National Power and Music Sellers
The Case of Sweden and South Korea
Ever since the days of Napster, the music industry has been combating illegal downloading and file sharing—in the world battlefield. Piracy continues to soar and remains a huge barrier to market growth, as is suggested by the overall decline of about 30% in global music sales between 2004 and 2009 . Music labels have had to trim their budget and the development of new artists has suffered. In the US, moreover, targeted and draconian lawsuits against particular infringers have arguably isolated the labels from their consumers, undermined their lobbying power in Congress, and resulted in high legal costs at a time of retrenchment. Finally, in what appears to be an uphill battle, they have sought the cooperation of the ISPs (see this issue of The MBJ) .
The US recording industry is not alone, however. In fact, currently there seems to be more traction protecting intellectual property rights abroad than in this country—and it could be an indication of things to come. The 2010 Digital Music Report of the International Federation of the Phonographic Industry (IFPI), released early in January, reports on two country examples which are encouraging: South Korea and Sweden. In both, legally sold music is apparently making gains against pirated product, and this article will examine their story. As has been reported in earlier issues of this journal, France and Britain are already in the process of implementing graduated response laws, also as known as three-strike laws, to combat piracy (see, for instance, our December 2009 release at the www.thembj.org).
It appears that the anti-piracy efforts of recording labels around the world are becoming national rather than trade-based, with greater reliance placed by the industry on governmental and legislative support. Rather than the individual lawsuit, the preferred route now is to seek government support through an act of congress or otherwise. The objective is to enlist the purveyor of local broadband connections as a potential ally supporting the struggle for the defense of intellectual property.
In South Korea, a high-tech infrastructure allowed the early and massive adoption of digital music, but the IFPI report notes that government intervention was the key to the industry’s success last year. Two major infringing services, Soribada (a P2P system) and Bugs (a free streaming service) made their mark early in the millennium. The result was a high rate of piracy, and a dramatic decrease in CD sales. Legitimate digital sales in downloads and ringtones did not make up for the loss. Sadly, the trend of remaking songs from old repertoires became popular due to a lack of investment in the sector.
An effective step by the South Korean government was to announce a strong graduated response law. It came into effect on July 2009. Korean web portals and search engines that hosted vast user-generated contents, as well as private blogs that contained copyrighted materials, alerted their users. This generated much public awareness of the law and enabled consumers to fully understand the penalties involved in the three-strikes system. A survey found that more than two-fifths of all file sharers reported less illegal downloading. Statistics showed that digital sales grew by 53 per cent in the first nine months of 2009, and so did physical CD sales—the latter, for the first time in five years. According to the IFPI, there has been an encouraging growth of label revenue which has led to a recovery of investments in local repertoires and more consumer choice in the music that is released. Even if the IFPI is not an unbiased observer, corporate revenues cannot easily be fudged, so this is an encouraging phenomenon. It should be remarked as well that South Korea is one of the most wired nations in the world, consistently topping international rankings.
Sweden, on the other hand, was once known as “the world’s largest facilitator of illegal downloading” . This was largely due to The Pirate Bay, a website that indexes BitTorrent files, and whose host server is located in the capital city of Sweden, Stockholm. Jonas Sjöström, head of independent label Playground Music proclaims that Swedish independent labels have been extremely damaged by illegal file sharing in the last few years . In an online-driven market like Sweden, the increase in the number of BitTorrent users in 2007 contributed significantly to limit market growth. In May 2006, Swedish police raided The Pirate Bay and shut down all the host server. However, after few days later, the Pirate Bay’s server was restored, and relocated in the Netherlands This led to a sudden increase of the file sharer base, negating the statement of US based Motion Pictures Association of America (MPAA) that “Swedish Authorities [had sunk] The Pirate Bay” . In fact, pro-piracy protests “sparked” in the streets of Sweden, apparently with the veiled encouragement of the media–who seemed to take it as a civil right that was being denied to users .
Against that background, it is perhaps surprising to find how well the Swedish market performed last year. While the rest of Europe suffered a significant decline in sales, the music market in Sweden improved by 10% in value, driven hard by an astonishing rise of 99% in the legal digital market .
In 2008, moreover, Sweden had given birth to the Spotify platform, a growing ad-supported music streaming service that began to compensate record labels regularly a year after (see TheMBJ, October 2009 at www.thembj.org), In 2009, moreover, sales at the Swedish iTunes store increased . Finally, and perhaps most significantly, the Swedish government also publicized the implementation of the Intellectual Property Rights Enforcement Directive (IPRED), a European Union anti-piracy mandate that regulates the enforcement of intellectual property rights, separate from each European Union member’s national law.
As the IPRED came into effect on April 1st, it allowed copyright holders to obtain the name and the address of copyright infringers from ISPs. Research conducted by GfK shows that 60 % of illegal file-sharers stopped or at least reduced their activities online due to the introduction of IPRED. In addition to this, the Swedish court ruled against the Pirate Bay in a trial that was held in February 2009, finding its four founders guilty[8].
World wide, the example of South Korea and Sweden suggests that anti-piracy efforts require the emergence of new and practical music services (such as Spotify), well-enforced legislation (especially in South Korea but also in Sweden), and the recognition that government sponsored initiatives that favor sellers and display the use of political power to educate and limit the prerogatives of the consumer can work (this was the case in Sweden, eventually, and in South Korea).
By Beom Hong
References
1. Page 6, 2010 IFPI Digital Music Report
2. http://www.latimes.com/entertainment/news/la-ca-webscout29apr29,0,1261622.story?coll=la-home-entertainment
3. Page 27, 2010 IFPI Digital Music Report
4. Country Report IFPI on Sweden 2008
5. “Swedish Authorities Sink Pirate Bay.” A press release from MPAA in May 31, 2006.
6. http://www.wired.com/science/discoveries/news/2006/06/71089
7. Page 27, 2010 IFPI Digital Music Report
8. http://thembj.org/article.php?article_id=56
