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Although the market is growing steadily and service providers generate more than $2 billion in revenue by sales of music downloads and ringtones each year, the revenue of the recording industry is less than $100 million annually.

Shen's label is enjoying its best days, with bands drawing big crowds at live music shows, especially music festivals, which are becoming popular with young Chinese.

"For those who want to build up a fan base in China, performing at music festivals has proved to be a good way to go," Shen says. "The core is still the artists and the quality of their music."

When he selected the foreign lineup for his music festivals, Shen didn't choose the top three big-name bands listed on Chinese music websites, such as Xiami, and social networking websites such as Douban. Instead, he chose those artists who are not big-name stars but have a stable fan base in China.

"Now Chinese music fans have a wide access to international musicians through the internet. What we do is introduce new artists to them," he says.

The upcoming Modernsky Music Festival, which runs from Nov 27 to Dec 8 in both Beijing and Shanghai, will see bands from the West, including Swedish rock band The Cardigans and twin sisters Tegan and Sara from Canada.

"For the artists from the West, careful preparation and good contact with local promotional companies are important. They have to create a Chinese context," advises Mathew Daniel, R2G vice-president.

Live Nation China also analyzes the Chinese market before deciding whether to organize a tour for an artist. That includes checking song downloads and social media as well as talking to trusted peers in different cities, says Robb Spitzer.

Spitzer is optimistic about the Chinese market. While international stars only used to perform in big cities like Beijing, Shanghai and Guangzhou, Live Nation China now organizes tours through five or six Chinese cities.

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