Musical piracy, that is the illegal sharing of music files online, is the first enemy of the Haiti earthquake victims, according to the Recording Industry Association of America (RIAA).

The reason is that every illegal download of the latest version of We Are The World eats into the aid being sent to the poor Caribbean country, aid funded from the song’s earnings. What the recording industry is forgetting is that it will make a tidy profit down the line from the sale of the single. Record studios have all the reasons to be cross with internet pirates, quoting studies that online piracy costs the global economy as much as $12 billion a year.

That is why the recording industry is trying to find its online bearings and make a profit from the new digital economy. One possible business model are websites that stream copyright-protected music, such as Sweden-based Spotify, which has a catalogue of more than six million titles. Revenue is generated from premium account subscription fees and advertisements being played in between songs for free users. Spotify, however, is not accessible in Bulgaria unless a user registered for the service early on and uses a proxy IP address assigned to one of the six countries where Spotify is available – Sweden, Norway, Finland, UK, France and Spain.

Spotify claimed about 250 000 subscribers in January 2010, who accounted for just over four per cent of the service’s seven million users. The premium account offers better sound quality, the ability to use the service on mobile devices and an offline mode, all without advertising, for $15.

Spotify’s case is interesting because music sales rose by 10 per cent in 2009 in Sweden, the home of notorious torrent tracker The Pirate Bay. The rise in sales is doubly interesting given the 10 per cent drop in sales globally.

This phenomenon can be explained by a combination of tougher laws against online piracy and the rise of online services like Spotify. According to the International Federation of the Phonographic Industry, which represents the recording industry worldwide, revenues for services like Spotify have increased fourfold in Sweden in 2009.

Spotify declined to comment on its 2009 financial results, nor when the service would be available in Bulgaria.

Insufficient revenue
Spotify’s advent to Bulgaria is unlikely to happen soon because the local market is not ready for free online music services. The reasons can be found at zamunda.net and at arenabg.com, the two most popular Bulgarian torrent trackers.

Nevertheless, several attempts to offer copyrighted music online have been made in Bulgaria.

The first bad news comes from Vmusic (vmusic.bg), owned by online media group Netinfo, set up in May 2009 as an online radio, similar to the Last.fm service. Netinfo signed deals with distributors Vitality Records/Orchard and Bulgarian recording company Payner, securing the usage rights to 300 000 titles, including artists such as Simply Red, Coldplay and Elton John.

"Until the end of 2009, the advertising revenue was split between us and content providers," Eva Micheva, Vmusic’s brand manager, said. All music content was taken down at the start of 2010 and Vmusic will be developed as an online music encyclopaedia.

"Our goal is to become the place everybody thinks of whenever they wonder how old is Madonna, for example," Micheva said. Any user "could create a web page for his favourite artists and add the artists’ biography, record history, photographs and links with videos," she said.

According to traffic data from Nielsen Online, Vmusic receives about 4500 unique daily visits and has more than 54 000 registered user profiles.

Musicspace (musicspace.bg) was developed by mobile operator M-Tel, offering copyrighted content generated by Bulgarian artists. That amounts to about 3000 songs and a community of about 30 000 users. Performers get a fee for every song downloaded off the website, as well as for every instance of a video being streamed. M-Tel declined to comment on the issue of Musicspace revenue and how it is split with performers.  

Mp3.bg, owned by online media group Investor.bg, has been around since 2006. "For the time the website existed, revenue from online sales was incomparably lower than revenue generated from advertising," group administrator Ivailo Lakov said. At the end of 2009, Mp3.bg was integrated into the group’s daily news website dnes.bg.

"We have stopped selling music online and we will now focus on providing free content," Lakov said. According to Nielsen Online, Mp3.bg had more than 64 000 unique visits in February. The website will undergo a re-branding as part of its further integration to dnes.bg, he said.

Another website, 4fun.bg, has been offering music for a year and is accessible to internet subscribers of mobile operator Vivacom.

Vivacom’s data say that these users number 320 000 of whom 15 000 have been registered on the 4fun.bg. Vivacom said that more than 3000 people log on every day and the service has 15 000 registered users.

The website offers 100 000 songs from Universal’s catalogue and users can freely download songs from one genre of choice. The service uses digital rights management (DRM) technologies and can be uploaded to up to three portable devices that support digital content protection.

For a fee of four leva a month, added to Vivacom’s subscribers monthly bill, 4fun.bg users can download music from all genres. "The total number of songs downloaded from the website in the past year is 140 451 but most of them have been downloaded for free," Vivacom said, without providing details concerning the website’s earnings.  

In addition to music downloads, users have additional services on 4fun.bg, including free text messages within Vivacom’s network, online games and printing digital photographs. Vivacom plans to add 10 new services to the package by the end of 2010. 

It is possible that Apple could enter the Bulgarian market with its iTunes Store. The company just recently opened its AppStore for local debit and credit cards, which could be taken as a sign that the iTunes Store could soon begin accepting payments from Bulgarian customers, who would no longer have to register in neighbouring countries, such as Romania. Until it happens, Bulgaria’s online market for copyright-protected music will remain poor and with declining functions amid the world economic crisis. 

Kapital weekly, issue 10