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buen and loot

pirates have turned up the volume in recent years, finding new ways to copy and distribute copyrighted music.

david snipes examines the growing problem of music piracy and what’s being done to counter it.

the problem with music piracy in egypt is that the average consumer doesn’t know the difference between a high-quality, licensed album and the myriad of poor-quality, unauthorized versions of the same album sold at kiosks for a fraction of the price. nor do they realize the moral and legal implications of buying pirated music, which, in essence, is abetting criminals.

it’s ignorance like this that is hurting music sales, charges sameh adel maher, general manager and co-owner of mirage records, one of the oldest local producers and distributors in the market. “the music business, from the point of sales volume, has decreased by about 40 percent in egypt in the past two years,” he says, attributing much of this decline to the impact of piracy. “the trade in pirated music is a worldwide problem that is depriving the music industry of billions of dollars in lost revenues.”

the international federation for the phonographic industry (ifpi), a london-based anti-piracy organization representing multinational record labels, estimates that illegal copying of music video and audio recordings costs media companies $4 billion per year. the agency has noted a marked increase in music piracy in the middle east and north africa in recent years. ifpi figues indicate that piracy involving the physical copying of music accounts for 50 percent of all music sales in egypt, amongst the highest in the region.

sameh morcos, owner of dj recording, estimates that the figure is closer to 80 percent, and approaches 100 percent in some areas. most pirating in egypt involves the creation of “cocktails” – cassette and cd compilations of songs by various artists. it’s a lucrative business as cocktails “sell more than straight copies of any single artist.”

producing a legitimate compilation requires enormous expense to secure the rights to each song, but morcos says pirated compilations can be produced for next to nothing and sold for just a few pounds each. in economically depressed areas such as upper egypt, the delta and the outskirts of cairo, black market sales of cocktail cassettes account for the vast majority of all music sales, whether legal or pirated. and with summer approaching, the brigands of the music industry are gearing up for the high season.

“in july, the holiday season starts on the north coast, with tens of thousands of young people hitting the resort areas,” he says. “from alexandria to marsa matrouh there will be over a hundred shops selling cocktail tapes of pirated music.”

similarly, so-called “copy shops” are springing up across the country, where kiosk and internet café owners provide on-demand compilations of local and international music artists. the customized music cocktails are burned to cds on the spot from a computer database of mp3 files, all of which are illegal. not a piastre of these sales goes to the original artist.

burn baby burn!
in egypt, the popular perception of a music pirate is a chain-smoking hacker hunched over a computer, burning off piles of cds, or copying from one cassette to another. the reality, says morcos, is that most commercial piracy is committed by replication plants consigned by music companies to produce their media. during the day the factories use the masters to burn cds for the label; at night they compile and burn copies for illegal distribution.

one piracy expert presented another scenario in which music companies, in an attempt to maximize profits, distribute pirated copies of their own albums. “nobody’s ever been able to prove it, but it’s said that recording companies burn, for example, 5,000 cds for sale, then [secretly] burn another 15,000 to distribute without paying taxes.” authorities are either unaware of the scheme or complicit in it, the expert added.

while ghada tosson, marketing manager and co-owner of mirage records, admits that such scenarios could happen, she says the real problem lies with small-scale operations. “most of the pirating is done by small-scale replication plants unconnected with licensed plants,” she says, adding that inadequate law enforcement has allowed these illegal operations to thrive.

representing the companies that distribute over 90 percent of all recordings by arab artists, the ifpi has been at the forefront of efforts to stamp out piracy in the middle east. it’s also working with local authorities as well as music production and distribution companies around the world to develop concrete proposals for fighting music piracy. egypt is in its crosshairs.

“the ifpi serves to chalk out focused strategies for the region, keeping in mind the ground realities in each country,” explains ahmed mohamed fouly, the federation’s senior middle east consultant. “we’re confident the activities of regional authorities will represent a major development in the ifpi’s efforts to spread awareness about copyright laws and build stronger relationships with the region’s governments and enforcement bodies to safeguard the rights of music companies.”
egypt was among the first countries in the region to sign a number of international agreements aimed at protecting intellectual property rights (ipr). among them are the paris convention for protection of industrial property (1883), the bern copyright convention (1887), the madrid convention (1954), the nice convention for the classification of goods and services (1957) and trade-related aspects of intellectual property rights, or trips, (1995). it’s more impressive than it sounds, say industry insiders.

“up until a couple of years ago, egypt’s protection of international property rights was well below international standards, hardly meeting its commitments under trips,” explains tosson. quite simply, domestic legislation had failed to keep pace with international ipr agreements, some over a century old.

in may 2002, the egyptian government passed ipr law no. 82, a long-awaited, comprehensive piece of legislation aimed at bringing egypt’s ipr legislation into line with the country’s trips obligations. law no. 82 offers copyright protection to artistic and literary works, computer programs and audio-visual works.

the law stipulates monetary penalties and prison terms for patent, copyright and trademark violations. more importantly – for the music industry at least – sound recordings are granted copyright protection for 50 years from the recording date if owned by an enterprise, and for 50 years after the death of the author if owned by an individual. the specified penalty for copyright violations is a fine of £e 5,000-10,000 per infringement and/or a prison term of not less than a month.
the law offers significant improvements over earlier legislation, but it’s clear to many that the penalties dwarf the profits, doing little to deter piracy. “considering the profits made from piracy – which costs the perpetrators next to nothing – there is virtually no incentive for them to stop,” says tosson.

since the passing of law no. 82, authorities – armed with a mandate to enforce egypt’s trips obligations – have stepped up raids on illegal operations. “egyptian authorities take the protection of intellectual property rights seriously, and are committed to the fight against music piracy,” assures fouly. he cites a june 2003 police raid – a coordinated effort between the ifpi, local police and the egyptian central association of audio producers (ecaap), an official body representing the interests of the recording industry in egypt – that netted roughly 2 million counterfeit arabic-language music cassettes, the largest bust in egyptian history.

technology is helping pirates, but it is also helping the authorities to nab them. the ifpi encourages its members to use source identification (sid) codes. when sid codes are employed, every disc produced in a given plant carries a special signature imprinted on the disc. police look for the distinct four-character sid codes during raids of shops suspected of selling pirated music cds.

consumers can also use sid codes to differentiate between real and pirated music cds. other telltale signs of a bootlegged copy is inferior packaging, the absence of copyright details or missing credits. additionally, pirated copies are often compilations, such as “greatest hits” albums of a single artist, or a collection of various artists. but while the sid system may help curb bootlegging of music cds, a similar system has yet to be invented for music cassettes, which still represent a healthy percentage of the music piracy market in egypt.

burners’ booty
egypt’s anti-piracy efforts appear to have had some effect. the international intellectual property alliance (iipa), a coalition of associations representing us copyright-based industries, reported a decline of 4 percent in the piracy level in egypt in 2004. but the organization only tracks the piracy of music by us artists, leaving many to wonder if efforts have had any positive effect on copyrighted arabic music, for which no figures are available.

tosson says she’s seen some improvement, but says poor enforcement and the difficulty of convicting perpetrators has kept the pirates in business. “the egyptian government took a few actions against piracy in 2004 and the anti-piracy police department in cairo has recently become more active,” she says, adding that most actions taken were against small-fry retail operations selling pirated tapes and cds. copyright owners waited in vain for a raid against the largest pirate operation in egypt, but it has yet to happen.

more frustrating are the bribes and legal loopholes that keep piracy charges from sticking. tosson recalls a recent raid on an illegal replication plant churning out illegal copies of the latest release by singer mohamed fouad that led to the confiscation and arrest of a major counterfeiter. police seized an enormous cache of bootlegged cassettes, but “by the time it was presented as evidence, a bribe was paid and the illegal copies were replaced by original, legal copies. the case was thrown out [of court].”

setbacks like these worry international watchdogs. in may, the ustr placed egypt on its “priority watch list” of us trading partners that have failed to adequately protect copyrighted material of us origin, including music, videos, software and biotechnology. while the decision was based primarily on concern over alleged patent violations by egyptian pharmaceutical firms, the accompanying report stated that there are “serious concerns” about “extremely high” piracy and counterfeiting rates in egypt.

the iipa, whose recommendations form the basis for the music section of the ustr report, claims piracy in egypt cost us music companies $7.5 million in 2004. it charges that high duties on the import of licensed music cds, which are taxed 32 percent of their total cost plus freight and another 10-percent sales tax, make finished music cds exorbitantly expensive compared to blank recordable cds, which are charged a mere 2-percent duty. “this adds to an environment where the legitimate product simply cannot compete with the pirated product, especially bearing in mind that music piracy in egypt is predominantly burned cd-rs,” it said in a recent report.

tosson is among those who believes the only effective way to combat piracy is for the music industry to take action. “the time has come for local music companies to lobby for support at the government level and within the community to combat music piracy,” she says. “we must all lobby the government to strengthen enforcement of anti-piracy laws. it’s in the interest of the government as well since taxes are not paid on pirated copies, which is a loss of revenue for the state coffers.”

swashbuckling action plans
the key to any successful anti-crime campaign is to understand the reason behind the crime. in the case of music piracy, it’s simple economics. industry experts estimate that 60 percent of egypt’s 70 million citizens cannot reasonably afford to purchase a full-priced cassette, let alone a cd. that’s 42.5 million egyptians who – like all people – love music and desire to own it. if pirates, mass producing music cocktails at £e 2 each can clear £e 1.50 profit per copy selling to this segment of society, pirating is a very lucrative industry indeed.

to solve the problem requires a change of thinking. most people who purchase pirated music usually justify their actions by claiming licensed music is unaffordable and that the purchase of pirated copies is not a crime. ipr experts, however, reckon the purchase of illegally made copies that put money into the pockets of pirates instead of the rightful copyright holders is no less a crime than paying a criminal to steal a car.

in recent years, the music industry has noted that police are more cooperative and willing to take action to thwart piracy. “the authorities have really stepped up their efforts,” says tosson. “when record companies become aware of the location of pirate operations and report the activity to the police there is an immediate response, which wasn’t always the case in the past.”

and artists are getting in on the game. “copyright is my right. buy a licensed copy or you’ll face trouble with the police,” shaabi crooner shaaban abdel rehim sang on one album.

more effective are the opinions of respected religious authorities, who the industry has turned to for support. in 2002, sheikh ibrahim atta allah, grand mufti of al-azhar issued a fatwa, declaring: “piracy is the worst kind of theft and prohibited in islam.”

the response? the day a pious businessman learned of the fatwa, he called a major software manufacturer demanding to purchase licensed software packages, insisting that he didn’t want to keep unlicensed copies any longer now that he realized they were “haram” (forbidden by religion). “some people legalize when they realize it’s against religion, but others don’t care,” says ghada khalifa of business software alliance (bsa), a group representing major software manufacturers.
while religion can work as a deterrent for certain individuals within egyptian society, the music industry is aware that that decision to purchase pirated music is often not based on faith, but rather on economics.

recognizing that egyptian society is divided into the haves and have-nots, some recording companies have adopted a two-tiered pricing system – producing high-quality but shorter legal versions of the tapes for markets in economically depressed areas. “most recording companies offer stripped down ‘economy’ tapes costing far less than the £e 10-12 for the normal tape in those areas,” explains maher. “these feature chinese, rather than the more expensive korean, tape and are made of the shorter radio versions of the songs.”
the economy tapes help thwart piracy by providing low-income consumers with an alternative. “if the consumer is aware that this is the real product and therefore of higher quality, they are more likely to purchase it,” says maher.

musical shares
like everything these days, the internet has revolutionized the piracy industry. the rise of music download websites and peer-to-peer (p2p) file sharing software – most of which is free or extremely cheap to use – poses a new and more insidious threat to music companies. the two models differ in structure, but both allow users to download music mp3 and windows media files, which can be listened to on a computer or burned to a cd.

music industry executives took note in 1999 when a new software program, napster, was launched. the software used a central directory to enable music fans to effortlessly swap songs stored on their computers over the internet. the idea quickly caught on, and soon a number of napster clones such as gnutella, grokster and imesh were not only up and running, they were carving a slice out of music sales.

it took an unlikely duo – heavy metal band metallica and rapper dr. dre – to bring the napster to his knees. collaborating with the recording industry association of american (riaa), a body representing the interests of the recording studios, the artists took the software’s developer to court for copyright infringement. in july 2001, a us federal judge ruled napster must block all files of copyright protected material, effectively forcing the service to shut down.

but it wasn’t long before music executives realized the marketing potential of a p2p service. in 2002, napster was resurrected as a legitimate service after the digital media company roxio purchased its rights and univeral music and sony music entertainment signed on as minority shareholders.
“today, we see napster and others are now-legal download sites, and the artists and record companies are receiving royalties,” says tosson. in fact, many download and p2p sites have reinvented themselves. some are fully legal, others are quasi-legal, and all too many are highly illegal, allowing users to download files for free and making their profits instead from banner ad placement.

“these sites have built their businesses on the theft of copyrighted material,” charges tosson, who says the sites encourage people to download or share copyrighted music (which they may or may not own the rights to) instead of purchasing the licensed product. “in the end, everyone loses because the recording industry has lost a significant proportion of revenue through online piracy and that affects the ability of producers to finance new projects.”

traditionally, local producers had to bear the brunt of financial losses as almost all the contracts in the middle east entailed the payment of a fixed lump sum for the artist. while this shielded artists from the impact of piracy and the financial risk of a release failing to connect with the public, it also deprived them of additional monetary rewards should the release prove to be a hit.

increasingly, with major players such as emi and universal signing worldwide distribution deals with local production houses, artists are becoming aware of the benefits of opting for a royalty-based system where the artist, producer and songwriters share in the success or failure of an album. it’s a more equitable arrangement for dividing revenues, but tosson points out that it also means all parties are directly “affected by every decision to download a new song for free rather than pay to own it.”

and with the growth of internet, online piracy is taking ever-increasing slices of the revenue pie. according to the ministry of communications & information technology (mcit), the number of internet users in egypt has tripled since the government introduced its so-called “free internet” model in january 2002. ministry figures show the number of internet users at 2.5 million in 2003 with conservative estimates projecting the number to reach 14 million by the end of 2007. in addition, an estimated 400 internet cafés are said to be using unlicensed software that allows users to illegally download or share copyrighted music files.

but it’s not just the growing number of internet connections that worries artists and producers, it’s the bandwidth. broadband adsl lines are now available for as low as £e 150 per month, making it feasible for home users to download large amounts of music to their pcs. “an adsl line is very inexpensive and many people are sharing within their buildings to reduce costs,” notes maher. “this has had an impact on sales in the music business as people are downloading songs from illegal sites.”

the ability to download music at home makes it almost impossible for authorities to enforce anti-piracy laws. thus the focus is on shutting down the illegal download and p2p sites. the catch is, the egyptian government cannot shut down websites hosted on servers located in other countries, which are beyond their jurisdiction.

not that it would. to date, there has never been an ipr lawsuit filed in egypt against a local download or p2p site. without that precedent, online pirates operate with impunity. almost every arab artist has had at least one album pirated. in one case, the master recordings of an amr diab album were stolen from the studio and used to burn thousands of pirated copies released to the market before the original.

but changes – in some cases prompted by the threat of lawsuits – are taking place. music portal mazika.com, a subsidiary of linkdotnet since 2002, has partnered with regional music giant rotana to provide legal music downloads. the legal status of other download sites is unclear. industry insiders have accused some of the major sites affiliated to satellite channels of allowing the download of songs and mobile ring tones without paying any royalties to the copyright holders.
but with all those digital copies circulating, are physical cds and cassettes in danger of extinction?
tosson thinks that’s unlikely to happen. “i don’t think there is any danger of the physical product disappearing from the market,” she says. “there are still people who really appreciate having the original product with the leaflet, the picture of the artist and the credits. they want the album. it’s like keeping a jewel or something valuable.”

egyptian singer mohamed mounir is also certain the physical product has a future, but one in which people’s musical collections consist of both physical and legally downloaded products.

mounir, whose songs frequently appear on unlicensed compilations, says legitimate music sales face unprecedented competition from a variety of online sources. “people prefer the option of taking the music for nothing, and that’s the reason we need the enforcement of laws in order to give legitimate businesses a fair go,” he told business monthly. “that in turn will perpetuate the ability of entertainers to get financing for future productions.”

tosson agrees. she says physical and online piracy is depriving artists of their rightful financial reward and discouraging investment in the music industry. “the use of pirated music deprives consumers of high-quality recordings and lessens the incentive for recording companies to develop and market their productions on a local and global scale,” she says. “alternatively, a well-regulated music industry brings benefits to all, generating employment and contributing to the economy.”

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