Music piracy: a worldwide issue, different means but same results
par Juan Andrés Fuentes Véliz
McGeorge Schol of Law - Master of Laws in Transnational Business Practice 2003
MUSIC PIRACY: A WORLDWIDE ISSUE, DIFFERENT MEANS BUT SAME RESULTS
Three hundred years ago, ruthless buccaneers hoisting the Jolly Roger sailed the Caribbean in search of plunder en route from the New World. Today a new breed of pirates continues to capture its bounty among the azure seas and swaying palms of Latin America.1(*) These new pirates use another's production, invention or conception in an unauthorized form resulting in an infringement of a copyright. This paper discusses music piracy in Peru as an example of how piracy works in most of Latin America, the legal scheme in Peru that has been designed to prevent copyright infringement and its enforcement, music piracy as a universal issue, and recommendations to face this problem.
The term music piracy refers to the illegal duplication and distribution of sound recordings.2(*)
Peru is a democratic unitary state of 1'285, 216 square km that ranks the country among the world's 20 largest nations. Peru possesses a rich culture not only for being heir of the Inca empire which left a legacy of their wisdom and art all over the country but also for being the principal metropolis in America during colonial times.3(*) Peru also has an extraordinary variety of ecosystems in which shelters a wide variety of animals and plants.4(*)
Even with its rich history and great potential, Peru over the last 20 years has suffered one of the biggest economic crises of its entire history. Political corruption and terrorist groups, such as Sendero Luminoso (The Shining Path)5(*) have been major factors in the establishment and continuation of this crisis. Many politicians have seen their chief role to be to increase their fortunes at the expense of the national treasury. Terrorists, who thought violence was the solution to establish a new social order, created disorder and scared away national and foreign investment.
Thus, many unemployed found a way to survive the crisis: music piracy. Even though, it is illegal, piracy continues as a means for Peruvians to support their families. Street vendors are the nexus between pirates' producers and customers. The cost of music also contributes to the continuation of piracy. Street vendors6(*) offer a CD for 3 soles (less than 1 U.S. $) while record stores in Peru charge an average of 19 dollars per CD.
Pirates only need a copy of a disc to start production at plants near their target market. Within a few hours of an original release or even earlier, pirated products appear, on the market, much more rapidly than legal editions.
On the other hand, legal industries generally ship albums from where they are produced by land or sea, slowing delivery. Producers may send albums by air but this increases their costs. Thus, it is almost impossible for legal industries to offer their albums as inexpensively as the pirated ones.7(*)
CD piracy is gaining strength from the advent of a new device called the CD recordable (CD-R), introduced in 1997.8(*) The CD-R is a home recording machine, which costs around three hundred dollars, and can easily copy music and other sounds onto blank CDs for as little as one dollar.9(*) The CD-R is commonly known as a burner because laser for the CD-R machine burns information onto the CD-R disc.
Consumers have a right to copy music onto a CD-R for their personal use. This is a right recognized in the Audio Home Recording Act of 1992 (AHRA).10(*) The AHRA11(*) does not prohibit the manufacture, buying, or use of CD-R's.12(*) A different situation arises when «the burner» is used for commercial purposes.
The Supreme Court in Sony v. Universal City Studios already decided the validity of personal use of this kind of innovative devices by consumers. In this case, Sony invented the Betamax video tape recorder for home use. Universal sued Sony alleging that it infringed copyright. The supreme Court said: « if Betamax were used to make copies for a commercial or profit- making purpose, such use would be presumptively be unfair» but «a use that has no demonstrable effect upon the potential market for, or the value of, the copyrighted work need not be prohibited in order to protect the author's incentive to create.»13(*)
It is interesting to note that CDs appeared in the eighties but they were not as successful as was hoped due to their high price. Most of them were made in Japan, they had a high defect rate and approximately one out of every three discs was discarded before leaving the CD factory. Early on this led to an industry decision to continue paying recording artists a royalty rate based on the sale price of vinyl disc (9.98 U.S.$) instead of the higher sale price of compact discs.14(*) But, in 1989 everything changed. CDs were everywhere.15(*) As CDs took over, the major labels acquired their own domestic CD pressing plants and the defect rate dropped to almost zero so the cost of manufacturing compact discs dropped dramatically as well. One would have expected the retail price of CDs to also drop and for the profits to be split evenly and fairly with the musicians who were making all the music.16(*) However, this did not happen. CD prices have continued to rise while manufacturing costs have dropped to less than it costs to manufacture a $9.98 vinyl release.17(*)
* 1 Kenneth D. Ebanks, Pirates Of The Caribbean Revisited: An Examination of The Continuing Problem of Satellite Signal Piracy In The Caribbean & Latin America, L. & Policy Intl. Bus. 33(1989).
* 2 Sound recordings are properly defined by 101 of the Copyright Act of 1976 as «works that result from the fixation of a series of musical, spoken or other sounds, but not including the sounds accompanying a motion picture or other audiovisual work, regardless of the nature of the material objects, such as discs, tapes, or other phonorecords, in which they are embodied». Thus, a sound recording could be the performance of a literary work as the poems of the Peruvian Cesar Vallejo. However, they involve typically musical works.
* 3 Peru.Com, Turismo <http://www.peru.com/turismo/english/elperu/> (accessed Oct. 11, 2002).
* 4 Id. In addition, Peru features one of the world's richest fishing grounds, thanks to its special climatic conditions and a wealth of nutrients that have give rise to a staggering number of fish species (more than 900), mollusks, crustaceans and 33 species of sea mammals.
* 5John Pike, Sendero Luminoso (SL) Shining Path < http://www.fas.org/irp/world/para/sendero_luminoso.htm> (last updated Sept. 22, 2002).
* 6 Instituto Nacional de Estadística & Informática (INEI), Peru En Cifras < http://www.inei.gob.pe/> (accessed November 01, 2002). In Peru, the minimum salary is 410 soles (114.75 U.S. dollars) per month. This amount t is received by a big percentage of the population. The average-salary received monthly by a person working for the Peruvian Government is 888.73 soles (248.94 US dollars). Only 68.5% of the population, able to work, has employment. Is true that the cost of living in Peru is low, but not low enough to live properly with only 410 soles.
* 7 Yvan Cohen, Software Pirates Pile Up Profits In Afflicted Asia, Christian Science Monitor, Dec. 29, 1997, quoted in Rama John Ruppenthal, Trips Through The Far East: High Tech Product Piracy & The End for Alternative Regional Solutions, 20 Wis. Intl. L. J. 152 (2001).
* 8 Recording Industry Association of America (RIIA), Releases Year-End Anti-Piracy Statistics 1997 < www.riaa.com/apyr97.htm>, quoted in Jeanmarie Lovoi, Competing Interests: Anti-Piracy Efforts Triumph Under TRIPS But New Copying Technology Undermines The Success, 25 Brook. J. Intl. L. 453 (1999).
* 10 Audio Home Recording Act 1992, 17 U.S.C. 1008 (1992).
* 11 Audio Week, Warren Publishing, Inc. October 28, 2002. On the day of enactment, AHRA was heralded as landmark legislation to spur developing mass market in consumer digital audio recorders, free from threat of litigation from music copyright holders. Ten years later, AHRA's birthday has come and gone with little notice from recording industries that worked hard on drafting that compromise legislation. One reason as that markets that developed for consumer digital audio recording products covered under AHRA's scope such as Digital Compact Cassette, Minidisk and Audio CD Recorders, were a lot less significant than anyone would have imagined.
* 12 No action may be brought under this title (Copyright Act) based on the manufacture, importation or distribution of a digital audio recording device, a digital audio recording medium, an analog recording device, or an analog recording medium or based on the non-commercial use by a consumer of such a device or medium for making digital music recordings or analog musical recordings.
* 13 Sony Corp. of America v. Universal City Studios, Inc, 464 U.S. 417 (1984).
* 15 Id. Negativland has its own theory about this sudden change. «It was not because of the customer's preference. There is a common business practice between distributors and record stores. Stores can buy something from a label, and if they don't sell, they can return it. However, in the spring of 1989 all seven major distributors (i.e. Sony, Warner, Emi, etc) announced that they would no longer accept returns on vinyl and also they began deleting much of the vinyl versions of their catalog. These actions literally forced record stores to stop carrying vinyl. They could not afford the financial risk of purchasing releases on vinyl because if they didn't sell they would be stuck with them. The consequence of this was that the customer no longer had a choice.»
* 16 Steven Albini, The Problem With Music, Negativland < http://www.negativland.com/albimi.html> (accessed Oct.19, 2002). Albimi, an independent producer, says that when he talks to a band who are about to sing with a major label, he imagine a faceless industry lackey at the other end holding a pen and a contract waiting to be signed. Nobody can see what `s printed on the contract, he adds.
He puts a very illustrative example. In his scenario a band sold a 250 thousand copies and this is the balance.
Record Company: $ 710,000
Producer: $ 90,000
Manager: $ 51,000
Studio: $ 52,500
Previous label: $ 50,000
Agent: $ 7,500
Lawyer: $ 12,000
Band member net income cash: $ 4,031.25
* 17 Negativland, supra n. 14. A CD, with its plastic jewel box, printed booklet and tray card now costs a major label about 80 cents each to make (or less) and a small independent label between $ 1.50 and $ 2.50. Meaning that CDs should now cost the consumer less than their original price over a decade ago.