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Legal Due Diligence in the Digital Music Industry of Vietnam

Written by: Chris Vale, Trung Tran


The rapid expansion of Vietnam’s digital music industry and recent successes of large streaming services in Vietnam will no doubt prompt the emergence of other foreign players into the market. Global giants Apple and Spotify can extend their existing platforms, but for new entrants we are seeing an increase in the acquisition of Vietnamese music platforms with ready-made reputations and large customer bases.

License and Permit

Vietnamese digital music companies tend to offer a multiple-in-one package. This entails a website functioning as either a music streaming platform or a social networking site, and a mobile music application for streaming or downloading content with a Wi-Fi or cellular connection.. The requirements include:

  • Online Social Network Establishment License – For social networking service, although failure to obtain this license can result in revocation of the domain name.

  • Registration Certificate for Service of Content Provision on Mobile Telecommunications – For cooperation with mobile network providers to provide the service in unlimited and high-speed data packages.

Content

Content protection is at the heart of digital music so intellectual property issues are of utmost importance.

  • Non-centralisation of copyright/related right collection: Most CMOs only manage copyrights for the music compositions or related rights for the records. Accordingly, for proper licenses of a work, the company must contract with two CMOs.

  • Immature Capacity for Managing License Portfolio: A digital music company may have to manage a million licensed works with varying licensing scopes and terms. Few Vietnamese companies have developed an advanced internal system to properly manage such a large license portfolio.

  • Contractual Compliance: Most license agreements limit the use of content to Vietnam, restrict certain types of devices or platforms for streaming, require labelling of explicit content and security of the content from redistribution and infringement. Usually these obligations are not observed, constituting a contractual breach.

  • Non-transferability of integrity rights: In Vietnam, the employee retains the right to the integrity of the works. This is bad for employers as it can potentially block them from modifying the content.

Cybersecurity and Privacy

  • Internal cybersecurity requirements: Vietnam’s cyber-information security law requires most digital music companies to establish an internal cybersecurity unit, arrange annual cybersecurity examination and assessment with competent agencies.

  • Consent for data collection: This ensures users provide complete and precise data with opt-in consent for collection. In practice, these obligations are often neglected.

As the digital music industry becomes increasingly lucrative, foreign investment will continue with further M&A activities. However, the acquisition of digital music companies may not be a common practice that Vietnamese DD lawyers are familiar with, proving that the knowledge in specialised legal areas such as intellectual property or data protection law is essential in dealing with DD.

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