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MUSIC INDUSTRY INSIDERS DOUBTFUL ABOUT EFFECTS OF NEW LEGISLATION ON SLOVAK MARKET

Record labels sing the blues

ALTHOUGH the already deformed Slovak music industry is not yet directly feeling the impacts of the worldwide slump in record sales, the global crisis and a newly proposed copyright law are likely to worsen the situation of the Slovak market, some critics say.
World sales of recorded music fell by 11 percent in value and in units in the first half of 2003, according to a report issued by the International Federation of Phonographic Industries (IFPI) in October 2003.

ALTHOUGH the already deformed Slovak music industry is not yet directly feeling the impacts of the worldwide slump in record sales, the global crisis and a newly proposed copyright law are likely to worsen the situation of the Slovak market, some critics say.

World sales of recorded music fell by 11 percent in value and in units in the first half of 2003, according to a report issued by the International Federation of Phonographic Industries (IFPI) in October 2003. The local situation is no better.

"Generally speaking, the Slovak music market has stagnated since 1999, and on the basis of interim 2003 figures, we might say that the situation will not improve in the near future," Slavomír Olšovský, director of IFPI - National Group Slovakia, told The Slovak Spectator.

Slovakia was among the twelve countries in the world where music industry revenues increased in the first half of 2003. Experts point out, however, that the increase has little to do with real market growth.

"The slight increase in the number of albums sold and retail value in comparison with the figures of 2002 is no sign of the improvement of the market situation from a long-term perspective. It is merely a short-term effect of changes in the VAT rate, the distribution framework, and price levels of domestic music," said Olšovský, adding that the worldwide decline in music sales has had no effect on the local market.

The VAT rate went down from 23 to 20 percent and, in the new year, it will go down to 19 percent.

"There isn't a decline in the numbers [of albums sold], because the share of relatively cheap compilations went up. Those sell in greater numbers, but for less money," said Július Kinček, director of the Forza Music label and one of Slovakia's most successful music producers.

According to experts, there has been little change in people's preferences for local and foreign artists.

"The ratio of international-to-domestic artists in airplay and sales remains stable. A 40 percent share in sales for domestic music is in line with general trends worldwide. The price level of local productions is one of the reasons behind such a high figure," said Olšovský.

Kinček, however, said the situation is getting worse.

"Although sales of domestic artists in numbers of copies continued to be significantly higher in 2003 than sales of foreign artists, radio stations gave them much less room," he said.

Released in September, the IFPI's yearbook on the global market for recorded music highlights the revival of rock music, largely at the expense of dance music. However, Kinček says genre is not too important in Slovakia.

"Rather than preference for a certain genre, there is a preference for a certain type of song, especially in the much deformed broadcasting of large radio stations. A song has to be in high or, at the least, mid tempo; around three minutes long; and have an intro a maximum of 10 seconds long with the chorus starting in the 50th second at the latest. There can be no distracting elements. And if it's Slovak, it has to come from an 'allied' label [that is unofficially teamed up with a radio station]," said Kinček.

The IFPI concluded in its October report that unauthorised file-sharing and commercial piracy were major factors in the decline of sales. According to the report, Slovakia, along with Brazil, Central America, the Czech Republic, Spain, Thailand, Russia, and Ukraine, is a country where piracy is at a rate of over 25 percent and "noticably worsening".

However, some insiders seem sceptical about the prospects of any real change.

"Piracy is a huge problem, and in Slovakia there is no way to fight it efficiently. The Slovak public is content with the situation and the Slovak music industry doesn't have the technological potential to do anything about it," said Kinček.

At the same time, others remain more optimistic.

"The music industry will continue to develop new business models that allow customers access to online music from legal sources and the huge success of internet-based music services overseas shows us one of the possible answers to the challenge of the internet and digital technology in general," said Olšovský.

"At the same time, we need to promote the awareness among the general public of legitimate alternatives to music downloading. The www.pro-music.org website that was developed in cooperation with artists and retailers seems to be very successful in this respect," he added.

Big music businesses are trying to unite their efforts to fight the falling revenues. In early November, Sony and the Bertelsmann Music Group (BMG) formally announced plans to merge their recorded-music operations.

According to IFPI's 2002 global market-share figures, Sony held 14 percent of the market and BMG 11 percent.

However, even if the two struck a deal, market regulators could obstruct their plans; they have taken actions against similar mergers in the past.

The announcement by those two giants came at a time when two other large labels, Time Warner and EMI Group, both holding 12 percent market shares, were discussing a similar deal. However, that plan later failed.

Regardless of the success of these two cases, the trend is likely to continue and have a significant impact on the Slovak music scene.

"The multinational corporations will continue in their efforts to merge and to get rid of local branches, especially in smaller countries such as Slovakia. This provides an opportunity for those who can offer these multinational corporations the best distribution and marketing service.

It will have a negative effect on the releases of domestic albums, especially of new artists," said Kinček, whose company represents Time Warner in Slovakia.

Olšovský declined to comment on the issue.

Besides global trends, the music industry will have to deal with the effects of new legislation.

A new draft copyright law prepared by the Culture Ministry is already in parliament and critics have voiced some major objections.

"The draft intentionally breaks the gentle balance between artists on one side and manufacturers and users on the other, which is also defined by European standards, in the benefit of the latter," said Kinček.

"As a label boss I should be pleased, but I'm well aware of the fact that breaking such a gentle balance will in the end turn against both. I expect the impact will be negative," he added.

Among other things, the draft legislation stipulates that authors, performers, and producers would have equal rights to the final work, which would lead to a decrease of authors' shares of profits from the use and reproduction of their work from 50 to 25 percent.

Some experts are enthusiastic about the proposed change.

"The new copyright law will have no immediate effect on the state of affairs in the music industry," said Olešák.

"However, the approach adopted by the Culture Ministry seems to be more pro-business than the present Slovak copyright legislation.

If other elements, such as purchasing power, income level, or tax rates develop well, it will definitely not hinder the development of the Slovak music market."

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