PRESS RELEASE

ONE IN THREE MUSIC DISCS IS ILLEGAL BUT
FIGHT BACK STARTS TO SHOW RESULTS

• IFPI Commercial Piracy Report 2005 names ten top priority countries for the music industry
• Launch in Spain, Europe’s priority piracy problem country
• Illegal music discs show lowest growth in 5 years

London and Madrid, June 23, 2005 – One in three music discs sold worldwide is an illegal copy, creating a US$4.6 billion music pirate market that destroys jobs, kills investment and funds organized crime.

Despite the huge scale of the problem, some governments have taken encouraging steps to address music piracy in the last 18 months, according to the recording industry Commercial Piracy Report 2005, which is published by IFPI today.

A total of 1.2 billion pirate music discs were sold in 2004 – 34% of all discs sold worldwide. But growth in disc piracy has slowed to its lowest level in five years, partly thanks to stepped up enforcement efforts in countries including Mexico, Brazil, Hong Kong, Paraguay and Spain.

Industry and government enforcement efforts are also reaping results. The past year saw record levels of pirate production taken out of action, while seizures of commercial CD burning equipment in 2004 were twice the levels of 2003.

Sales of pirate music exceed the legitimate market in a record 31 countries in 2004 – including, for the first time, Chile, Czech Republic, Greece, India and Turkey.

IFPI launches the report today in Spain, Europe’s most serious piracy problem country where rampant street CD piracy has shrunk the legitimate market by one third in the last three years.

Spain is one of ten top priority countries named by the IFPI report, where piracy levels are at unacceptable levels and where additional government action is urgently needed. They are: Brazil, China, India, Indonesia, Mexico, Pakistan, Paraguay, Russia, Spain and Ukraine.

It also highlights four other countries – Bulgaria, Canada, Korea and Taiwan where piracy, both physical and on the internet, is a special focus for the international recording industry.

IFPI Chairman and CEO John Kennedy said: “The music industry fights piracy because if it did not the music industry would quite simply not exist. Billions of dollars of investment go into releasing and marketing over 100,000 albums in a single year, and this is only possible when there is good, effective enforcement of copyright.

"We are launching this report in Spain for a very good reason. Spain was once a thriving legitimate music market known for the quality of its artists and the success of its music industry. Today Spain is known for the most serious piracy problems in Europe and urgent action is needed to do something about it. The government is aware of the situation and has announced plans for a programme against piracy – however, we now need to see concrete actions and specific results."

Industry anti-piracy efforts, backed by forensics and working closely with agencies such as Interpol, helped in the decommissioning of CD plant lines with the capacity to supply 380 million discs, or half the entire disc market for music in the US. There were also record seizures of CD burners, which doubled in 2004 to 28,350.

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John Kennedy said: "Over the next few years governments and society are going to have to learn to take piracy more seriously – piracy not just of music, but in all its forms. It is no longer acceptable for governments to turn a blind eye, or to regard piracy as merely a small irritation to society. The illegal music trade is destroying creativity and innovation, eliminating jobs and bankrolling organized crime."

"Looking worldwide, we are seeing some good progress by some governments, especially among some of our top ten priority countries. However, too many governments are still fighting piracy with no more than announced good intentions and unfulfilled promises. That is not enough. There needs to be proper enforcement, deterrent penalties and political commitment."

The report says that, for all the importance of the internet to the music business, fighting piracy of physical formats – largely discs produced in vast quantities either in high-speed burning laboratories or in traditional CD plants – is as great a priority as ever for the recording industry.

IFPI TOP TEN PRIORITY COUNTRIES

• Brazil (52% piracy rate): despite a partial market recovery in Brazil in 2004, pirate sales outnumber legitimate sales. However, in a very encouraging move, the government’s new anti-piracy council has begun to implement a comprehensive series of anti-piracy actions.
• China (85% piracy rate): the world’s largest pirate market, worth US$411 million, has seen a slight fall in the piracy level. Despite that, a lack of political will and absence of clear coordination between government agencies means there has been little substantial progress. Urgent and coordinated government action is still needed and courts must treat copyright infringement as a crime and impose deterrent sentences.
• India (56% piracy rate) is one of IFPI’s priority countries for the first time due to the sharp rise in CD-R piracy and the availability of mp3 files online. Corruption and very slow court processes hamper prosecution of pirates. Disc regulation and fast track courts for IPR infringement are urgently needed.
• Indonesia (80% piracy rate) has 15 optical disc plants, with pirate product exported into markets including Australia. Government action on plants has been weak, and the blatant sale of pirate music in retail areas reflects a lack of commitment to addressing the problem.
• Mexico (60% piracy rate), until recently among the world’s top 10 music markets, has been devastated by piracy. Enforcement improved in 2004. A Guadalajara initiative to turn pirate shops into legitimate outlets has had a positive effect. Legislative changes have criminalized piracy.
• Pakistan (59% piracy rate) is one of the world’s biggest exporters of pirate discs. There has been some enforcement at the customs level, and a recent series of raids on plants producing pirate discs. Action needs to be more comprehensive and sustained however.
• Paraguay (99% piracy rate): The country is a major transit point for blank discs which fuel pirate markets, mainly in Brazil and Argentina. There has been encouraging progress, with government launching a specialised anti-piracy unit. Stricter customs action and heavier penalties for piracy are still needed.
• Russia (66% piracy rate) is the world’s second largest pirate market, with capacity far exceeding local demand. IFPI forensics has identified Russian-made pirate disc exports in over 27 countries. Government efforts to tackle the problem are a chronicle of unfulfilled promises. Russia needs a political offensive, adequate enforcement, plant regulation and deterrent penalties.
• Spain (24% piracy rate) was one of the world’s top legitimate markets, which has shrunk by a third in the past five years. CD-R street piracy is rampant. The government has stepped up enforcement in 2004 and proposed a comprehensive programme of anti-piracy actions.
• Ukraine (68% piracy rate): Three years after trade sanctions were imposed by the US government, and despite encouraging signs from the new Yushenko administration, the country maintains a high level of piracy. Optical disc laws and the criminal code should be strengthened.

COMMERCIAL MUSIC PIRACY REPORT 2005: KEY FIGURES

• Music disc piracy rose 2% to 1.2 billion discs in 2004, the lowest level of growth in five years but nearly twice the number of pirated discs in 2000.
• Anti-piracy enforcement efforts helped in the de-commissioning of 87 CD production lines (up from 68 in 2003) and the seizure of 28,350 CD burners, double the level of 2003.
• Sales of all pirate recordings fell slightly to 1.5 billion units, as cassette piracy fell by 28% to 390 million units in 2004.
• The value of the world music pirate market was largely flat at US$4.6 billion in 2004 (US$4.5 billion in 2003).
• Pirate sales outnumber legitimate sales in 31 countries.
• Pirate operations are getting smaller but more numerous as disc piracy shifts increasingly to smaller-scale high-speed CD-R burning labs.
• CD-R piracy, predominant in Latin America, Southern Europe and India, rose 6% in 2004.

For further information please contact:
Adrian Strain, Fiona Harley or Julie Harari at
IFPI Communications on tel: +44 (0)20 7878 7900