SUPERHIGHWAY ROBBERY OF MUSIC SPARKS INTERNET LAWSUITS & CHAOS

A massive amount of Internet piracy of music has been uncovered and resulted in three U.S. Federal Court lawsuits by major record labels against ghost Net sites which enable visitors to download entire songs of top artists in full CD quality. These lightning legal actions come just as a major US study documents legitimate global CD sales via the Internet passed the A$25 million mark in 1996 with projections that buying CDs over the Net will exceed A$2.1 billion by 2002--7.5% of total music sales. The driving force is countries like Australia which are 30-40% of Net sales and whose retail CD prices are much higher than US or cheaper countries due to tax.

Aside from Australia being a target for Internet music pirates and overseas online CD stores which can land top line product currently for less than A$20 a CD, the bright news is that musicians are now turning to the Internet to bypass record companies and retailers by selling direct to consumers. But instead of discs or tapes, the new wave of selling or sampling direct to consumers in CD quality is by offering downloads of songs from the Net for under $1 each.

As upcoming Conference speaker Rob Hirst--Midnight Oil & Ghostwriters band member--enthuses, "Aside from the more sinister aspects of the Net like porn or piracy, the 'perfect world' of the Internet is a plus for both the musician and their audience. The artist can sell direct to the fans without markup or compromise, using the ultimate in global distribution. Meanwhile the purchaser receives the package cheaper, unmodified and delivered to their door. And as downloading times fall, CD quality repertoire direct to the home computer and music centre will upend our traditional ways of buying and collecting music." Hirst speaks on the Artist Panel 1/8.

Fellow speaker and lawyer Adrian Fitz Alan--Business Affairs Director for CD market leader Sony Music--says the Conference will serve as a crucial forum for all levels of the Australian industry noting, "Sony has always been at the cutting edge of innovative music delivery from our pioneering of cassette and CD formats to being the first major record company with a global Internet site. We know what the consumer demands and intend to meet the future market with all forms of online delivery." Fitz Alan will speak on an International Dealmaking panel 2/8.

From America, expat Australian music mogul Chris Gilbey--former Chairman of Export Music Australia and former BMG A&R head--says: "I was reminded of my prediction two years ago at this event where I said, "'The Internet will do for Australian CD prices what Professor Fels & the PSA never could.' Record companies screamed in protest. In retrospect I was pretty accurate. The fact is that the Web globalizes goods and services trade and breaks down national boundaries, mediating lowest common denominator prices with access to a global market instantly."

Conference convenor Phil Tripp says, "The Internet will dramatically change the music industry over the next decade, radically more than what the CD and MTV did to change tastes and music styles in the past 10-20 years. Micromarketing across borders digitally will force the industry to reinvent itself at the same time it is being absorbed into the entertainment software business, competing with other new media, video, pay TV, games and emerging online content providers."

With 40 + top overseas & Australian speakers, the National Entertainment Industry Conference sponsored by Apple Computer Australia at the ABC Radio Centre in Ultimo, Sydney August 1-2 will deal with crucial issues and will attract up to 500 attendees at a cost of $250 for two days or $150 for one day. Four page brochure & registration form available from IMMEDIA! (contact number 02 9557 7766) or from their Conference Internet site at http://www.immedia.com.au/neic.

For interviews, photos or media passes, contact Roland McAdam at IMMEDIA! (02) 9557 7766

BACKGROUNDER FOR IMMEDIA! RELEASE ON SUPERHIGHWAY MUSIC ROBBERY

Musicians can both benefit and be harmed by this Internet technology. MP3 & other new online technologies allow near CD quality recordings to be rapidly transmitted over the Internet meaning bands can either offer their own songs free or sell them as songs or albums to consumers around the globe. But unscrupulous operators are already emerging who 'pirate' recordings and put them online for free or charge for either already released CDs or unauthorised 'bootleg' concert or studio recordings. An example of an unauthorised site sitll online as of June 20 is MP3 Database at http://mp3central.simplenet.com/database.htm

The US lawsuits launched by the Recording Industry Association of America (RIAA) were issued against three 'John Doe' unknown copyright violators. Three World Wide Web sites in California, New York and Texas allowed Internet surfers to download into their computers free full versions of popular songs by such artists as The Beatles, Alanis Morrisette, Nirvana and Celine Dion among many others. Fresh Kutz, the largest of the three had over 500 recordings available. RIAA was joined in the suits by Sony, Island, MCA, Capitol/EMI, Warner, Atlantic, Geffen and other record labels. Australian record companies & music associations are finding abuse here.

The global music industry report on selling CDs online was prepared by Jupiter Communications of New York and costs US$995 as a special book. It points to one online CD seller, CD NOW! (www.cdnow.com) as controlling 33% of Internet CD sales in 1996 which were valued at US$18.2 million. The Jupiter Report estimates that by 2002, online music sales will be US$1.6 billion, about 7.5% of global music sales. 30-40% of online sales come from outside US.

The reason for Australia's high retail CD prices is the wholesale sales tax of up to 22% which adds up to A$4-5 a CD. Sales tax is paid by the retailer when they buy records from distributors--not when they're sold--and the distributors collect for government creating a huge bankroll. The Federal Government gets over $100 million from the consumer for their CD purchases. If the Government were to abolish this culture tax, CD prices would drop by up to $4-5.

Records are a cultural item, yet are taxed as luxury items. Books, magazines, hard core pornography with music in the background, computer software (even with music), t-shirts with rock band photos or album cover images, rock books, even sheet music are not taxed!

Consumers buying via Internet can order up to 10 CDs for under A$200, and thereby avoid sales tax and duty--delivered by air within a few days at an average price of A$17 including shipping costs. Customs routinely does not stop personal shipments with less than a A$200 value.

Average A$29.95 CD price breaks down to Retailer $8.50 (28.5%), Distributor $4.50 (15%), Record Label $3.60 (12%) Marketing/Promo $3.30 (11%), Tax $3.35 - $4.00 (18.5-22% of wholesale price of $18.25=11% of retail), Artist Royalty $2.95 (10%), Manufacture & Packaging $2.10 (7%) and Songwriter $1.65 (5.5%). These are approximate amounts and vary according to the artist's deal.

Whenever an Australian artist's recording is purchased from overseas (by Internet or import) they only get 50% of the royalty they'd get if it was sold here because of record deals. The record company here also gets less, the songwriter 50% of their royalty and the music publisher 50% of what they would collect. It often takes a year to collect the money from the overseas sale due to industry accounting practices. The local retailer gets nothing, the distributor loses a sale, the local CD manufacturer misses out, same with the booklet printer. The government loses tax and loses out further by every dollar going offshore with little returning home through the Net.

These topics & more to be discussed at the National Entertainment Industry Conference Aug 1-2

"Apple's sponsorship once again gives us the latest technology and resources to spotlight the newest and best developments in interactive multimedia as well as Internet technology for the audience, who come from all levels of the entertainment industry." event producer Phil Tripp of IMMEDIA! states. "Aside from arranging a display of cutting edge hardware and software technology for the participants to see & handle onscreen & online, Apple's financial contribution to the Conference helps us keep the admission cost accessible to everyone from musicians to executives."

Eight 75-minute panel discussions by overseas and Australian experts are led by a keynote speaker in each area covered. Panelists and speakers range from top recording artists, record company & publishing MDs, radio & pay TV programmers, Internet and interactive multimedia developers as well as legal and finance experts.

While the conference sessions are happening in the 500 seat Goossens Hall, the ABC Radio Centre foyer will be packed with up to 12 stands featuring the latest in Internet and interactive multimedia technology exhibits from Apple and other music or entertainment based companies. Attendees will also each receive a ten kilo 'showbag' with Australian and overseas entertainnment and technology publications, a conference booklet with articles and related agenda items plus a wide range of information on new media and entertainment software applications. And to cap each day off, the sessions will conclude with a 'Schmoozatorium' drinks session at 6 pm.

The attendees in past years have included top level executives from the music, film & TV, pay TV, multimedia and Internet disciplines as well as musicians and managers eager to learn the latest on dealmaking, legal and business affairs. As Tripp explains, "Itıs not enough to just be able to sing and play, doing it locally. Those who are going to succeed need to know what the next steps are to make themselves export-ready or be able to do the deals they need in new media. Plus, the music and entertainment software industries are rapidly merging, creating many changes."

Apple's participation as a sponsor has kept registration rates at a low $250 for two days or $150 a day for bookings prior to July 1, the price including the cocktail networking time. After July 1, prices increase to $350 for both days or $200 a day. For those who wish to register, forms and brochures are available from the producer IMMEDIA! by phone (02) 9557 7766, fax (02) 9557 7788 or email at info@immedia.com.au. An informational website is set up at www.immedia.com.au/neic.