SARA FISHER

Staff Reporter

It was a near free fall for a while, but Asian consumers are again snapping up U.S. record labels good news for an industry that has come to rely on the Pacific Rim markets.

Music sales declined sharply in Asia and Southeast Asia in 1998, often at even sharper rates than those seen during the first year of the region's financial woes.

In South Korea, album unit sales slipped by 33 percent from 1997, according to the International Federation of the Phonographic Industry. The fall was 32 percent in Hong Kong, 21 percent in Singapore and 17 percent in Taiwan.

The one exception was Japan, where unit sales fell 2 percent in 1998. But because of an increase in the yen against the dollar, overall music revenues were up by 4 percent.

No mid-year statistics are available, but L.A. music executives relay anecdotal evidence that sales have been picking up. Officials with DreamWorks Records, the music division of DreamWorks SKG, say there has been increased pressure over the last few months to get the label's artists to Asia on promotional tours.

Warner Bros. Records officials report that the latest Madonna album, "Ray of Light," has sold a respectable 1 million units in Asia. Virgin Records recently scored its all-time highest-selling album with the Japanese band Dreams Come True.

"All of us retailers, the affiliates and the labels believe that there is light at the end of the tunnel," said Steve Margo, senior vice president of the international division at Warner Bros. Records. "There is every reason to believe that the Asian (music) markets will return to a strong position."

That belief has caused record companies to keep investing in the region, despite a slipping return on their Asian investments. In fact, many labels have been opening regional offices in Asia, which both develop local talent and promote Western artists.

Virgin Records opened a regional office in China this spring, and Warner Bros. has maintained affiliate companies in all nine of the major Asian markets, and has upgraded the management personnel there.

No major record label can afford to write off Asia no matter how precarious its economies might be. Japan alone constitutes the second-largest market for music in the world behind the United States, representing 16.9 percent, or $6.52 billion in sales.

L.A. record companies consequently have encouraged their artists to woo Asian fans in person. And as more signs of economic recovery become apparent, the number of music acts touring Asian countries has begun to pick up.

Barenaked Ladies, Alanis Morissette, the Red Hot Chili Peppers and the Smashing Pumpkins have all recently visited or are soon scheduled to tour the area. Veteran rockers Aerosmith, along with new heavy metal act Buckcherry, are scheduled to team up for a New Year Eve's concert in Osaka.

"It is essential, absolutely essential, to get an artist out there if you want them to become a global star," said Mel Posner, who heads the international department at DreamWorks Records. "Japan is an important part of the business."

The Asian music markets have remained attractive to U.S. music companies because some artists that haven't caught the Western world's ear can do quite well over there. Heavy metal music sells pretty well in Japan, often to a wider audience than in the United States. But most Asian countries' music lovers have a predilection for the pop-flavored variety.

"There is a big market for the very mainstream type of artist out in Asia and Southeast Asia," said Vivian Gueler, senior director of international marketing and promotions for Virgin Records America. "It's almost always pop. That's what we focus on in the region."

Posner and his team recently presented their artists to Asian radio executives, concert promoters and music executives. One of the label's country singers caught their ears, but DreamWorks executives were told she would only sell if she sounded less country and more pop. DreamWorks went back to the studio, altered the music tracks on her album, and the label now has a country singer with a pop sound playing all over the Indonesian airwaves.

"This isn't a common practice, but I'm willing to wheel and deal in order to expand our repertoire," Posner said. "It's part of the opportunity to sell music out there that we can't elsewhere."

Music executives are less encouraged, however, about piracy in the Asian markets. The growing problem has only further eroded the market for the U.S labels.

The IFPI labeled Hong Kong, Taiwan, China, Malaysia and Singapore as "priority" countries when it comes to piracy and lax law enforcement policies. China ranked third in the world in domestic piracy levels, peddling $240 million worth of pirated CDs and cassettes that constituted 54 percent of all albums sold in the country in 1997, the most current year available. Russia ranked No. 1, with pirated material representing $375 million, or 70 percent of all music sales.

Most pundits expect to see piracy figures rise in 1999, due to ongoing economic problems in these countries and the new proliferation of unauthorized digital copies of songs floating around the Internet, which can be downloaded for free.

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