CONTROVERSIAL REMARKS: Song Ke, a well-known figure in the Chinese music world, concludes that Chinese recorded music has come to an end (CFP)

Song Ke, CEO of Taihe Rye Music Co. Ltd., suddenly announced his resignation on January 5, shocking the Chinese music industry and again raising concerns over the future of the industry.

Song, born in Beijing in 1965, is a central figure in the development of Chinese pop music. He majored in environmental engineering at Tsinghua University and then studied at Texas A&M University in the United States, but he made recording and selling music his career.

"Learning how to turn a song into a marketable copyrighted product was probably the most important lesson I learned in the United States," Song said to the press several years ago.

Over the past 15 years, the success of many Chinese music stars, such as Pu Shu, Wang Feng, Sun Nan and Lao Lang, among others, has been attributed to Song and his company. From 2000 to 2003, Song served as deputy general manager and production director of Warner Music China.

And until recently, Song was the head of Taihe Rye Music, a leading Chinese record company Song established in 1996.

For many, Song's resignation seems to signify the end of the record business in China, and Song himself has often made the argument that "China's recorded music sector is dying."

While others in the industry have different opinions, it's clear that the golden age of China's recorded music is over and the sector now faces enormous challenges.

Bad news

2011 was a year of bad news for Chinese record labels and producers.

In March, Song declared that his company would no longer sign contracts with new musicians at an event in Shanghai. "The old business model—making money through selling recorded music, is at an end," said Song.

In June, FAB, a 22-year-old Chinese music retailer, closed its store at the Oriental Plaza in Beijing's Wangfujing downtown area. "Sales of recorded music are shrinking year by year. FAB will now focus on developing a broad array of digital music products instead of selling tapes and discs through high-cost street stores," said Xiao Wei, sales manager of FAB's Beijing office.

But FAB doesn't think the street stores will completely disappear. Rather the company believes CDs, as a media product, will gradually become a collector's item for dedicated music fans, said Xiao.

Problems in the music industry aren't confined to China. Internationally the recorded music market is facing the same challenges. Sony Music Entertainment, one of the world's largest record companies, announced that it would shut down its three music brands: Jive, Arista and J last October.

Meanwhile, Avex Group, Japan's biggest music company, closed its office in China due to the depression of the music industry.

EMI Music, another leading music company, was acquired by its rival Universal Music Group (UMG) last November.

Digital storm

For decades, recorded music companies followed a fixed business model—companies contracting an array of singers and artists to make albums, and then selling those albums in the form of long-playing records, tapes and compact discs. This business model was also introduced to China as Chinese pop music emerged in the 1980s. Between 1980 and 2000, the vast majority of music fans in China primarily listened to music from cassette tapes and CDs.

However, from 2000 onward, with the rapid penetration of the Internet and the advent of easily transferable digital music files, mp3s, digital products became the mainstream of the global music industry.

As digital music has swept the planet, CDs, cassettes and vinyl records have become obsolete; the traditional business model of record labels and music companies is no longer viable.

Song foresaw the inevitable primacy of digital music and began to shift the focus of his company to producing and publishing digital music in 2003. In collaboration with China Mobile, the country's largest mobile phone operator, Song and his team developed the first polyphonic ringtones for the Chinese market.

The digital business was highly profitable. Song earned 20 million yuan ($3.17 million) from his ringtones download service in 2004. The profits Song earned from his cellphone and Internet-focused music ventures stood in stark contrast to the declining revenues he saw in the conventional records business.

By 2011, digital music services accounted for 40 percent of the revenue of Taihe Rye Music.