Russia Sanctions Could Increase Music Piracy
Spotify leaving Russia could be a bigger deal than it seems
In January 2008, 10 months before Daniel Ek unveiled Spotify to the world, U2’s legendary manager Paul McGuinness gave a fiery speech at the MIDEM music conference assailing Internet Service Providers for taking a “free ride on music” as music piracy, enabled by the proliferation of broadband, continued to batter the industry.
14 years later, the piracy wars have largely been solved thanks to a combination of streaming platform convenience and mobile app ecosystems, while ongoing rulings and regulations, like the Canadian Supreme Court declining to overturn the country’s first anti-piracy web-block, German self-regulation, and the recently-introduced U.S. SMART Copyright Act continue to try to plug the remaining leaks.
But skirmishes continue in the international IP wars and occasionally threaten to explode as wider-reaching global tensions rise. 2021 saw the first increase in global music piracy after half a decade of decline.
The rise was largely attributed to the popularity of stream-ripping sites. In February, the Russian owner of two ripper sites, Tofig Kurbanov, was ordered to pay $83M in a lawsuit filed by the RIAA and the major labels. The problem is, Kurbanov lives in Russia, which made collecting the money difficult, even before the events in Ukraine. Now, it’s likely impossible.
Amongst the myriad degradation of international norms seen in the Russia/Ukraine conflict, the Kremlin announced last month that Russian companies no longer had to pay for IP coming from countries that have sanctioned Russia, effectively legalizing piracy. And with Spotify shutting down service to Russia last week, it’s all but certain that a pirate version of the app will appear shortly.
Of course, the Russian market accounts for less than $300M dollars, making it akin to a rounding error on Spotify’s ledgers. More concerning is India, which represents a major driver of Spotify’s growth in recent years. The country of 1.38 billion people has found itself caught in the middle between Russia and the West. There’s no indication that India wishes to move behind the new Iron Curtain, but the country was first in music piracy according to a recent report. A trend that could increase if new norms of IP theft spread beyond Russia’s borders.
But the biggest player to watch is, as usual, China. In terms of revenue, China was number two after the U.S. for music streaming in 2020, with the native platform Tencent Music generating 60% of the dollars. But 2021 saw the company stripped of its exclusive supply contracts with big music labels during a larger assault on tech companies by the Communist government. China has also tried to distance itself from Russia when it comes to the lines being drawn, but Xi’s relationship with Putin remains far more cordial than with the West. And it was only a decade ago that 99% of the country’s music was pirated.
Ultimately, trying to read tea leaves is especially difficult in the fog of war. So do not consider any of this a prognosis. But the idea of an entire continent opting out of the legitimate music business should be at least a little concerning for those who make their living in said industry. If there are 1,000 reasons why the fissure between East and West caused by the war in Ukraine is disturbing the global order, consider this reason 1,001.
IMAGE OF THE WEEK
Salient statements from this week’s music news.
The money to be made in music outpaces interest rates, but more expensive money will inevitably make margins leaner for investors.
Takeaway: As the capital to purchase music catalogs becomes more expensive, the royalty returns will inevitably not be as attractive. For now, however, enthusiastic music fans are keeping the catalog ratings on a high note.
2. Swedish Musicians’ Union Calls On Spotify to Investigate ‘Fake Artists’ Amid Playlist Controversy
A previous Spotify exec has ties to a company accused of securing major playlist placement for non-existent artists.
Takeaway: Swedish newspaper Dagens Nyheter (DN) reported that Firefly Entertainment was allegedly associated with an array of “fake” artist profiles on Spotify – and that the indie label had cashed in on millions of streams, in part by placing the accounts’ tracks on first-party playlists.
Food stamps for festivals could be Europe’s best social welfare scheme yet.
Takeaway: A maximum of €200 can go on live experiences, including concerts and festivals, and another €100 is available for physical products, like vinyl. A further €100 is for digital products, such as mp3 albums. Items not permitted include food, text books and musical instruments.