfers all kinds of meanings to what Radiohead were doing that they weren’t able to create themselves. (PS Boing Boing is hip, pro-net neutrality, anti-DRM and copyright, written by cool new media/sci fi author cultural leaders, etc). The fact that the downloadable album is DRM free is a really important point too, I think – because it dramatically increases the perceived risk the band was taking with the experiment.

I think there’s a performative element to making that payment as well – that is, I am quite sure that people would be motivated (even if not consciously) by being able to say that they did it. There’s a fair bit of this going on with people downloading ‘big label’ music from P2P networks absolutely shamelessly, but being very proud of supporting local bands by going to gigs, or paying for their favourite local/indie bands’ full albums on iTunes, because they want to support their particular brand of ethereal-yet-soothing whining but only if they don’t think most of the money is going to just end up in the hands of Sony BMG. I wonder if this means that it’s also inflected with a form of rational altruism, ala ‘I’ll give money to World Vision because I know they do good things with the money’. Or at least something-that-people-think-is-altruism, which is the same thing if it produces the same result.

The ‘how could this scale?’ question is intriguing too, and I’m especially interested in thinking not just how big, but what are the necessary preconditions in terms of social and cultural values.

Thinking about my own case studies, I have always been interested to observe that the users of Flickr who have the most invested already (in their own efforts to create ‘good’ content and build social networks) are the ones willing to pay a $25 pa subscription fee – all you really get for the subscription is better storage and no ads anywhere. Without the subscription fee the ads aren’t that obtrusive anyway. My sense is that what people are paying for is to feel good about supporting a community that they think has real social and aesthetic value, and a company they believe behaves with integrity and continues to improve the site. Of course you also get the little ‘Pro’ logo next to your name. But I think it’s a bit like paying to keep the local rooftop vegie garden going or something, even if you do that by paying to lease your own little corner of the garden as an individual.

Meanwhile over at YouTube, the only time money changes hands is when ’star’ users get a share of the advertising revenue. You also used to be able to pay for promotion within the website, which is a form of payola. There is much, much, much bigger community with just as much invested in the social networks they have created ‘in game’, but almost no visible community management on behalf of the company as far as I can see. I’ll be really interested to see if it proves sustainable considering the lack of care that has been taken to cultivate goodwill and long-term investment in this core group of lead users, because the ‘casual’ users of these services are notoriously fickle – why wouldn’t you move on to the next new thing if all you have invested in the old one is a few crappy photos or videos that you can just move to facebook where your ‘real’ friends are? Then again, maybe they’ll succeed in what they’re trying to do, which is to be the online television network that we all watch the most, supported by partnership deals with media producers and advertising revenue.

Lucy: What time do you guys get up??

I just wanted to point out that people have demonstrated a willingness to pay a premium for the feeling that they are influencing a system and addressing some sort of inequality lots of times already.

Fairtrade products, ‘green’ toilet paper, ’socially conscientious’ options for super-fund investment. The key is that they are generally getting a product they wanted, anyway - but it comes with an added element of social satisfaction/benefit.

I think flickr is a good example of the fact that the product or service itself isn’t necesarily the biggest motivator in this kind of purchase. People put up with scratchy toilet paper because the satisfaction they derive from feeling that they have helped save a rainforest is greater than the satisfaction they would have derived from soft paper. Some members of the flickr community might have been tempted by a campaign that asked them to donate or become an official flickr supporter because they feel that it is an important or valuable service… but if they get an ad-free account and a little social kudos, then that’s great too. I know lots of people who pay to join the official pearl jam fan club… buying radiohead’s album isn’t too different from that, except you get the album and you get to choose what to pay.

Green products work because lots of people agree that looking after the environment is a good thing. Fair trade products work because lots of people agree that poverty and social inequality is a bad thing. The radiohead idea worked because, at the moment, lots of people agree that record labels are bad and artists are good. If people change their mind and decide that radiohead are greedy and arrogant and made too much money out of their last album, it might not work for radiohead anymore. But it might work for another band…

I half wonder, though, whether it is also a little bit like making tax optional (or very low) with the idea that people should have the freedom to support the services they think are the most valuable. The US philanthropic system… is the total that is donated to hospitals, universities and neighbourhood welfare programs equal to, greater than, or less than the total tax burden that the community would have put up with in the form of tax? Does a feeling that taxes are too high mean that people feel that they are entitled to cheat the system off more than they would if they didn’t pay any tax at all?

Jean: We get up early, Lucy and we never go to bed. Get with the program!

Although Jason is in London, don’t forget.

Great examples of what I was trying to think about with regard to World Vision. I really like the idea of paying for agency (or ‘influence’, as you put it). To expand on it, it’s not only ‘green products work because people think green is good’; it’s ‘green products work because people think green is good and want to transfer some of that goodness to themselves as part of the ongoing process of self-branding’

Just one thing though. I think the profound point about Flickr that kind of spun me out early on is that people are effectively paying for something which they themselves are co-creating: the company creates and continues to improve the architecture, but the pool of good, beautiful or useful images and the social activity that contributes very substantially to the value of the network are created collectively by these active, engaged and invested users. Who pay to contribute more, higher quality images, as well as for all the below-mentioned warm fuzzy feelings. Clearly, and my community garden metaphor was about this point, there’s something going on here for the participants that is really not about free labour.

This is quite different from putting up with scratchy toilet paper. (and Banksy may have things to say about this too with subscription-based MMOGs)

As well as getting us to think about business models, it should get us to ask, “How does this change the idea of the ‘social contract’ between the company and it’s co-creators?”

PS I think libertarians want to abolish tax altogether except for absolutely essential infrastructure (or even that), isn’t that right Jason?

John Banks: A great discussion - Jean I agree that your comments about the motivation/incentives for users participating in Flickr as co-creators definitely also holds for MMOGS - the core, lead users I’ve been following throughout the development of Fury have invested many 100s of hours providing design feedback, developing fan sites, participating in word of mouth marketing by posting in-game vids to youtube etc and now many of them are subscribers -paying their $9.95 US per month. In interviews they discuss this motivation or incentive as about supporting a great game and influencing the development process -so provided Auran continues to listen to them and demonstrates this by introducing changes, updates, modifications that respond to the feedback, some users feel a commitment to support the company by both subscribing and actively promoting the game.

Jason - these various examples including Radiohead are also great examples of the multiple games logic that we’re working up in our paper. Jean’s comment that “I agree Jason and Lucy, it’s about investing in something that people ethically want to succeed”, also aligns with your provocation in an earlier email to John H and I that multiple games often have an ethical dimension.

I’m in the middle of reading Robert Wright’s NonZero: History, Evolution & Human Cooperation. Wright uses game theory models to suggest cultural evolution (including the co-evolution of cultural/symbolic practices and technologies) is about the unfolding of greater complexity and scale in non-zero sum interactions. He basically argues that dynamic between new technologies and social/cultural behaviors encourages the emergence of new and richer forms of non-zero-sum interactions and then social structures/institutions (social-network markets I guess like we see playing out in and around MMOGs etc) evolve that realize this potential. I see MMOGs and space like Second Life, FlicKr etc as laboratories for experimenting with these non-zero dynamics. We’re innovating new ways to cooperate across larger and larger scales by devising new ways to play increasingly complex and profitable non-zero sum games.

Wright argues these non-zero dynamics produce more positive outcomes and mutual benefits as they embed us in “larger and richer webs of interdependence”. The trick and challenge is developing the mechanisms (I guess markets, business models etc) that convert non-zero sum interactions into positive outcomes (note this doesn’t necessarily need to be reduced to direct financial outcomes, the benefits playing out here can be quite different - i.e. multiple games). As Beinhocker comments these social technologies must “provide methods for allocating the payoffs in such a way that people have an incentive to play the game” - how the rewards for participation & cooperation are distributed is a crucial question and problem.

Interesting to note that Wright views globalisation as a process of unfolding non-zero sum logics.

In the case of RadioHead, I’ve noticed through following a few headfi and music forums quite extensive threads in which people proudly post the amount they paid for downloading In Rainbows then performing their attitude towards the big label industry. Definitely an attention economy dynamic playing out here.

Jean by social-contract I guess you mean the practices, behaviors, institutions and mechanisms that enable positive outcomes to be distributed and shared from these non-zero sum opportunities. Beinhocker makes the observation that “if the rewards are distributed in the wrong way, the cooperation collapses and the non-zero sum gains evaporate” (267). Hmm, perhaps this also links back to our discussion on IP - i.e. IP as a social technology for regulating the pay-offs from non-zero sum games and providing incentives to participate.

Editor’s note: since I get the last word, I feel like I should point out that without accurate and comparative sales figures this is all a bit hypothetical, although the enthusiasm for performing altruism is very interesting. According to the Wikipedia (and if it’s in there, it must be true), nobody seems to know yet just what the average price paid for In Rainbows was, and how many people paid nothing.

Here’s a link to a presentation I gave back in July for the Centre for Screen Business, Australian Film, Television and Radio School (AFTRS).
In this presentation, I draw from my recent research with Auran Games on their massively multiplayer online game, Fury to discuss user co-creation relationships as emerging social network markets. Fury was released in October.

I consider how the choices that participants make in negotiating these relationships can be understood as emerging competencies for navigating the opportunities, risks and uncertainties associated with these networks. I argue that far from being duped or exploited, users are often quite canny and knowledgeable participants in the making of these relationships.

I’ll post an update on Fury and my research with Auran in the near future. Since the October release Fury isn’t at this stage a commercial success. Online game press reviews, for example, have been quite critical. There are a range of reasons that explain this failure, including that the game really was released too early - a lot of polish and fine-tuning still needs to be done. However, the Auran development team are currently hard at work addressing many of Fury’s identified shortcomings with a significant update that will be available to download from December 16.

From my research perspective, it is interesting to note that many of the problems identified in the reviews had been raised throughout the testing phases by the core player community. So why weren’t changes, fixes and updates made before release then? Part of the answer is the challenge of negotiating the complex relationship between professional creatives and expert users. I’ll post more on this soon.  The coming December update responds to much of this input from the core Fury player community, the problem for Auran is have the changes come too late …..

Pictures: Miranda Kuo and Martin Bloom.

Kaiser Kuo is an English speaking researcher’s dream.  He’s frank, articulate and a Chinese music industry ‘insider’ with impeccable credentials.  Furthermore, he has worked for a number of internet-based start-ups and is now Oligvy’s Group Director for Digital Strategy.  As editor of Oligvy’s Digital Watch he is well versed in the potential of new technologies.  Just to make the rest of us feel inadequate, he manages to write an entertaining blog Ich Bin Ein Beijinger and produces a monthly column for Beijing’s English Language Magazine That’s Beijing.  Little wonder that most people doing research on China’s music industry eventually find their way to his office.

Kaiser is American born Chinese and has spent 15 years in Beijing.  He was a founding member of the Chinese heavy metal group Tang Dynasty, often credited with the title ‘first heavy metal band in China’.  Tang Dynasty’s self-titled 1992 album sold over 900,000 copies and won MTV’s ‘best music video’ award.  The album broke new ground in the Chinese music industry with its mix of heavy metal sounds and elements of traditional Chinese music, such as Beijing Opera.  The band enjoyed a high level of success in both mainland China and Taiwan. 

After leaving Tang Dynasty in 1999, Kaiser helped to form a new band – Spring and Autumn.  Spring and Autumn has not enjoyed the commercial success of Tang Dynasty, but has a devoted following and regularly appears at China’s major music festivals. Kuo somehow manages to fit writing songs, showing up at band rehearsals and appearing at China’s major music festivals around his role at Oligivy. 

On a quest to figure out how music industries function in an environment where new technologies are adopted with breathtaking speed and where copyright systems are still developing, I interviewed Kaiser in his Beijing office.  Here’s a little of what he had to say:

Lucy: China’s commercial music industry is developing at a moment when technology is challenging music business models all over the world.  I’m interested in whether things might be going on here that are ahead of the game in other markets?

Kaiser: I think that China is not burdened by legacy systems as such.  They’re not burdened by this gigantic record industry apparatus.  I mean it is big, but in modern music especially, there isn’t the entrenched, intertial beast to wrestle with in order to get things to change.  So a lot of the labels are already very much aware of coming into an environment that’s already just so full of pirates, so full of P2P networks that they’ve had to rethink their models entirely.  Most of them have looked to mobile for salvation. 

Lucy: Why do you think that is?  Why has mobile been so successful?

Kaiser: Because physical units just aren’t going to work here anymore.  You can price them as low as you want, but you’re never going to be able to price lower than the pirates.  And so the Chinese being an utterly pragmatic people, there’s no real ethos that’s built in.  Nobody feels any guilt whatsoever about buying pirated products.  People have come up to me copies of my CDs – without any shame at all – and asked me to autograph what are clearly pirated versions of works I’ve done.  I mean I’m saying this as somebody who has had works extensively pirated.  But not extensively enough.  Lets take this back a bit.  Lets talk about the genre I know. There would be no rock scene of any measurable size at all, if it weren’t for the advent of piracy, starting with the ‘dakou dai’ – the saw gashed cassette tapes and CDs that used to come in. [Note – dakou dai were cassettes or CDs that had been confiscated and officially destroyed by customs.  In fact, a drop-saw would generally be used to make a gash through the cover, with a relatively small cut being made in the cassette or CD itself, which could often be played normally.  Many of these ‘destroyed’ products made their way back onto the black market in mainland China.  During the 1990s they were an important source of foreign music].
 
Lucy: I used to buy those.

Kaiser: I did too.  I’ve known friends with whole bookshelves full.  They were a terrific thing.  Starting with those and then of course with the pirate industry.  That exposed a whole generation of young aspiring musicians to every genre out there, to the best work that was being done internationally.  It really raised the bar for them, so they understood how good production was, how good the musicianship was, what the song-writing was like, what they needed to aspire to.  In some sense it might have kept China’s bands in an imitative phase longer than might have been the case otherwise, but it at least built an appreciative audience.  Not a huge one, but a larger appreciative audience. 

Lucy: Do you think that that was just a necessary phase of development and it happened to coincide with physical media being the main product in the market?

Kaiser: But it only got worse, right?  Because so many of these people who are interested in music are also internet users.  If you look at 20-24 year olds alone in China, the penetration of Internet usage is over 40%.  Its about 43.4% according to the last survey.  And in urban areas, if you were to leave out rural China, I’m sure that it is upwards of 70%.  Its enormous.  So all these people, the young urbanites in China are all Internet users and everybody knows where to go to download music.  It’s no mystery at all.  There’s no reason to go and buy any of it.  So they’ve gone from the frying pan into the fire.  They hadn’t even put a dent in pirate physical copies before p2p and mp3 downloading came along.

Lucy: What are your feelings about the role of the record industry in China?  Do record labels have a job to do here, and is it the same job that they have done in other markets?

Kaiser: They have a very different job here.  Their job now needs to be entirely focussed on digital and they should be looking toward full song mobile downloads.  Japan – let’s look at Japan, where they are still selling a lot of physical units, there is a culture of that.  There are still a lot of hard core collectors who want the original stuff with no mistakes in the liner notes and all that. But there are stores all over Japan where you can go and rent CDs – brand new releases.  People walk outside the store, sit on the nearest park bench, flip open their PC and rip the CD, and then they return it.  So everyone knows what that’s all about.  There’s also quite a bit of internet downloading.  But of digital music downloads in Japan, now this is an old statistic, its from about a year ago, 95% or more are by mobile.  So when KDDI, which is one of the Japanese carriers, launched this service which is called Chaka Uta Full, it took off like gangbusters, it just went absolutely nuts and they have done probably close to a hundred million full song downloads now.  People are willing to pay quite a bit of money for the convenience of not having to put it on your PC before you can put it on your personal media player, but just going directly, just using your phone and over the 3G networks in Japan. Downloading a full song that’s in AAC code just like on your iPod, with quite good quality sound.  People are willing to pay a premium for that convenience and immediacy.  It’s the immediacy of receiving the thing and the postponement of payment until your actual phone bill arrives.  The combination those two things really make it. 

Lucy: But China doesn’t have 3G.

Kaiser: Not yet.  But it’s coming. Or something better is coming. It’s inevitable. I would stake my family’s fortune, such that it is, on this being a huge application in China.  So that is what the smart record labels are all looking toward right now.  They’re all watching very carefully to see how China Mobile moves in this space and who the intermediary players are.

Lucy: The other big part of what we’re interested in is social networks and user generated content.  At the moment, do you think that there is a lot going on with this?  I know that the internet singer phenomenon is quite big here.

Kaiser: It’s big, but sporadic, hit driven, and I don’t know that it necessarily constitutes a trend with any legs, that its necessarily going to go very far.  I think there’s a tendency to overstate user generated content, not just in China, but everywhere.  There very few people who actually have the skill set to make decent recordings.  It’s not as easy as people imagine.  It has become a lot easier, yes, with Cakewalk and then Sonar and all of these other home recording deals.  But you still need to have some modicum of musicianship.  It’s not like you can bypass that altogether.  So it’s still just a very small percentage of people who are very heavy users – producing, whether its video on Tudou or its music uploaded to Wangyou, there’s not that much of it.  And also, SNS [social networking systems] hasn’t really been used to the extent that, say, Myspace has in the United States, I mean it hasn’t built itself on Indie bands in the way that Myspace, at least by reputation, seems to have.  Actually, according to the guy who runs Myspace China, Luo Chuan, its not as big as most people imagine it to be in the United States.  But Myspace’s reputation in the United States is that it’s all about Indie music.  I’ve played a few Indie music festivals recently, we played MIDI and then we played the Lijiang music festival down in Yunnan, and at both places Myspace had sponsored very heavily.  Their signage was absolutely everywhere.  And I expect to see them doing quite a bit of that.  So Myspace China is looking at independent music as one of its possible mainstays, but it’s not the only thing by any stretch of the imagination.  There just aren’t enough bands and there’s not enough of a fan base here to really make it a viable core of a social network. 

Lucy: I’ve read ring tones and ring back tones make up a huge proportion of the profits of the music industry at the moment, which means that the demographic of music customers is shifting.  So, some of the most popular songs aren’t necessarily high quality music, they are just the songs that ordinary people or lift ladies or migrant workers like, because those listeners have now become a very important part of the market.

Kaiser: Absolutely.  I mean, this is very much lowest common denominator… it’s the pabulum that’s served up from Hong Kong or Taiwan mostly.  Not a lot of people are downloading Ziyuan songs for their ring back tones, or any of the more progressive, artistic bands.  But that’s just a function of the fact that rock is still a very marginal phenomenon in China.  It is making inroads into the industry, but it’s still very peripheral. 

Lucy: But just getting back to that for a minute, if ring tones and ring back tones are where the money is at the moment, what does that mean for investment in other artists?  Or in different kinds of music?

Kaiser: It’s making it very very tough.  The typical deal that somebody gets, if they haven’t really earned their bones and built a following will be a one-off payment that is nominally an advance on royalties based on a very conservative estimate of the units they will actually move. Then they are expected to record and produce the album out of that advance, they are not given additional funds to record.  In our case with my current band –  Spring and Autumn, Chun Qiu - we were able to get the company to pay for our studio time, in addition to giving us an advance.  This is the way of things with record companies here.  You never actually pass the number based on which your royalties were calculated.  You approach it asymptotically, so you are actually only selling a unit every quarter or something.  Nobody even bothers to look at the books.  Everyone sort of understands that that’s pointless.  So for bands, I think that its actually a healthy thing, its forcing them to rely on live performance, which I think is ultimately a good thing for the bands here because, at least the genres of music I care about, are very much live performance genres of music to begin with.  That’s how you really hone your chops.

Lucy: Can I just use your band as an example – is your label acting as an artist management company? 

Kaiser: No, they’re not. 

Lucy: So you have been able to un-bundle your deal?

Kaiser: It’s completely unbundled.  RHC International are really nothing more than a distribution company.

Lucy: Is it a mainland label?

Kaiser: It is a mainland label.  They have signed Arsenal, AK47 and a few other bands.  I think they just don’t have the wherewithal to do artist management.  They don’t really know how to do that.  We have a separate guy who books shows for us.  He’s very good.  His name is Zhong Sheng and he actually manages a handful of popular bands. 

Lucy: When I did my last interviews I had the impression that a lot of labels were relying for their income on artist management and advertising.

Kaiser: Some of them are.  I think Modern Sky is sort of going that route.  Ours is really not a label, they’re really just a distribution company.  This was the same model that we had with Jingwen with my last band, Tang Dynasty, recorded its second album under them.  They were at that point strictly a distribution company.  They were moving into label territory, and during the time that we were recording they founded a new label, but we weren’t actually on that.  It was called Scream Records, which is still going.  So Scream is sort of a label subsidiary of the distribution company Jingwen.  And they do, to some extent, artist management.

Lucy: Before I came I had all sorts of grand images in my head about a really decentralised model here, where labels weren’t going to be able to have the same power in the market because of technological factors, and different environmental factors, but this whole publishing license thing seems to really centralise it.

Kaiser: I wouldn’t say they necessarily have power in the market.  They are still very much small time.  They really count pennies.  But, you know, it was a nice enough experience.  They were generous, our studio time ran out and they paid the additional, we didn’t have to pay too much out of pocket – we split the difference on some of the days.  We were being sort of perfectionistic.  They wouldn’t pay for mastering, which was just criminal I think.  But I managed to find a venture capital firm that was willing to back us and pay for – it wasn’t a lot of money – to have it mastered in London so that the record actually sounds quite good.  We are very happy with the results.  We also paid out of pocket for our producer, who was an American friend of mine.  He’s also much of the reason why the album sounds good. 

Lucy: One of the big differences between China and other markets is that MP3s are really quite open here – no one seems to bother with publishing licenses and copyright when it comes to MP3 downloads. 

Kaiser: There’s no effort in any kind of DRM.

Lucy: When you imagine this industry in 10 years, do you think its going to have a similar structure to industries in other parts of the world, or do you think that’s something quite different is going to come out here?

Kaiser: I think you’ll see convergence, but it will be moving more towards what it’s like here in China right now, or what it’s like in Japan, rather than moving toward what it’s like in Hollywood. 

The WGA writer’s strike has opened a can of worms - who else isn’t getting paid their fair share of new media revenue? What about all the unpaid actors? What about the non-human actors? We all know from watching Oprah’s YouTube special that it is actually adorable animals performing novelty tricks that make the awesomeness that is the Internets, and they’re going out in support of their non-furry friends:

From Colbert Report writers Frank Lesser and Rob Dubbin.

While we’re on the topic… Birbeck College at the University of London will host The Creative Industries and Intellectual Property in May 2008. Abstracts need to be submitted by the 15th of December - so get on your bikes!

Imagining a World Without Copyright is a great essay by Marieke van Schijndel and Joost Smiers.

van Schijndel and Smiers discuss the disadvantages of the current system, briefly explore the benefits and limitations of some of the alternatives that have been proposed to date and then make their own proposal. The key point for me about this essay is that van Schijndel and Smiers recognise that artists are entrepreneurs. They also make an attempt to identify the ‘locus of the impulse to create’, which becomes the starting point of a proposed solution.

Given the culturally, politically and emotionally charged and contested concepts that have bogged down many discussions about how copyright should be reformed, I think that this is a sensible approach. ‘What are we trying to achieve?’ and ‘What is a legal framework capable of achieving?’ are perhaps the two most important questions for anyone considering alternatives to the current system.