Performance Rights in China
Songwriters all over the world struggle to collect royalties from those who have obtained licenses to use or perform their works. These writers have neither the time nor the resources to monitor such uses, so organizations have been created to do it for them. China is no different in that respect. This briefing explores how these societies, working for performance rights in China, differ from those in the United States and whether there is value in soliciting their services.
In 1914, songwriters and publishers in the U.S., frustrated with their inability to enforce the public performance right granted them under the Copyright Act, banded together to create the American Society of Composers, Authors and Publishers (ASCAP). This organization was charged with: 1) monitoring public performances (including live shows and radio plays) of copyrighted music, 2) collecting proper royalties from users; and 3) paying songwriters. Shortly after ASCAP was created, Broadcast Music, Incorporated (BMI) entered the scene, and the two have since dominated the U.S. performance rights industry. A similar society was created in China, but not until 1992. It is called the Music Copyright Society of China (MCSC) and remains the only player in the Chinese performance rights industry.
Where is the Need for this Service Greater?
There certainly was, and remains, a great need for performance rights societies in the U.S. However, many U.S. artists were successful in enforcing their performance rights through litigation in Federal Court. The downsides to litigation are that you must sue one infringer at a time and that it is both costly and time consuming. In China, however, enforcing copyright protection through the courts is rarely successful because Chinese courts place unsurmountable burdens on plaintiffs to establish their case. Even when plaintiffs win, they, in many cases, cannot recover damages. When damages are available, they are statutorily capped at a certain amount, regardless of extent of the harm or unjust enrichment at issue. In fact, in 2007, the U.S., along with other countries, brought a World Trade Organization dispute against China for its inability to enforce copyright protection. So, without an adequate litigation alternative, one could argue China has the greater need for a performance rights organization.
The Effectiveness of the MCSC
It’s not entirely clear how effectively the MCSC collects and pays royalties. The primary concern is its lack of clout and experience. Such societies in the U.S. have been around for a century, building leverage and traction. The MCSC, on the other hand, has only been around for about 20 years, which is also about how long copyright law has existed in China. So, most Chinese users are still not accustomed to paying to use the music, and without more significant enforcement from China’s courts, change comes at a snail’s pace. Still, the MCSC has made some headway, increasing royalty collections from US$4.4 million in 2003 to US$18 million in 2012. However, that amount pales in comparison to ASCAP’s and BMI’s combined collection of about US$2 billion in royalties in the U.S. for the same period.
Copyright laws in China continue to advance, providing more protection against more modern and digital forms of infringement. However, these protections are still very hard to enforce. For instance, in the mid-2000s, songwriters were given broadcast rights, which should allow them to collect royalties from broadcast companies. In practice, though, MCSC has been unsuccessful in collecting from broadcast companies because they are powerful and state-owned. MCSC might have more success in such negotiation if its copyright owner membership were vast enough to apply some pressure. As it is, MCSC has a membership base of only 7000 members. ASCAP and BMI have membership bases of more than 500,000 and 650,000, respectively.
Though Chinese statutes are gradually becoming more favorable to copyright holders in their legal right to recover performance rights royalties, such holders struggle to properly enforce those rights. MCSC has the potential to fill a growing need for copyright holders in China, but without a more supportive court system and a more substantial membership base, this rights society falls terribly short of its potential. It may be tempting for songwriters to tap into China’s extensive music consumer base, but anyone hoping to make a profit on performance royalties should think twice about it, at least in the current climate.
JD/MBA Candidate 2016