Warner agrees deal to take on Russian piracy
11.08.2006
WARNER Music yesterday agreed to make its repertoire available to Russia's second-largest mobile phone network in an attempt to make money out of a market dogged by piracy.
The American music major will provide content to VimpelCom, which has 45 million subscribers in Russia, when it launches a music to mobile service later this month.
The deal has been struck to come just ahead of Madonna's arrival in Moscow, where the Warner Music superstar is playing for the first time in her long career next month.
Warner has long steered clear of Russia ¡ª preferring to concentrate its efforts in the United States ¡ª while rivals Universal and SonyBMG have subsidiaries there.
Warner operates through local distributors, but has made only a limited amount of its content available because it was concerned about the levels of physical piracy. However, the belief is that mobile is a more secure system and represents a way for Warner to establish itself profitably in the country. EMI has found there is good demand for mobile content in the country, selling 550,000 ringtunes of French DJ David Guetta's World is Mine .
Pete Downton, vice-president, business development for Warner, said: ¡°We're trying to use both the carrot and the stick. You can't just focus on piracy without giving people legitimate services alongside.¡±
Until now, the American company has been partly deterred by the high levels of piracy. Russia is the second biggest physical pirate market in the world, with somewhere between 50 and 70 CD plants in existence producing counterfeit music.
Domestic demand requires only five manufacturing sites, according to data collected by the International Federation of the Phonographic Industry, the trade body. The legal retail market is estimated to be worth $390 million (¡ê205 million), less than the pirate industry, which makes $450 million.
Russia is also home to allofmp3.com, which is being sued by the BPI in the UK because it offers cut-price music, saving money by not paying the royalties due to artists and record companies.
Warner has also struck similar mobile music deals in China with China Unicom, and with KDDI in Japan, as it tries to bolster its weak non-US business with digital agreements.
Separately, EMI said that it had signed up a distribution deal with Musicbrigade, whose innovative digital service allows music to be downloaded to a mobile phone and a computer simultaneously. Musicbrigade is a pan-European subscription site, charging customers €9.99 (¡ê6.75) for access to music and videos.
Warner and EMI are vying to prove that they have the faster-growing business, while each company waits for the European Commission to resolve the legality of the Sony BMG merger. The British and American companies tried to buy each other, although each rejected the other's bid.
Source: The Times
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