Allofmp3 Press Conference

October 17, 2006

Allofmp3 organized an on-line press conference during which reporters from all over the world were able to ask questions to Vadim Mamotin, Director General of Mediaservices, Allofmp3's parent company. Below is a transcript of this press release.

Representing the company is Ilya Levitov and Rory Davenport.

by Ilya Levitov, 13.10.2006 14:15:44
Welcome to the AllofMP3.com press conference. The participating journalists cover 11 time zones. Representing the company is Vadim Mamotin, Director General.

Ilya Levitov and Rory Davenport are also participating. Ilya will translate questions into Russian for Mr. Mamotin and then translate his answers to English. We scheduled this online press conference to address issues surrounding the AllofMP3's business model, which has been criticized by the record cartel and, more recently, U.S. Trade Representative Susan Schwab. The company has been unfairly characterized as a pirate website. Nothing could be further from the truth.
AllofMP3 is a legitimate business that is incorporated in Russia, pays taxes in Russia and pays royalties to the Russian Multimedia and Internet Society (ROMS).

by Klaus Herbst, 17.10.2006 19:08:40
Hi! Why do you now - for the first time - hold a press conference and what is the reason for consult a well reputed American PR agency?

We scheduled this online press conference to address issues surrounding the AllofMP3's business model, which has been criticized by the record cartel and, more recently, U.S. Trade Representative Susan Schwab.
The company has been unfairly characterized as a pirate website. Nothing could be further from the truth. AllofMP3 is a legitimate business that is incorporated in Russia, pays taxes in Russia and pays royalties to the Russian Multimedia and Internet Society (ROMS).

by David Harrison, 17.10.2006 19:11:30
If the WTO forces the Russian Government to bring licencing laws in line with the EU or US, what do you think will be their first action in regards to Allofmp3.com?

You should address this question to the Russian government.

by Toby Lewis, 17.10.2006 19:12:48
1. How much revenue did Allofmp3 receive from its digital music sales in 2005 or so far this year?
2. How much money did Allofmp3 pay to ROMS and FAIR in 2005?
3. Are you arguing that your site is legal because you are simply 'broadcasting' music rather than selling permanent copies of music?
4. Do you not think that the changes introduced into Russian copyright law on 1 September, in particular the introduction of the making available right, change your legal situation?

We are not disclosing financial details during this conference.

by Nathan Anderson, 17.10.2006 19:13:55
What percentage of your purchase price is paid out in royalties? How many artists collect this money? Can you name the top four or five artists who have been paid?

15% To clarify we pay royalties to ROMS. It's ROMS responsibility to compensate the appropriate copyright holders.

by David Balfour, 17.10.2006 19:16:06
Can we assume that the purpose of this press conference is to deny repeated allegations that allofmp3 is operating a service which breaches copyright?

Yes, the company is in complete compliance with Russia law.

by Christian Hoeferle, 17.10.2006 19:17:29
From your perspective: Why do western rights holders deny the legitimacy of your ROMS license?

Because the, the record cartel, doesn't control ROMS. They would rather have complete control over the royalty question.

by Christian Hoeferle, 17.10.2006 19:20:27
MediaServices has claimed to only cater to Russian customers. Why then do you market your services in the English language with charts from four of the world's five biggest music markets?

We don't actively market to other countries. for example, we don't purchase ads or run online commercials.

by Nathan Anderson, 17.10.2006 19:22:14
The US has pressured the Russian government to close down AllofMP3.com if it wants in to the World Trade Organization. Recent changes in Russian copyright law also give the government more power to act against your site. In your view, what are the chances that you will still be operating one year from now?

Of course, we will survive. The music industry is rapidly changing and we will change with it.

by Neil Buckley, 17.10.2006 19:23:01
Could you respond to the recent suggestion from Susan Schwab, US Trade Representative, that the existence of Allofmp3 is a major barrier to the conclusion of a bilateral US-Russia agreement on Russian membership of the WTO?
Could you also please address the following four questions, posed by the international music industry:

1. What are your revenues, and what share of them have been distributed to artists or copyright owners? What are your top 10 best sellers, how much has your top-selling artist been paid and can you identify any artist or copyright owner who will confirm they have received payment from Allofmp3.com?

2. How can Allofmp3.com justify its business model by saying it is licensed by Russian-based body ROMS to make available and sell music over the internet, when ROMS does not have the mandate from any of the relevant copyright owners (record producers, authors and music publishers worldwide) to issue such licences in or outside Russia (and was furthermore expelled from CISAC in October 2004)?

3. Copyright societies representing hundreds of thousands of composers, authors and music publishers around the world have written to ROMS making it plain that ROMS has received no such rights from them. This means that Allofmp3.com is making copyrighted works available without the permission it needs. When is Allofmp3.com going to stop illegally exploiting the works of composers, authors and publishers?

4. Allofmp3.com's website admits it may not be legal in countries other than Russia, yet it is available in English and even publishes charts from the US, UK, Germany and France. What steps is Allofmp3.com taking to comply with the law outside Russia?

The truth is that US Trade Representative Schwab knows that isn't true. The US government is conveniently using AllofMP3 as an issue to gain further concessions from Russia.

by Christian Hoeferle, 17.10.2006 19:26:00
How do you think you will manage to come to a mutual agreement with the recording and publishing industries?

We are looking forward to direct negotiations, which we plan on seeking.

by Juliana Koranteng, 17.10.2006 19:28:01

What effort has Mediaservices made to meet up with IFPI, Representative of the international recording community, have a face-to-face exchange of words,in order to explain why it believes it Is offering a legitimate business; and what does the company plan to so if the copyright organisations still refuse to accept its
Legitimacy.

It is our understanding that ROMS has reached out to IFPI. We feel that is the appropriate action right now. We reserve the right to change our mind and seek a meeting with them.

by Nick Coleman, 17.10.2006 19:28:42
Two questions:
1 How do you respond to charges that purchases from your site, particularly from outside Russia, in countries such as Britain, are illegal?
2 What is the current status of your legal case with the IFPI in a Moscow court?

We operate like most Internet-based businesses. We clearly caution visitors to make sure they are in compliance with their country's law.

by Christian Hoeferle, 17.10.2006 19:28:53
I would also like to see your answers to the 4 questions posted by IFPI, RIAA, CISAC et al.

We are going to address IFPI's questions later today. We wil either issue a release or post our response to our website.

by Alan O'beirne, 17.10.2006 19:30:01
Given the companies assertion that it is acting in accordance with Russian Law, do the recent changes in Russian copyright legislation not alter that assertion?

It doesn't impact our business

by David Balfour, 17.10.2006 19:31:08
UK record labels claim not to have received a penny in royalties from the use of their music on allofmp3.com. If allofmp3 is indeed legitimate, and pays royalties, how can this be explained?

They should come to ROMS and take the money. ROMS has been offering them to pay them the royalties they have collected for a long time.

by Chris Rugaber, 17.10.2006 19:31:55
Hello--are any of the royalties paid to the ROMS forwarded to U.S.record companies? If not, why not? What percentage of your sales are from the United States?

Again, ROMS has notified the US recording industry that is is holding royalty payments and it has offered to distribute those royalties. So far, the big record companies have resisted ROMS offer.

by Adam Sherwin, 17.10.2006 19:32:06
Is allofmp3.com a serious barrier to Russia entering the World Trade Organisation? If so, why not comply with the demands of the International record industry?

AllofMP3 is not a barrier to Russia's entry into the WTO. That is part of the recording industry's campaign against the company. But make no mistake, our company has no bearing on Russia's entry into the WTO.

by Mark Drajem, 17.10.2006 19:32:52
So this is the press conference? OK. So you aren't paying the recording industry or artists to distribute their music, how can that not be copyright infringement?

What more is AllofMP3 do? We operate under Russian law, we pay taxes in Russia and we pay royalties to ROMS, the official licensing agent in Russia. ROMS has offered to pay the record companies the royalties they collected but been rebuffed. Clearly, the recording industry is trying to gain additional leverage before entering in to direct negotiations with either us or ROMS.

by Susan Butler, 17.10.2006 19:32:58
If your site may not be legal in other countries like the U.S., the U.K. and Australia, why is it available in language of those countries?

We still are not convinced our business is not legal in our countries. The laws governing Internet transactions is very complex and there are conflicting international laws and country-specific laws.

by Peter White, 17.10.2006 19:33:27
What are the plans to grow the business? Do you see potential in other markets or other forms of digital content?

We are constantly evaluating our business but don't envision moving into other digital products.

by Janko Roetggers, 17.10.2006 19:34:56
Hi Ilya & Rory, could you explain a little more how the recent legislative changes in Russia have been affecting Allofmp3? I understand that from your point of view authors now have the right to exclude their works from collective licensing, right? How would such an exclusion process look like - an how many authors have made use of it so far?

That's right.

How would such an exclusion process look like - an how many authors have made use of it so far?

None of them!

by Toby Lewis, 17.10.2006 19:35:13
You said you pay money to ROMS but don't you also pay any money to FAIR?

Yes, we pay money to FAIR.

by Tom Mennecke, 17.10.2006 19:35:42
The RIAA and IFPI have just released a joint press release which questions the legality of AllofMp3.com. In the release, the RIAA and IFPI question, "Copyright societies representing hundreds of thousands of composers, authors and music publishers around the world have written to ROMS making it plain that ROMS has received no such rights from them."

In other words, it would appear copyright holders are not receiving any royalty payment from ROMS, nor are they authorized to act as their agent/representatives. To what extent does AllofMP3 ensure that artists/copyright holders receive their royalties, or ensure ROMS is the proper avenue to legitimacy?

Let's start with the fact that the record companies have little regard for the majority of musicians. They are concerned with making money for themselves, not the artists. In our opinion, we and the artists would be better off dealing directly with each other. In fact, we believe that is the future of the music industry. We think labels will fade, not disappear but fade, and that artists will have much greater freedom to actually control their work, which they don't the minute they sign their contract.

by Chris Rugaber, 17.10.2006 19:36:03
Have you received any pressure from the Russian government to shut down or to forward royalties to the United States?

We have not been pressured by the Russian government. We believe they fully understand we are in full compliance with the laws. On the other hand, we have faced various legal actions initiated by IFPI. But we have addressed most of those issues and will continue to do so.

by Daniel Lagger, 17.10.2006 19:37:28
Your Online-Encoding system is unique. Not even your partner site mp3stor has it. Do you own the patent rights on this system?

Yes, it's developed by us and is patented.

by Alex Ritson, 17.10.2006 19:37:58
We did an interview with the International Federation of Phonographic Industries this morning in which they said that they had never seen a penny of the money allofmp3 has earned in selling music on your site. If you are paying royalties to Roms, it certainly doesn't seem to be getting to the artists or record companies overseas. What is your response to that?

We can't control what ROMS does. However, we want to be very clear that we have encouraged ROMS to distribute the royalties. Clearly, it is in our best interest, as well as the musicians, that ROMS distribute the royalties to the record companies.

by Alex Viega, 17.10.2006 19:40:00
Can you clarify how it is that you obtained the albums/tracks you offer on the site? Do you have direct licenses with the major record labels for their content? If not, how did you acquire the recordings? Also, can you expand on what the purpose of this 'news conference' is? What are you trying to say regarding your dispute with the major record labels? Are you taking any new action, legal or otherwise, to resolve the matter?

The purpose of the news conference is to publicly come out to say that we are a legitimate company. We are troubled by the business dispute
and believe it has hurt our business. We also want to say that we are considering a number of options to address the issues including appealing for direct negotiations with the record labels. As we see it, the record labels really have an issue with ROMS, and perhaps, the Russian government. But suing AllofMP3 and enlisting the US government to put pressure on us is not the solution to their problem. They really should view us as an opportunity to do business in Russia. We are doing well and the companies and artists could benefit from working with us.

by David Harrison, 17.10.2006 19:40:07
Besides the cheap price points allofmp3 has great functionality. All reasons for success at home and abroad. Are tracks encoded from Wav on the fly to the customers preferred format? Who does the developing? If in house, how big is your team that works on this? Would you consider licensing your code elsewhere?

We have a small team and do most of the development in-house. Only a few non-critical parts of the system are outsourced.

by Brian Duggan, 17.10.2006 19:43:50
What direction do you see your Web site taking if harsher restrictions are placed on it?

It is impossible to tell what actions we make take to alter the site.

by Toby Lewis, 17.10.2006 19:50:34
If a recording artist does not wish AllofMP3 to sell the artist's music, will AllofMP3 - like other sites - remove their music from the site?

The artists could go to ROMS and request their music be removed from AllofMP3. That has happened on a few occasions and we complied with
the request.

by Klaus Herbst, 17.10.2006 20:09:22
How does online encoding work? Would DRM ever be a possibility if it helped to become acknowledged?

Our online encoding tailors the data format to fit individual user's demand of quality and device compatibility. If we're offered DRM technology that does not discriminate our users, we would consider it.

by Ilya Levitov, 17.10.2006 20:21:14
We are going to stop taking questions but will answer those that are in the queue and that we can get to within the next 15 minutes. We apologize that this event has been a bit sluggish. Please note that you can contact Ilya and Rory to schedule interviews and get additional information. We will get better at this. We promise.