AllofMp3 fights back

Thanks to sodoff for pointing this out to me:

Mediaservices, which operates the popular and controversial allofmp3.com music site, is convinced that its business model is legitimate and that it maximizes demand for music and spurs consumers to buy more music. The company believes that everyone wins, record labels, artists and distribution companies when the market is broader and deeper. Relying on a handful of artists for the majority of sales is an outdated. One October 17th they held an on-line Press conference to address issues related to on-line music distribution and erroneous piracy characterization by U.S. Trade Representative Susan Schwab. Although the RIAA and IFPI, their international equivalent, have tried to portray music purchases from allofmp3.com by U.S. and Western consumers as illegal (in order to dampen demand) there is no creditable evidence fort this (see Background, below) [There are widespread rumors that there are Interpol warrants for the arrest of Mediaservices executives.]

A transcript of the press conference.


Of note is the substantial alleged penetration of allofmp3 into U.K. on-line music sales. Although it may be risky to extrapolate, I estimate that allofmp3's U.S. music sales are easily several times that U.K. and may be up to 5% of U.S. on-line music sales.

Since November 2003 the web music merchant www.allofmp3.com, operated by the Russian company Media Services, has been openly selling some of the most popular western music at a fraction of the cost of widely touted American sites, such as Apple's hugely successful iTunes, Rhapsody, MusicMatch, Napster, Sony Connect. Clients can select from a wide variety of encoding options (e.g., AAC, MP3, OGG, WMA 9 Lossless, Monkey's Audio, OptimFROG and FLAC) starting at rates of 128kbps all the way to full CD (.wav files). Unlike its major competitors Allofmp3 sells the tracks by the megabyte. Beginning in January rates were doubled to USD 0.02/ MB. Instead of paying USD 1.00 per track AllofMP3 users pay less than USD 0.10 and less the USD 2.00 per album. Currently the site boasts almost 30,000 albums from all genre and it all appears legal for the moment.
The legal skinny
How does ALLofMP3 prevent being shut down? They do it the old fashion way: legally. There is a loophole in the Russian copyright legislation that makes services like Allofmp3 possible. Apparently this loophole cannot be closed easily. Allofmp3 has signed agreements for this with Russian Organization for Multimedia & Digital Systems (www.roms.ru). According to their license allofmp3, has the right to use musical compositions by providing downloads. Under the license agreement Allofmp3 pays out fees to ROMS for downloaded materials that are subject to the Russian Federation Copyright And Related Rights Law. ROMS is a member of CISAC (www.cisac.org) - the International confederation of authors and composers societies. ROMS manages intellectual rights in the Russian Federation. All third party distributors licensed by ROMS are required to pay a portion of the revenue to the ROMS. ROMS in turn, is obligated to pay most of that money (aside from small portion it needs for operating expenses) to artists. Both Russian and foreign. This license is only supposed to allow content to be sold to Russians. The site doesn't appear to do non-Russian advertising and promotion, though they do have an English version of the site available (they say its to address problems with Russian language- encoding standards which existed they launched but that many Russian nationals living outside of the country prefer to use the English version for browsing). They claim its a site created for Russians but those who come to their site from abroad are welcome and are provided with full service. Sales to non-Russians are said to be 'insignificant' but I rather think its because their management has wisely chosen a Russian processor www.cyberplat.com that does not offer AllofMP3 direct access the information from user credit cards. They get only notifications about successful transactions. Plausible deniability is as smart in business as politics. The Music Industry claims that Allofmp3 is illegal but their own lawyers tell them "... the music industry doesn't have much chance in succeeding (if they attack these companies who are using music files on the Internet under current Russian laws)." Instead they are pushing for changes in Russian copyright law but progress is glacial. Chances that the loophole will be closed on short term are low and there is great resistance to changes. As for the legality of non-Russian clients downloading from allofmp3 this is country dependent. In countries with liberal copyright protections, like the Netherlands, downloading is legal. In countries with stricter copyright protections its less clear. MP3's, OGG's, etc are not illegal in the USA and therefore can be imported. There is also no law against importing music from other countries (including Russia). Because you are buying this legally in Russia and then importing to the USA, this should be 100% legit. The only applicable U.S. law appears to relate to the "Infringing importation of copies or phonorecords". But even this statute "...does not apply to importation, for the private use of the importer and not for distribution..." If MP3's, OGG's etc are in fact considered phonorecords, U.S. citizens can legally buy these as long if they are for private use and not for distribution. If MP3s, OGG's etc. are not considered phonorecords, no import laws apply. The sections of digital audio recording and sound recording have no mention of importation. Bottom line: Downloading from Allofmp3 is legal for U.S. Citizens, as long as the files are for private use and not for distribution. More details of the legality can be found here.