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China's Karaoke Royalty Scheme Reaches Impasse
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China's ubiquitous karaoke bars have taken first blood in their battle against royalty fees recently imposed by China's National Copyright Administration (NCAC).  

On November 9 the NCAC unveiled a pilot scheme that required karaoke bars in Beijing, Shanghai and Guangzhou to pay 12 yuan (US$1.5) a day for each of their private rooms.  

But the backlash from bar owners has forced the authorities to take a step back. "Those bars that can't afford the royalty charges will not be forced to pay right now," Liu Guoxiong, head of the China Audio and Video Association (CAVA) said.

The Guangzhou Cultural and Entertainment Industry Association, which represents the city's largest karaoke bars, led the opposition to the scheme and said its members would refuse to pay.    

Huang Shiqiu, head of the association, said the group believed the two national associations entrusted with the fee collection - the Music Copyright Society of China (MCSC) and the China Audio-Video Collective Administration (CAVCA) - did not have the legal authority to do so and the charges were unreasonably high.   

The CAVCA is currently awaiting official approval from the government. In the meantime it's entrusted CAVA to collect the royalties. "We should pay the royalty charges but the problem is to whom and how we should pay," Huang said. Associations representing local karaoke bars in Shanghai and Beijing voiced similar concerns.  

Wang Xudong, a copyright lawyer in Nanjing, said that since copyright is a private right, royalty charges should be negotiated by the owners and the users rather than established by the authorities. He also pointed out that copyright protection expires 50 years after an author's death.   

"The two associations can only collect royalties for copyright owners that have entrusted them to do so,” Wang said. “In fact the copyright of most songs played in karaoke bars hasn't been entrusted to the associations.   

"The per-room fee system is also unreasonable since it charges money for songs which the association has not been entrusted to collect," he added.   

Song Ke, managing director of the mainland's largest domestic music company, Taihe Rye Music Co Ltd, said his firm hadn't received any royalties since it was set up in 1996. He suggested that music copyright owners should get together and collect royalties themselves.  
"Since it's difficult for individual music companies to collect royalties from karaoke bars we should organize a body that accords with law to collect the royalties and distribute them among ourselves," Song said.   

Wang Huapeng, deputy director of the CAVCA, doesn't agree. He said that the royalties would be paid to the copyright owners and the association receive a cut - less than 20 percent - to cover its management costs.  

MCSC, with 4,234 members, collected 64 million yuan (US$8 million) in royalties in 2005, which according to Wang's calculation, would net the association more than 12 million yuan (US$1.5 million).   

The Collective Management of Copyright Regulations that came into effect on March 1 last year allows copyright collective management bodies to take a certain percentage from the royalties but that should decrease as royalties increase.

Wang said more than 80 percent of music copyright owners had authorized the CAVA to represent them and a list of copyright owners would be published soon.   

The ten billion yuan (US$1.25 billion) in revenues racked up by the 100,000 karaoke bars in China each year should theoretically generate eight million yuan (US$1 million) in royalties for copyright holders.   

The Ministry of Culture in July said it would create a unified royalty fee system and charge karaoke bar operators for each song downloaded.  

Karaoke bar operators will be able to join the Ministry's unified fee system voluntarily which will be on trial in the cities of Wuhan, Zhengzhou and Qingdao this year.   

Insiders say the different fee mechanisms reflect a tussle between the NCAC and the Ministry of Culture. Collecting copyright fees is a potentially lucrative business
(Xinhua News Agency November 30, 2006)


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