Global report shows disc piracy 50% up despite sharp increase in enforcement actions

Governments urged to step up enforcement to stop the damage to cultures, economies and world trade

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Music Piracy Report 2002

Washington DC, June 11, 2002

Global sales of pirate music discs rose nearly 50% to an all-time high of 950 million units in 2001. The total world music pirate market was estimated to be worth US$4.3 billion, a slight increase on the previous year.

Organised CD-R piracy is driving this proliferation in the traffic of illegal music. Pirate production is now roughly split between large-scale manufacturing plants and small-scale organised CD-R garages and laboratories. Commercial CD-R pirate sales tripled in 2001 to 450 million units.

Actions by enforcement authorities, assisted by the music industry, contained the spread of music piracy in 2001. There was a sharp increase in the number of discs seized and pirate lines de-commissioned, mainly in South East Asia and Latin America.

Commercial CD-R piracy spread in particular in Latin America, North America and Southern Europe in 2001. South East Asia, and, to a lesser extent Eastern Europe, are the predominant centres of large-scale factory-pressed pirate music CDs.

These are the findings of the annual review of global music piracy released today by IFPI, the organisation representing the recording industry worldwide.

Commenting on IFPI's Music Piracy Report 2002, Jay Berman, IFPI Chairman and CEO said: "Piracy is sometimes and mistakenly called a 'victimless crime'. It is not. The economic losses due to piracy are enormous and they are felt throughout the music value chain. Piracy also nurtures organised crime across the world, and it stunts investment, growth and jobs.

"The global recording industry is responding to this problem but it critically needs help from governments. We need proper laws and above all effective enforcement of those laws. It is time for governments to prove, with tough actions and not just words, that copyright piracy has no place in the development of modern economies."

Rick Dobbis, President of Sony Music International, said: "While piracy is a global issue that affects both artists and record companies, it's important to note that most of the real pain is felt locally by the economies of the individual countries where the pirate products are manufactured and sold.

"Tolerance of piracy fosters lawlessness and tax evasion. Some of the hardest hit victims of this growing problem are local economies. Owners of local record stores, CD plant workers, marketing, promotion and distribution people, and workers from every aspect of the complex business of making and distributing music are all affected. As their earning power is diminished, local governments are robbed of an important part of their tax base, and local economies are placed in jeopardy. I join IFPI in asking local, regional and national governments from around the world to give their law enforcement agencies the resources and support they need to address this very serious issue."

PIRACY REPORT 2002 - KEY FIGURES AND TRENDS

An estimated total of 1.9 billion pirate recordings, including discs and cassettes, was sold in 2001 (up from 1.8 billion in 2000). This means that two in every five recordings sold worldwide is an illegal copy
Pirate disc sales rose 48% from 640 million units in 2000 to 950 million units in 2001. Within that total, pirate CD-R disc sales tripled to 450 million units while factory-manufactured discs rose slightly to 500 million units, compared to 475 million in 2000
The increase in the value of the music pirate market (up from US$4.2 billion in 2000 to US$4.3 billion in 2001) was limited by sharply falling prices of pirate CD-R discs. The report values the illegal market at pirate prices and does not estimate losses to the industry, which are far greater than $US4.3 billion
Illegal music sales outnumber legal sales in 25 countries - predominantly developing markets - compared to 21 in 2000 and 19 in 1999
Countries in the spotlight where piracy is at a rate of over 25% and notably worsening include: Brazil, Central America, Czech Republic, Slovakia, Spain, Thailand and Russia. Ukraine, where the US has imposed sanctions over the failure to effectively regulate optical disc plants, remains a largely pirate market, and is also still a main distribution point for pirate CDs
The top five priority countries in terms of domestic piracy levels are: China (90%), Russia (65%), Brazil (55%), Indonesia (85%) and Mexico (60%)
South Asia remains the hub of pirate CD manufacturing - the region provides seven of the top ten disc manufacturing countries. Chronic overcapacity is driving the increase in pirate production
In the USA CD-R piracy increased significantly in 2001: 2.8 million pirate CD-R discs were seized, up from 1.6 million in 2000

THE INDUSTRY RESPONSE

In 2001 IFPI completed the formation of its 50-strong global anti-piracy network, which works alongside another 250 industry investigators employed by the organisation's affiliated national associations
Assisted by IFPI and national affiliates, enforcement authorities worldwide seized ten million CD-R discs - three times more than in 2001 - 19 million blank CD-Rs (up from less than 1 million) and more than 45 million copies of counterfeit CD artwork
Seizures of blank CD-Rs are increasing in 2002. Three huge seizures of blank CD-Rs in Mexico (10m), Paraguay (12m) and Spain (2m) netted 24 million units
Twice as many CD production lines (42) were de-commissioned in 2001 as in previous year, eliminating CD production capacity equivalent to the size of the market of the UK. The raids were mainly in Indonesia, Philippines and Malaysia
Litigation by IFPI against CD plants and distributors infringing copyright in 2001 resulted in ten financial settlements, taking IFPI's total revenues for settlements to US$5 million over the past four years

THE CALL TO GOVERNMENTS

The fight against piracy is critically dependent on support from governments, judiciaries and law enforcement authorities. Enforcement must treat intellectual property infringement for the serious crime it is; pirates who make a living by stealing other people's work must face deterrent penalties and if necessary go to jail. Governments must stop their countries becoming safe havens for pirates by effectively regulating their CD production plants.

The recording industry's four key priorities are:

Copyright laws in line with international standards
Optical disc regulations to control pirate CD manufacturing, particularly where production capacity far outstrips demand, including compulsory use of identifiers such as the Source Identification (SID) Code. The priority countries for effective plants licensing laws are Russia, Indonesia, Thailand, India, Poland and the Philippines, Ukraine, Taiwan and Malaysia
Proactive and efficient enforcement by police and customs
Aggressive prosecution of crimes within judicial systems, including deterrent sentencing

For further information contact: Adrian Strain or Fiona Harley, IFPI, tel: + 44 20 7 878 7900 (or mobile: +44 (0)7879 480 689)