A KTV in Beijing allows customers to make their own music videos.	Young people having fun at KTV.	A band plays at the Beijing Melody KTV.

On July 15, the State Copyright Bureau, the Ministry of Culture and the Ministry of Public Security jointly launched a 100-day crackdown on piracy. Then, the State Copyright Bureau took aim at karaoke bars. Later that month, it published the copyright fee standards for karaoke bars. They'll have to pay royalties of about RMB 0.2 per song played.

The move has been widely debated by the media, karaoke operators and their customers. The media pointed out that this is another important part of the Chinese government's efforts to enhance intellectual property rights (IPR) protection. While karaoke bars expressed their support for IPR protection, they said the fee collecting procedure should be open and transparent, and should not affect their operations.

Seesaw Battle Between KTV and Copyright Owners

Karaoke is one of the most popular forms of entertainment in China. Statistics released by the Ministry of Culture show that by the end of 2005, China had more than 50,000 registered entertainment venues, and more than 100,000 business venues, with karaoke bars.

An official with the State Copyright Bureau explains that China first sought copyright fees from karaoke bars almost 10 years ago, but results were less than perfect. Established in 1992, The China Music Copyright Association began to collect royalties on behalf of the copyright owners, and the rates were calculated according to the scale of the KTV businesses. Take Shanghai for example, with its thousands of karaoke joints. They began to to hand over copyright fees to the China Music Copyright Association in 2001. These days, large business that have more than 80 karaoke rooms pay RMB 6,000 (US $750) a year, and those with fewer than 20 rooms pay RMB 1,200 (US $150) annually.

At a press conference on World Intellectual Property Rights Day last May, famed singer/songwriter Liu Huan said, “I have been writing music for 20 years, but I've received fees of only RMB 90 (US $12) from Karaoke halls. They are doing great business. Perhaps they should pay songwriters from their profits.” In Beijing, you won't get a room in the biggest ones like Cashbox Partyworld and Melody unless you book in advance. And for China's three Golden Weeks, people have to reserve their room several days in advance. KTV rates range from scores to hundreds of yuan per hour. When income from drinks is taken into account, these companies make a fortune. The China Music Copyright Association says it collects about RMB 60 million (US $7.5 million) every year, but that's a tiny percentage of their huge profits.

The drive to recalculate copyright fees is logical, given the popularity of music videos. Copyright holders say karaoke enterprises that use their music videos should pay for the privilege. In March 2004, their lawyers wrote to 12,000 karaoke operators seeking the payment of MTV copyright fees. Some of the world's biggest players, like Sony, Warner and Globe, were also involved. Industry insiders say it costs RMB 60,000 to 100,000 to produce one music video. And many singers wonder why they should bother producing videos when they cannot recoup their outlay.

Who Should Foot the Bill?

Many people believe it is karaoke operators that should pay the copyright fee, but they have a different opinion. At the press conference, Sun Bing, general manager of Tangguo Entertainment Space and spokesperson for the National KTV Union, said that KTV establishments provide a venue for customers to sing the songs. The karaoke bars are basically acting as a link between the music company and the customer. As the customers are the end users of the copyrighted material, they should be the ones who pay. However, the State Copyright Bureau insists the copyright fees should not be paid by the customers.

Xiao Zhang, a white-collar at a foreign trade company, visits a karaoke hall nearly every week. He believes KTV operators who profit from using the copyrighted materials should fork out the fees. “When the copyright fee policy was announced, I called the Cashbox Partyworld to ask about their prices. I was told there had been no price increases.” Even so, Xiao Zhang is pretty sure the KTV companies will find a way to channel the crarges towards the customer. “As the saying goes, ‘The wool comes from the sheep's back.' Most consumers probably wouldn't mind - or even notice - paying a few more yuan. And when the time comes, they won't have any choice, anyway.”

So will KTV operators tack the fees onto consumers' bills? Sun Bing says that depends on the royalty collection standards. KTV bills currently contain two items - room rent and drinks - and copyright fees are not included. And though the copyright fee collection system has not yet been put into place, some karaoke halls have already jacked their prices up - in some cases by 50 percent. KTV operators meanwhile believe that they're helping songwriters by promoting their music. What concerns consumers most is that the most popular songs in karaoke halls are Hong Kong, Taiwan and Western songs. They wonder whether the royalties will ever actually reach the copyright owners.

An Irreversible Trend

Last July, the Ministry of Culture approved the National Karaoke Content Management and Service System to be launched by the Cultural Market Development Center. The system will be piloted in Wuhan, Hubei Province, Zhengzhou, Henan Province and Qingdao, Shandong Province. A universal KTV database has been built, “aiming to prevent unhealthy songs from entering karaoke bars, and gradually solve the conflicts between CD companies, copyright owners and karaoke operators.”

Liang Gang, director of the Cultural Market Development Center, explains that copyright owners negotiate their fees before their songs are added to the database. Then karaoke bars can download these music videos, and the system records the number of times they're used.

The State Copyright Bureau is currently soliciting public opinion on charging RMB 12 per day per private room in all karaoke halls. If there are no objections, that system will be implemented. Wang Ziqiang, spokesman for the State Copyright Bureau, says it will be implemented soon. And after karaoke bars, the bureau is considering collecting copyright fees from radio and television stations. It's becoming clear that there'll be fewer and fewer free lunches on offer in the field of IPR.