China's market for digital music developed quickly in 2005 with the total amount of sales reaching 36 billion yuan (US$4.49 billion), which is ahead of more traditional music markets.

Liu Guoxiong, head of China Audio and Video Association, said at the 2nd China International Forum on Audio-Video Industry, held in Shanghai on May 25 that the digital music market would develop quickly between 2006 and 2010. Sales could reach 12.7 billion yuan (US$1.58 billion) in 2010 with further regulation of the market and the application of new technology.

Liu considers 2005 an extremely unusual year in the development of the audio-video industry. The rapidly developing telecommunications, networks and portable terminals made an enormous impact on the traditional audio-video industry and created significant opportunities. The year is being described as "the first year of an era in China's digital music" as the business took a firm grip of the market.  
 
The market share of traditional audio and video products has fallen away for two years in succession. Their sales in 2004 was 2.51 billion yuan (US$313.03 million) with 417 million discs being released -- a drop of 8.9 and 8.6 percent respectively over the previous year.

Official sales figures for 2005 have not yet been announced but industry insiders predict that the figure for released discs will be around the 414 million, showing another fall in sales volume and income.

Liu Guoxiong explained why the traditional audio-video industry remained stagnant. First, pirates had a big influence. And second, the publishing system of the traditional audio-video market couldn't satisfy the consumption habits and likes of young buyers.  The most important thing was the impact from new media like cell phones, the Internet, portable terminals and the like.

New media has greatly changed the traditional market chain in terms of publishing channels and terminal sales. The traditional chain is a process from specialized creation, production, distribution, sales to consumption. Digital music uses network technology, and the Internet makes a significant contribution to the consumption of audio and video products by offering and rapidly spreading original content. The new chain offers individual or specialized content, Internet diffusion, and free or paid terminal consumption. Thanks to the effective use of digitalized technology, these single recordings have taken the lead over the traditional albums in both distribution and income.

According to information from iResearch, Liu Guoxiong predicts that the total size of the market for audio-video products could reach 4.1 billion yuan (US$511.46 million) this year. And that figure could leap to 8.14 billion yuan (US$1.02 billion) in 2008, he suggests.

The market for digital music has attracted a great deal of international finance and this has aided its rapid development. Around 700 million yuan (US$87.32 million) was invested between October 2005 and March 2006. Hurrayi Solutions has purchased 60 percent of the shares of Feiyue Records with 60 million yuan (US$7.48 million) and 51 percent of Huayi music with 35 million yuan (US$4.37 million). Rock Mobile has got a US$30 million investment.

Liu Guoxiong said China had also made great progress in IPR protection and would sign another two treaties in relation to this. It is wise to protect the Internet copyright and boost the development of the digital music market.

(China.org.cn by Li Xiaohua June 11, 2006)