:A RUSSIAN music download website stands in the way of the country’s long-cherished ambition of joining the body that governs world trade, it emerged yesterday.
The United States has singled out the site, allofmp3.com, as an obstacle to its support for Russian membership of the World Trade Organisation (WTO).
Susan Schwab, the US Trade Representative, wants Russian authorities to close the site, which America regards as one of the world’s largest online repositories of pirated music.
But MediaServices, the Moscow company running the service, insisted yesterday that it complied with Russian law on copyright protection and actually helped to prevent piracy. It accused US officials of seeking to protect American online music providers from Russian competition.
The website, which has 5.5 million subscribers, sells individual songs for between 10 and 20 US cents each, compared with 99 cents at Apple’s iTunes store. Fans of the Beatles, for instance, can download Back in the USSR for a mere 13 cents from a library that contains some 850,000 songs.
The website claimed to have signed up thousands of new customers since Ms Schwab criticised it in Washington on Wednesday. She said: “I have a hard time imagining Russia being a member of the WTO with a website like that operating.”
Ilya Levitov, a company spokesman, told The Times: “We are getting more than 5,000 new customers a day. The problem for the Americans is not copyright but our business model and our prices, which are killing their business.
“We sell songs for 15 or 20 cents and they want to keep their CD prices. Of course, the American Government is trying to help their companies to get richer. If we sold songs for $1 there would not be any problem, but you can’t sell music here at that price. It would be the same as two bottles of vodka for one song, and nobody in Russia can afford that.
“We understand that the Americans don’t like it, but we are not breaking any laws here. We are a Russian company operating in Russia and this is just double standards.”
The WTO sets the rules for the global trading system and resolves disputes between member states. The organisation, which has 149 members, aims to increase international trade by promoting lower trade barriers.
Membership negotiations with China took more than 15 years before agreement was reached. Russia first applied to join a predecessor body in 1993, and is the only major economy that is not a WTO member. The US is the last major opponent of its membership.
Russia had hoped to win US support ahead of the G8 summit in July, but the two governments are still in fraught negotiations on outstanding issues. The dispute has become a major obstacle in the personal relationship between Presidents Putin and Bush.
Ms Schwab’s comments made clear that intellectual property rights continue to be one of those issues. The download site was set up in 2000 by six computer programmers, who initially developed it for their own use. Mr Levitov said it evolved into a business as its popularity grew.
Most subscribers are Russian, but it also has a large international following and is claimed to be the second most popular source of downloads in Britain after iTunes. The site displays a licence from the Russian Organisation for Multimedia and Digital Systems (ROMS), an industry group that manages property rights in Russia. Mediaservices said that it paid a percentage from each download sale to ROMS, which then forwarded the fee to the copyright owner.
However, Western music companies have refused to accept the fee, arguing that ROMS has no right to represent their interests in Russia. The IFPI, the international music industry body, has begun legal action in Moscow against two of the site’s directors, Vadim Mamotin and Denis Kvasov, to halt operations.
The company is reluctant to discuss its earnings, but Russian Newsweek recently estimated revenues at $30 million a year. Mr Mamotin told the Moscow Times that the music industry was losing more money in free file-sharing networks. “We are offering a model under which people will walk away from piracy,” he said.
allofmp3.com Top 10 albums
1 FutureSex/Love Sounds — Justin Timberlake
2 Ta-Dah! — Scissor Sisters
3 Sam’s Town — The Killers
4 Continuum — John Mayer
5 Revelations — Audioslave
6 Back to Basics — Christina Aguilera
7 Modern Times — Bob Dylan
8 Eyes Open — Snow Patrol
9 The Open Door — Evanescence
10 B’Day — Beyoncé
iTunes Top 10 UK albums
1 Sam’s Town — The Killers
2 Ta-Dah! — Scissor Sisters
3 Razorlight — Razorlight
4 The Open Door — Evanescence
5 The Information — Beck
6 Eyes Open — Snow Patrol
7 The Open Door — Evanescence
8 Undiscovered — James Morrison
9 Alright, Still — Lily Allen
10 The Pacha Experience — Various Artists
Russian music Internet site refuses to buckle to US pressure
by Nick ColemanFri Oct 6, 10:03 AM ET
A Russian Internet site selling Western pop music at knock-down prices says it will continue its methods even though the United States says it is obstructing Russian accession to the World Trade Organisation.
As the troubled WTO negotiations continue, US negotiators have repeatedly returned to one issue: the worldwide music sales of Russian website allofmp3.com, which defended its conduct in an interview with AFP on Friday.
Russia, the only major world economy not in the WTO, hopes to wrap up membership talks with the United States by the end of this month, the trade ministry has said.
Washington is the last major economy not to have assented to Russian membership of the WTO, which Moscow has been trying to join since the early 1990s.
And along with other issues such as access to the financial services market, a particular problem has been Russia's lax protection of intellectual property and the vast quantities of bootlegged music and films found in shops and bazaars across the country.
US Trade Representative Susan Schwab has personally taken aim at allofmp3.com.
Her office has placed the company on a "notorious markets" list and in a speech last month she accused Russian authorities of allowing the website to operate with impunity.
Washington's objections are mainly because the website has found a ready market outside Russia's borders, becoming the second most popular music site among British consumers after US on-line store iTunes, the Kommersant newspaper said Friday.
"The White House's concern is that the site offers Western music to Western consumers.... This isn't the first time that the administration of George Bush has drawn Russian authorities' attention to the issue," Kommersant said.
The site offers music tracks for as little as a third of a dollar and entire albums for two dollars, which compares with 99 US cents per track from iTunes.
Kommersant quoted a defiant representative of the Internet site as saying that complaints by Schwab were actually helping the company.
"Susan Schwab markets us so effectively -- she could already be our press secretary," the unnamed spokesperson said.
The owner of the website, Denis Kvasov, is continuing to battle a lawsuit in a Moscow court by the international music industry body IFPI, Kommersant said.
Contacted by AFP, a spokesman for the website's holding company, MediaServices, denied that it was in violation of Russian law and defended its foreign sales.
Washington is using Russia's WTO aspirations as a lever to help US companies, said the spokesman, Ilya Levitov.
"They're trying to help their companies in the competition with us because our prices are much lower," Levitov said.
He said that Russian law allowed the company to distribute music that it obtains via a Russian society, the Multimedia and Internet Society.
"We're totally in compliance with Russian law.... It's a Russian company owned by Russian people. It's a Russian business," Levitov said.
As for foreign buyers, "we announce on our website to every user that he or she should check the laws of the country in which he lives," Levitov said.
In a bid to allay US concerns, Russia's parliament gave preliminary approval last month to a strict new law on intellectual property rights that Deputy Prime Minister Dmitry Medvedev said would bring Russian in line with Western demands.
But more widely the negotiations may have been hampered by Washington's increasingly tough stance towards Moscow on the issue of Iran's nuclear programme.
In August the United States announced sanctions against two Russian defence companies over their links with Iran, the defence export agency Rosoboronexport and jetmaker Sukhoi.
Kommersant estimated the annual turn-over of allofmp3.com at between 25 million and 30 million dollars (20 million and 23 million euros).
