Over 1 Billion Served

Whether or not online file-trading has had an effect on compact disc purchases positive or negative, a new report published by the International Federation of the Phonographic Industry (IFPI) indicates that the real problem facing the music industry worldwide is that fewer and fewer of those CD purchases are of the real thing.

Global sales of pirate CDs have more than doubled in the last three years, says the IFPI, and pirates now generate an illegal international business worth more than US$4.5 billion. Sales of pirate CDs are estimated to have risen by 14% in 2002 alone, exceeding one billion units for the first time. When unauthorized cassette sales are added, the total value of the pirate music market exceeds US$4.6 billion.

The IFPI says that means that one out of every three of all CDs sold worldwide is a fake—and a disproportionate number of those fakes are appearing overseas. The trade group reports that, with the exceptions of the US and Japan, the pirate music market is greater than the legitimate music market of every country in the world.

Much of the proceeds from music piracy fund organized crime syndicates, says the IFPI, which recently released a new report, Commercial Music Piracy 2003, detailing the problem. The report states that the legitimate music industry is threatened with collapse in Brazil, China, Mexico, Paraguay, Poland, Russia, Spain, Taiwan, Thailand, and the Ukraine. China tops the list in terms of its piracy rate—the IFPI claims that more than 90% of all recordings ($530 million worth) there are forged copies "despite the country's accession to the World Trade Organization."

The IFPI reports that Russia, Brazil and Mexico also stand out among worst-affected markets, with massive sales of pirate music that far exceed their legitimate markets. Taiwan and Thailand are noted as having huge disc manufacturing overcapacity, which fuels CD piracy, while Spain is singled out as Europe's fastest-growing problem territory. The report charges that Poland's Warsaw Stadium is a massive illegal black market, where enforcement remains weak. Paraguay is cited as the gateway for massive pirate imports and exports for South America. The Ukraine remains a priority country for the IFPI, which charges it with having poor enforcement and very high levels of domestic piracy, despite the migration of many CD plants across the border to neighboring Russia.

Despite the overwhelming numbers of fake discs, anti-piracy groups are claiming several victories: two huge CD seizures in Mexico, the dismantling of a major piracy ring in the Philippines, and an action in Luxembourg that netted one million CDs, the biggest CD seizure Europe has ever witnessed. A total of 71 CD production lines are reported to have been decommissioned in 2002 (up from 42 in 2001), representing a production capacity of 300 million discs.

IFPI Chairman Jay Berman notes that, while the music business invests substantial resources in fighting piracy, the industry's self-help strategies critically depend on help from governments as well. "First," says Berman, "we need modern copyright laws and proper enforcement; second, the huge overcapacity of CD plants needs to be reined in by optical disc plant regulations; and third, we need deterrence—music piracy is serious organized crime that can only be tackled when courts deliver serious deterrent penalties."

X