media and entertainment

Our Beijing-based attorney, Mathew Alderson, is Co-Chair of AmCham China’s Media & Entertainment Forum. Each year the Forum puts together a chapter on media and entertainment for the AmCham China White Paper. As part of the research for the 2013 White Paper, Mathew interviewed Nathaniel Davis, a director of Split Works and Splatter, which are Shanghai and Beijing based live music/festival promotion agencies & music strategy/creative consultancies. Part of the interview is reproduced here.

Alderson: What unique problems do foreign promoters face when promoting shows in China? In other words, what problems are particular to China as opposed to being prevalent in developed markets?

Davis: The main problem or barrier to foreign companies operating as show promoters in China is that neither foreign entities nor China-registered  WFOE companies can legally operate as sole entities and apply for performance permits (批文) from the China Ministry of Culture. This can only be done in partnership with Chinese domestic companies, either in terms of a formal joint venture or a temporary partnership.

Another serious problem is distortion of the market brought on by promoters (both foreign and local) who offer fees to international acts that are not in line with the realities of the market. In other words, many international acts are being paid premium fees for shows here when there is very little chance for the promoter to make that money back because they are hobbyist promoters with family or government money and have no real understanding or desire to help create and develop a sustainable environment for shows in China.

The other main problem is the entire 批文 system set up by the Chinese government which requires extra lead times for promoters to confirm shows before they can even begin to advertise, promote or market those shows and then even longer lead times until tickets may be sold, for those events of a size (e.g. arena, stadium, festival shows) requiring Public Security Bureau (“PSB”) approval. This process can require anywhere from 20-40 days.

Alderson: How could the live entertainment sector in China be improved to encourage more participation by foreign promoters?

Davis: The answer would partly be the conclusion of the last White Paper chapter:

“streamline and clarify relevant procedures and regulations, not only for the benefit of live entertainment venues, producers, and artists, but also for the benefit of China’s cultural industry overall.”  That is a good place to start.

After that, I would suggest there also needs to be not just a streamlining and clarifying of regulations, but also a reduction in procedures and regulations. The legal process for having shows approved — particularly large shows — is nearly incapacitating. The lead time for these approvals can be crippling. It simply takes too long and it is often hamstrung by something as banal as  one of the government officials who needs to sign off on the approval being out of Beijing and needing to wait until he is back to physically sign the permit.  It is not easy to do shows here — that is why there are so few of us here doing it.

This is not just relevant to foreign promoters but to everyone working in the industry.

Alderson: What particular problems beset the advertising and promotion of live performances in China?

Davis: A lack of non “pay-to-play” media (i.e. media that are actually interested in stories, rather than what they get paid to promote.)

Lack of real media interest in anything other than mainstream music-celebrity driven stories.

Also the previously mentioned problems of not being able to legally promote or advertise a show until Ministry of Culture permits are received.

Alderson: What particular problems beset the selling of tickets to the public in China?

Davis: The problems are not dissimilar to those in the U.S. There is a robust scalped ticket market made up of a combination of fake tickets and tickets that have “leaked” from the venues, ticketing companies and government agencies that receive free tickets.

Otherwise, the main problem is still a relatively limited market for live music even in the major metropolitan areas of China, including Beijing and Shanghai. Ticket prices remain extremely high relative to the purchasing power of ordinary people.

I think there is also the lack of a completely secure, transparent and trustworthy ticketing service. We could definitely benefit from the development of a secure e-ticketing platform.

Alderson: How difficult is it to book large, high quality venues and what are the main difficulties in doing this?

There are only two real high-quality venues in the country, both of which were set up by AEG and one of which is still managed by AEG. The Beijing venue — the MasterCard Center — was originally built for the 2008 Beijing Olympics. The Shanghai venue — the Mercedes Benz Arena — was opened in 2010.  All of the other large venues are old and were originally indoor sports arenas and were not really built to do concerts or live entertainment events. The two aforementioned venues can be difficult to book simply because they are very busy.

However the difficulty lies not in the “booking,” but in the logistics of actually putting a show on at that level and in dealing with the vagaries of the system and specifically with the PSB.

Alderson: How good are local Chinese sound engineers, technicians and crew?

Davis: There are several good ones working out of Beijing, but they are few and far between. There are several foreign sound engineers here now who are in great demand. But overall there is a huge gap in the maturity of the live event industry here. There is top level gear here, but a limited number of qualified people to use the gear properly.

According to Mathew (who represents Nathaniel’s companies, along with a number of other companies involved with China entertainment), Nathaniel’s assessment is entirely consistent with the way that foreign involvement in live entertainment is classified by the Chinese authorities. As with other forms of entertainment, foreign involvement in China’s music industry is restricted. Live performances are considered particularly sensitive given the tendency of some foreign performers to publicly support causes or individuals that are “off limits.”

Virtually nobody gets tired of comparing Beijing and Shanghai, myself included.  There really is a dichotomy, with neither side (yes, “side’) having much appreciation or understanding for the other.  When asked by people who have never been to China to compare the two cities, I usually sum it up by saying something like the following:

Shanghai is the business and finance city. It has a history of being China’s most international city and in many ways it still is. The people there are like New Yorkers/Parisians, which means they look down on pretty much everyone else.

Beijing is China’s government/power city.  It’s polluted and dry. Its location is unexpected for Westerners in that it seems to have been situated more for defensive reasons than for commerce or livability. It is also China’s media and tech capital.

Five years ago, my China trips almost always meant me spending three days in Shanghai for every day in Beijing. But a few years ago, that ratio completely flipped and now I probably spend at least five times more time in Beijing than in Shanghai. My law firm does a lot of work for media and entertainment and technology companies and that work is often complicated and hands on. That work is mostly in Beijing and it typically requires more client meetings. Much of our Shanghai work involves manufacturing companies and for a variety of reasons, they tend to require a lot less hand-holding and face-to-face visits.

Anyway, I am writing about Beijing and Shanghai because I got an e-mail from Matt Schiavenza the other day regarding the redesign of his blog.  And when I went to look at it (it looks great, BTW) I got hooked on his series of interviews with people living in different cities around the world.  They are truly fascinating and, near as I can tell based on the cities I know best, quite insightful and accurate. I ended up getting quite enthralled and read them all.

The Beijing and Shanghai ones are both excellent. The Beijing interview is with Jeff Crosby, whom I do not know.  The Shanghai interview is with John Pasden, who has been churning out great stuff on Chinese language (mostly) and culture (a bit) on his Sinosplice blog since 2002!  If you want to get a better feel for Beijing and for Shanghai, I recommend you check out the two interviews and then let us know what you think. Both of the interviews and of the whole Beijing v. Shanghai thing.

Just came across another thoughtful set of predictions for China 2007, this one from Shu-Ching Jean Chen of Forbes Magazine:

  • “The Chinese Communist Party will continue to entrench its one-party rule. It is pursuing a Singapore-model, both on the mainland and in Hong Kong, of managing two seemingly contradictory tasks: ruthlessly stamping out political dissent while opening up its economy to global trade. Singapore, with a population of 3 million, has proved the success of combining a benign but autocratic political rein with the friendly face of a capitalist economy. Hong Kong, with 7 million people, could easily follow this prescription. Whether the same formula can work with the mainland’s diverse population of more than 1.3 billion will decide the future stability of China.”
  • “Chinese banks are still corrupt, ineptly bureaucratic and ill-managed, but can remain that way and still prosper.  The government controls all of the banks and will bail them out of any problems “short of a financial meltdown.”
  • China’s “economy is far more open to foreign investors than most believe.” There will always be bureaucratic foot-dragging and red tape to make foreign investing difficult, but the very top of “Chinese officialdom” — those “who make the final decisions” — still “lean toward using foreign investment to jump-start a cumbersome state-dominated economy. Foreign companies doing business in China will for the most part continue to thrive.
  • China’s second tier cities will reign in 2007.  “China’s provincial cities will be the pulse of the Chinese economy in 2007 more than the showcases of Shanghai and Beijing.”
  • Pollution will “darken the sky and blacken the earth.” “Green-minded investors will take notice and diversify their Asian holdings from China to other developing parts of the region.”

I agree with the first three, but disagree with the last two. Shanghai, in particular, will continue to boom in 2007, more so even than in 2006. SMEs [small and medium sized enterprises] and service businesses love Shanghai because it has so much infrastructure in place for them. And yes, we all know it is more expensive than the second tier cities, but what’s a couple thousand dollars a month to be able to participate in such dynamism? When our China lawyers assist service businesses on where to locate in China, the resultant list of potential locations nearly always includes Shanghai. Beijing will also do just fine in 2007 as China’s center for government, technology, and media and entertainment, all of which will continue to thrive. Oh, and there is this little thing called the 2008 Olympics that will play a major role in Beijing’s economy as well. Doing business in China will continue to get easier.

China’s environmental problems will lead to more investment, not less. It will lead to environmental investing and, unfortunately, to investing by those who wish to take advantage of China’s lax environmental enforcement.

Please check back in a year to see who was right.