Digital Dreams: CHM teams up with APRA, MGM and iTunes

Author: Jaive Smare

Could this change the music business model in PNG?

The Piracy problem in PNG leads CHM down new roads in music distribution and sales.

In recent years, Papua New Guinea’s number 1 music company, CHM, with the aid of the police, has conducted raids on counterfeit products all over PNG, confiscating burning towers and thousands of counterfeit music CDs.

No sooner can a studio release an album on to the market before songs are copied unlawfully onto cheap CD’s and resold by pirates for far less on the streets.

This means that the artist doesn’t not receive a fair amount of its royalties from sales of their music, the studio does not make it forecast sales and revenue figures and sometimes may not recoup the money it has put into production and promotion of the album.

It’s a situation that could stymie the progression and growth of the biggest media industry in Papua New Guinea as well in the South Pacific unless the Government and its enforcing bodies can step into to make piracy less lucrative or the music labels change their business models.

Unfortunately, protecting copyrights is not on the Governments priority list so the music labels and the artists are beginning to consider other models to protect their industry.

The New Deal

Recently CHM, the biggest recording label in the South Pacific, signed an agreement with the Australasian Performing Right Association and MGM Distribution to upload over 300,000 songs it has released over the last 30 years onto iTunes.

APRA collects and distributes license fees for public performance, enabling CHM to collect royalties from radio stations in Australia, as well as Solomon Islands, Vanuatu and Fiji and possibly other countries as well.

With the iTunes venture, it means that now these songs can be sold as singles for download on a world wide and very popular platform, the iTunes Store.

iTunes has over 600 million songs on its catalogue and is the worlds most popular online music store. In June 2003, it was announced that the store had sold more than 3 million songs in its first month of operation.

It continues to grow everyday.

Will this venture prove profitable for CHM and its artists?

Possibly. There are some great talents produced under the CHM label and its possible some may achieve fame and large sales of their singles on iTunes and royalties from APRA.

But it doesn’t mean that CHM or the artists can just sit on their backs and let the money roll in.

They would have to still work pretty hard, doing promotions, concerts and appearances as well as working on and writing new material.

Though iTunes has sold several million downloads, most of these sales are for established artists or emerging bands who already have established the infrastructure necessary to make it in the music business, such as large fan bases, many concerts, signing up with major labels etc.

The CHM model wont guarantee overnight success, but it will happen.

Also, physical sales of albums in stores will continue, but at least now there is another venue for the labels and artist to earn an income from, to counter the losses to piracy.

Disruptive Technology in Music

One of the prerequisites for business to survive in the music industry must be to ability to handle disruptive technology. This disruptive technology includes such things as the ability of people to copy and burn music, to share music on peer-to-peer networks or email it to each other.

Enforcement of copyright laws using police and State agencies does not seem to deter pirates, because obviously, piracy is low cost and lucrative and the State agencies are pretty lax about protecting the rights of artists.

In the music business, Music labels provide capital, knowledge and marketing skills to promote and distribute music. They already have well established distribution channels and know what works and what doesn’t. They also have the money to make it happen. An artist has more chance of success by signing up with label. The label releases the artist’s song, factoring all the costs involved in producing and promoting the album. The artists receive a certain amount of money for the album as well as money from royalties from sale.

In a perfect world without cheap and affordable piracy and peer to peer networks, a world that existed in the 1980s – 1990s and prior, the label would recoup what it had spent and make some money, the artists would get paid and then get rich (if they sold well) and everybody would be happy.

The problem with piracy is that it hijacks the final and most important part of this commercial process, the sales of the album.

Why buy a Lady Gaga album for $29.80 when you can buy for less than $5.00? or better still, you can get it for free on a Peer2Peer networks.

The artist doesn’t make any money; the record label doesn’t make any money. All that money they should make is instead going to the person burning duplicated copies of the CD.

This does not bode well for the music industry. In order for good music to be produced, artists need to be rewarded for their efforts. That’s why copyright laws exist. It protects their rights to earn a living from their efforts and also encourages more creativity.

Piracy does not encourage creativity; it does not build a culture that fosters creativity.

Unfortunately, it is here to stay.

So record labels such as CHM and artist must look at means of sustaining sales and making money.

And maybe revisit the reasons why people buy and share pirated music.

According to Apple CEO Steve Jobs and the people behind iTunes, the issue of piracy was a behavioral one. He said users were not offered viable opportunities to buy their favorite single at a reasonable price and a reasonable quality online.

So they created iTunes, where an artist single could be bought at great quality and reasonable price.  You can buy whole albums for less than $10.00, or singles for $0.99cents.

How does iTunes Protect Against Piracy?

Apple, in order to get the deals necessary to fill its online store with music, has had to develop software that protects music available in its catalogue from being pirated.

This software is known as its digital rights management (DRM) system. The system according to Apple CEO Steve Jobs ‘envelopes each song purchased from the iTunes store in special and secret software so that it cannot be played on unauthorized devices.’

This system allows users to play their DRM protected music on up to 5 computers and on an unlimited number of iPods.

If the DRM protected music is put on the internet for free downloads or shared via emails etc, it shouldn’t be able to play on the computer where it was illegally downloaded or should not be able to play on the persons portable playing device.

In the event that the DRM system is compromised ( meaning someone has figured out a way to hack the DRM and make protected music not protected anymore) Apple has a set time to fix the problem or the record companies will withdraw their entire music catalog from the iTunes.

How this help CHM and artists signed by CHM?

For a music lover, say in a country like Australia, she could listen to a song from a PNG artist released by CHM on Queensland radio. If she likes the song she can just log on to the iTunes store and download the song and presto, its stored in her iPod or Mac for her enjoyment.

CHM and the artist receive royalties from APRA and royalties from iTunes.

At the same time, CHM does not have to worry so much about illegal copies of the program being copied because of Apples commitment to maintaining the success of its iTunes product through its DRM system and policies.

Conclusion

Digital music downloads is the World Wide global trend.

As iTunes success has shown, there are other ways to sell music with better protection against piracy.

As they learn more, we can only ask if CHM will usher in a new era of digital distribution that will not only spur the growth of the industry in PNG to greater heights, but also protect the business it has built over several decades, a business that has been sorely impacted by piracy.

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4 thoughts on “Digital Dreams: CHM teams up with APRA, MGM and iTunes

  1. In every market around the world, the uptake of legal digital downloads is less than the percentage of drops in physical unit sales. This is a strong indicator of widespread piracy when it comes to music. At the same time the cost of producing and distributing music has dropped massively, creating an increase in independent music labels. The business model has changed to suit the new technology.

    It makes me very happy indeed to see CHM take this step, and I hope that aspiring musicians see, marketing, distributing and managing themselves can be executed with a laptop and a net connection. Pressing physical units for distribution can be the largest cost of releasing an album…now it costs nothing but a little time.

  2. One of the interesting aspects about CHM is that it actively pirated overseas music and software, and sold it in its shops in the 1990s. I still remember being able to purchase a full suite of Adobe software (worth thousands of dollars) for about K40 in the main CHM shop in Boroko. Pirated copies of overseas albums were also readily available. One can conclude that despite the positive work CHM has carried out for local PNG music, at least part of its business in the early days was built on piracy (but not local piracy – only overseas things as far as I know).

    The main problem I think CHM will face is that the biggest market for Melanesian popular music is in Melanesia, and the networks for digital distribution tend to be informal – file sharing between people on usb flashdrives or external hard drives, even mobile phones. That will be almost impossible to control. The fact is, in places like Australia, income from recordings has plummeted (I was told by the head A & R guy from a major transnational recording company a few weeks ago that they only signed one or two acts in 2009, and won’t sign many more this year – their budgets are a fraction of what they used to be). This is not all negative – possibilities open up for live performance income streams. That will be a major challenge for companies like CHM, but will provide all sorts of interesting possibilities for independent musicians.

  3. Like Denis (Crowdy) above, I used to be a patron of the CHM music retail outlet and bought my C-60 copy of a Lucky Dube album in the 1990s. CHM has done a 360 degree turn although I hope it is for ethical (and not business re-structuring) reasons. I think the opportunities for CHM and its stable of recording artists presented by DRM is an unknown territory and like copyright, we are yet to catch up on legislation and policymaking let alone awareness amongst the average signed artist, composer, musician, indie producer etc. CHM is well-positioned to make it happen not only for itself, its artists, but also for the industry.

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