John Kennedy, Stockholm presentation

November 15, 2005

Good morning. My name is John Kennedy, Chairman and CEO of IFPI. IFPI is an international federation which represents the interests of over 1400 hundred record companies worldwide and works with our affiliated national groups in 46 countries.

Our mission is to help the recording industry, a US$30 billion industry, pursue the core activities of its business - investing in artists; promoting and marketing great music; and creating as many ways, in as many formats as possible, for consumers to enjoy - and enjoy LEGALLY - the music we produce.

I am delighted to have this opportunity to be in Stockholm today to explain the latest steps of the recording industry to help tackle the most serious problem affecting the recording industry internationally today. First of all, I must warmly thank Stefan Jacobson and his staff at PetSounds Records for allowing this very apt location for our press conference - in a setting which reminds us that this is first and foremost a discussion about one thing - music.

As a music business veteran, having until recently been at the head of the largest record company Universal Music, I can speak first hand of the extraordinary success of the Swedish music industry over the years. You are a music culture that has punched far above your weight, bringing to the world great artists and great song writers and in turn bringing great rewards to Sweden's reputation and economy.

Yet I am in Sweden today for another and far more serious reason. Today the Swedish record industry is for the first time announcing legal actions against large-scale illegal file-sharing. This is a very significant escalation of our enforcement actions against people who are uploading and swapping copyrighted music on p2p networks.

Sweden is the latest of 17 countries where such individuals will now face often large financial penalties. A sustained and effective public information campaign has done its job in warning people of the consequences of this activity. But unfortunately in Sweden it has not resulted in a significant fall in illegal file-sharing. Today, we are taking the campaign to the next inevitable phase. The message is that, from Sweden to Hong Kong and from Singapore to Argentina, there are no havens for the theft of music on the internet.

What, precisely are we announcing today is over 2,100 actions in 16 countries outside the US. These actions are taken under the legal system of each different country - sometimes they are civil actions, sometimes criminal. They are targeted at large-scale uploaders, people who are uploading hundreds of even thousands of music tracks on the p2p networks. Those people now face large fines and damages claims. Hundreds of them in Europe, and thousands more in the US, have faced the financial reality of ignoring all the warnings. Payments on average have totaled around 3,000 euros. That is not a small deterrent.

Today's actions cover the full range of p2p networks where large-scale copyright infringements are taking place. File-sharers on all major unauthorised networks are affected - that means users of Kazaa, Gnutella, EDonkey, Direct Connect, BitTorrent, WinMx and SoulSeek.

The recording industry started taking these legal actions 18 months ago. The question has been asked - are we not misguided in suing our own customers? The answer is quite simple - if you are taking copyrighted music and distributing it on the internet, you are not our customer. Our customers are people who download music or buy CDs and pay for them. Music fans respect the copyright of the artists they love. We make no apology for enforcing the law against internet copyright theft. No more than our hosts would apologise for prosecuting a shop-lifters who steal from the shelves in this premises here today.

I have said have spent a lot of time educating people in different countries before taking these actions. Some people might think we have spent too much time warning people. We have run campaigns to educate parents about the rights and wrongs of downloading music on the internet, knowing the critical importance of parents in helping their children understand intellectual property and why it needs respecting.

We have sent instant messages directly to file-sharers - more than 50 million globally over the last two years. And only last month we launched a new software to help encourage people to enjoy music safely and legally on their computer. These actions have, in one respect, been highly effective. All our surveys show seven out of 10 people know that file-sharing without permission of the copyright holder is illegal in virtually every country of the world.

However, education is plainly not enough. Deterrence relies not just on a message - it relies on actions to make people realise the very real risks in their carrying on this activity. People in Sweden, as well as elsewhere, will face criminal convictions and monetary damages. They will be from all walks of life and in many professions. Many will be young men in their 20s and 30s. Many in ordinary jobs, others in not so ordinary jobs. In Germany a judge was caught. In France, a chef. In the UK, a local councilor.

But this is not a strategy simply aimed at stopping people getting music. On the contrary, the message to our customers everywhere is - get music online, it is available in a fantastic range of ways and at tremendous value. Two million tracks are available online. Over three hundred sites across Europe. A track for life, for half the price of a cup of coffee.

The music industry is rapidly responding to consumer demand for music online - this year the share of our revenues from digital music will more than double to around 6% of industry turnover. I am not saying CDS will not survive, because I am convinced music fans love CDs as well - but there is not question that the legal digital music business is the most exciting part of our industry's future.

What are we achieving by this campaign? We are containing illegal file-sharing. We are not idealistic enough to think we will eradicate it completely. The problem remains a massive obstacle to our business today. At the last count there were 900 million illegal files on p2p networks - down substantially from 2003 but still an enormous figure. But it has held relatively flat in comparison to the sharp increase in broadband penetration in the last two years.

Just as important, attitudes to internet piracy are changing. More and more people today are turning to legal music sites and recognizing the legal and security risks in illegal peer-to-peer. There is a very long way to go, but our actions, combined with the recording industry's drive to create a legitimate music business, is having an impact. As we approach 2006, it is an old-fashioned idea, not a rebellious one, that it is acceptable to steal from record producers, artists, song-writers and composers. Only a dinosaur could think that is it OK.

And we are successfully putting pressure on the networks that are encouraging internet piracy, too. Since July, in three continents, five court judgments have come down against those networks - in the US against Grokster, in Taiwan against Kuro, in Australia against Kazaa, in China against Baidu and in Korea against Soribada.

I am delighted to be able to convey these messages today in Sweden. I recognize that Sweden is both music-loving country and of rapid technological progress. But a perception has clearly grown in the last year or so among some people in Sweden that this country is something of a haven - that the copyright laws applying elsewhere do not apply here, or will not be enforced. Today the message is that the law applies in Sweden as much as anywhere else.