24 February 2022
Digital music platforms are not permitted to establish exclusive copyright agreements unless there are specific conditions, according to China's copyright administration, which is cracking down on monopolistic activity in the country's private sector.
According to a statement posted on WeChat by the National Copyright Administration of China (NCAC), the order was given at a meeting in Beijing with influential digital music platforms, as well as record and songwriting copyright firms. The ruling comes amid a broadening assault on China's technology industry by Chinese regulators, which has focused on monopolistic conduct, unfair competition, and consumer rights.
"Digital music piracy used to be an issue that was widely criticized in China," says Mingming Yang, a partner at Wanhuida Intellectual Property in China. "To crack down the music pirates and to strengthen the protection of music copyrights, the National Copyright Administration of China (NCAC) issued a Notice on Ordering Online Music Service Providers to Stop Unauthorized Dissemination of Music on July 8, 2015, requiring all digital music service providers to take down all unauthorized dissemination of music works by July 31, 2015. According to reports, 16 service providers urgently took down more than 2.2 million unauthorized music works before the deadline."
He adds, "However, the intense protection of music copyrights led to new issues beyond the NCAC’s expectation that the digital music platforms utilized the exclusive copyrights to carry out competition and seized users by acquiring exclusive rights. To achieve exclusivity, the music platforms even acquired those companies who hold music copyrights. As revealed in the announcement of the State Administration of Market Regulation (SAMR) in 2021, Tencent and China Music Group had a relevant market share of around 30% and 40% respectively in 2016, while Tencent gained more than 80% of the exclusive music library resources by merging with its main competitors. It was also reported that losing copyright license of Jay Chou’s songs may have caused NetEase Cloud Music to lose 15% of its users."
The SAMR opened an antitrust investigation in January 2021 and issued an administrative penalty in July 2021, ordering Tencent and its affiliates to take measures to restore the competitive state of the market, such as releasing exclusive music copyrights within 30 days, stopping the payment mode of high prepayments, stopping to require upstream copyright holders to grant better conditions than competitors.
The NCAC’s new order aims to regulate the monopolistic behaviour and unfair competition, and protect consumer rights, by clarifying that the digital music platforms and record and songwriting copyright companies and online music platforms are not allowed to sign exclusive copyright agreements except in special circumstances.
Yang adds that the cease of signing exclusive copyright agreement might result in lower revenue for creators on an individual platform in the short term.
"But the creators will have more cooperation channels, which may bring increase of the overall exposure of music works and benefit creators in the long run," he says. "Moreover, some new musicians may have to agree to a buyout agreement with the platforms in the past and now they may have more options. Stopping signing exclusive agreement may also encourage veteran musicians to create new songs."
He shares that both the SAMR’s antitrust investigation and the NCAC’s new order reflect China’s attitude to end the vicious competitions in the field of digital music but to construct a healthy ecosystem of digital music. "The digital music platform giant cannot continue to squash its competitors by monopolizing the music library resources, which may offer more growth opportunities to the small platforms and encourage new players to join the digital music market," he says.
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