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Mon 5 Aug 2002 04:00 AM

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Grand Theft Audio

Five record companies — Sony, EMI, Bertelsmann, Warner and Vivendi Universal — dominate 80% of the global music market. Nothing could stop them, until MP3 came along. ITP.net looks at how digital audio is threatening the Middle East music industry.

Introduction|~||~||~|Music. To some people it means nothing at all. To others it’s just another commodity. But to people like us it is a necessity of life, and it is indeed an expensive craving to satisfy. Retail prices for CDs increase year on year, currently reaching in excess of US$20 per album. But we were quoted just over $1 to produce one audio CD if we ordered 1000 from Analogue Media (www.amtechdisc.com), including casing and a four-colour print cover. With billions of records sold annually, the difference represents an overwhelming profit, the largest proportion of which goes to the label, not the retailers and not the artist.Record companies claim that CDs are worth their street value because of the superior sound quality they offer compared to older, cheaper formats, namely cassettes and LPs. Plus, there are hidden expenses in the production of major albums: royalties, publicity, publishing rights and distribution. But, there is no disputing the fact that the cost of making CDs has fallen while retail prices have inflated; someone is making a handsome profit at the expense of we audiophiles.Little surprise, then, that free music download from the internet is booming. Statistics suggest that ‘MP3’ has replaced ‘sex’ as the number one search word on the net and, despite the collapse of Napster, the format continues to grow in popularity.Developed by the Motion Pictures Expert Group, MP3 stands for MPEG Layer 3. It is a compressed audio file technology, decreasing the space required to store a standard CD track — which is a lot — making download and file sharing over the web faster. MP3 tracks are between 2 and 5 megabits in size, but this is up to 12 times less than the equivalent size in CD format.Released in 1992, the music business initially dismissed MP3 as a craze for computer geeks, but has since been stung by the rapid rise of downloads. Reports suggest that copyright infringement costs the global industry in excess of $14 million a day, and the internet undoubtedly accounts for a significant and growing share of that. Proof comes in figures announced last month that estimate a 5% drop in worldwide music sales over the last 12 months; 10% is predicted this year.The biggest long-term threat to the industry is the digital piracy of CDs before commercial release. Promotional singles and albums sent to radio stations, television music channels and club DJs are finding their way online so that, by the time they are released, the market is already consumed. Britney Spears’ single I’m a Slave For You was downloaded 200,000 times from the FastTrack network four weeks before its official release last October. ‘Not a big issue,’ you may rightly say, but then recently, Heathen Chemistry, the new album from Oasis, was distributed on the internet a full three months before its formal launch. Now pity the talented piper who doesn’t get paid.Despite high profile lawsuits from US record companies and watchdogs, MP3 media is increasingly attainable. The download site Napster.com pioneered the software technology that allows surfers to share content between their computers, in other words ‘swapping’ files rather than downloading from Napster.com itself. Napster simply provided the software — free of charge — through which this could be done. At its peak, the site attracted 15 million users with 2.8 billion songs traded in a month. Though now shut down, there are still plenty of similar sites continuing to avoid legal action. The Middle East defines mass copyright violation at its worst. The sale of counterfeit CDs and music cassettes has been rampant for a long time, while the public broadcast of music without licence dissuades future investment in the region. Free internet music is the latest dimension in illegal trade, and it is less visible and a hopeless case for policing.The International Federation of the Phonographic Industry (IFPI) represents the global recording trade and chairs the fight against piracy on behalf of its 1,400 members. According to the federation, there are six high priority countries in the Middle East: Egypt, Lebanon, Saudi Arabia, Kuwait, Syria and Pakistan. The pirate market in Egypt alone is worth an estimated $46.5 million, or 48% of the country’s total. Estimates for Lebanon, Saudi Arabia and Kuwait are over 50%.One man on the front line of the war against piracy is Willem van Adrichem, the Middle Eastern representative of the IFPI. He points the finger at Pakistan: “They export at least two million [counterfeit] CDs a month,” he says. “That includes all formats: VCDs, DVDs, software and audio. There are eight illegal CD plants in the country and they are capable of exporting an enormous number of products.” He adds that Dubai, due to its proximity to Pakistan, is the hub for regional transit routes. Eddie Esho, branch manager of distribution company SIDI, adds: “Internet piracy is a major problem as it is hurting sales. The end user is getting a downgraded product at a cheaper price. The owners of the music are not getting their dues, and that is affecting the whole cycle.”Mekki Abdulla, managing director of the Arabian Radio Network, says that the local music industry is being damaged as revenues are lost to piracy. “The money is no longer there to develop new talent and, while you have a niche of established artists, you no longer have a high volume of fresh talent coming through,” he says.Tambi Fernando, managing director of Emirates Studios, gets to the crux of the problem: “Why would people spend their money on a legitimate download when they can get the exact same piece of music for free from a different site?” he asks. “The internet and the wealth of MP3s available has killed the music business. If music is downloaded without charge then there is no money coming back into the industry. And, if there is no money coming back into the industry, then there is no money feeding the production houses nor the artists.”Another source, who wished to remain anonymous, echoes the point: “Why should I pay Dhs50 for a CD in a legitimate store when I can purchase the same music for Dhs12 from a street vendor? CDs are too expensive, so if I can buy them cheaper, I will.”Stewart Morrison is the marketing manager at BMG Middle East and North Africa, one of the few major labels with a strong presence in the region. He disagrees that the internet will kill the global music business, saying that people have forecast this for decades: “They said that music cassettes would be the death of the industry when they were first introduced,” he says. “Then mini-discs were the next menace, and now MP3 files and CD burners are seen as the threat. At the end of the day, consumers will always want a record collection. It is like stamp collecting: people want to keep a physical object.”True enough, but the MP3 boom has highlighted the problem that CDs have out-priced themselves. And, considering that you are lucky to have three decent songs on the average album, the ability to customise your own compilations with individually downloaded tracks is an added bonus of MP3. The internet has become a twenty-first century listening booth. If you like the sample, then you can buy the real McCoy. Furthermore, supporters of free MP3 download claim it is a valuable resource for unsigned bands to find their own audience; they are no longer subject to the preferences of broadcast executives who decide what’s played on the radio. The internet, it is said, is the greatest tool of democracy.Napster has come and gone, but there is a large number of online services out there offering the same, and they are proving harder to close down. So, if you can’t beat them, join them, and that’s exactly what the international record labels are doing. A host of new subscription-based MP3 sites are being launched, and this middle ground may prove the solution to lowering music retail prices. A heavy-handed approach to the likes of Napster by the industry giants failed to kill consumer demand for free music as we found alternative sources of MP3. Instead, the big labels decided to sleep with the enemy. BMG made the first move, buying out financially-stricken Napster following its expensive court defeat, while Sony and Universal united to create PressPlay, and EMI, Bertelsmann and Warner formed MusicNet. All are legitimate, paid-for music download services that offer a range of pricing options and custom packages. It’s not free, but it’s cheaper than buying from the stores. Stewart Morrison from BMG: “I think the internet offers a lucrative opportunity, particularly for us here [in the Middle East]. We deal with 22 countries and crossing borders is physically difficult. If we could market music from one network across borders without physically shifting CDs, then our job would become a lot easier. By just directing people to the website, we could save a lot of time and money.”A generation of internet users have grown up used to the idea that music does not need to be bought. The question is, are they willing to pay now? As you read this, 2.7 million people are logged onto free file-swapping services; there are many more in total. Piracy will never go away — it never has — but the music industry has a long way to go before it convinces the public that its products are worth the price.||**||

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