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December 19, 2006

Southeast Asia royalties dispute could stunt mobile music services’ growth

Telecoms firms in Indonesia and the Philippines are set to withdraw most of the international catalog they offer through their mobile music services for use as ringtones, full track downloads, and video music downloads due to a legal dispute with music publishers.

By CBR Staff Writer

In Indonesia, Yayasan Karya Cipta Indonesia (YKCI), a collecting society representing composers, authors and publishers in the country, has asked leading telecoms companies, including Indosat, Telkom Flexi and Bakrie Telecom, to pay an increased royalty rate for using most of the international repertoire or remove such music from their services.

The record companies had secured a royalty rate of 5.4% of the wholesale price per track, but YKCI is asking that this be increased to 12%.

Over in the Philippines, the country’s two major mobile service providers, Globe and Smart Telecom, have decided to withdraw most international repertoire from their newly-launched music services after the international publishers asked for a royalty rate higher than the level charged by music publishers for locally-produced music.

Record companies including EMI, Universal, SonyBMG and Warner Music had launched a number of music services in partnership with Globe and Smart Telecom offering master recordings of top international artists. The record companies, represented by the Philippines record industry association PARI, had secured licenses at a royalty rate of 10% of the wholesale price per track. However, the international publishers have now asked for a rate more than double the local royalty.

In early September, PARI was warned that its members should stop offering international repertoire through the mobile services or face possible legal proceedings.

The dispute is in danger of suspending the growth of a digital music business that offered a compelling alternative to illegal downloading in Southeast Asia, the IFPI, which represents the recording industry worldwide, said in a statement.

Indonesia and the Philippines are two of Asia’s smaller music markets, worth $50 million and $25 million in 2005 and held back by piracy rate of more than 50%, the organization pointed out.

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Record labels, publishers and technology providers all need to work together to help grow the legal digital music market across Southeast Asia, commented Leong Mayseey, regional director of the IFPI Asian Regional Office. If consumers cannot legally buy international repertoire because telecoms companies have withdrawn them this benefits no one but the pirates. It is vital that the publishers and the telecommunications companies settle this dispute quickly.

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