The cost of music piracy

Rampant music piracy is hampering the region’s economic progress and could be undermining the development of its popular culture.

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By  David Ingham Published  April 1, 2004

|~|PIRACY_IMAGE.jpg|~|If piracy is to be combatted, enforcement of the law is required.|~|Wander along the streets of Beirut, Cairo or Damascus and you’re far more likely to hear the latest Arabic, rather than Western, hits blaring out of open windows and storefronts. When it comes to the loyalty of listeners, Arab music is holding its own in the region. However, more than half of the music that you’re hearing is likely to be playing off a pirated music cassette or CD. The International Federation of the Phonographic Industry (IFPI) estimates that piracy of Arabic and international music reached 60% in Kuwait in 2003. The figure for Hindi music is believed to be higher. In Lebanon, the country that provides the Arab world with many of its most popular stars, the piracy figure is estimated by the IFPI to be 70%. The figure in both Saudi Arabia and Egypt was put at 45% in 2003. Put another way, 3 million units were pirated in Lebanon in 2003, with losses pegged at around US $15 million. Legitimate sales were put at 1.3 million units, worth a combined $6.4 million. In Kuwait, 2.9 million units were pirated, representing losses of $12.8 million. 1.9 million units, worth $8.5 million, were sold legitimately. By contrast, an estimated 0.5 million units were pirated in the UAE, an infringement rate of just 10%, representing $3.2 million in losses. Legitimate sales were 4.6 million units, worth a healthy $28.6 million. “In some countries in the Middle East, we really are seeing that piracy is blatant,” says Willem van Adrichem, regional co-ordinator, Middle East & South West Asia, anti-piracy enforcement at the IFPI. “People sell pirated cassettes and CD-Rs on the street.” The IFPI, which represents companies that produce and distribute more than 90% of all sound recordings by Arab artists, isn’t taking this lying down. It has identified and is trying to battle with three main forms of piracy: illegal industrial CD duplication, burning onto CD-R discs using personal computers and copying of cassettes. Up to 40,000 CDs produced illegally on industrial machines are coming into the GCC each month, according to the IFPI. Pakistan is a major source of these CDs, along with countries in the Far East. Western, Arabic and Hindi music are all victims of the copying. Burning onto CD-R discs is a growing problem that is likely to become much larger given the widespread availability of PCs and CD-ROM drives. By far the largest scourge of the music industry, however, is duplication of cassettes, which remain by far the most popular music storage format in the Middle East Sometimes it’s obvious simply by looking at a cassette or CD that it is a pirate. In other cases, the quality of both the recording and the artwork can be of a decent standard, according to the IFPI. In most cases, the price is the giveaway. “If you know a CD should cost, hypothetically, Dhs10 and it costs Dhs1, I think everyone will realise it’s a pirate product,” says van Adrichem. The question that has to asked, of course, is why all of this matters. Piracy may be wrong, but why should individuals and, more importantly, the governments responsible for enforcing anti-piracy laws, ultimately care? Adrian Cheesley, managing director of EMI Arabia, outlines two very good reasons. Intellectual property rights (IPR) infringement clearly hampers economic development, he says, and it will undermine the development of popular Arabic culture in the long term. “It destroys the culture of a country because piracy means local artists can’t afford to start out in music - there won’t be any music, or it will be very restricted,” he says. “There’ll be no incentive for kids to produce music because it will be pirated and there will be nobody to invest legally in the repertoire. You’re finding it even now to an extent.” The argument is that record companies, faced with the prospect of rampant piracy, will inevitably opt to sign ‘safe’ artists who are more likely to achieve high sales. That means less room for innovative or ‘alternative’ types of music. So rather than opting to sign up an Arabic rock band or one of the emerging generation of Arabic political rappers, record companies will instead support the local equivalent of Celine Dion or Whitney Houston. “There ends up being less choice of music because the music record companies are going for will be very safe. It will be Star Academy or Pop Star because you’ve got a big market for that,” says Cheesley. Evidence that piracy deters investment is clear, he says. He names major recording companies that have either considerably downsized or closed offices in Lebanon in recent years because of the piracy situation there. “There’s jobs lost and investment lost and it means these companies won’t be signing Lebanese or Arabic artists and promoting their music in other parts of the world,” Cheesely says. Shuckri Bundakji, president of BMG Middle East & North Africa, expresses similar sentiments. “Regional countries that support their respective local recording industries stand to benefit greatly by creating new jobs, expanding their economies and encouraging the growth of local culture,” he says. Detractors of the recording industry have frequently cited the criticism that music costs too much and some degree of piracy is therefore to be expected. In the Middle East, that argument is hard to make with cassettes, which generally cost a modest Dhs or SR20, to as low as one or two dollars in Egypt. CDs, which go for around Dhs60 in the UAE, are, Cheesley argues, far cheaper in real terms than vinyl records ever were and their price has risen more slowly than that of, say, paperback books. At the same time, he adds, recording and marketing costs have gone up considerably. The upshot is that record companies are going through a torrid time. All of the big players have seen revenues plummet for several years now, prompting a round of merger and acquisition talks. Globally, the main reason for their pain has been the downloading of music from the internet, characterised first by Napster and more recently by Kazaa. One positive for the regional music industry is that internet downloading hasn’t yet taken off in the Middle East. That’s not to say that it won’t happen, but it is also possible that the internet could represent an opportunity for Arab musicians and music companies. “In the future, digital distribution should help Arab music because it isn’t well distributed outside the Middle East,” says Cheesley. “It will be a way to sell Arab music legitimately to expatriate Arabs.” Mobile phones could also represent a lucrative source of revenue for music companies. Ring tones are already big business and EMI sees downloads of real music to a mobile phone as the logical next step. Cheesley confirms that EMI is now talking to a number of companies in the Middle East about providing its Arabic and Western catalogue for sale online. Services may start in the first half of 2004. In the meantime, physical piracy dominates in the Middle East and is even getting worse in some places. The IFPI estimates that the piracy rate in Lebanon increased from 42% in 1999 to its current level of 70%. The IFPI’s van Adrichem says that countries can deal with the problem if they want to and he holds up Dubai as proof of that. There, he says, the customs authorities, the censorship department and the police all work together to deal with IPR infringement, with the result that the UAE has a piracy rate estimated to be as low as 10%. “I would hope that countries like Lebanon and Kuwait would get more involvement from the police authorities,” says van Adrichem. “If there is a political will, if you have the legislation and you have enforcement of the legislation you can bring down the level of piracy significantly.” One thing that may persuade countries with a piracy problem to clamp down is globalisation. Countries that want to join the WTO have to agree to comply with strict regulations related to IPR protection. Kuwait has been talking about signing a free trade agreement with the United States and Lebanon is negotiating to join the World Trade Organisation. “In every free trade agreement, IPR enforcement is mentioned,” van Adrichem points out. “If the authorities in Kuwait are serious about the free trade agreement, they have to take IPR more seriously. We have to see what happens in the next few months.” Ultimately, piracy can be dealt with if there are three things in place. One is legislation outlawing it, another is enforcement of the legislation and the most important is the political will to tackle the problem. In Lebanon, in particular, the latter appears to be lacking. In July last year, the IFPI and senior recording industry figures managed to secure a face to face meeting with Lebanon’s Prime Minister in which the issues outlined in this article were discussed. Until this day, street vendors continue to sell pirated cassettes right outside the front door of Beirut’s Virgin Megastore.||**||

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