Music Piracy Poses a Worldwide Problem
TAIPEI -- Taiwan's music-download business has been dominated for several years by two peer-to-peer file swapping services, EzPeer and Kuro. But a legal battle being waged against the two services by the recording industry is heating up as legitimate music download services prepare for launch here in the coming months.
EzPeer and Kuro offer users unlimited downloads of MP3 files for $3.28 and $2.89 per month respectively. With hundreds of thousands of users for each service, their combined revenue is expected to hit $31 million this year, says Robin Lee, secretary general of the International Federation of the Phonographic Industry Members' Foundation in Taiwan, which represents the interests of major record labels and has filed copyright infringement lawsuits against both services.
Because EzPeer and Kuro don't have licensing agreements with the music labels providing the content, the services are considered illegitimate. Their success has badly hurt the recording industry, according to Lee, helping to drive down legitimate recording industry revenues by more than half, to $157 million in 2002.
But change is in the air. Acer is one of the companies leading the push to establish legitimate music download services for Internet users in Taiwan and China. The company plans to offer a service next year that will act as a back end for companies that want to sell Chinese-language songs over the Internet.
The Acer Music Platform will initially offer an index of around 20,000 Chinese songs that can be offered by third parties for sale over the Internet, says R.C. Chang, chief technology officer of Acer Value Labs. The platform allows users to search and download songs, and includes a payment gateway and digital rights management capabilities based on technology from Microsoft, he says.
Unlike music download services in the U.S., such as Apple Computer's ITunes service, Acer will not sell digital music files directly. It will offer the platform as a turnkey offering for companies that want to step into the online music business, Chang says.
"We won't get into the music business because it is not our core competence," he says.
However, an Acer subsidiary, Third Wave Publishing, will be the first company to use the Acer Music Platform to sell music online, Chang says. That service is expected to be launched in February and will be followed by others, he says.
For now, the Acer Music Platform is still in development. Acer is currently in talks with about 15 recording companies to secure licenses to sell music over the Internet in Taiwan, Hong Kong, and China, Chang said. "We're still at the [memorandum of understanding] stage. We haven't signed any final contracts yet," he says.
Acer hopes to have an index of 20,000 songs available when Third Wave launches its online store in February, and plans to gradually expand the number of songs available for download to 50,000 by the middle of next year, Chang says.
Pricing for the service has not yet been finalized, but Acer and the record companies will take a commission on every song that is sold, Chang says. When pricing is finalized, Chang expects the price to be low so that the service can compete against online services that record companies have accused of illegally offering music files for download in exchange for a monthly fee.
"The price will be low, otherwise it can't compete with Kuro and others," Chang says.
Services like EzPeer and Kuro, with more than 300,000 and 500,000 paying subscribers respectively, are a major headache for recording companies in Taiwan, IFPI's Lee says.
IFPI has responded by filing copyright infringement lawsuits against both services and against three users--two EzPeer users and one Kuro user--for illegally swapping music files.
Last month, prosecutors in Panchiao, Taiwan, ordered a suspended indictment against one of the EzPeer users in exchange for a public apology and a promise to help IFPI promote the notion of copyright protection. Legally, the suspended indictment means that the 22-year-old defendant is deemed guilty. However, if no additional offense is committed over a period of one to three years, the indictment will be dropped and the case dismissed.
Lee is happy with the outcome of that case, saying IFPI is not interested in seeking jail time or fines for these users.
"We just want to prove their actions are illegal," Lee says. "Can paying money make up for anything? No."
Recording companies in Taiwan have recognized the importance of the Internet as a distribution channel and have experimented with their own online music distribution efforts, Lee says. But those efforts have been stymied by the small size of the market and competition from EzPeer and Kuro, he says.
In one case, Warner Music Taiwan made a song by Singaporean singer Sun Yanzi available exclusively over the Internet for 65 cents per download, Lee says. The experiment was a failure, however. "One Kuro member paid [65 cents] to have the song and then everybody had it," he says.
With the suits against EzPeer and Kuro still pending in Taiwanese courts, eight companies, including Acer, are looking to open legitimate music download services in Taiwan and have begun negotiating with recording companies for the appropriate licenses, Lee says.
Taiwan's dominant telecommunications provider, Chunghwa Telecom, currently offers a streaming music service to subscribers of its HiNet Internet service through deals with Rock Records (Taiwan) and Warner Music Taiwan and is in talks to expand that service to include music downloads, Lee says.
In addition, IBiz Entertainment Technology has signed agreements with 12 recording companies and plans to soon launch a music download service in Taiwan called IMusic, he says, adding that the other five companies have yet to make their plans public.
As Taiwanese businesses gear up to launch legitimate music download services, the end could be near for EzPeer and Kuro. A decision in the first case, against EzPeer, is expected to be delivered before the end of this year, Lee said. If the court rules in favor of IFPI, the service would be shut down and other penalties, such as fines or jail time, could be handed down to the defendants, he says.
Looking ahead, Lee--who has spent nearly 18 years fighting music piracy in Taiwan--acknowledges that the recording industry's fight against illegal MP3 downloads is just the latest phase in an ongoing battle against music piracy and that a long road lies ahead.
"Wherever there are human beings, they need music. When there is music, there is a record industry. When there is a record industry, there is piracy," Lee says.