Wednesday, September 7, 2011

Music Piracy: A music industry insider talks illegal downloads, new laws, and 10 billion iTunes downloads

by RICK GOETZ on AUGUST 31, 2011 · 14 COMMENTS
Excerpted from an interview originally posted on
Whichever side of the fence you’re on in regard to the issues of music piracy, as artists creating music for public consumption, it’s a topic of special concern. Here, Alex Jacob of the International Federation of the Phonographic Industry (IFPI) talks about the music industry, illegal downloads, and some of the causes the IFPI champions. The IFPI is Europe’s equivalent to the Recording Industry Association of America (RIAA), the group that represents the interests of the major (and other) labels, distributors, and producers in the music industry in the U.S.
Tell me about IFPI.
IFPI is the international trade body for the record labels, both the four internationals and also many hundreds of independent labels throughout the world. We exist to try and persuade governments and policy makers of the importance of strengthening intellectual property laws in the Digital Age so that our members can continue to invest in artists and produce great new music. We also work to extend the rights of our members in areas of Public Performance Rights. For example, you might know that the U.S. is one of the few countries that doesn’t have broadcast rights for producers or artists. So that means unlike in the UK or in France, every time a radio station in the U.S. plays a track, it pays the songwriter, but it doesn’t pay the producer or artist. When you have a $20 billion corporate radio industry, that’s potentially a lot of money that the music industry is losing out on in comparison to other countries. It also means that when American artists are played on radio stations overseas, that money doesn’t float back to them because there is no reciprocal arrangement for when overseas artists are played in the U.S. Those are the kinds of campaigns we work on.
That sounds like SoundExchange if it covered the non-digital broadcasts.
That’s absolutely right. And then you have sister organizations of SoundExchange such as Phonographic Performance, Ltd. (PPL) in the UK that collects income from radio stations and TV stations that use recorded music. These music licensing companies work very closely with IFPI and our performance rights committees to try and ensure that the best practice is copied around the world and that the rights of producers and artists are extended around the world so that everyone enjoys a level playing field.
Would you say the primary function of the IFPI, at this point, is to protect digital copyright? Is that where a lot of your efforts are focused?
Yes. IFPI has been around for a long time. It was founded back in 1933, and has always fulfilled a range of functions. But piracy has always been right up there on IFPI’s agenda. And piracy has a physical world too – the CD world. At one point, roughly one in three CDs sold worldwide was a counterfeit and had no money going back to the artists and record producers, so it was obviously a major issue. In the digital world, we estimate that 95% of music downloads online are unlicensed and illegal, with no money going back to the producers and artists. There’s a quantum leap in the level of piracy from the physical/CD world into the digital world. When you’re laboring under that burden of an industry, it has to be one of your major priorities.
Do you think there is any going back at this point? Do you ever foresee a time where Pandora’s Box will close?
I think we’re very keen to embrace the legitimate use of technology. Our members have licensed more than 30 million tracks through over 470 legal services worldwide. So, there’s no objection to making music available to consumers and music fans online. The problem is obviously the illegal downloading and streaming – the piracy problem. And as I said, 95% of music downloads are unlicensed and illegal. That’s one hell of a figure. We do think that we can improve on that. We’re starting to see countries worldwide introduce legislation to tackle the problem – in France, South Korea, New Zealand, the UK. Governments are starting to put laws on the books that actually require some cooperation from internet service providers (ISPs), who are effectively the gatekeepers of the internet. In tackling online piracy – not just of music, but also of books, films, software, games – President Sarkozy has convened this huge conference in Paris in which he’s brought together the content industries and the tech industries to talk about how we can create what he calls a “civilized internet” – an internet where privacy laws are respected, that can’t be abused for criminal use and one where intellectual copyright is respected and creators can actually get some remuneration for their work. And that doesn’t just mean in the music industry or with iTunes or other services. There are many different business models out there. There are streaming services that are free for people to use and enjoy, such as Spotify, and YouTube is of course extremely popular as a free-to-use video streaming service. Alongside that there are subscription services and download stores.
But it’s that help from government that we feel can help us move the needle in terms of piracy. We’re doing our bit in terms of licensing all these range of services. And now governments and ISPs need to do their bit to establish the rule of law online and stop it from being, as Prime Minister John Key of New Zealand said, a “wild west.”
Where do the negotiations in the U.S. and the UK – which are two of the biggest music markets on the planet – stand?
In the UK, the Digital Economy Act was passed last year. It still has to be fully implemented. There was a judicial review of the Act brought by two ISPs that was rejected, although they are now considering whether or not to appeal that. But under the terms of the new Digital Economy Act, ISPs have to send notices to individual users that are uploading copyright-infringing files and say, “We know what you’re doing, please stop and start using the legal services that are out there.” And if a system of notifications alone doesn’t work in the UK, then ISPs will be mandated to bring in sanctions.
What about in the U.S.? Have you made any headway with government stepping in and protecting these rights?
We certainly have a lot of political support from people like New York Governor Cuomo, Vice President Biden and from other politicians. I know the film industry as well as the music industry has been trying to reach out to ISPs. There is no response at the moment, but we’re hoping the U.S. will look and see what’s happening in other countries like France and the UK and see the success story from those countries that may move things forward.
What about the ratio of purchase to piracy? Has piracy planed at this 95-percent rate?
The ratio of pirated music to legally-purchased music has been pretty constant. But what we’re seeing is that as broadband networks roll out across the world, both the legal and illegal consumption of music increases in tandem with that rollout. So, the 95-percent rate has remained constant, but that percentage reflects both rising piracy and also rising legal sales. iTunes for example, earlier this year marked its 10-billionth music file sold. Legal services are popular, but at the moment they are still dwarfed by piracy. We very much hope that all the work we’re doing to try to get a modernized set of copyright laws along the lines you see in countries like France and South Korea will help shift the needle on the 95 percent. The first graduated response systems have only started running in the last few months, so it’s still very early days. But we have to be optimistic that both the new services that are coming on stream and these kinds of actions that are backed by government will have an effect.
Is there anything copyright /content holders can do that lessens the amount of piracy?
Absolutely there is. We run an internet anti-piracy team here, and our international groups do as well. If record labels register their content with us, then we can put out content protection guys to work to try to curb the amount of illegal distribution of their work online. Last year for example, the internet anti-piracy group here in London secured the take-down of seven million infringing links worldwide. They can also help record labels talk through their whole protection procedure, ensuring that they have the best systems in place to minimize the damage from leaks. It’s very difficult to avoid all leaks, particularly once the CD has been shipped out from the factory to the stores ahead of sale. But they can help you reduce the leaks during the period before the official release. And the average leak a couple years ago used to be several weeks before an album was released; now it tends to be just several days. That is at least mitigating some of the impact. And of course subsequent to the leak are take-down notices put out against the blogs and forums that are posting links to the illegal content. That kind of action can really make a difference and can make all the difference to an artist’s initial chart position that, as you know is so important when they’re trying to market the album further and get on. The difference between getting into the Top 20 and not getting there is huge.
So, it certainly is worth any record label, small though they may be, talking to their IFPI-affiliated national group and registering their content so we can help them.
So, quite literally, someone would go to the IFPI directly – or the RIAA in this country – and just register. Does the size of the label matter? Do you have to have a certain number of copyrights?
No. The actual official IFPI statute talks about making sound recordings available in “reasonable numbers.” We have many small independent members that have a fairly limited repertoire. But our internet anti-piracy guys are out there working on the big Taylor Swift releases and also classical indie labels like Hyperion on their piano concerto series. There’s a full range of work they undertake. Definitely the advice I’d give to any record label is to go speak to your local industry association and register your repertoire.
Most of our readers are DIY musicians. So, if you’re a single artist that started a record label to release your own album, and then you went to any of the direct distributors – ReverbNation, TuneCore, CD Baby – would you be eligible for the types of services IFPI and its affiliate organizations offer?
Off the top of my head, I think you would be. If you’re making sound recordings available, even through a partner, and at a reasonable level trying to commercially sell them, you’re certainly someone we’d be interested in talking to. The systems are here and set up and working. We recently had a conference organized by the Association of Independent Music (AIM) – which is the indie body in the UK – to try to set up small indies. And they are often artists that are self-releasing and forming their own label.
Alex Jacob is the Senior Communications Executive at the International Federation of the Phonographic Industry (IFPI) in London, UK. He has worked at the IFPI for over five years as a member of the communications team. He is responsible for reaching out to stakeholders and working with the media to explain developments in the music industry and the steps required to develop a sustainable digital music sector in the future. IFPI is headquartered in London, but has offices worldwide in cities including Miami, Hong Kong, and Brussels. The organization also works with 45 affiliated groups, such as the British Recorded Music Industry (BPI) in the UK, the Australian Recording Industry Association (ARIA) and the Recording Industry Association of America (RIAA) in the U.S.
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Read more: Music Piracy: A music industry insider talks illegal downloads, new laws, and 10 billion iTunes downloads | Echoes – Insight for Independent Artists

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