To become the leader in culture and intellectual property related industries in the PRC.
BackgroundIn April 2008, the Group completed the US$200,000,000 (approximately HK$ 1,560,900,000) acquisition of Grand Promise International Limited (“Grand Promise”). This gives the Company an effective 49% interest in China Culture Development Digital Technology Co., Ltd. (“CCDDT”) (北京中文發數字科技有限公司), a PRC sino-foreign joint venture company. CCDDT is mainly engaged in research and development of software and information technology products; system integration; technology consultancy and services; and other services. It was granted the nationwide exclusive right, for the life of the joint venture (i.e. 30 years), by the Ministry of Culture Market Development Centre (“MOC Market Development Centre”) to establish and operate the nationwide karaoke content management service system (“Karaoke CMS”)(卡拉OK內容管理服務系統). Via the Karaoke CMS, CCDDT will carry out copyright transactions of karaoke programmes between Intellectual Property Owners (“IP Owners”) and karaoke venues and also provide technical support and operational services for value-added services (“VAS”) at karaoke venues.
The China Audio–Video Copyright Association (“CAVCA”) (中國音像著作權集體管理協會) is the body approved by the National Copyright Bureau (國家版權局) to collectively manage copyright of audio and video programmes for IP Owners. The copyright of karaoke programmes collectively managed by CAVCA includes most of the Chinese language music and a large portion of foreign language music (including copyrights of songs from four major international record labels and more than 80 other well-known record labels in the PRC, Hong Kong and Taiwan). CAVCA chose to work with Beijing Tian He Culture Co. Ltd. (“Tian He”), a jointly controlled entity of CCDDT (together “CCDDT Group”), on an exclusive basis for 10 years to collect copyright fees from karaoke venues via utilising CCDDT Group’s copyright collection services and the Karaoke CMS during this period.
CAVCA has announced its 2008 standard tariffs for karaoke programme copyright fees. The announced tariffs range from RMB8.00 per room per day in Guizhou to RMB11.10 per room per day in Shanghai. An important point to note is that karaoke venues in a province, whether connected or not connected to the Karaoke CMS, will all be paying copyright fees to CAVCA and the IP Owners either based on the standard rate basis (“Standard Rate Basis”) or based on its actual operating data on a pay-per-play basis (“Pay-Per-Play Basis”). Tian He will invoice karaoke venues based either on the Standard Rate Basis or Pay-Per-Play Basis and then, on behalf of IP Owners, collect these copyright fees and settle the copyright fees collected to the IP Owners respectively. CCDDT and Tian He will be paid a service fee by the IP Owners.
Future OutlookThe Karaoke CMS is targeted to be operational and collecting fees on behalf of IP Owners in 25 provinces and direct jurisdiction cities by the end of calendar year 2008. By the end of calendar year 2009, the Karaoke CMS is targeted to be operational and providing services for copyright transactions in all the provinces in the PRC. Meanwhile, CCDDT will simultaneously work to develop and rollout other VAS of the platform.
