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Russia: Music Industry Battles Rampant Piracy

  • Sophie Lambroschini

A delegation from the World Trade Organization arrives in Moscow later this week (30 March) to monitor Russia's progress in meeting requirements for joining the trade group. Among the WTO conditions is concrete action by Russia to protect intellectual and industrial property rights -- including the rights of music-industry professionals. Music piracy is rampant in Russia, where a dearth of protective legislation has cost the recording industry hundreds of millions of dollars a year. RFE/RL correspondent Sophie Lambroschini looks at how law-enforcement organs and music professionals are fighting to control the problem:

Moscow, 27 March 2001 (RFE/RL) -- "They can say that friendship between women doesn't exist. They can say what they want, but I know we won't give up the warm friendship that fate gave us for anything...."

Pop stars Alyona Apina and Lolita got together to record this song on "women's friendship" and saw it rise to the top of the Russian charts. But for Russian pop stars, a hit record is not enough to guarantee success.

Rampant piracy in Russia's music industry eats away at recording royalties, forcing most performers out onto the concert circuit as the only sure way to earn income. Composers like Lora Kvint, who wrote Apina and Lolita's hit song, are even less lucky. With millions of pirated recordings in circulation in Russia, even popular composers like Kvint have almost nothing to show for their success:

"The royalties I receive are extremely strange. After my songs appeared on CD recordings by Filipp Kirkorov, Alyona Apina and Lolita, and a few other famous singers, how much do you think I made for the entire year? $63. I think it's useless to ask for the paperwork proving that this is correct -- [the producers] just explain to me that it's all right and fair. So I think it's better not to fight with anyone, to just get my $63 and make peace with the thought that that's what it means to be a Russian [artist]."

At least six out of every 10 CDs sold on the Russian market are considered illegal -- produced and sold without a license. According to the International Federation of the Phonographic Industry, or IFPI -- a 1,300-member organization fighting piracy worldwide, -- each illegal recording sold means a loss for both the artist and the studio that paid out a hefty sum to produce the CD legally. The IFPI estimates that the Russian music industry loses upwards of $300 million a year in revenues to piracy.

Even so, Russia is not the worst offender inside the CIS. That distinction falls to Ukraine, a worldwide provider of counterfeit discs with five known CD replication plants and an overall capacity of 70 million discs a year. Those numbers have put Ukraine at the top of IFPI's list of offenders and under the threat of possible U.S. trade sanctions.

But Alexander Indeykin, an IFPI regional anti-piracy coordinator, says Russia could soon overtake Ukraine in pirated CD output:

"Over the past year we have observed an increase in pirated exports from Russia. To tell you the truth, this year or next year Russian pirates will already be able to create problems for the world music industry. We have information that the largest Ukrainian producers, the ones with the best equipment, may transfer their production to Russia, because of the measures taken by the world community and the United States to limit Ukrainian trade."

But Russian authorities claim that are hitting back hard against the country's pirates, in accordance with WTO standards on intellectual property rights. As proof of their efforts, they point to Moscow's recent closure of the Gorbushka outdoor market, where thousands of people would flock on weekends for the city's best selection of pirated and legitimate CDs, videos, and computer software.

Although the closure was protested by Moscow consumers and Gorbushka salespeople alike, city authorities claimed the market was a haven for counterfeiters and their goods. They said over 8,000 illegal CDs were seized at the market just before it was closed last month.

A replacement to the Gorbushka market is being constructed at what the mayor's office called a "more civilized" site where illegal sales, racketeering, and tax evasion will be nearly impossible. To soften the blow to consumers of a 30-percent price rise to "legitimate" levels, authorities have organized a free anti-piracy rock concert, featuring some of Russia's biggest stars, to mark the opening of the new market next month .

Music-industry professionals find little to celebrate in the change, however. Artyom Arefiev, sales director for the country's Universal Music label, says closing the Gorbushka market may have delivered the deathblow to an already difficult business.

"Pirated production was and is still being sold in Moscow. And the closing down of the Gorbushka did not change the situation -- or it did, but only for the worse, because we lost a lot on original CD sales there. [I] can say we lost about 20 percent of sales. People who used to buy authentic CDs [at the Gorbushka] don't know where to get them now -- so the only solution for them is to buy pirated products, [which are easy to find.]"

Copyright violation has been a punishable criminal offense in Russia since 1997. But industry professionals and law-enforcement officials alike say there has been little in the way of effective change.

Ivan Sobolev, deputy head of Moscow's economic crime unit, says part of the problem is that a rights' holder must file a complaint before police can act:

"We mainly work not to fight piracy, but to protect the interests of the legal holders. Without an official complaint by a legal holder, there is no criminal case."

Filing a complaint can sometimes be a lengthy bureaucratic process. Igor Mikryukov, who heads an advocacy group defending rights-holders in Russia, says that even cooperating with police in the end bears little fruit:

"[The police] send us a concrete request to analyze the product, to take part in trials and investigations. Every day we get about 10 such requests. There are dozens of cases of administrative punishment, but only a few criminal cases with a prison sentence -- these are very rare."

According to IFPI, only 54 people have received prison sentences for piracy in Russia. An additional 159 people -- usually retailers -- have been fined.

Universal Music sales director Arefiev says the situation in the music business is a reflection of the overall Russian economy, where law-enforcement organs are often working on the wrong side of the law:

"There was a time when I would take part in [fighting piracy] myself. I would go to a kiosk, see pirated goods there, and would call the [district militia to report it.] There I would be told 'well, you see, a high-placed militia officer controls this kiosk, so we can't do anything about it.'"

The music industry has tried a number of ways to fight piracy, including slashing prices. Few Russians can afford a $15 CD manufactured abroad, especially when a pirated copy can sell for as little as $2.

But Russian recording industries are hoping to counter that trend by issuing new, more affordable discs produced in the CIS. Both the Universal and BMG labels have launched a so-called "Cyrillic Project" -- a special series of locally manufactured discs that sell for between $4 to $6 apiece.

Music rights advocate Mikryukov says he hopes Russian consumers who usually buy pirated music will find the better quality of the legitimate CDs a good reason to pay the slightly higher prices:

"This [legitimate] CD can cost between 100 and 150 rubles on the shelf. The pirated one costs 60 rubles. But to buy a beautifully made [CD] -- which [quality-wise] cannot be compared with a pirated one -- is [economically] completely realistic. We did [market] research, and in fact, the buyers' criteria are the same."

Mikryukov says other anti-piracy measures include marketing incentives like contests and free prizes to persuade consumers to buy the legal CDs. Special packaging and holograms are also meant to help law-enforcement officials distinguish real CDs from fakes.

But Mikryukov says competition is continuing as the piracy industry grows more and more sophisticated, often blurring the line between legal and illegal production:

"It's growing bigger, stronger. Links are being established by pirates between production and sales. They're adapting, optimizing their production, making it cheaper and better. In one district near Moscow, [pirates] were using industrial-quality equipment whose quality was indistinguishable from legal production because during one shift they would make legal [CDs] and during the second and third shift -- fakes."

Mikryukov says some companies will also apply for licensing rights to produce 1,000 CDs but will produce an additional 3,000 on the side, for which they pay no fee, taxes, or royalties.

Some professionals have simply tried to strike a legal deal with potential pirates. IFPI's Indeykin explains that clear, transparent contracts with factories and timely payments can turn production units away from the temptations of CD printing orders from well-paying but unreliable pirate clients.

Arefiev also said that he tried to negotiate with pirates who want to, in his phrase, "go clean," and offered to sell Universal's production in the regions for legal distribution. But, he said: "[We] just couldn't settle on a price. What they offered, while probably representative of the local market, was just too low to accept, or we would be selling without any profit."

For the time being, Russia's economic realities seem to indicate that no major improvements in the industry are likely soon. Until the majority of Russians can afford to buy legitimately produced CDs, the music industry will continue to do battle with the pirates.

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