Pirates in firing line as threat to music makers breaks all records

Date: 02/10/1997

EUROPE's 12-billion-ecu music industry is booming. With artists like the Spice Girls, Elton John and U2 filling stadiums and making cash registers ring in record shops across the world, on the surface things could not be better.

But there are dark clouds on the horizon which threaten this success story.

Piracy is also booming. Latest industry figures show sales of pirate music cassettes and compact discs reached 4.6 billion ecu in 1996. Globally, one in every three music carriers (cassettes or CDs) is a pirate.

This parasitic industry which rides on the back of artistic talent is at record levels. Many of the world's CD pirates are on the doorstep of the EU. Worse still, countries playing host to the pirate factories are bidding to join the Union.

Industry is not taking this threat lying down. The International Federation of the Phonographic Industry (IFPI), which represents 1,300 record producers across the world, has launched a lobbying assault on the European Union and on governments harbouring pirate CD plants in a bid to push the issue right to the top of the agenda.

Frances Moore, IFPI's director of European affairs, says Bulgaria and the Czech Republic are two of the main culprits among the countries clamouring to join the EU. She is urging the Union to force these countries to put their houses in order before they are allowed in.

CD plants in Bulgaria capable of churning out 45 million discs a year are flooding the nearby Greek market with pirate music. The Czech Republic, despite having a low level of domestic pirate sales, mops up the spare capacity in its CD plants by exporting pirate music elsewhere. This pattern is also evident in plants across the Far East (see table below).

The Czech Republic is one of the front runners for EU membership in the first wave of enlargement. Bulgaria did not make the 'top five' when the European Commission's opinions on the candidates were published in July, but the IFPI is concerned about increasing pressure for it to be added to the list, particularly from Greece and Scandinavia. “We have heard that they are lobbying for Bulgaria to be admitted. If it were, this would be a dreadful worry,” says Moore.

A key problem, she believes, is that the Commission's July Agenda 2000 report on the readiness for EU membership of states from central and eastern Europe focuses too much on what laws they have put in place to match the Union's main body of legislation, known as the aquis communitaire.

“The point we are making to the Commission is that it is not enough just making sure that these countries get the aquis right. There has to be enforcement of laws as well,” she insists.

Currently, complains Moore, the problem of enforcing the rules - including those on piracy - is “merely being tinkered with” through the technical assistance programmes Phare and Tacis.

Top officials from member companies of the IFPI, which include the six majors (BMG, EMI Music, PolyGram, Sony, Universal Music and Warner), will travel to Athens in November to urge Greek officials to clamp down on imports of pirate CDs from its Balkan neighbour.

At the same time, EU member states have agreed to exert tough trade pressure on Sofia to shut down or control the two errant CD plants which are flooding the Greek market. This follows months of informal contacts between the Union and Bulgaria, which ended in a July fact-finding mission by Commission anti-piracy officials. But despite all this activity, including a high-profile raid on CD plants by Bulgarian officials to coincide with the Commission visit, piracy levels have not changed.

“The informal thing is now at an end. The Commission said it will review the issue in October. We are sure it will announce trade action,” said an IFPI lawyer.

There is speculation that the Union might declare its intention to call for a World Trade Organisation disputes settlement panel to look into the issue at a 28 October meeting between EU and Bulgarian trade officials.

At the same time, while the music industry squares up to eastern European pirates, it faces another, possibly greater, threat from the exponential growth of the Internet.

Pirate CD plants can be closed down and the culprits imprisoned with relative ease. But the fear is that digital sound and video can be pumped through the anonymous networks of the World Wide Web by online service providers and the myriad news groups with scant regard for copyright rules.

Pirate services are already up and running which could dent music companies' ambitions to market their products legitimately over the Internet. They ask how many customers will be willing to pay a bona fide company 15 ecu for an album when they can download it in digital quality on to their personal computer from a pirate website free of charge.

A lot hinges on the shape of a draft EU directive on copyright in the information society which the Commission is set to unveil in November, says Moore.

This is expected to give a legal framework to last year's update of the World Intellectual Property Organisation's Berne Convention to take technological advances such as the Internet into account.

The IFPI and other providers of 'content', such as the film industry, hope Internal Market Commissioner Mario Monti's proposals will provide the legal safeguards to prevent them from being robbed on the information superhighway.

Top of the IFPI's shopping list is a completely new 'distribution to the public' right which would allow record companies to control and be paid for content delivered over the Internet or other high-tech networks such as video on demand. This contrasts with the relatively limited rights of remuneration they enjoy when their content is broadcast on radio and television.

“Early indications are that we will get this 'on-demand' right,” says Moore. But there are fears that it will fall short of giving record companies the same right to payment for music delivered by other interactive television channels and online services which pump out chunks of music or film at regular intervals.

Although customers do not instantly get what they want, they can set their video recorders or Internet browsers to record their choice when it is finally shown.

Moore also fears Monti's directive will fail to harmonise the variety of levies which member states place on blank music cassettes.

This means, in practice, that governments will be free to decide whether private home copying is tolerated or not. If it is, they will continue to levy duties on blank tapes which are then shared out among rights holders to make up for lost revenue from home taping.

Eleven member states currently operate remuneration schemes, coupled with an exemption from the reproduction rights of copyright holders where home copying is concerned. Only the UK, Sweden, Luxembourg and Ireland do not impose such a levy.

But, confusingly, the Commission is expected to grant legal protection to the anti-copying devices which record companies are starting to put on their products to thwart home-tapers.

“What puzzles us is that we might not be able to exercise our right to use technical controls if the private copying issue is being left to member states,” says Moore.

The IFPI is now waiting anxiously for details of the proposed directive, which are likely to emerge when it leaves Monti's Directorate-General for the internal market (DGXV) for scrutiny by other Commission services, probably later this month.