Optical disc plants and piracy

The Piracy Problem

Representing 75% of all music sales globally, the audio CD remains the dominant carrier for music. This format, with its improved sound quality and durability, has until recently represented a win-win situation: a win for the music industry, a win for customers, and a win for optical disc manufacturers who have set up plants around the world to satisfy the continuing demand.

But there is a sting in the tail. The success of the CD has resulted in an explosion in optical disc plants, bringing with it excess manufacturing capacity, which is now about double that of legitimate demand. Improvements in technology and increased availability of second-hand machinery have only exacerbated this problem. Tighter profit margins facing the manufacturing sector have, inevitably, raised the stakes, and optical disc piracy - frequently linked to large-scale international organised crime - has proved to be an attractive business. The global pirate music market totalled 1.9 billion units in 2001, of which 500 million were pressed CDs. That's about 1.4 million illegal discs per day, which is an enormous number, particularly given the massive rise in CD-R piracy. The value of this global pirate market is estimated at US$4.3 billion in 2001 (at pirate prices).

The size of the piracy problem is well publicised and well known. However, what is not always appreciated is the potential liability of optical disc plants, if they master or replicate unauthorised stampers or CDs (see Why Is Piracy Illegal?)

Before music discs may be manufactured it is necessary to obtain the authorisation of:

The holder of the rights in the sound recording (usually a record company); and
The holder of the rights in the composition (usually administered by an authors' collecting society).

For more details on this, see the joint IFPI/BIEM Publication Copyright For Replicators - How To Protect Your Business

The result of this is that an optical disc plant and its management can incur liability for substantial damages and/or face criminal prosecution if it manufactures and delivers orders for music discs without ensuring that it has a "mechanical licence" from a collecting society AND that the customer has the right to reproduce the sound recording concerned. Optical Disc plants copy and sometimes distribute sound recordings - if the producer has not authorized that copying or distribution, the plant will generally be equally responsible in law with the customer that placed the order. This applies both to stampers and optical discs.

The music industry's response

The entire music industry - composers, artists, authors and producers alike - faces huge losses as a result of optical disc piracy. The industry's response has been to take action against any plant found to be manufacturing pirate product without undertaking the necessary checking procedures. The results of this policy are self-evident: civil suits and criminal investigations have been taken against CD plants in America, Europe, the Middle East and Asia, and this has led to judgments and settlements totalling in excess of US$180 million in infringement actions against optical disc manufacturers in the past five years. (see Litigation News)

So what can plants do to avoid music piracy? With potential damages running into tens of millions of dollars, it is in the interest of every optical disc manufacturer to work with the recording industry. A central part of the music industry's response is to help plants that are concerned about piracy to avoid getting involved in it. This is why, in addition to piracy awareness seminars, organised for manufacturers by the local recording industry associations over the last few years, we have developed a set of Good Business Practices for optical disc mastering and manufacturing plants. Drawing on years of experience of fighting piracy, the practical advice of plant managers, and the insight of those who got caught, these guidelines boil down to the simple principle of "Know Your Customer, Know The Product You Replicate And Master".

As well as using the IFPI Good Business Practices, plants can also look to the International Recording Media Association (IRMA) for help.

IRMA represents the world's leading producers of optical media, and it operates an Anti-Piracy Compliance Program. The Program is designed to implement internal procedures that will help plants spot orders for unauthorised product, and is available to plants in Europe, North America and Asia, with coverage for Latin American plants due shortly. IFPI has been and continues to be involved in the development of the Program, along with organisations such as the Recording Industry Association of America (RIAA), Motion Picture Association of America (MPAA), the Business Software Alliance (BSA), the Software Information Industry Association (SIIA), the Interactive Digital Software Association (IDSA).