A stage to showcase China's pop music, the 2007 China Billboard held its annual ceremony on January 12, 2008 in Beijing.

Sponsored by China's music Internet portal www.99.cn, and supported by the Ministry of the Culture, the event involves many of China's top performers, residing both inside and outside the country, and is broadcast to audiences worldwide through CCTV-1, CCTV-3 and CCTV-4.

However, while the event is good for China's music industry, the revenue it generates is inadequate." Earnings from sponsors and the audience for the one-night only performance were far from enough," said Lu Pinliang CEO of www.99.cn.

Lu plans to increase the musical variety and use the Internet and mobile phones to broaden the viewership of the show in bid to increase profits.

Having worked at JP Morgan in the United States for seven years until 2004, Lu, familiar with the capital market, said it was comparatively easy for him to operate an online company.

Following a long-term survey, Lu discovered that other Internet portals including e-business and online games, all have a core business to make money. However, there is no stable profit-making mode available for any music website operators in China. In addition, whenever some entertainment websites reached a certain level of development, major recording companies would lodge a complaint against them and demand huge copyright fees.

Seven leading record companies worldwide, including EMI Group PLC, for example, sued Baidu.com Inc., a leading Chinese-language Internet search engine, September 2005. The reason was that Baidu had provided some MP3 songs for download without accrediting EMI on its site.

However, recording companies changed their tune from 2006, due to the fact that it was harder for them to earn money by the traditional practice of selling CDs, Lu said.

Statistics from the International Federation of the Phonographic Industry (IFPI) indicated that the global sales volume of CDs went down year-on-year by 15 percent in 2006, and its sales volume continued to drop by 20 percent in January 2007, compared with the same period the previous year. In contrast, business volume from the digital music sector rose to $2 billion in 2006, doubling year on year, accounting for 10 percent of the total music market.

As a result, the four recording giants -- Universal Music Group, Sony-BMG, Warner Music Group, and EMI Group PLC -- have changed their management strategy by cooperating with websites and telecom operators.

Some music companies have begun to earn profits from websites and wireless businesses. For instance, Taihe Rye Music Co. Ltd., a recording company in China, earned half of its income from digital music and wireless business in 2006.

The changing tune of the world recording companies offered an opportunity for Lu Pinliang, who came up with a plan to operate an entertainment music website, aiming to fight for a share in China's Internet market.

How to attract more users is our current focus, said Lu. "A website is not able to win profits without attracting a large number of users."

Making use of the annual China Billboard, the company will, from 2008, hold many music performances nationwide and allow a more diverse range of unknown performers on the billboard, so as to let them rub shoulders with more well-known artists.

Lu's website has currently attracted more than 100,000 users since it opened four months ago.

Lu said, however, it is difficult to charge service fees because of the scourge of music piracy. Lu shifted his focus to university students, who, he believed, are loyal users. Inspired by U.S.-based Facebook Inc., he found that offering community tools on the Internet, is viable and easily catches the attention of students through personnel interrelations.

It was unexpected that when Facebook, merely a name of a book introducing new students, was used as a website's name, it became so popular worldwide, Lu said.

When Mark Zuckererg, an undergraduate at Harvard, established Facebook in February 2004, the number of its registered users hit 1 million in the same year, and its users expanded from university students to senior high school students, and then to white-collar workers. The website went on to become the world's second largest social networking website after MySpace.

In October 2007, Microsoft announced to invest $240 million for a 1.6 percent stake in Facebook, which meant the three-year-old Facebook was valued at $15 billion.

Lu hopes his website would be used by 5 million registered users by the end of 2008. The number of university graduates in 2007 in China was 4.8 million, which means there are approximately 20 million students in universities nationwide.

Once the website attracts enough users, Lu plans to charge fees for its high-quality music download service. In addition, his website will provide social networking functions, apart from music. The website also plans to develop more bows in its quiver, including advertising, to earn money on the Internet.

(Source: The 21st Century Business Herald)