Wolf Richter

Last week started with a public announcement by the US lobby group IFPI to increase their enforcement attempts against illegal music downloads in China, allegedly by targeting the big search engines. According to IFPI, 99% of all songs currently circulating on the Internet in China were illegal copies. Unfortunately, IFPI did not have to detail their plans on how to proceed with their enforcement attempts and thereby got around explaining what they would do different this time, because somebody else stole the show from them:

On Wednesday, the WSJ published an article, that Google – also a major power in the Chinese search engine market – had partnered with a local Chinese company (most analysts agree that the partner will be top100.cn) to provide legal music downloads in China. Although the details are still nebulous (Which labels are on board? What watermarking or DRM technology will they use? What restrictions on reuse and sharing will come with the license?) this move has the potential to change the rules of the game.

When I talked about file sharing in China together with my friend and colleague Leah Belsky at a conference on IP law in Beijing last year, we concluded that gatekeepers, among those search engines, were in a prime position to move ahead and shift the paradigm from prohibiting file sharing to capturing the value inherent in file sharing. While it took the market power of a player like Google with the golden lure of their ad revenue to shake up the inertia of the industry, this is only the beginning of a transformation process from business models relying on scarcity to those monetizing wide circulation. There is still value left on the table: the question now is who will be first to recognize where the value potentials are and who will be first in devising the tools to capture these potentials? The race has just started and will remain thrilling!