How Start-Up R2G Battles Music Pirates Beijing Firm Takes
Web Sites to Court, Employs Tech Savvy
BEIJING -- Internet-based copying of songs has helped cripple the music industry in China. Now, one pioneering local start-up is using technology to build a business that aims to make music pirates pay.
Privately owned R2G, by taking song thieves to court and deploying technical savvy, is seeking to prove there is money to be made in a market many in the music industry had all but written off. R2G represents record companies like Vivendi SA's Universal Music Group and Bertelsmann AG's BMG Music Publishing, using custom built software called Spider to detect and document illegal listings online of songs owned by their clients.
The Beijing company then negotiates with the Web sites -- filing lawsuits if necessary -- to work out legitimate royalty payments for future downloads on those sites. R2G takes a cut of the payments.
The company was started in 2003 by Jun Wu, a prominent Chinese technology entrepreneur, and Scarlett Li, a former executive at Star TV, News Corp.'s Asian satellite network. R2G stands for "red to green." The company says red represents piracy, which means an industry can't move ahead, and green represents things moving smoothly.
R2G doesn't disclose its revenue or financial results. It says it has contracts with more than 50 music labels and publishing houses, and has licensed song use to more than 100 service providers.
The firm's initial focus has been on songs downloaded to mobile phones and used as ring tones and "ring-back" tones that callers hear when waiting for a phone's owner to answer. Mobile music, which began about five years ago as a side business for music labels, has become a significant source of revenue in China -- which, with some 430 million cellular subscribers, is the world's largest wireless market. BDA China Ltd., a Beijing telecom-consulting firm, estimates that ring-back products alone generated about $430 million in revenue in China last year.
In the past, little of that money was making its way to the artists and record companies that own the rights to the music. When R2G started, Ms. Li estimates, about 90% of service providers selling ring tones were engaging in some form of piracy. Record companies, which have tended to see the China market as a lost cause, had too few employees in the country to monitor violations and try to protect their rights.
R2G has put the online companies on notice that piracy can be costly. Since last year, R2G has won a string of lawsuits against Internet companies that provide music for ring tones. Chinese courts have ordered six domestic companies to pay R2G fines ranging from about $6,000 to $11,000 for selling unauthorized ring tones on their Web sites. The amounts, while relatively small, can sting for such companies, which tend to be tiny. Aside from the cost, R2G and its clients say the suits sound the alarm for other violators.
"You've got to show that you are serious before [the online companies selling songs] are willing to come to the table and talk to you," says Steven Fock, regional general manager for Asia Pacific at Warner Music Group Corp.'s Warner/Chappell Music Inc., another R2G client. "That's the frustration that we are facing now, and that's main reason why we are working with R2G."
Lax protection for intellectual-property rights in China has been a problem for businesses, with counterfeit sales of software, movies, music, clothing and other goods reaching billions of dollars each year, according to U.S. industry associations. The problem is one of the biggest sources of tension between China and its big trading partners like the U.S. and the European Union.
China has laws on the books that protect copyrights and other intellectual property, and the government has stepped up raids of shops carrying pirated goods. But overall, foreign executives say, the laws are still inadequate and enforcement can be inconsistent.
Ms. Li says R2G's goal is to change the culture of the music industry in China. She brings to that monumental task a total lack of sympathy toward those who break the rules. "They need to pay for what they pirated," she says. The lawsuits R2G has filed, it says, are meant to set precedents for chasing other companies that won't pay for using songs that R2G controls for its clients in China.
In 2000, when Ms. Li and Mr. Wu met, online music distribution was still relatively new. Mr. Wu had already built three Internet start-ups, including Nasdaq-listed Linktone Ltd., which provides content for wireless operators in China, and another company that helped big carriers handle billing for mobile-phone text messages. Since 1997, Ms. Li had run Star TV's Channel "V", where she organized the music channel's first Chinese music awards and handled government relations for the company.
The two cast about for a way to make money in music. "In China, you just don't get much revenue selling CDs. It's all piracy," Ms. Li says. "So we thought: How do we enter the digital-media business?"
They settled on ring tones, an area where consumers were already spending significant sums. In addition to representing record labels, R2G also works with Chinese service providers to ensure they have access to properly licensed content.
One of R2G's first big successes came last year, when it lobbied Baidu.com Inc., a search engine that is China's most visited Web site, into deleting thousands of links to Internet sites that offered pirated pop songs. And afterward, Baidu agreed to make R2G its only ring-tone distributor, to guarantee that all of the search company's mobile music content offerings are legal.
R2G, which has 90 employees, owns exclusive rights to tens of thousands of songs in China, including those by Chinese-language pop superstar Jay Chou. The company purchases the Chinese publishing rights of titles agreed upon with the labels, then collects a share of the royalties paid by mobile music providers who use the melody or lyrics of those titles.
Still, R2G faces big challenges. Violators remain obstinate, and some are fighting the court orders against them. Cao Ming, chief executive of 9Sky.com, a digital music Web site based in Shanghai, says his company is fighting a court order to pay 89,000 yuan ($11,311) for 11 titles licensed by R2G from Universal Music. Mr. Cao maintains that R2G has asked for too big a slice of the revenue from the song downloads. His company and R2G are "on the same side" of the piracy issue, he says, "but we have different understandings."
"It's a very tough business," Ms. Li says. Financially, she notes, "there's a lot of risk associated with the piracy issue."
Ms. Li says her company's efforts are bearing fruit, at least in the mobile music business. According to R2G's estimates, the number of companies stealing its clients' songs is about 40% smaller than it used to be.
R2G战斗在打击盗版音乐第一线
互联网上随意复制歌曲的做法削弱了中国音乐行业的发展。现在，一家中国新创企业正在利用相关技术开展一项业务，目标是让那些盗版音乐公司付出代价。
源泉(R2G)是一家民营公司，它利用专业技术查出盗用歌曲的公司并将它们送上法庭。它用自己的努力向外界证明，这个被很多音乐业人士认为无利可图的市场还是有钱可赚的。R2G代理Vivendi SA旗下的环球音乐(Universal Music Group)以及贝塔斯曼集团(Bertelsmann AG)旗下的BMG Music Publishing等唱片公司，它利用按客户需求定制的软件Spider在网上监测并记录属于客户的音乐被非法盗用的情况。
之后，R2G会和这些网站进行协商－－如必要的话向法院提起诉讼，找出日后网站依法支付版税的解决方案。R2G将从这笔钱中提取一部分作为其收入。
R2G由互联网企业创业高手吴峻及曾在新闻集团(News Corp.)旗下星空传媒(Star TV)供职的李岱于2003年共同创建。R2G的意思是“由红到绿”。该公司称，这里的“红”代表盗版等停滞不前的行业，“绿”则代表健康发展、畅行无阻。
R2G并没有对外公布其收入或者财务状况。它表示，它已经与50多家音乐品牌及发行公司签订了合同，并且已经授权允许100多家服务提供商使用其代理的音乐作品。
R2G最初的业务重点是下载到手机上用作彩铃及回铃(ring-back)的乐曲。手机音乐兴起于五年前，当时还是音乐品牌的副业。随着中国手机市场日益扩大，手机音乐现在已经成为一个重要收入来源。中国现有手机用户4.3亿，是全球最大的无线通讯市场。据总部设在北京的电信咨询公司BDA China Ltd.估计，中国市场仅音乐回铃产品一项去年的收入就达到约4.3亿美元。
在过去，这笔收入里进入拥有这些音乐的艺术家或唱片公司口袋里的寥寥无几。李岱估计，在R2G创立之初，提供彩铃服务的供应商中有90%都有某种形式的盗版行为。唱片公司往往对中国市场不抱多大希望，他们在中国从事监控盗版、保护权益的人手很少。
不过，R2G却让那些网上音乐服务公司意识到：盗版的代价是高昂的。自去年以来，R2G在一连串起诉提供彩铃音乐的互联网公司的案件中获得胜诉。中国法院裁定六家中国公司因在其网站上销售未经授权的彩铃音乐，需向R2G支付从约6,000美元至11,000美元不等的赔偿。赔偿金额虽然并不高，但对那些规模往往也很小的公司来说还是能产生很大刺激作用的。R2G及其客户表示，除此之外，这些诉讼案件对其他侵权公司有警示作用。
华纳音乐(Warner Music Group)旗下Warner/Chappell Music Inc.亚太区总经理霍绍文(Steven Fock)说：在（这些出售音乐的互联网公司）愿意坐下来跟你谈判之前，你必须让他们意识到你对这个问题很认真。他说：在这方面我们一直不是很顺，这也是我们和R2G合作的主要原因。”
中国的知识产权保护措施不够严格，这是很多企业面临的同一个问题。据美国行业协会的数据，在中国，盗版软件、音乐、服装及其他仿冒品的销售收入每年高达数十亿美元。侵犯知识产权已成为导致中国与美国及欧盟(European Union)等贸易伙伴国关系紧张的主要问题之一。
中国已颁布了保护着作权及其他知识产权的法律，政府也加强了搜查出售盗版产品的商家等打击行动。但是，外资企业的高管们表示，这些法律根本不够，而且其执法力度也松紧不一。
李岱说，R2G的目标是改变中国音乐行业的文化。为了完成这一重大使命，她不会对任何违反知识产权保护法规的企业心慈手软。“他们要为所盗版的产品付出代价，”她这样说。R2G称，它在中国代理客户很多的音乐作品，它要向使用这些作品而又不愿支付版税的公司进行追偿。它已提起的诉讼都是为日后的行动确立判例。
李岱和吴峻2000年相识的时候，在网上分销音乐还是件新鲜事。那时，吴峻已经成立了三家互联网企业，其中包括为中国的无线运营商提供内容服务的那斯达克上市公司掌上灵通(Linktone Ltd.)以及另一家帮助大型运营商处理手机信息帐单的公司。李岱自1997年开始执掌星空传媒旗下的Channel[V]，在此期间，她组织了Channel[V]首届“全球华语音乐榜颁奖典礼”，日常还负责处理公司的政府关系事务。
李岱和吴峻一直在探寻一条能够通过音乐赚钱的道路。“在中国，销售CD根本不会带来多少收入。市面上全都是盗版，”李岱说。“因此我们当时就想：进入数字媒体领域怎么样呢？”
他们最终选择了铃音，中国消费者在这方面的总支出金额已经相当庞大了。除了代理音乐品牌外，R2G还与服务提供商合作，确保他们能够获得经过合法授权的内容。
R2G去年首战告捷。其中一个成功案例就是说服中国访问量最高的搜索引擎百度(Baidu.com Inc.)删除数千个盗版流行音乐网站的链接。之后，百度同意由R2G担任其独家铃音分销商，以保证百度网上所有的手机音乐内容都是合法的。
R2G有90名雇员。它拥有数万首歌曲在中国的独家许可权，其中包括华语歌坛超级明星周杰伦的歌曲。R2G购买经唱片公司同意的曲目在中国的发行权，然后从使用这些曲目的旋律或歌词的手机音乐供应商所支付的版税中提取一部分作为它的收入。
不过，R2G仍然面临很大的挑战。盗版公司仍十分顽固，一些公司对法庭的判决拒不接受。上海音乐网站九天音乐网(9Sky.com)首席执行长曹茗说，法院判决九天音乐网因为擅自使用R2G拥有独家授权的11首环球音乐的歌曲需支付人民币89,000元（合11,311美元）作为赔偿，他们对此不服。曹茗坚持认为，R2G要求从下载这些歌曲获得的收入中提取的比例太高。他说，在盗版问题上，他的公司和R2G是站在同一个立场上的。“但是我们对此有不同的理解。”
李岱说，这是一个非常艰难的领域。她指出，盗版问题的相关风险很大。
李岱说，R2G的努力已取得了一些成果，至少在手机音乐领域是这样的。根据R2G的估计，非法使用其客户音乐内容的公司数量比以前减少了约40%。
Loretta Chao
