Russia's Brand of iTunes

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Visit and you'll probably think you've hit download heaven. The site features millions of songs with CD-quality audio, from Elvis to the Flaming Lips, and adds 30 albums a day — including music by the likes of the Beatles and Led Zeppelin that isn't even available at other download stores. Tracks cost a few pennies and entire albums go for a buck or two, a fraction of the cost at Apple's iTunes store. In Britain, the site garners 14% of the online music market, second only to iTunes. "I've probably downloaded a couple hundred songs," says Don Goldberg, a public relations consultant in Washington. "It's stuff you can't find elsewhere."

Nor should you, according to U.S. trade officials and record industry executives, who view the site as the most flagrant piracy operation in Russia, a country rapidly gaining on China as a counterfeiting center. At least 24 optical disc plants, including some on government-owned property, now produce bootleg DVDs, CDs and software in Russia, according to the International Intellectual Property Association (IIPA). Crime syndicates are widely believed to control the business, worth an estimated $1.7 billion a year, according to the IIPA. With Russia seeking entry to the World Trade Organization (WTO), Western governments are pressuring Moscow to crack down on counterfeiting. Yet the trade is flourishing. "We've put very high-level pressure on the Russians to deal with this," says a Bush administration official. Two Bush cabinet heads have discussed with Russian government ministers, to no avail, he adds. Says the official, "this is our poster child for the problem."

And as Putin's government focuses on other business issues, such as gaining control of natural gas supplies to Europe and leveraging Russia's vast energy resources, that problem is growing. Allofmp3, run by a mysterious company called Mediaservices Inc., looks legit even if its legal status is questionable. The site accepts Visa and Mastercard, and a Dutch firm, ChronoPay, processes credit card transactions. The site declares that it is authorized to sell downloads by an organization called the Russian Multimedia and Internet Society (ROMS) and FAIR, another copyright licensing agency. Read the fine print and you'll see that Mediaservices claims it pays "license fees" for material downloaded from the site.

Not so, says the Recording Industry Association of America and its international affiliate, the IFPI, which insist that Western record labels haven't received a dime in license fees. Nor have those copyright protectors authorized ROMS or FAIR to collect payments. The Russians "set up this bogus licensing scheme," says Lauri Rechardt, litigation director for the IFPI, "and quite clearly it's not a problem for the authorities." Counters ROMS general manager Oleg Nezus: "Foreign organizations that lay claims about pirate use...are either adventurists or idiots." (E-mails to Mediaservices were not returned.)

So what's keeping the site alive? Loopholes in Russian law that sanction organizations such as ROMS may provide some legal cover. Prosecutors are also overwhelmed with violent crime and corruption cases and lack the resources to tackle complex copyright disputes. The IFPI has, in fact, filed three complaints, pleading with the Moscow City Prosecutor to launch a criminal probe. The prosecutor eventually agreed to pursue cases against MediaServices managing director Vadim Mamotin and a former official, Denis Kvasov, and on April 21 impounded a computer server, though the site was up and running the next day. One of those cases has since been returned to the prosecutor's office by a judge, "to remove deficiencies." The IFPI, for its part, is seeking civil damages against Kvasov and Mamotin, but may be chasing shadows. "Both are figureheads," says Vladimir Dragunov, an IFPI lawyer in Moscow. "The real owners are hard to trace. We only know that a Cyprus-based company recently bought and now operates Mediaservices."

Even if Russian prosecutors shut down, copycat sites are bound to emerge elsewhere in the former Soviet Union. Indeed, competition already exists from sites like A disclaimer on that site notes that mp3s are low-quality audio and "if you like particular album or song we recommend you buy the original CD." It's not a bad idea — though fewer and fewer people seem to be heeding it.