Youth brands turn music into marketing muscle

But piracy is stifling legal sales

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HONG KONG--International record labels may not be earning much profit in China, but a handful of advertisers are finding plenty to sing--or rap--about.

“For young Chinese, music is another way of giving people an outlet and finding something they can create as their own. A lot of it is driven online, the internet is what’s helping these communities to grow and thrive,” said Kel Hook, managing director of Wieden + Kennedy’s Shanghai office.

Until now, using music in advertising just meant signing up sappy pop stars from Taiwan, Hong Kong and the mainland to appear in TV spots or endorse products online. That's still a common strategy for companies like PepsiCo, Coca-Cola Corp. and McDonald’s, where the connection is usually more about celebrity than music. Pepsi’s new soy drink brand, for instance, is promoted by Taiwanese pop star Lou Zhi Xiang, and singer Jay Chau has often appeared in Pepsi advertising.

But China’s music market is changing as young music lovers choose edgier music. The question is whether old-world music suppliers and advertisers can keep up with them. Digital media makes it easier for young Chinese to learn about new kinds of music, and create their own.

“Music and new media, such as YouTube.com-type ads, supported by ringtones, mobile ads and viral promotions, this is the direction we need to go in,” said Harry Hui, Pepsi’s chief marketing officer for its beverages unit in China and a former Universal Music executive in China.

Hip-hop is hot

In fact, hip-hop music, fashion and offshoots like beatboxing (vocal percussion) are becoming very popular with a number of arch-rivals.

“Nokia and Motorola both want to own hip-hop; the same is true with Coke and Pepsi, and Nike and Adidas,” said Kenny Bloom, Beijing-based CEO of Asiavision and a twenty-year veteran of China’s music industry. (See also "Q&A with Asiavision’s Kenny Bloom, AdAgeChina, June 6, 2006)

“Hip-hop is definitely cool and that’s one of the only things you can absolutely say in China is cool right now,” said Mr. Bloom.

“Hip-hop, like basketball, is very popular here,” acknowledged Ed Elworthy, Nike’s brand communications director for China in Shanghai. The sportswear marketer frequently injects cutting-edge music in its events and advertising, even creating a music video for a tournament it held last month in Beijing.

“The subculture of hip-hop is exploding from a music and performance level,” said Preston Duane Kennedy, Shanghai-based chairman-CEO of Dai-Biao, an online urban lifestyle portal devoted to hip-hop music.

Referring to the rise of break-dancing and DJ competitions in China as well as the music itself over the past couple of years, “hip-hop is beginning to break into the mainstream. There’s a a demand for it now, so the music can be an ambassador to the coveted Gen-Y demographic.”

Interest in western music subcultures goes far beyond Shanghai or Beijing, China’s most sophisticated cities.

In Yanji, an industrial city of 420,000 in northeastern China near the North Korean border, for example, executives at Wieden + Kennedy, Nike’s agency in China, discovered “a thriving beatbox, hip-hop community.” (Beatboxing, part of hip-hop culture, is the art of vocal percussion.)

“Although the music’s origin is western, they are adapting it, mixing in Korean and Chinese lyrics and rhythms and making it their own,” said Mr. Hook. Wieden + Kennedy is producing a documentary about Yanji kids as an example of how different types of music are growing at a grassroots level. (Visit tudou.com/programs to see a promo for the documentary.)

Hip-hop music and related activities like breakdancing competitions are not unusual in western countries, but their popularity here suggests young Chinese are becoming more adventurous and eager to express themselves through music. That’s a major shift since 1985, when China had a single rock star, Cui Jian, who shot to fame through a nationally televised talent show.

Combating piracy

Despite the rising interest in alternative, foreign songs, the music industry at large faces the same challenges in China that Hollywood studios and global television networks do.

“We’ve got to find a way to compete with online piracy, which is worth over $1 billion globally in lost revenue,” warned Gary Chen, CEO of Orca Digital, one of China’s first legitimate digital music companies in China. Besides ongoing battles against the black market and illegal downloading, China’s music industry is hurt by the limitations of a state-run distribution system.

China “really stands out” in Asia with the highest rates of playing digital music, downloading it--legally and illegally--and sharing it, said Synovate’s director of media research for Asia/Pacific, Craig Harvey, in Hong Kong.

The Aegis-owned Hong Kong-based research company recently explored the music habits and attitudes of young Asians, including Chinese. Along with Viacom’s MTV and Branded, organizer of the Music Matters Asia/Pacific Forum last week in Hong Kong, Synovate surveyed 3,857 respondents aged 15-to-34. The survey was conducted in March 2007 via telephone and face-to-face on AsiaBUS, Synovate's monthly omnibus survey, in China, Hong Kong, India, Indonesia, Korea, Malaysia, the Philippines, Singapore, Taiwan and Thailand.

In the past month, 84% of Chinese consumers have played music on a computer, 72% played music on an MP3 player, 39% have downloaded and saved a song to their phone “and a whopping 63% have downloaded a song from the internet without paying for it, by far the highest numbers regionally for all these activities,” said Mr. Harvey.

Chinese music consumers are also the least likely to use a radio or television to access music in Asia, with only 6% ever listening to music on the radio compared to a regional average of 20%, and only 8% watching music videos on television ,compared to 19% regionally.

“With 45% of consumers believing all their music will be in a digital format in five years, digital music is fast becoming the norm for the entire Chinese music industry, presenting unique opportunities, as well as piracy challenges,” he added.

The Synovate survey also indicated that 65% of Chinese are ready to replace their mobile digital music player with a music-playing mobile phone.

Music goes mobile

In fact, many already have converted to music phones. According to Beijing-based research house Analysys International, mobile phones with music players accounted for 6.5% of the total handset sales in China in the first quarter of 2005.

But their popularity is growing fast. In the first quarter of last year, sales of music phones grew 29.6%, compared to a year earlier, and rose another 33.8% in the third quarter.

“Motorola is taking the role of the record companies in China,” said Ian Chapman-Banks, Beijing-based VP, marketing for mobile devices in Asia/Pacific. Last year, the handset maker launched a Rokr music phone and a Chinese-language MotoMusic site packed with songs, ringtones and videos that could be downloaded and distributed legally. (See also, "Can Motorola attract the youth market through music?" AdAgeChina, July 12, 2006.)

“Do brands make bands, or do bands make brands like Moto? It’s all coming together in China through digital media,” said Mr. Chapman-Banks at the Music Matters conference.

SonyEricsson and Samsung have come out with music phones, while Nokia, the world's largest mobile phone maker, has rolled out its “Music gets you talking” brand platform and its full line of music handsets in China.

Perhaps profiting more than anyone else in the industry, China’s mobile phone service providers are capitalizing on the popularity of music phones by aggressively pushing extras such as ringtones and music downloads.

China Mobile, for example, operates M-Zone, a youth-oriented plan that offers music-related news and extras for a $2 monthly fee. The company has reaped millions of dollars just from televised reality-show singing contests. Viewers vote for their favorite performer in each series by sending an SMS text message with their mobile phone--for a small fee paid to the phone company.

Telecom consultancy BDA in Beijing calculates that revenues from such services in China will jump from $10.4 billion last year to $28.6 billion by 2010. Demand for such services is expected to skyrocket with the launch of third-generation (3G) mobile technology before the Olympic Games start in Beijing in August 2008. China's digital music market, meanwhile, was worth $512.5 million last year, and will reach $1.6 billion by 2010, according to Liu Guoxiong, chairman of the China Audio-Video Association.

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