Russian site Vkontakte
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Several different factions of the recording industry have united to file legal proceedings against one of the world’s biggest online music infringers, Russian social network vKontakte.
 
Sony Music Russia, Universal Music Russia and Warner Music U.K. have all filed separate cases against vKontakte for deliberately facilitating copyright piracy on a large scale. The court action has been coordinated by IFPI, supported by Russian record labels trade body National Federation of the Music Industry (NFMI), and follows months of preparation, during which IFPI made repeated attempts to persuade vKontakte to address its huge number of copyright infringements, but to no avail.
 
The claims against vKontakte were filed today (Apr. 3) in the Saint Petersburg and Leningradsky Region Arbitration Court and charge the social network with creating a service aimed at large-scale infringement of the rights of copyright holders.
 
Launched in 2006, vKontakte -- which has a similar design and user interface to Facebook and is available in a number of international languages, including English -- has quickly grown to become the most popular social network in Russia, with more than 88 million registered users from Russia and 143 million worldwide. Although it is predominantly a social network, the site also contains a comprehensive music service, which provides a vast reserve of unlicensed music streams from domestic and international artists.
 
On the day of the court filing, unlicensed music from Miley Cyrus, Selena Gomez, Martin Garrix, Pink, Nirvana and Eminem, alongside many others, was all featured on the site’s “popular music” page, while a random search by Billboard of a dozen international artists, across all genres, found unlicensed repertoire on all twelve occasions. A request for this week’s Billboard Hot 100 chart-topper, Pharrell Williams’ “Happy,” additionally brought up over 22,000 audio files. The site also offers users the ability to upload and share unlimited music and video files, which, once uploaded, cannot be removed.
 
According to IFPI research, each track in the Hot 100 top 20 averages over 20,000 links. While the site does offer copyright owners the option to request the removal of infringing content, IFPI says the process is “time-consuming” and requires the copyright owner to issue a take-down notice for each individual instance of infringement. In February 2014, vKontakte was named in the U.S. Trade Representative's annual report listing “notorious markets” for piracy for the fourth year running.
 
However, the controversy has done little to harm its revenues. In 2012, vKontakte was reported to have made $172 million in annual income, the vast majority originating from targeted advertising. Comparable figures for last year are not available.
 
“Despite repeated efforts by IFPI and all the companies to get vKontakte to come to table and talk seriously about becoming licensed, we have had no meaningful response, so this case has been in preparation for quite some time,” IFPI chief executive Frances Moore tells Billboard.biz.
 
If the legal proceedings are successful, “the finding of infringement would be very influential because no major company of this size, either in Russia or internationally, wants to have the shadow of illegality hanging over it,” Moore goes on to state.
 
Included within the Apr. 3 legal filings are court orders requiring vKontakte to remove infringing repertoire from its service. The legal action also includes a claim for compensation of just over RUB 50 million ($1.4 million). In line with Russian law, the figure of $1.4 million is based on a small sample of specific tracks detailed with the court action.
 
“It is a very, very small sample of specific tracks that are being taken before the court where we can demonstrate infringement. The amount of money [$1.4 million] is related only to those tracks. It is not a reflection of the overall damage that is being done by vKontakte,” says IFPI general counsel Dan Pickard, who is hopeful of the case being resolved within a 6-month time frame.

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Of greater importance than financial compensation is vKontakte’s cessation of mass copyright infringement,” says Moore, who points to Russia’s relatively low ranking in IFPI’s list of the world’s biggest music markets. According to IFPI’s 2014 “Recording Industry in Numbers” report, music sales in Russia in 2013 totalled RUB 2.2 billion ($ 69.4 million), making the country the world’s 23rd music market by size.
 
“Russian should be one of the top ten markets of the music industry,” says Moore. “The potential of the market is huge, but as long as you have this massive database of world repertoire being made available illegally it is unfair completion and it guts the market. If we can get that under control. If we can stop those copyright violations then legal digital services could turn Russian into a Top 10 market.”
 
In other developments unrelated to today’s legal proceedings, there have been mixed reports that vKontakte founder Pavel Durov has resigned as CEO of the company. On April 1 Durov published a post on his personal VK.com page stating he was leaving the company as it was “becoming increasingly difficult to defend those principles, which were once laid in the foundation of our social network.”
 
However, Durov published a follow-up Apr. 3 stating that his “resignation at this difficult time would have been a betrayal of all that we defended the last 7 years.” Implying that his decision to resign on April 1 had been an April fool’s joke, Durov went on to thank “everyone who supported me on April. 1,” before adding, “I’m not going anywhere – and remain CEO VKontakte.”

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