Rampant piracy leads to ad-supported free music, but not for U.S.

Cyndy Aleo-Carreira — Thu, 07 Aug 2008 23:03:46 -0700

While the RIAA sues U.S. citizens at an alarming rate for allegedly distributing pirated music, the Chinese music industry has basically given up. Back in February, the BBC noted that Chinese musicians no longer expect to make money from recordings, as the majority of music in China is pirated. Lawsuits filed against Chinese search engine Baidu and Yahoo have done nothing to decrease the amount of piracy. So when Google stepped in to offer a search that would provide the free music that users expect with a shared revenue model that will split advertising money three ways between Google, Top100.cn (a music service co-founded by NBA star Yao Ming), and Top100.cn's industry partners, it was met with open arms.

What, then is the difference between the U.S. and China? Is it simply the sheer volume of piracy in China?

Estimates from the International Federation of the Phonographic Industry (IFPI) claim that as much as 99% of online music distribution in China is pirated content. At that point, piracy becomes an overwhelming issue that the recording industry could no longer fight, and it turned to other ways of making money, including live performances. In contrast, a 2007 Institute for Policy Innovation report suggested that the U.S. piracy rate was much lower: only 5% of total U.S. music tracks are pirated. In China, the same chart shows piracy accounts for 88% of total music tracks.

The success of download services like iTunes and Amazon's MP3 sales demonstrate that the U.S. is willing to pay for music as long as it's just as convenient to purchase as it is to download illegally. Of course, I'm sure U.S. residents would be more than happy to take advantage of a model like the Google deal with Top100.cn. The question is whether the record labels would be happy with the ad revenue instead of actual sales.

Image: Howard Pyle illustration of pirate captain on deck, from Howard Pyle's Book of Pirates.

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