Beijing, Jul 4 (IANS): The music industry in China is struggling, and at a crossroads. Music producers complain that they are losing out to piracy and the rise of digital media, according to a Chinese daily.

Although China is the world's second-largest economy and has a population of more than 1.3 billion, its music sales ranked 22nd in the world last year, the Global Times reported.

Earlier this year, Song Ke, one of the most popular music producers in China, said he was quitting the business to run a roast duck restaurant.

Song, former deputy general manager and production director of Warner Music China and founder of Taihe Rye Music Co Ltd.

"China's music industry is at a crossroads. We all need to think about what to do," Song said.

Last year, China's music industry earned $82.8 million in total sales, according to the International Federation of the Phonographic Industry.

But 76 percent of that total revenue came from digital sales. Sales of compact discs, records and cassettes totalled $19.9 million across the country.

Online piracy has been the main reason behind the drop in record sales that dropped to $19.9 million last year. Sales had reached $55.5 million in 2006.

In 2010, more than 70 percent of the revenue from China's music companies came from digital music sales.

Another factor harming China's music industry is revenue distribution.

If a song generates 100 yuan in revenue, only two yuan go to music producers in the form of royalties. The remainder goes to telecom operators as well as internet service providers.

In many countries, music producers take a bigger share of sales. In the US, music companies can get up to 70 percent of music sales, while in Japan, 90 percent goes to producers, said Zhan Hua, CEO of Taihe Rye Music.

Producers also complain they are losing out to the ring tone business.

China Mobile made more than 26 billion yuan in 2010 from ring tone sales, a figure that exceeded 30 billion yuan last year, according to the China Audio-Video Association.

With limited income from records, many bands are turning to tours.

Tian Jianhua, spokesman for punk band Reflector, said the band puts up more than 200 performances a year, but its best-selling record has sold only about 100,000 copies.

Record label Modern Sky has gone for music festivals. Each year, the company hosts the "Strawberry Music Festival" in Beijing, Shanghai and Xi'an.

A company called 13-Month, famous for finding folk bands, has held an annual national tour called "Folk on the Road" since 2009. It is also producing short films. Only 10 percent of its more than 10-million-yuan revenue last year came from royalties.