Doing Business in China: Lessons from the Music Industry

China's Music Industry

Declan Nolan, of Shanghai SIP Engineering Consulting, sent me a Smart Shanghai article the other day on Archie Hamilton, the Managing Director of Splitworks, a China-based concert promotion agency, and the interviewee in the article. Hamilton has been in the China music business for ten years and in his interview he shares countless pearls of wisdom applicable for anyone doing business in China or planning to do so.

How do I know the article is excellent and Hamilton’s words constitute pearls of wisdom? Because my law firm’s China lawyers have either seen or dealt with pretty much everything he describes, and in most instances, many times.

Hamilton starts the interview talking about the cancellation of Lenny Kravitz’s show:

It just bugs the shit out of me, because all these agents and managers, they’re always like, “Fuck we just got burned again!” and “It’s a shit market…” And you’re like, “You know there are good promoters in China, because you’ve worked with all of them, so why don’t you give the fucking shows to the good promoters?” And they’re like “ahhhh yeah but the money was so good…” And generally when something sounds too good to be true, it is.

Exactly. I cannot tell you how many times we have seen a company choose someone in China because “the money was so good” but in doing so set themselves up for problem after problem. We see it with the partners these companies choose and the unnecessary risks they take. Even closer to home, we see it with the law firms they choose, and all to save (or make) just a little bit more.

An example from this week is telling. An American company contacted my law firm about a year ago for help with what I knew would be a complicated and risky China joint venture. This company ended up choosing not to hire us because we were “considerably more” than the -no-name Chinese law firm referred to them by his China handler. Now he was e-mailing because the government had turned down the Joint Venture for the exact reason I had told him it could not work. He was frustrated because he had wasted massive time and money and was seeking our assistance on what to do. Amazingly enough, when I quoted him the initial retainer we would require to get started, he balked because a Chinese law firm someone he knew had referred him to would be “considerably cheaper.” I did not even bother to tell him what his always seeking to save had already cost him, I merely told him we would not be budging on our retainer amount or our fees. It would haver be un-lawyerly of me to use the same sort of language as Hamilton, but seriously?

Hamilton then notes how he is seeing fewer expats coming to China, which absolutely jibes with what our China-based lawyers are seeing. Hamilton sees the second tier cities becoming “even more interesting” than Shanghai and Beijing, and due to rising costs, we are seeing the same thing for our clients.

Hamilton’s views on China’s anti-corruption crackdown jibe with ours as well in that he sees it as real and as having an impact. He very rightly notes that “the rules are laid out very clearly, if you take the time to listen.” Here’s how he sees it:

Yeah there’s a big crackdown on red envelopes, but there’s also a lot more competition. A lot of people are going, “Well if I write about cool stuff, then people will read it, and we’ll get more ad revenue.” So we’re finding a lot more than the Chinese media we talk to are a bit more open to talking about stuff without being paid for it, and that’s a huge change.

For me, there’s always been a way to do it. All our shit’s above board. The rules are laid out very clearly, if you take the time to listen.

Reminds me of what I said in a 2011 post, China Law: Don’t Blame It On The Gray

For years I have been fighting against those who claim Chinese laws are gray. China’s business laws are generally as well written or as clear as any other country’s. My contention has always been that those who claim China’s laws are grey are usually just saying that to excuse their own failure to abide by them.

Hamilton does a great job explaining how and why China is increasingly enforcing its laws:

It demonstrates to me that there is a level of pragmatism within the authority, like “We understand this has to happen. We understand this is an important part of development. We’ve let it happen up to now in the grey, but actually it’s too big and it’s too out of control from a safety/crowd-control perspective, and we need to start regulating this stuff, because every other country in the world does.” It’s gonna force change, and make things a little bit more expensive, but regulation always does…

What are your thoughts?

Leave a Reply

Your email address will not be published. Required fields are marked *