Asia's Maddening Music Biz

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Universal's Japan operation has struck it rich this year with a new act called GReeeeN. This group, formed by a bunch of medical students who remain anonymous to the public, has been a huge hit for Universal Music Japan. Their latest single, Aiuta, has sold more than 2.5 million downloads, and their debut album, A Domo Hajimemashite, sold 400,000 units in three weeks after its June 27 release.

Universal and other music recording companies could really use some sustained growth in Asia, given the somewhat depressing industry outlook expected in the years ahead. Legitimate physical sales of music (LPs, cassettes, CDs, DVD audio, and so on) have been falling or remaining stagnant this decade, and the $29.3 billion in worldwide sales the industry raked in last year is expected to fall 61%, to $18 billion, by 2009, according to a study by Soundbuzz, a Singapore digital music provider.

And Asia, despite its huge mobile-phone base and dynamic economies, is a big part of the problem for global record companies trying to embrace digital technologies as distribution channels for their artists. In China, about 350 million knockoff CDs are in circulation and these in turn are being ripped, burned, and transferred to PCs and MP3 music players, according to the International Federation of the Phonographic Industry (IFPI). It is by far the biggest black market for pirated CDs, which cost the recording industry more than $400 million in lost sales per year. The mainland is also a growing player in online fraud.

At the urging of major recording labels such as EMI, Mercury Records, Sony BMG, Universal, and Warner (WMG), the IFPI has gone after regional Web sites and search engines such as Yahoo! China. The concern is that Internet service providers have allegedly maintained links to illegal music download sites, where one can gain access to tracks by international artists such as Coldplay and Gorillaz and any number of popular regional acts for no charge. On Apr. 24, a Beijing court ruled that Yahoo! China should be responsible for blocking access to such sites.

Bremner is Asia Regional Editor for BusinessWeek in Hong Kong.