by : Business, July 2010

Live Touring in China

Concert touring in China has become a much more important outlet for artists. Popularity in a country of a billion plus population is, of course, the allure, not to mention its potential for sponsorships and endorsements. But government policy in China is often confusing and the rules of commerce are hardly standardized. Consequently, most Westerners, although intrigued by China, are cautious about jumping into this promising marketplace.

Major acts that engaged China in the last four years include Avril Lavigne, Linkin Park, Beyonce′, the Killers, Jay-Z, Bjork, Oasis, Kanye West, Celine Dion, and Bob Dylan. Linkin Park was the first stadium act to return since its debut there; [1] Beyonce′ was the second. Avril Lavigne, Kanye West, and Bjork, though successfully completing their tour, encountered difficulties, while the other acts were either banned by the government or cancelled by the promoters.

The Application Process

The strict performance application process, which is often involved in cancellation cases, is required in Mainland China for all foreign artists, including those from Hong Kong and Macau. The government requests artists to apply for commercial performance permits at least 30 days prior to intended show dates. [2] Although the regulations are in writing, there is still a lot of ambiguity in the text. According to “Regulations on Control of Public Places of Entertainment,”[3] the state government examines permit applications taking into account political, ethical, and cultural factors. However, the interpretation is rather unclear considering that Jay-Z was denied for his use of profane language, yet Kanye West, was granted permission. In addition, political censorship also exists against possible political disorder. Last year, the Beijing government restricted foreign acts’ appearances at the Modern Sky Festival: China celebrated its 60th anniversary, and wished to avoid any kind of security risks. [4]

Moreover, some promoters have been using the government as a scapegoat for event cancellations. For example, when rock band Oasis was experiencing what they thought to be difficulties with the Chinese Government on its March 2009 tour, a Ministry of Culture’s representative denied any ban on the British band, claiming that the promoter’s statement was an excuse to get out of the contract. “We have learned that the promoters of [Oasis’] concerts in China [have come] across some financial problems,” said Sun Qiuxia, a government official, to news agency Xinhua; Oasis’ two concerts, it turned out, had already been approved.[5] Another similar case came up again in April this year with Bob Dylan. This time, Chinese officials affirmed that the promoter did not submit the performance application on time; meanwhile, the promoter stalled with changeable excuses.[7] In other words, promoters take advantage of China’s vague banning criteria whenever a contract becomes financially onerous for them.

Making Money

Cases like those of Oasis and Bob Dylan demonstrate that it is not easy to generate profits in the Chinese market. China’s live touring industry can be very limiting for foreign artists trying to maximize revenue streams largely due to the diminished marketing power that they have there. For example, most states will commonly not allow tickets to be put on sale until at least 30 days prior to a performance. This shortened timeline, combined with a dearth of local sponsors, challenges the promotion process and limits concert awareness, ultimately inhibiting ticket distribution.

Asian artists, on the other hand, have a huge advantage in drawing sponsorships. They have tight bonds with localized brands such as China Mobile— an essential channel to consumers in recent years as China Mobile develops a ticket distributing line for mobile devices.[8] As the frequency of Asian artists’ public appearances multiply, so have the their own branding opportunities. Consequently, most foreign acts find it challenging to make connections with partners or even to begin to target audiences.

Another area that foreign artists are finding themselves at a disadvantage is merchandising. Fans in Mainland China have invested a fair amount of money into well-known artists such as Jay Chao, but are not as enthusiastic when it comes to western performers. One cause may be a much larger product release by Chinese artists relative to foreign acts. For example, along with the standard T-Shirt selection, Jay Chao additionally offers limited edition action figures modeled to his characteristics, specially designed calendars, and more of the like (these things make up a substantial part of Chao’s revenues). It must be remembered as well that the Chinese population is more indifferent to album sales, for they have access to free music downloads.

Lastly, ticket pricing is regulated in China— imposing a cap on potential box office gross earnings.[9] In the current marketplace, the general stadium ticket price ranges from 280-1,600 RMB (approximately US $40-$240), tax and facility charges included. This leaves less room for promoters to mark up production costs and artist’s guarantees. Take, for instance, Usher’s upcoming concert on July 11th in Beijing, at the 10,000-seat Wukesong Arena. Calculating gross potentials from the ticketing agency’s online seating chart at the scaled ticket price, a sold out concert can only gross 7.3 million RMB (just over USD $1 Million). So far, the show has only sold about two-thirds of the total capacity, making it unappealing. Moreover, its promoter, AEG, does not own the venue, so the rent and utility fees, which are regulated by state officials, go straight to the Chinese government.

Conclusions

China has shown its market value so far for frequent visiting acts from Hong Kong, Korea, Taiwan, and Singapore. For these artists, it is worth investing in marketing strategies and to build their own business structures for what is still a non-standardized system. Meanwhile, foreign artists are subject to the same cumbersome application process in China, which puts them at a disadvantage. As long as this continues, and given the cap on ticket prices, Western stadium stars’ current expected returns are small and do not stimulate a critical mass of tours by foreign artists.

By Po-Ya Chang

[1]“Linkin Park Do Shanghai – Proper! | China Music Radar.” China Music Radar – An Insider’s Look at China’s Burgeoning Music Industry. 19 Aug. 2009. Web. 27 June 2010. .

[2]Schwankert, Steven. “Beyonce Confirmed But China Cancels Other Foreign Acts.” Music Business | Music Industry | Record Sales | Billboard Charts | Billboard Hot 100. 1 Oct. 2009. Web. 27 June 2010. .

[3]“Regulations on Administration of Commercial Performances.” Web. 27 June 2010. .

[4]“Ministry of Culture of the People’s Republic of China.” 6 Aug. 2008. Web. 27 June 2010. .

[5]Schwankert, Steven. “Beyonce Confirmed But China Cancels Other Foreign Acts.” Music Business | Music Industry | Record Sales | Billboard Charts | Billboard Hot 100. 1 Oct. 2009. Web. 27 June 2010. .

[6]Caanaves, Sky. “China Disputes Oasis Ban, Blames Concert Promoter’s ‘Financial Problems’ – China Real Time Report – WSJ.” WSJ Blogs – WSJ. 3 Mar. 2009. Web. 27 June 2010. .

[7]Canaves, Sky, and Kersten Zhang. “Mystery Surrounds Cancellation of Dylan Tour – China Real Time Report – WSJ.” WSJ Blogs – WSJ. 7 Apr. 2010. Web. 27 June 2010. .

[8]dhttp://www.12580.com/

[9]Ticket prices are regulated by state counsels:

“Ministry of Culture of the People’s Republic of China.” 6 Aug. 2008. Web. 27 June 2010. .

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