How Much Do You Value Your Music?
How Much Do You Value Your Music?
  • 정남경 기자
  • 승인 2013.03.18 20:14
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The singer PSY’s “Gangnam Style” was downloaded 3,600,000 times in Korea which generated65,000,000 won. However in foreign countries, it was downloaded just 2,900,000 times, but it generated2,810,000,000 won. This discrepancy reveals that Korea’s sound source prices are too low compared toother countries and Korea’s sound source distribution structure is inequitable to the artists. Therefore, theMinistry of Culture, Sports and Tourism announced a new payment regulation for sound sources that wasrevised in June 2012. However, many Korean people are downloading sound sources illegally and they havebecome accustomed to not paying for music. Therefore, people do not think reasonably about paying for theirmusic. We need to consider the problems faced by Korea’s sound source market as well as some solutions.

Limitations of the record market
Until the early 2000s, CD (Compact Disc) sales were the leading source of revenue for themusic industry. MP3 player development and MP3 functions installed in cell phoneshave caused CD and tape sales to diminish to almost nothing. The record marketused to generate 1,000,000 album sales per year, but now it has becomedifficult for the industry to generate 100,000 album sales in a year

Changes to the sound source market
Getting music via the sound source market has become thegeneral trend. While there are many advantages to thischange, there are also many unfavorable factors like illegaldownloading. However, after sound source prices werelowered, this problem has diminished. The sound sourceservice site “Melon” has 18,000,000 members and thenumber of paid members has reached 2,000,000.Among these, over 90% of the members are usinggross per month packages. A sound source downloadcosts 600 won but when using gross per monthpackages, people can buy 150 sound sources for9,000 won. Therefore, people can buy music for only60 won per sound source.

The development of the sound sourcemarket and related problems
For several years, we had an inflationary market.In contrast, sound source prices have only increasedby 100 won per download. The reason for this smallincrease is that when the price of 1 sound sourceincreased from 500 won to 600 won, consumerobjections were very strong. Increases in sound sourceprices will be much steeper this year. However,considering the overall inflation rate, it is still a reasonableincrease. Regardless, many consumers feel overly burdenedand have a negative response to this reality.

A questionnaire about the reality of the sound sourcemarket
The Observer gave a questionnaire to 180 students asking their opinions onthis topic. The results showed many students make use of illegal downloadingand a flat sum system. Also, most students think that current sound source prices inKorea are appropriate. Moreover, most students (over 62%) are unaware of the new payregulations for sound sources. In addition, 57.8% think that the increase in the sound source pricesis burdensome to them. Lastly, 31.2% think that a reasonable price to download sound sources is under 500won. Likewise, 31.2% think that the 500 won range is reasonable.

Korea’s sound source market compared toother countries
Koreans pay 60 won per sound source if they buy a 150download music package. In the USA, it costsapproximately 1,130 won and in the United Kingdom it is1,730 won. France’s rate is 1,890 won and in Japan it is2,960 won. Korea’s rate is very low when compared toother countries.
The USA accounts for a third of the entire world’smusic market and for the most part rest is taken up byJapan and Europe. In the case of the digital musicmarket, Japan and the USA account for the largestmarket share. In the USA, Apple purchases and sellssound sources based on a three stage distributionstructure. It begins with the original copyright holder,then the distributor, then iTunes and finally theconsumer. This is a very simple structure compared toKorea. From the beginning, the original copyright holderand the distributor’s payment ratio was 7:3 and the pricecategory was high as well. Therefore, Americans takethese relatively high prices for granted.
In early 2000, Japan’s music market was smaller thanthe USA’s billboard chart market. However in 2011, itgrew to 8% larger than the USA and had sales of157,000,000,000 won. CD sales volume was 78% of theentire music market. CD sound source sales are big inJapan, so sound source is considered to be a big value.
Similar to the USA’s billboard chart and Japan’sAuricon chart, Korea made its first official popular musicchart site, the Gaon chart. However, it excludes albumsthat do not pass through the major distributors. Forexample, “Jang Ki Ha and Faces” album sold over 40,000copies but these were not tallied because an indie labeldistributed it individually. This does not seem to be fair.

New pay regulations for sound sources
This regulation was passed in order to vitalize thesound source market and protect consumer rights atthe same time. Additionally, increasing the producers’share of revenue will be helpful to inspire their will. Theratio of producers and distribution company’s soundsource profit was 54:46 but it has changed to 60:40. Inaddition, the price for one sound source download is 12won for streaming and 600 won for downloads. Thisnew rule was started on January 1st, 2013. As a result,Melon’s price increase policy changed. For streamingwithout any restriction, it increased its rate from 3,000won to 6,000 won for 1 month. Similarly, fordownloading 150 sound sources, it increased from 9,000won to 15,000 won for a month.
We did an interview with Kwhang-Ho Choi director ofthe Korea Music Content Industry Association aboutwhat he thinks of this new regulation. He answered thatmaybe if sound source prices increase, consumers willtemporarily stop paying for downloads. However, priceswill increase as consumers leave the market so weshould keep watching over of this. He said prices willincrease in the short term, but prices will eventuallydecrease gradually because service licensees will havecutthroat competition to attract consumer.

Why Korea’s sound source reality is a problem
First, sound source prices are too low compared toother countries so it is difficult to produce good quality music. Second, due to the appearance of free digitalmusic licensees’ like Bugs, Maxs mp3 and Soribada in2001, idea that “music is free” has been ingrained in theminds of consumers. The digital music market has aduty to break this conception. Third, the illegaldownloading market is too big. According to thecopyright protection center, the illegal music market inKorea in 2010 totaled 413,000,000,000 (On-line168,100,000,000. Off-line 244,900,000,000). The illegaldownloading market that was previously done mostly byPC is changing to smart phones. Finally, the soundsource market is unstable because of the newregulation. If someone buys a sound source for 600won, a copyright holder like the lyricist and composerreceives 60 won. Artists like singers receive 36 won andowners of copyrights receive 264won. Finally, 240 won will go to thedistribution site. The originatoronly receives 10%. This is a smallincrease, but the consumer mustpay more than twice the amountthey used to. This price causesplunging sales. As a result, the cutfor the originator will not go up.If these problems continue,Korean popular music’s generalquality will decrease compared toother countries so thecompetitiveness of K-pop willvanish. If prices are low, all thepayment received by musicproducers like record productioncompanies and artist‘s will be lowas well. Therefore, this phenomenoncan lead them to become lethargic. Ifthings remain unchanged we could miss an opportunityto expand into the world market. For continuous worldmusic market leadership, improving general musicquality is the most important thing.

Solution of sound source reality’s problem
To resolve these problems, the copyright protectioncenter is executing a program to crackdown on illegalactivities by using resources like a web hard tracking. Aregistration system of web hard obligates registration ofa special type for on-line service providers like P2Psites. The Korea Communication Commission allowedregistration until May 20th, 2012 to let enterprise keeptheir on-line service going.
Kwhang-Ho Choi director of the Korea Music ContentIndustry Association said a plural/separation trustsystem is being considered to enhance copyright trustorganization’s business transparency. This is to inducehigh quality copyright services through marketcompetition and trusting the organization. He also toldus about some solutions that we can implement. “Ithink people’s consciousness regarding illegaldownloading has improved considerably. In anenvironment where people can easily download contentillegally, it is not reasonable to say “stop illegaldownloading” while appealing people’s consciousness.In order to have an effective regulation system thatprotects the market, public concern and governmentaction are critical.” Moreover, he also commented onKorea’s music market’s future and possibilities. “Nowfor the moment, it is impossible to clearly solve all theissues, but the government and people who love musicare sympathetic to these problems. Therefore, themarket can improve gradually.”

The Korean music market is improving faster than werealize and Korea is the only country where the digital soundsource market has overtaken the off-line record market.Many countries in the world are trying to learn from ouron-line music market. Therefore, we can make avirtuous cycle industry by turning this crisis into anopportunity. Above all else, an attitude of valuing ourmusic is needed for the Korean music market’s future.

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