China is emerging as a key market for digital music - despite some of the highest piracy rates in the world.
That is because the market in most countries (excluding Japan) is PC-based and therefore heavily affected by piracy, but in China it is 95 per cent mobile in the form of ring tones.
'We get excited about the mobile world because there is a billing relationship with the customer already in place and because there is a less rampant existing pirate market,' said John Kennedy, chairman of the International Federation of the Phonographic Industry.
Leading players like Guangzhou's Rock Mobile and Shenzhen firm A8 are already generating serious revenue despite the market's relative infancy.
Rock Mobile has targeted US$40million to US$50million in revenue this year, while A8 is aiming for 400 million yuan. Both companies have their sights set on initial public offerings, having received US$30 million and US$20 million respectively in venture capital last year.
Rock Mobile chief executive Conor Yang said he expected the number of music mobile phone users in China to reach 25 million this year out of an overall market of 400 million. He agreed that the mobile operators' dominance could be a double-edged sword.
'Mobile operators do the policing role when it comes to demanding certificates for copyright material, and that's how you can make money from mobile music,' he said. 'But there is no room for negotiation with the operators. When 3G comes and when there are more licences for operators ... data will become more important and we may be in a better position to negotiate.'
