Mon, Oct 27, 2003 page11

• Net piracy is killing local music industry

  The International Federation of the Phonographic Industry (IFPI) is suing two local internet sites (kuro.com.tw and ezpeer.com.tw) that supply software to enable peer-to-peer (P2P) file-sharing and provide on their servers central index lists of the files available on their subscribers' hard disk drives. The IFPI is also suing three P2P end-users. Following his interview last week with kuro.com's chief executive officer James Chen, `Taipei Times' staff reporter Bill Heaney talked with Robin Lee, the federation's secretary general in Taiwan, about why his members have felt the need to turn to Taiwan's courts in the fight against P2P

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  Taipei Times: How much is P2P and Internet piracy hurting the music industry in Taiwan?

  Robin Lee (李瑞斌): More than 70 percent of consumers in the record industry are aged from 12 to 22 or 24, and they are all computer users. The physical market for legal products has been going down from 1997 when we had NT$12 billion in revenue to 2002, when it was only NT$4.9 billion.

  Meanwhile, the problem of piracy in night markets has also been decreasing. This year, the number of vendors of pirated music products in the whole of Taiwan is now only 50, according to our survey for the first half of this year. Last year it was 300. This is due in part to the government's special [anti-piracy] task force but also because Internet piracy has expanded. Internet piracy is more attractive than night markets.

  

  Robin Lee, secretary-general of the International Federation of the Phonographic Industry office in Taiwan, holds a poster showing dozens of Taiwanese music stars which was used in an anti-piracy campaign, during an interview last week. Lee says the federation is suing two local Internet sites that supply software for peer-to-peer file-sharing and three end users to send a message that piracy is piracy, no matter what form it takes. He says Taiwan's music industry has been badly damaged by piracy.

  PHOTO: SEAN CHEN, TAIPEI TIMES

  Kuro says they have 500,000 users who pay NT$99 per month. That means their income is around NT$600 million per year. Ezpeer charges NT$100 per month with 300,000 members. That means Ezpeer has NT$360 million in income. They have NT$960 million in total. The legal physical market is only NT$4.9 billion, but only two Internet P2P sites can earn NT$1 billion. You can see how big this market is and how much we are losing.

  TT: The P2P community claims that the music industry is behind the times and wants to keep the physical market -- compact disks -- as the primary channel for selling music with the Internet as secondary. How do you respond to that?

  Lee: This is not true. We are not fighting against new technology. What we are against is people using technology to hurt copyright owners. For example, music formats keep on changing, and we were among the first to move from the LP to the cassette to the CD to the VCD and DVD, and in the near future CDi.

  You can run your business with leading technology, but you need to get permission or authorization from the copyright owner. And it's not just happening in music, it's also happening to motion pictures, books, software and computer games. The Internet market cannot replace the physical market, but the Internet is a new commercial way of distributing music. We are trying to co-operate with new technology.

  TT: How are you trying to do that, since you have rejected Kuro's offer to collect an extra NT$50 on top of their NT$99 monthly fee and pass that money directly to the music industry as a kind of royalty fee?

  Lee: Kuro and EzPeer are not the only two Internet business models. Now there are seven Internet companies negotiating with the music industry. They are all trying to cooperate with the record industry to create a new way of e-commerce, via download MP3, or streaming files. [Apple Computer Inc's music download site] iTunes is acceptable as each tune pays a royalty. We [the IFPI] are not a business, and we do not negotiate business terms -- we focus on copyright protection.

  We set out three conditions.

  First, get legal permission. If you want to use our music in your system, you need to get our permis-sion. Second, you need effective control which means that you can only use the titles authorized by the record companies and must stop users sharing the titles you do not have the right to use. Third, you must have transparent reporting, which means you need to let me know how many times my titles have been downloaded or exchanged in the last month, or last two weeks, so that we can calculate the royalty and then how to share the income.

  I have talked to Kuro three times since the end of May, but they said they cannot accept the second condition -- effective control. That is the most important one. It's like running a record shop and saying I'm not sure whether half the products in my shop are pirated. How can you expect the record companies to accept that?

  Some of the seven negotiating with us now are P2P like Kuro and they say they can control effectively. For the record companies, they will choose the one who can offer real, effective control. branches

  TT: Many users want to buy music over the Web legally from labels, but very few offer the service. By being so slow to adapt to users' habits, doesn't the music industry only have itself to blame for the rise of unauthorized file sharing?

  Lee: Physical products are easy to control. The labels have branches all over the world. The branches in Taiwan can only control the physical market here. The Internet is global.

  But there are examples. ROC Records is already co-operating with Chunghwa Telecom Co's (中華電信) Hinet, but they are not making money. People do not want to pay more than NT$100 to get everything, as they do on Kuro and Ezpeer. They don't want to pay per song. For example, Warner Music launched a new song from Sun Yan-zi (孫燕姿) in December for NT$20 per download, but Taiwanese don't want to do that. How can you expect legal companies to survive when there is Kuro and Ezpeer?

  TT: Kuro and Ezpeer do not place any of your members' titles on their servers. The titles are stored on subscribers' individual computers. They say they are innocent of copyright infringement. How do you respond to that?

  Lee: Subscribers can search the central index on Kuro's server. That is why Kuro is different. I type in a key word and within seconds I can see who has the music file. If I did not join Kuro, I can not know what is in your computer, that's the point. I do not know you, so how can I know what files you have to share? Who shows me? Kuro.

  TT: You have not managed to close the two sites so far. Does that mean they are legal?

  Lee: We took Ezpeer to court already a year ago and Kuro in August, but we are still waiting for the court decisions. If Ezpeer goes first, then Kuro could go much quicker as Ezpeer is a leading case, and a leading case needs time.

  TT: Many titles are already available too widely to protect, but can't you develop technologies to protect new titles?

  Lee: Music is the easiest to digitalize, so we were hurt first. But on Ezpeer, users can also offer motion pictures so other industries are already at risk. We have a copy-control system in the copy-control CD (CCCD), but the technology is not so strong, so it is easily broken. We also tried to make sure our disks could only be used on players, and could not be burned onto other disks or computers. But the music industry received lots of complaints from users who wanted to play music on their computers. We are trying to educate consumers that you cannot buy one and use it everywhere.

  TT: The Ministry of Economic Affairs' Intellectual Property Office recently said you and Kuro/Ezpeer have to work out a deal on Internet licensing. Will you go back to the negotiating table now?

  Lee: This is a legal case. It is also a business case. The government has no authority to stick its fingers into this case. We have to wait for the courts to decide, but it doesn't matter if it's a business or not.

  According to the Copyright Law (著作權法), making over five copies is a criminal offense, but within five copies it also infringes our copyright, but then it is no longer criminal, it's a civil case. If it's over five copies, I'll sue you in the criminal courts, if less, then I'll sue you in the civil courts.

  TT: Don't you think that suing existing or potential customers is counterproductive?

  Lee: I don't think so. Piracy should not exist in either the physical or the Internet market. Should consumers get music without paying? No. The consumer needs to be educated. We are protecting not just the copyright owners' rights, we're also protecting consumers' rights. If consumers pay a little money to buy pirated products, we cannot protect them.

  TT: With piracy hurting the music industry so much, are there fewer artists willing to record new music?

  Lee: It's already happening. The number of new releases and new artists has dropped dramatically. They are changing their careers.

  In 1999, there were 248 new albums released and 29 new artists, but last year there were only 142 new albums and 17 new artists. If labels lose money in the physical and Internet market, no-one can expect them to invest more in new local talent.

  Taiwan has lost its market. It used to be the second largest market in Asia [just four years ago], now it's fourth largest after Japan, [South] Korea and India. It's not just the record industry. There are no more local motion pictures. Who knows how many years we have to wait before there is no more local music industry?

  The Internet is a new format for commercial release, but we have to protect it.
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