The entertainment and media industries in China, including music, radio, film, television, games, newspapers, magazines, and book publishing, in all of their varied forms.

IPR Protection: Beyond Law and Enforcement

In the Hutong

Sore from power-walking

1635 hrs.

In conducting my technology and intellectual property rights (IPR) panel with the Notre Dame Medoza b-school students last week, I realized in the midst of Eric Priest’s comments that the problem of IPR protection in China was too often painted as a two-dimensional issue.

Laws, cops, and jails

The first dimension is law, or the extent that China has on its books the statutes, treaties, regulations, and administrative procedures to protect patents, trademarks, and copyrights. I’m no lawyer, but I defer to the three attorneys on my panel (two of whom were Ph.Ds) who seemed to agree that the legal structure to protect intellectual property rights is in place in China.

The second dimension (and the one that gets all of the attention) is enforcement. Okay, China, the world seems to say, you have all of these wonderful laws to protect intellectual property of all kinds. So why are companies, individuals, and institutions violating these laws everywhere in China with seeming impunity?

And here we have the problem. The lawyers, organizations, and government negotiators fighting to protect intellectual property rights in China are focused on getting more cops to shut down more factories, arrest more people, jail them longer, fine them more, and prove to the rest of the population that messing with intellectual property law is a ticket to jail. They use that old logic “kill one to save a hundred.”

As much as it might enrage some of those defenders of intellectual property rights to say this, there are not enough cops, jails, or judges in China to end the problem purely by judicial means. (In fact, I’d suggest that even in the most developed societies, the tools of enforcement were only ever meant to be used in the relatively rare cases of overt, commercial violation of patent, copyright, and trademark laws.) And there never will be.

The Law is Not Enough

Eric Priest, one of my co-panelists at the Notre Dame seminar, is a trained lawyer with two law degrees, and even he is impatient with those who leave the IPR to their attorneys:

“Both domestic and international entertainment companies have tried the litigation path in China with little success. Major Chinese search engines like and have deep pockets and are far and away the most popular channel for accessing free music files online in China, so they were natural targets for contributory infringement suits. But murky legal issues (Baidu won on appeal because the court found it only aggregated links to content but did not in fact serve the content itself, while was found iable for infringement under similar circumstances) and notoriously low damages for infringement available under Chinese law have left copyright owners with little recourse, and emboldened internet companies to continue to conspicuously serve up free, unlicensed content.”

Eric suggests that the better approach is to create business models that ensure compensation for the artists and labels as well as the company profiting from their distribution. In the paper he lays out three potential business models that could be used in China. Without doubt, new models need to be created, tested, revised, and perfected, and therein lies a major part of the opportunity.

The problem with the model approach is that any new model hoping for adoption must deliver a experience that is superior for the consumer to the model it is replacing. A painful number of models fall short of that promise. Some of the largest companies in the world have failed to deliver a superior book-reading experience on a mobile device, and the jury is still out on Amazon’s geographically limited (and still expensive) Kindle. Conversely, home video has taken off because it offers an experience that is in many ways superior to the cinema. And iTunes turned music downloads into a mainstream experience.

In China, technologists cannot stop at creating business models that satisfy the music supply chain: they have to offer something that is so much superior to free music that people will be willing to pay for it. And then the people will need to be sold. Ask Steve Jobs: even the best experiences in the world don’t sell themselves. For all of its virtues, Apple had to market the hell out of the iTunes experience to drive uptake beyond an initial core of users. Success for any business model will require a greater effort still.

Win their hearts and minds and their wallets will follow

Which brings us to my point. As much as lawyers may wish us to believe that law and enforcement should be adequate, as much as engineers may wish us to believe that technology offers a silver bullet, as much as entrepreneurs believe that smart models are the solution, they are all ignoring one more important piece:

Compliance. Voluntary compliance.

I’ll put that in short words: people have to want to do the right thing. Then you have to give them an opportunity (business model.) Then you have to make non-compliance inconvenient (DRM, or something better that replaces it). Then you have to make breaking the law downright costly (laws/cops/courts/jails/fines). You need every element in that chain if IPR is ever to have any value. Because you can put all of the technical and legal solutions in place that you want, but until you have convinced the consumer that compliance is in his best interest, too, he or she will find ways around it.

You make it personal. You make it meaningful. You make a civic and more importantly a social virtue out of compliance. You make that individual feel like he or she is doing something important every time they lay cash down for something they could get for free. No. I will not do that. It’s not right.

Is doing that going to be easy? Absolutely not. This is what management texts refer to as “a big, hairy-assed goal.” But the industry uses the size of the task to justify not undertaking it. They tell themselves “it is too hard. You cannot change Chinese culture, and anyway it is easier and cheaper to hire more lawyers and get our industry associations to talk smack about the Chinese government in congressional hearings.”

Yes, it will be a long, difficult, and costly process, but so is the current effort to push for enforcement. The industry has spent millions pushing for better laws in China. It is spending tens of millions on enforcement and litigation. How much is it spending on getting people to want to pay for something they are used to getting for free?

It may take a generation or more to change the way people behave. But it can be done, and it must be done if artists – songwriters, composers, and performers – are ever to have a trade in China, and if the music business as a whole is ever to thrive.

And the time to get started is now, if not sooner.

Chinese Film and Those Pesky Foreign Audiences

In the Hutong

Glued to CNBC

1804 hrs.

The New York Times does an amusing little story about a hush-hush crash course at the UCLA film school for young Chinese entertainment industry suits, aiming to instruct the PRC execs in the way Hollywood does business ( China’s Media Moguls Tutored by Masters of Hollywood).

Why can’t you people just read the words?

The executives, all in their “20s and 30s,” were given lectures and workshops by some of the leading lights in Hollywood, each clearly motivated as much by a desire to crack China as any thought of helping the youngsters.

But the money quote was not delivered by Dan Glickman of the MPAA, Mike Simpson from William Morris, or even Gareth Wigan, the former vice-Chair of Sony Pictures and one of Hollywood’s leading globalizers.

No, the quote of the day was delivered by one of the young Chinese executives:

“When the floor opened for questions, the Chinese had questions of a different sort…Another wondered how Chinese films could find a global audience when American viewers continue to reject subtitles. ‘Americans are spoiled,’ the questioner complained.”

Moviemaking would be great if it weren’t for that darned audience

Without arguing the speaker’s point, he calls our attention to the real core of China’s global box-office problem.

The gap in quality of material and production values between Chinese films and big-budget western productions is still significant, but it is declining. The quality of China’s leading productions easily matches that of some of the more popular independent films in the United States.

But for all of the improvements on the production side, Chinese film executives have a lot to learn about marketing – especially international marketing. Rule one, of course, is that blaming your target customers for your failings is a fig-leaf for incompetence.

One of the core differences between the film business in China and that in the United States is that the US industry is at least nominally driven by what people want to pay to watch. The result is a lot of dreck, of course, but dreck that at least has a shot at making some money.

Chinese film, on the other hand, is dominated by the creative conflict between filmmakers and regulators, the latter acting on behalf of party ideologues. There is precious little room in that clash of power and ego for the voices of executives speaking on behalf of the ticket-buying audience.

So despite the best intentions of Robert Rosen, dean of the UCLA School of Theater, FIlm, and Television, and China Film Group’s urbane vice-chairman Jiao Hongfen, one does not hold out much hope for improved prospects for Chinese film in with significant masses of non-Chinese moviegoers.

At least, not until marketers start having a say in the product.

The Education of a Mogulette

In the Hutong
American Idol while the Party Secretary watches
0001 hrs.

Wendi Deng has told Vogue that she will be collaborating with her pals Zhang Ziyi and Florence Sloan to establish a new film production company based on the DreamWorks model. The first project of the unnamed venture is apparently an adaptation of Shan Sa’s novel The Empress, and Ms. Deng dropped the name of Ridley Scott as a possible director.

Let us set aside for a moment the fact that DreamWorks SKG was built on the collective talent, track records, and Hollywood street credibility of Steven Spielberg, Jeffrey Katzenberg, and David Geffen. Ignore for a moment that whatever the strengths Deng, Zhang, and Sloan bring to the table, they are simply not in the same league as the the DreamWorks founders. All of that doesn’t matter: with the support of Rupert’s money and Zhang’s screen success, they will likely get some movies made.

You may also remember that MySpace China was publicized as Ms. Deng’s deal. From Joseph Kahn’s piece in The New York Times last June:

Wendi Murdoch has stepped up her role in China. She plotted a strategy for the News Corporation’s social networking site, MySpace, to enter the Chinese market, people involved with the company said. The News Corporation decided to license the MySpace name to a local consortium of investors organized by Ms. Murdoch.

There is a pattern to all of this, an internal logic.

Ms. Deng is not a News Corporation executive. She plays no official role in the business. When she helped put together the MySpace China deal (assuming, of course, that her participation was real and not some form of positioning), she was basically doing it as The Boss’ Wife, as News Corporation laobanniang. That would probably rankle anyone who had an MBA from Yale and a little ambition, so it probably rankled Ms. Deng.

The venture with Zhang and Sloan – let’s call it QueenWorks – gives Ms. Deng more than a project on which to occupy her time. It is her first real job since marrying her husband, and her first shot at running her own gig. It is also her shot at a lasting piece of the action, a legitimate business she can build independent of News Corporation that she can use as the foundation of her own media organization. It makes her something more than Mrs. Murdoch, and yet she carries that cachet into every meeting she walks into.

Providing she is serious about it, providing it is not simply a toy for a bored wealthy housewife, she could actually make something out of the organization. Either way, what we will have will be a litmus test: given a wealthy backer (her husband) and interesting partners, is Wendi capable of running a successful business?

This is an important question to News Corporation. If Wendi can prove herself an able executive in her own Hollywood operation, it gives her considerably more credibility at a later date when the complex issue of Rupert’s succession comes up. It is one thing for the spouse of the boss to seek a role in the business. It is another entirely when that spouse also has made her bones as a successful businessperson.

This new venture will bear watching.

Hollywood Icon Comes East

In the Hutong
Rolling with the changes
1842 hrs.

The Hollywood Reporter, long essential morning reading for the entertainment industry in the United States, Europe, and elsewhere, has had permanent roots in China for a couple of years now, with an official bureau led by Jonathan Landreth. The THR staff have provided a much-needed addition to the coverage of the music, film, television, and new media industries here in China. With occasional exceptions, however, much of the fine reporting coming out of THR in China has been trapped behind a firewall.

That all changed today, when THR launched The Hollywood Reporter Asia, a website that not only allows us to see the superb coverage coming out Jonathan and his team here in China, but also regional and global industry news. One other thing I really like about THR-Asia is that it is edited right here in Beijing, underscoring Beijing’s growing role as the media center of the region.

Give it a look. Personally I’m adding it to as part of my daily routine. If I have one quibble, it is the lack of an RSS feed, but I understand that with THR offering their content for free, they want you in the site for the ads. A small price to pay.

Picture 2

A Tale of Two Actresses

In the Hutong
In search of a pain reliever
2027 hrs.

Whatever you may think about the relative merits of entertainers leaping from the screen and onto the world stage, we were treated this week to a profound contrast in the styles and approaches of two young actresses.

Exhibit A is Marion Cotillard, the 32-year-old French actress who won the Academy Award for Best Actress a little over a week ago for her apparently inspired performance as Edith Piaf (yes, I too am a philistine and had to Google it) in La Vie en Rose. In an interview from a year ago broadcast on a French website, she proclaimed that the 9/11 attacks were a hoax manufactured by the US government for political ends, and that the twin towers were demolished because they were obsolete.

Without supporting or debating the veracity of Ms. Cotillard’s claims, suffice to say that we here in the Hutong appreciate a good conspiracy theory in the same way we appreciate good science fiction – great stuff with which to tickle the frontal lobes, maybe even ask a few hard questions. But as most bloggers learn fairly quickly, when one takes a public stand that is in direct opposition to popular perception, one had best be very, very sure of one’s facts and be prepared to support one’s stand through effort and action. Sadly, Ms. Cotillard goes no further than voicing an opinion that begs for support.

Exhibit B is Angelina Jolie, also 32, also an Oscar winner (Best Supporting Actress for 1999’s Girl, Interrupted) who in her capacity as goodwill ambassador for the United Nations High Commission on Refugees decided that rather than snuggle up to the armchair activist crowd, she’d hop on a plane and head for Iraq and see what was going on. From her Thursday op/ed in the Washington Post:

“My visit left me even more deeply convinced that we not only have a moral obligation to help displaced Iraqi families, but also a serious, long-term, national security interest in ending this crisis.”

She continues:

“As for the question of whether the surge is working, I can only state what I witnessed: U.N. staff and those of non-governmental organizations seem to feel they have the right set of circumstances to attempt to scale up their programs. And when I asked the troops if they wanted to go home as soon as possible, they said that they miss home but feel invested in Iraq. They have lost many friends and want to be a part fo the humanitarian progress they now feel is possible.”

Her conclusions are hardly those of an expert, and her focus is exclusively on the issue of the 2.5 million Iraqi refugees for whom she seeks repatriation. More than one pundit has questioned her qualifications to speak on behalf of all of the troops deployed in Iraq. Nonetheless, they are startling because they come from an unexpected source, and because of the inevitable reverberations they will send through celebrity salons on both coasts – not least the circles in which she and husband Brad Pitt circulate.

(For the record, I don’t feel qualified to make a call on Iraq either way, so I won’t.)

Again, leave aside your own opinions on the specific matters at hand. To me what is germane is the difference in approach. Two young women, each given the opportunity because of fame earned on the screen to voice their opinions on larger matters to their audiences, chose to make use of their bully pulpits in incredibly different ways. One chose to make the kind of flippant, uninformed remark more appropriate to a conversation with close friends. The other chose to take the time and risk to journey to someplace she could learn more, then share her thoughts and findings – whatever they’re worth – with others.

Regardless of what you may think about Ms. Jolie, her motivations, the appropriateness of her remarks, or her qualifications to even make them, you must applaud her quest to learn a little something of the subject before volunteering so public an opinion.

A wise old sergeant once told me: “Wolf, opinions are like a**holes: everyone’s got one, and they all stink.”

The only way I would dare to correct that is to say that the more informed your opinion, the less it stinks. That is the lesson I will take from Ms. Cotillard and Ms. Jolie.

Telegraph: The Video Clampdown

In the Hutong
Seeking a sore throat remedy
2041 hrs.

Richard Spencer, fresh back from holidays, writes in the Telegraph about the new rules requiring websites offering video content to obtain a license.

He quotes me, but quite apart from that, his take is spot on – anyone who expects the government to swoop in and start closing down these sites is probably missing the point. Most of these sites are self-regulating already. Tudou and its kin were screening videos for content prior to posting from the beginning, and self-regulation extends beyond the frontiers: even Yahoo! won’t let me watch a video on their English site from here in the Hutong.

China Securities News are quoted as saying that the government’s main concern is keeping control over professionally produced films.

If you buy that – and I don’t – there is a little problem: at what point can you determine if a film on Tudou or YouTube is professionally produced, or just created by a really talented amateur?

Here’s my take:

China Central Television (CCTV) and the other state broadcasters have looked around the world and are worried. They see other broadcasters losing young viewers to user generated television. The Chinese broadcasters want to avoid that fate. They had no intention of losing their franchises to Sumner Redstone and Rupert Murdoch, and they’re certainly not going to roll over and let programming created by a bunch of amateurs with camcorders and mobile phones take their business away.

So they turn to regulators for help.

The policy makers, however, are not of a single mind – an issue in a system of government that depends increasingly on consensus create and enforce the law. To be sure, the broadcasters do not lack for support, but there is a growing group who are either privately tired of coddling China’s weak broadcasters, who see the Internet as the more important medium for the future, or both. They aren’t so quick to leap to CCTV’s aid, and want to see China turn into an influential power on the Internet.

So they come up with a policy that ensures they have the tools to maintain control, and that assures broadcasters that the government is ready to protect their monopoly over commercial broadcast content.

And then they sit back and watch and see what happens.

What the new regulations do is reiterate what is already government policy, and they leave room to allow the experiment to continue uninterrupted.

Investors are going to be wary for a time – this adds a level of uncertainty into the process that won’t go away, but eventually they’ll get comfortable again.

This does, however, serve as a dual reminder: these sites prosper not only at the whim of the government, but under the threat of a jealous broadcast sector with strong support in the party.

eKarma: Have a Little Virus, Pirates

Third Ring Road East
Breathing deep the inversion layer
1022 hrs.

Steven Schwankert of Village Grouch fame wrote an excellent piece for IDG (picked up here in The Washington Post) describing how Chinese fans seeking to download illegal copies of Ang Lee’s excellent film “Lust, Caution” are finding on their hard drives not a copy of the film, but with software that pops a nasty little trojan virus into their systems.

There are several interesting aspects to this story.

Virus? What Virus?

First, it was apparently found and addressed by Kaspersky Lab and Rising Software well before it came up on the collective radar screens of Symantec, McAfee, and TrendMicro. One wonders why this is the case, particularly given that Symantec and McAfee tout the value of their software in part based on their global scanning for viral threats. I am especially concerned about TrendMicro, who have a huge presence in China and who make a great deal about their expertise as an “Asian” security company.

It also suggests that the malware threat in China is growing and diversifying. From dorm rooms filled with budding software engineers, to the challenges facing the country’s law enforcement teams, to the quiet but rapid growth of China’s cyberwar military-industrial complex, the country has become as much a haven and spawning ground for creators and distributors of Malware as the United States or any other country. This would seem to argue for greater investment by the computer security vendors in local labs who can not only find but anticipate new threats.

As an aside, it would also seem that companies like Symantec are destined to become major defense contractors. But we digress.

The Empire Strikes Back

Second, it seems that Hollywood (including the music and TV people as well as the film side of the business) and the software industry may have inadvertently discovered a way to slow online piracy and perhaps even the growth of downloaded content. All the studios – or, better yet, the MPA and the Business Software Alliance – need to do is hire a few good hackers to come up with some particularly nasty viruses and spread them around online disguised as illegitimate digital copies of random applications, movies, and music files.

Sure, the viruses would not deter the most determined or careful downloaders, and the anti-virus companies would inevitably come up with fixes. But imagine, for a moment, the fear, uncertainty, and doubt this would wreak among the less-expert. The mere possibility that these files would include viruses would be enough to drive a lot of marginal downloaders away from illegitimate downloading (and probably a few away from legit downloads as well).

Naturally I would expect clearer heads in the PR and legal departments of these organizations to prevail, ensuring that neither Hollywood nor the software industry would ever actually subsidize – or even publicly condone such practices. But you can easily imagine how such an option must tempt some people in places like Redmond and in the Black Tower.

Indeed, if the matter of digital rights management has proven anything, it has proven that Hollywood and many large software concerns believe that extremism in the defense of intellectual property is no vice, and that goodwill is readily sacrificed in that battle. If anything will keep hackers from high-powered lunches at the Ivy or the Fulton Fish market, it is the fear of court costs.

Nonetheless, it is fascinating, if not a bit disconcerting, to think that there is a commonality of interest between the creators of malware and the creators of movies.

Engineer, Engage the FUD Pump

What I do expect is that the IPR-driven industries will kick into gear a semi-coordinated propaganda effort to ensure that stories like the “Lust, Caution” become as widely known as possible, so that the threat is seen as being far larger and more serious than it really is. This costs them little, supports their goals magnificently, and enables the studios and developers to position themselves as defenders of the public interest.

Which, frankly, is the smarter way to handle it. You steal, you pay. Or, you pay, we protect.

For all the failings implicit in Hollywood’s approaches to the IPR issue and digital entertainment, let’s not lose sight of the most important fact – downloading illegal files is theft, theft is wrong, and anyone who does so willfully probably deserves a hard drive filled with malware.

There’s More to That’s

In the Hutong
Looking up “Lactose Intolerance”
1537 hrs.

That’s Beijing, and its sister publications under the China Intercontinental Press marque, are the functional if not ideological successors of the departed-but-not-forgotten Beijing Scene, an underground periodical that was the lifeline for the dispersed and disconnected expatriates of the capital in the days before Internet, Jenny Lou’s, Starbucks, and cheap mobile phones.

Beijing Scene was written with an edgy, dry wit by people like Jeremy Goldkorn (later founder and lingdaoof,) Ada Shen (now a film producer here in Beijing) and Steven Schwankert (IDG Asia editor, SCUBA poo-bah, Explorer’s Club member and Village Grouch.) Whereas That’s, for much of its history, has been written and edited indifferently, almost as if the articles were meant as a token gesture to the pretense that the publications was actually something more than a repository for advertisements.

I’m not quite sure how, but that’s all started to change in the last year or so. I am not quite ready to pronounce That’s as the true heir of Beijing Scene’s legacy, nor name it the Village Voice of China. But I’m starting to see signs that more time, care, and attention is going into the editorial side of the business.

Unsurprisingly, that’s a talent thing.

Sticking rocker-cum-scribe-cum-digimarketing guru Kaiser Kuo on the back page with his Ich Bin Ein Beijinger column was initially a bit of a risk, but Kaiser has found his voice, and his occasional romps into styles and themes that seems to have him jamming with the laptop keyboard the same way he would with an electric guitar means that the book always finishes with an edge. Imagethief Will Moss, who occasionally subs for Kaiser, should have his own column, and we should probably encourage that when Will returns to Beijing from his Shanghai soujourn later this month.

I first came across senior writer Alex Pasternack when I had temporarily convinced myself that there was a lack of locally-savvy international environmental reporting in China. I started to plan what I could do with an opportunity like that. Then I ran across one of Alex’ articles on TreeHugger. And I got mad. And the more of his articles I read, the more pissed off I got. Because the guy is good. After I got over the fact that I had been beaten to the punch, I started to enjoy his writing style, especially how fast, easy, and fun his stuff reads.

Ed Lanfranco, though a journalist by profession (UPI should count itself lucky), is an amateur historian who put many professionals to shame, and his focus is Beijing. His stuff makes excellent reading, and it’s inThat’s. Besides, anyone who would say that if he were emperor his first act would be to abolish the second tone cannot help but write engaging stuff.

The occasional contributors are also getting really good. Amanda Weiss, in the current edition of That’s, does an interview with award-winning director Li Yu that is both engaging and includes a quote that is going into my hall of fame:

“When asked how she feels about being labeled a ‘feminist director,’ Li bursts into laughter. She shakes her head, amused. ‘If I were constantly crying out about feminism, it would be like I defined myself as a powerless, disenfranchised person. But I feel that just naturally existing is fine.'”

I could go on, but you get the point. There are the nascent signs of greatness in That’s, and it will be worth watching where Mike Wester and his team decide to take the publication.

A Blade Runner Shows His Age

In the Hutong
Digesting Subway
1830 hrs.

Director Ridley Scott has in his career delivered a body of work that includes some of my all-time favorite movies (Alien, Blade Runner, Black Hawk Down) and some movies that I enjoy as occasional guilty pleasures (Black Rain, Gladiator, Matchstick Men). He is the unapologetic master of the high-end Guy Flick. (And let’s be honest – even his Thelma & Louise was just a gender-bent buddy movie.) And, of course, he directed the commercial that introduced the Apple Macintosh to the world.

So it is particularly disturbing to hear the aging auteur getting all medieval on people who watch movies on their mobile devices. In an article in today’s Sydney Morning Herald, Scott is quoted from the Venice Film Festival as saying that the shift to the small screen would kill cinema.

“I’m sure we’re on a losing wicket, but we’re fighting technology,” Scott, the force behind Alien, Thelma & Louise and Gladiator, said.
“While it has been wonderful in many aspects, it also has some big negative downsides.”

I’m Not In the Business. I Am The Business.

Now, filmmakers have been pulling their hair out over technology destroying cinema since the introduction of talkies, but here we are, eight decades after he introduction of sound, sixty years since the introduction of television, and thirty years since the first VCRs began landing in homes, and each one of these “horrible” developments with their big negative downsides has only brought more opportunities to filmmakers and more revenues to Hollywood.

The ugly fact is that the movie business is in grave danger, but to blame mobile phones is the reddest of herrings.

Because, you see, the problem is not technology. It is Scott and people like him, people who really like Things the Way They Are, because Things the Way They Are have made them rich and famous and lets them make expensive movies and take home little trophies. These folks do not particularly like technology (watch Scott’s movies – he hates tech), do not understand people who do, and are deep down in places they do not talk about at Malibu parties they are just plain scared of anything with a microchip.

They see all of this change happening and are smart enough to understand that it means The End of the World As They Know It. And they are terrified. Hence Ridley’s mobile device fixation.

The fact is, technology will save the motion picture industry.

Would you…like to be upgraded?

The movie business is beset with problems that could fill a library. Films have become too expensive to make. The industry is structured – from finance to production to distribution – to quash all but a small number of entrepreneurs carefully screened (pardon the pun) and selected at film festivals. The business is overwhelmingly American in an increasingly global/local culture. The cinema experience is outdated, overpriced, and of little or declining relevance in much of the world.

None of this is to suggest that movies are going away. Something is, however, very wrong when people (especially young people) are spending far more money and time on other forms of entertainment, and those alternatives are growing – and fast. Cinema is losing its share of our wallet, but equally important it is losing our attention. (Hell, I’m an old guy, but I’ve spent more on games for my Sony PSP this year than I have on movie tickets for my entire family.)

Technology, in its different forms, is getting set to bring about a cinematic renaissance. More people can make films, make them cheaper, and get them in front of audiences faster and easier today than anytime since Mayer, Zukor, Laemmle, Cohn, Fox, Warner, and Disney showed up in L.A. and started buying orange groves. Green screens, cheap gear, and powerful software means that you don’t have to spend $200 million to make an epic – you just need a script, a camera, and a Macintosh.

Starting to see what’s bugging Ridley?

I have the choice of watching movies in a theater, on my big-screen TV, on my desktop, my laptop, my PSP, my iPod, or my ROKR E6. I can buy a film from a store, order from Amazon, or download from iTunes, not to mention the illegal channels. In short, I’m in control of how I decide to experience a motion picture, not the National Association of Theater Owners.

The future of Hollywood is lean, streamlined, personal, and technology based, and there are dozens if not hundreds or thousands of filmmakers who are following this road. Today they may be uploading 5 minute clips to YouTube. Tomorrow?

Do you like our owl?

Nowhere does technology offer a greater opportunity to build the film industry than right here in China, if for no other reason than there is less legacy infrastructure to stand in the way. There are other reasons, of course.

Technology substitutes for mass in China the same way it does elsewhere. Despite being the most populated country on the planet, there is a dearth of talented people both in front of the camera and, more critically, behind it. Stars may get all of the attention, but a pool of talented craftspeople – from the director down to the make up girl – is essential to sustain a traditional movie industry, and China’s pool is frustratingly shallow. The good people are expensive, and their lack forms an artificial bottleneck. The technologies that substitute for talented and experienced crew are the only way forward in the near term.

Production finance is another constraint to the growth of China’s film business, and the value of technology as a substitute for cash cannot be overstated. As with Hollywood, big budget flicks might get the attention, but the future will come from people who make films with a small handful of people.

If technology is important for production, it is essential for distribution, because without those small screens, the movie will probably be seen by a tiny number of people – if at all.

China has one cinema screen for every 466,000 people. (By contrast, the U.S. has one screen for every 8,000 people.) There are around 300 movies released each year in China, meaning that these films are all fighting for screen time, not just audiences. Even at the current rate of production, the only way many of these movies is going to be seen is on the small screen.

Real estate prices and personal habits in China further inveigh against the movie theater experience becoming as common as it is in the US. In short, mobile phones aren’t going to kill movies in China: they – in combination with other “small screens” – are going to give them their only possible market.

A tortise lays on its back, belly baking in the sun….

Ridley Scott will celebrate his 70th birthday on November 30 of this year and look back on a 42 year career of achievement that is the envy of many others who have sat – or dreamed of sitting – in the director’s chair. As he celebrates his septuagenarian status with friends and loved ones, perhaps he will pause to consider that Louis B. Mayer, the founder and longtime steward of MGM studios, found himself sidelined by Hollywood days short of his own 69th birthday. Louis B, once the most powerful studio head in a day where the studios ran the show, couldn’t change fast enough when the change started happening.

Ridley won’t be going away soon. He’s got a film in the can and at least four projects in development. But the Hollywood that created him is going away, and if he is not prepared to accept the changes that are driving Hollywood and the world’s film industry, he’d better start planning a career change.

Music Does Matter, Especially When It Is Mobile

In the Hutong
Dreaming of clear sinuses and carbohydrates
1958 hrs.

Lots of big music industry folks down at Music Matters in Hong Kong last week. For those of you not familiar with the confab, it is basically an opportunity for everyone who touches the music business to sit down and talk about the business in Asia.

The attendees included EMI, Mercury Records, Sony BMG, Universal Music, and Warner Music Group, along with a host of other companies in different parts of the industry.

It’s Like a Royal Navy Symposium, circa 1740

Naturally, at the top of everyone’s agenda was piracy, and that got a lot of play. Reading the coverage each music executive sounded like a cross between Babbit and Marvin the Paranoid Android, spinning tales of woe about how they are all getting ripped off by those bad kids ripping their pirated CDs.

Research house Synovate contributed their little bit to the gloom, with survey results from around the region suggesting that one out of five of Asia’s young urban consumers purchased a bootleg CD in the last month, and one in four downloaded an illegal song from the Internet. Synovate’s stuff is interesting, but all it offered was a snapshot rather than some inkling of how some of those numbers might be evolving.

The downer of the session likely came from industry group IFPI, who estimate that piracy costs the music business $400 million annually around the region.

Now, that’s not good, certainly, and we here in the Hutong are scrupulous – nay, anal – about legitimate content. But with clients and family in what has become affectionately known as “the Biz,” I’ll grant we are no test case.

Nonetheless, there is a sunny side to the music business in Asia, and the folks at the record labels appear to have a lot more to be happy about than the movie, television, and shrinkwrapped-software crowds.

The Music Industry Eats Its Wheaties in Asia

Brian Bremmer at BusinessWeek did a nice write-up on the program (“Asia’s digital Music Free-for-All“,) and he points to the PriceWaterhouse Coopers study that estimates Asia’s digital music industry at over $4.2 billion. In other words, if you believe the stats, digital music sales alone, not counting sales of CDs or cassettes, is four times LARGER than the total estimated piracy losses in the region. Think the MPA would kill for those kinds of stats? You bet. And the digital music industry is supposed to rise to over $9.35 billion in Asia.

(Okay, so can we fess up to the idea that digital media is not such a terrible thing after all? That while it eases piracy and cuts down on album sales because people are just buying the tracks they want, that it really is a significant market?)

And you need to look at what is driving the market: mobile phones. PWC says that 85% of that $4.2 billion were songs downloaded directly to music-enabled mobile phones. Half of the people MTV surveyed in Asia said they would listen to music more if they had a mobile music device like a music-enabled handset.

The Future of Music is Mobile

You look at all of these numbers, and you are led to a couple of inescapable conclusions:

1. Piracy sucks and still exists in Asia. (It still exists in America, for that matter, but we digress)

2. The future of music in Asia is mobile, and it’s a robust business already with huge growth prospects. Any artist, label, distributor, or retailer not doing everything they can to make legitimate music more accessible to Asia’s one billion (and growing) mobile device owners is both ignoring their future and giving the business away to pirates.

The challenge is for the industry to work together to make listening to music an increasingly fast, easy, and delightful experience. The model is there and its working. Now the challenge is to broaden the appeal.

It’s absolutely stunning Apple didn’t own this event. My friends at Apple need to get their collective act together. The music lovers in this region are shopping at other vendors and building that habit. Don’t wait for long, guys. The market sure won’t.

Hollywood to Boycott China?

One learns, after a few years in the media industry in China, to ignore the chest-thumping threats of media moguls to withhold something from China. This is for good reason: the threats are usually empty.

Such was the case several years ago when Disney CEO Robert Iger told the media in Hong Kong that unless China gave Disney a full-time TV channel, there would be no Disneyland on the mainland in China. The reason you heard no angry (or even stern) response from the Chinese government after Iger’s comment is that Chinese officials were laughing so hard they couldn’t compose a statement. The threat was hollow – having just opened Disneyland in Hong Kong, Disney was in no rush to open a park on the mainland. And, frankly, China’s officials knew that if they really want the people to go to Disneyland, they don’t need a park in Beijing or Shanghai – they just need to grant more permits for folks to visit the conveniently-located Hong Kong park.

Beware of Angry Lawyers. They Bark.

Two days ago, MPAA Chief Dan Glickman (aka, Hollywood’s hired gun in DC) told The Hollywood Reporter that if China didn’t do something about ending piracy, the industry could choose to boycott China. I don’t expect an official response – I think, once again, the government officials with remit over Hollywood’s fortunes in China are probably too paralyzed with paroxysms of mirth to compose a response.

I will, however, respond.

I can only surmise that Mr. Glickman dared to suggest the possibility of Hollywood divesting from China in order to play to his clientele, to prove that, like the recently departed Jack Valenti (rest in peace, Jack) he could play tough with the Chinese. Or, perhaps, he was pissed off at having to sit in economy class on his redeye from DC to the Coast. Or perhaps it was indigestion.

Because as far as anyone on this side of the Pacific was concerned, his offhand remark came off at best as reckless, and at worst profoundly ignorant, particularly in light of his distinguished background.

China Can Live Without Hollywood…

First of all, as Mr. Glickman himself noted, any sort of organized, multilateral action on the part of the major studios would likely be viewed by U.S. regulators as a violation of the Sherman Anti-Trust Act. So coordinated unified action is out.

And any non-coordinated unity of action is highly unlikely. Apart from the fact that Iger, Parsons, Stringer, Redstone, Murdoch, and Zucker don’t like each other any more than Disney, Warner, Zukor, Mayer, Cohn, Fox, and Laemmle did at the height of the studio system, each company knows that the departure of one would be to the advantage of another. If there are only so many slots each year, one guy walking away means more slots for someone else.

Most important, perhaps, is this: if the major US media companies simply packed their bags and left, in all likelihood they would suffer far more for their actions than China. Divestment may scare smaller countries who depend on foreign direct investment, or might concern China if the push to divest was broad-based. But given the microscopic footprint of the film industry’s investment in China (or, indeed, that of the entire entertainment business), divestment wouldn’t even be a rounding error in the overall flow of FDI in a given year.

We also should not forget that China is in the midst of a major policy shift away from encouraging foreign investment because of fears in Beijing that the country has sold its industry to a bunch of big-noses to the growing disadvantage of China’s domestic enterprises. While the rest of us might feel that concern is a tad overblown, it holds a lot of currency in Beijing, and they got the idea from U.S. economists.

So China’s attitude toward Hollywood packing its bags would probably amount to something like “don’t let the doorknob hit you on the ass as you leave.”

…Does Hollywood Want To Live Without China?

After over two decades of trying to figure China out, there are signs that a very small number of companies in Hollywood are beginning to build real businesses here. Of all of the majors, Warner has arguably done the best job of turning China into a business. They’ve built a music label. HBO and Cinemax have a profitable business here, as does CNN. And…here’s the kicker…in a nation of pirates, they actually have a modest but growing business in legitimate home video.

There are other examples. Despite a miserable system, the box office take for Hollywood films in China continues to grow, especially as the cinema experience improves in major cities and same-day releases become the rule rather than the exception.

To give up now – to just walk away – would be to ignore the progress that has taken place, and it would be tantamount to saying “we are NEVER coming back.” Because let’s not have any illusions: memories are long here. Much longer than your typical Hollywood career.

One day, you may realize there is actually a great value for you here.

Dreaming of Chollywood

I suspect that a lot of very senior people in the motion picture business – and in the entertainment industry – are starting to realize that the Chinese government at the moment has little interest in being a part of Hollywood’s world, and that China is just large enough – and developed enough – to say “no” to Hollywood and just not worry about it. The fault for that lies as much with Hollywood as it does with Beijing. It’s time to fess up to that.

Being confrontational, issuing ultimatums, and divesting (or even threatening to do so) are not going to solve the problem. Especially right now, with China prickly and sensitive, having a representative of the industry suggesting the global business equivalent of the nuclear option is just baiting the dragon. Come on, you big beast. Bite me. I dare you.

Trying to change the government’s mind – or forcing it to – won’t work as long as you are an outsider fighting for the interests of outsiders.

The only way things are going to change significantly in China for the global entertainment industry is to start playing an inside game.

First, stop focusing on piracy, and return the focus to access. Get more product into more stores. Where are the HMV and Virgin megastores? Or their Chinese equivalent? If Warners can build a home video business, why are they the only ones?

Next, get the consumer onside. Trust me, there is growing discontent about paying even $0.75 for a pirated DVD and then having it freeze up 5 minutes before the end of the movie. It happens ALL THE TIME here. And it doesn’t matter that the store or the guy on the street corner will give you a refund – the evening is already toast. Consumers are ready to pay for the real thing, and many to DEMAND the real thing. Deliver it at a competitive price, and they’ll buy. But unless the real stuff is ubiquitous, forget it.

Then, start working with your Chinese counterparts. If you think you’re hot about piracy, talk to some of these guys. Your movie gets ripped off in China, you shave a few points off of the global home video numbers. Their movie gets ripped off, and a massive chunk of their theatrical AND their home video is gone.

Start supporting their films. Start distributing them overseas. Build the kind of partnerships with mainland Chinese filmmakers that you’ve built with American, British, Canadian, Australian, German, Russian, and Hong Kong directors, producers, and independents. At the very least let them know that you’re on their side and want to help, then listen to dhem.

Hollywood’s greatest allies in China are consumers and filmmakers. And they are being ignored because it is a lot easier to listen to your lawyers than it is to think creatively about the problem. If the entertainment companies would simply form common cause with their natural local allies, more progress would be made in a year than has been made in the last 20 toward ending piracy.

The Other Side of China

A parting thought.

Even if you resign yourself to the possibility that China will never buy a lot of Hollywood entertainment, it would be foolhardy to remain blind to an important fact: even if you can’t make much money IN China, there are a growing number of ways you can make money WITH China.

The industry simply needs to take China as it is and discover where China fits in the broader scheme of things. Look at what your business needs, look at what China offers, needs and permits – and figure it out. Next week, I’ll look at a set of opportunities for Hollywood in China.

China is like nothing the industry has ever dealt with before. China will change the rules of the game. That’s not going to be pleasant for anyone, but there it is. There is opportunity here, but it’s going to require intelligence, creativity, and flexibility – not Mr. Tough Guy – to capture it.


In the Hutong
Dodging buses filled with People’s Representatives
0817 hrs.

As the National People’s Congress (NPC) and China People’s Political Consultative Conference (CPPCC) get going, I cast my eyes once again upon the Stte Administration for Radio, Film, and Television (SARFT,) that much-reviled rump of what once was the mighty Ministry of Radio, Film and Television (MRFTV).

SARFT would really like to see it’s remit expanded, lest it dry up and blow away in the next year, like it almost did ten years ago. We’re going to see another round of government reorganization in the next 1218 months – mark my words, because you heard it here first – and one of the questions that will be bounced around is whether or not SARFT should continue to exist as a separate organization, or whether it should be broken up and chunks poured into the MII, the Ministry of Culture, or simply pushed into freestanding enterprises.

What I expect SARFT to do (or, what I would do if I were Minister, or WIWDIIWM for short, since we appear to be going a little bananas with acronyms today,) is make a play to be formally handed oversight of content on the Internet and all forms of video games. If you are an ambitious cadre looking for stuff to regulate (and this town is full of them, I can tell you,) that’s where I would be looking.

One in ten Chinese is online. That’s a juicy target by itself. SARFT has a great “in” there, too: the growing IPTV sector. Hmm. Television via the Internet? Sounds like a job for SARFTman!

And games? Think of it. There are probably 3 million people playing with a gaming console of some type or another. There are probably 7 million people playing massively-multiplayer online games (MMOGs). Nearly every PC sold in China sells with at least one game on it (Solitaire) and there is no statistic for how many shrinkwrapped games are sold for those computers. Most of China’s Internet users spend some part of their time online playing games. There are 470 million mobile phone users, and every one of them has at least one game on their handsets. The damned things are everywhere, and NOBODY is regulating them.

The push to regulate has already begun. That little spaz the regulators are having about iCafes? That’s ALL about people playing games. Game-related mishaps get more coverage than murders – there was a huge hue and cry after one of my neighbors here in the Hutong, a lonely, overweight 26 year old addicted to his TV and his computer, died over the New Year holiday while playing video games.

So I see SARFT pushing to regulate it all – radio, film, television, Internet, and games. They have to – it is the law of the bureaucratic jungle: expand your remit, or shrink and die. SARFT has spent the last 10 years fighting a rearguard action against its own demise. With a sympathetic administration in place, this is the time to strike.

Is the Town Big Enough?

In the Hutong
Working off a sleepless night
1453 hrs

The Grouch just fired me a press release announcing the launch of Marketing Magazine, a Hong Kong publication aimed at, naturally, marketers.

Of course, there’s already a marketing magazine in Hong Kong – Media – and Hong Kong is also the home base of AdAge China. But the new kids from Marketing say that what makes their title different is that their publication is focused on Hong Kong, offering “mainly” Hong Kong voices.

Now, I wish the new guys well – we all know how much Media could use the competition – but I wonder how long the Hong Kong focus can last. As many newcomers find out pretty quickly, Hong Kong may look like a big city, but it’s really a small town. I wonder just how much money they will make selling ads to agencies in Hong Kong trying to outdo each other. I suspect they will go regional quite quickly despite protests to the contrary.

I hope they do, anyway.

Hong Kong doesn’t need another publication to reinforce its misguided self-importance and continuing insularity.

Hong Kong once was important, back when The Rock of Jardines was a remote outpost of capitalist spirit at the feet of a big commie dragon and Jimmy Clavell was writing novels glamorizing the colony even as he exposed its warts.

But the insularity that held Hong Kong together in the tough times during the last half of the 20th century is a malignant anachronism that continues to prevent the full globalization of the city in the most important aspect – the thinking of its people and leaders.

A Hong Kong marketing professional I know who has relocated to Beijing told a friend of mine earlier in November that she felt bad for her hometown. “It’s the only city in China whose prospects are in decline.”

How true.

Take heed, Marketing.

Nokia the iPod Killer? Bwaaaaaaaaaahahahahahahahahaha….

Somewhere on Jingshun Road
Enjoying the Africa-induced gridlock
1047 hrs.

An article by Alexander Dryer entitled “Apple Chomper: How Nokia can knock the iPod from its perch ” that was kindly forwarded by Neil Kothari has me wondering, once again, about what sorts of hallucinogenic substances they must put in the coffee over at Slate. Dryer, it seems, is convinced that Nokia’s N91 is the long-awaited iPod killer.

He cites all sorts of reasons: it has an 8gb hard drive, it’s sofware is usable, it is a “good” music player (only good, huh?) and a superb phone. Nokia has purchased Loudeye so it can build online stores for carriers. Also, Nokia sold 89 million phones last quarter vs a mere 8.7 million iPods. Oh, and it is opening sleek retail stores that copy Apple so slavishly that it has actually hired the same designer.

That’s why Nokia is the Apple killer?

Sorry, but I’m somehow not convinced.

I suppose it was inevitable that Nokia would try, given the long and distinguished list of firms that have gone before them. But the history of the consumer products industry over the last five years is replete with the corpses of companies that have tried to knock the iPod from its perch by a range of means and have returned from the fight mauled by wounds mostly self-inflicted. I’m afraid Nokia will be no more successful trying to kill the iPod with its candy-blob phones than it was when it tried to whomp Sony, Nintendo, and Microsoft in the portable game player business with the über-flop N-Gage.

Here are the reasons I would say this effort is a non-starter, in general but especially in Asia:

One Expensive Candy-Blob
Charging $599 retail for a “good” 8gb music player and a great phone will kill this. I can buy a great 80gb music player and a great phone for less money. I’m hardly a music aficionado, but after I loaded my 300-odd CDs and some podcasts onto my player, I was well into 20+ gigs, and that’s before adding video and any data files I want to carry. And I’m sorry, but I can’t be bothered with having to choose what songs go into my player and what songs stay on my drive, and if I wanted something that loaded only a playlist or two for jogging or commuting, I don’t need 8gb. I need 1gb.

The other problem with the device is storage. Dryer is quick to dismiss flash. He should slow down and think about what happens to battery life when you throw a winchester hard-drive drive into a phone. All those moving parts suck juice. I can live with 12 hours battery life – less – on my iPod. I cannot live with charging my mobile phone every 12 hours, or even every 24. You buy and N91, and you had better be ready for the music function to make your “great phone” less than adequate in use. “Yes, I’d like three batteries with that, please.”

Oh, and one more thing on price: competitors like Motorola and Samsung have already introduced phones in different parts of the world that do everything this product does, PLUS provide satellite TV, for the same or less money. So even on the basis of functions, the N91 is a loser.

Help Us North America – You’re Our Only Hope
Fighting Apple in North America is just plain bad strategy. It is Apple’s home market, the one where it is most deeply embedded, and where the total Apple ecosystem is strongest and, frankly, where Nokia’s brand name is weakest. Europe, Latin America, and Asia, on the other hand, are much less Apple country and are places where Nokia traditionally has stronger market presence. (Indeed, I’ve been involved in long, late-night debates over whether or not Apple really sees Asia (ex Japan) as a strategic market. Corporate structure and marketing efforts to date leave that in question.)

Further, they are parts of the world where the mobile music usage model is still in its formative stages. People aren’t used to carrying music players, but they ARE used to carrying mobile phones, and are already proving more amenable to using their phones as their primary music players.

Of course, Nokia is losing these battles as well, especially in Asia. Against the N91, over 75% of Motorola’s phones are music enabled. The second-generation ROKR – the E2 – has been doing brilliantly, as has, which is the largest legitimate music download service in greater China. Sony-Ericcson, Samsung, and LG have taken up large chunks of the mobile music market, and Nokia is showing up late at the party with a product too large for the Asian hand, pocket, or purse. So perhaps Nokia is putting so much focus on the U.S. because it hopes the lighter competition will help. Or maybe they think U.S. consumers will be less sophisticated than their counterparts in Japan, Korea, China, and Hong Kong.

It’s the Music, Stupid
The one thing I haven’t seen in all of this discussion of Nokia’s supposed ascendancy has been any relationships the company might be forging with record labels and artists. If you will recall, it is exactly those relationships – with the actual owners and creators of content – that gave iTunes its legitimacy among consumers and gave sales of downloads legitimacy with artists and labels. Unless Nokia lines up the backing of major labels – and the independent artists who are generating more and more of the world’s leading music – the ecosystem will not materialize, and the operators will go elsewhere.

This all assumes, of course, that Nokia is genuinely interested in making the legitimate discovery, purchase enjoyment and sharing of music part of its overall strategy. The other possibility – far more likely, IMHO – is that it could care less about whether the music is legitimate or not, as long as the phone sells. Short of a clear commitment to digital rights management and relationships with labels and artists at all levels, it would be hard for Nokia to claim that the N91 and its siblings do much more than provide pirates with a way to enjoy music.

It’s the Experience, Stupid
Mobile music is about much more than “stick it in the phone and listen.” The full experience includes discovering the music, purchasing it, storing it, playing it, and sharing it. From what I can tell, storing and playing seems to be covered, but as noted above actually discovering the music, purchasing it, and sharing it are missing.

Finding new music – or at least a song we’ve heard that we like – is an essential part of the entire experience. If it wasn’t HMV, Amoeba, Tower Records and the Virgin Megastore would have exited the business long ago. In countries like Asia where radio is basically a dying medium, other means of musical discovery are becoming ever more critical to the health of the music industry. The ability to conduct limited sharing of music, to provide an online alternative to radio, and to share information about music and artists with others of similar taste lies at the core of a successful system. I don’t see that coming from Nokia so far, and given that they’ve got music devices out there, it’s pretty clear that in Espoo Finland, the device comes first, and the experience is an afterthought – an unnecessary evil.

Clearly, Nokia have it backward.

This is the company that’s going to beat Apple? I think not.