IFPI boss Jay Berman has again accused Russia of being the world's largest exporter of pirated CDs. According to him, Russia produced 342 million counterfeit CDs in 2003 and exported all but nine million of the total. To believe the IFPI, every third pirated disc was "made in Russia." This accusation fits the claim that Russia does the greatest damage to the leading European and US producers.
But Igor Bokovtsov, president of the Disc Alliance association of non-profit partnership of Russian producers of the optical media, says the IFPI data for the past few years have been taken out of nowhere. The 11 enterprises of Disc Alliance produced 55 million CDs last year (in 2002, when the Alliance had nine members, it turned out 46 million CDs). The industry that consists of Russia's 30 largest companies, can hardly produce 100 million CDs a year. So, where does the IFPI get its figures?
The IFPI calculations are based on the technical description of equipment, but most of it is worn out and obsolete. On average it is seven to eight years old, while the producers of such equipment (mostly European ones) guarantee 100% productivity only in the first two years of operation, with an annual decline of 10% after that.
Secondly, though the blueprint capacity of Russian factories is 250 million CDs, the average annual output is barely 53% of the figure. In point of fact, according to the International Recording Media Association (IRMA), they only work to full capacity from October to December.
Thirdly, the State Customs Service of Russia reports that though tens of millions of CD-R discs are imported, legal producers do not use them because of their inferior quality. Andrei Brants, director of the Urals Electronic Works (UED-CD, Yekaterinburg), thinks companies cannot benefit from the production of pirated goods: the ordinary expenditure of $0.25 per CD is the same for counterfeit products. Since the Yekaterinburg factory, the largest in the industry, has many contracts, including from foreign clients (France), its bosses do not intend to allow its equipment to be spoilt by using cheap CD-Rs made in Asia.
Mr Brants agrees with Mr Bokovtsov's view that the IFPI figures of Russia's "contribution" to global counterfeit products are overrated by 100-150%. He says that he and his colleagues - directors and managers of optical media - had repeatedly invited IFPI inspectors to their factories to check that they were working honestly. The latter did not come, though the Urals Electronic Works is the largest in the industry (70% of the aggregate output of Disc Alliance). The works' managers even invited the IFPI to establish video monitoring at the factory, but the IFPI does not seem to want to see the true picture.
Our interlocutors also questioned the claim about the "billion-dollar losses" of Western companies because of pirated goods made in Russia - even if we accept the version about the hundreds of millions of Russian-made CDs sold abroad. Pirated goods are only sold when they are as good as the genuine article (the same equipment is used to produce genuine and pirated products) but sold cheaper.
CD prices started to be raised artificially in the mid 1990s, but the process now is going in the opposite direction. The super-profits of the producers of phonograms and film copies are becoming a thing of the past, as the demand for them has been steadily declining in the industrialised countries for several years- and not because of pirated goods. The Internet, which has joined thegame, has inexhaustible capabilities for copying and the process is practically uncontrollable. In reality, this is the root of the problem.
Five years ago, the EU assessed the Russian audio and video market as the most promising one, but prices for these goods had to correspond, at least roughly, to the so far modest living standards of Russians. Several major companies have concluded, thought belatedly, that prices on the Russian market should be reduced. They even produced cheaper copies specially for Russia.
Universal Music Group cut the prices of its CDs by 13%. Like BMG, Sony, EMI and other companies, UMG is competing with pirated products by producing cheap CD versions. The Russian CDs look just like their Western counterparts; the only difference is that there are fewer details on the cover and they are in Russian. Other companies are dissatisfied with this, which explains irrational accusations of Russia and other forms of pressure.
The Russian government is not shirking its responsibility to apply harsher measures to the audio and video pirates. In January-June 2004, law enforcers closed down 230 secret shops and opened 2,300 counterfeit cases. A total of 14,400 people have been called to administrative account and pirated products worth tens of millions of dollars have been confiscated.
And this brings us to the aforementioned trial in Rostov-on-Don. The court sentenced the culprit to three years in prison under Article 146 of the Criminal Code, "Violation of Copyright and Related Rights." It was the first time that such a harsh sentence had been handed down to a video pirate and all the national newspapers reported the court ruling.
The Russian Anti-Piracy Organisation (RAPO) is satisfied with the court ruling. Its director Konstantin Zemchenkov says over a hundred sentences were handed down under this article every year but all of them were rather mild. The sentencing of the video pirate to three years in Rostov-on-Don created a precedent that should frighten other pirates.
Although noting the success in the fight against the producers and distributors of counterfeit commodities, members of the Main Department of Economic Crimes at the Russian Interior Ministry believe that harsh sentences will not root out the crime. The market lives by economic laws - competition, prices, supply and demand. This is probably what US Ambassador to Russian Alexander Vershbow meant when he said that two major US companies, seeking to cut their production outlays, have expressed a desire to start producing laser CDs in Russia.
