The Russian social network VKontakte, a local Facebook equivalent that has an outsized and international reputation for piracy, has begun taking steps toward legitimate operation and as the Russian streaming market is in its formative stages and has room for bigger players.
Last week, VKontakte, owned by Mail.Ru Group, removed an option for streaming user-uploaded music tracks from its iPad and iPhone applications. The option is still available on other devices.
Apple and VKontakte did not respond to Billboard's requests for comment, but the Russian business daily Vedomosti quoted a source in the local music industry as saying that VKontakte is in negotiations with Russian and international labels, including Universal Music, Warner Music and Sony Music, about a launch of a subscription-based streaming application.
For years, rights holders' main problem with VKontakte has been its streaming option that allows users to upload any music tracks that immediately become available for streaming by other users.
Numerous lawsuits have been filed against Vkontakte, but in the lion's share of those cases the courts were satisfied with the company's claim that it had no control over user-generated content, but was willing to remove any illegitimate content at the rights holder's request.
That explanation, however, failed to satisfy local and international rights holders, though the procedure for removing illegitimate content is indeed straightforward and efficient.
Rights holders have complained that monitoring all music uploaded by VKontakte users would require substantial resources and making sure that no illegitimate content is uploaded should be the social network's task.
For several years in a row, the US Trade Representative and the International Intellectual Property Alliance have "blacklisted" VKontakte as a pirate web site.
Still, things began to change last year, when Russia adopted stricter copyright regulations. Russian courts seem to have also changed their attitudes, and a few recent copyright violation cases have resulted in verdicts against VKontakte.
At this point, no details are available about VKontakte's expected subscription-based streaming application. One thing is clear, however, is that VKontakte, with its daily audience of over 70 million, according to the company, a paid subscription would have substantial potential for cashing in.
Currently, the only major player in the legitimate streaming segment is Yandex.Music, a division of the search engine Yandex, Russia's largest internet company.
A Yandex spokesman told Billboard that the company's music service currently features over 19 million tracks, and its total number of streams this past reached 400 million.
The service is free for users, except for Apple and Android applications, which cost 169 rubles ($2.7) and 199 rubles ($3.2) a month, respectively, and allow users to listen to previously saved tracks while they are out of internet coverage.
Yandex.Music's financial data are not disclosed, but the service is believed to be funded from Yandex' advertising incomes.
Launch of Spotify was expected to give a boost to the segment, but last month, the Swedish streaming service canceled plans to debut in Russia amidst the country's slow economy, weak ruble and a new personal data protection law expected to be enacted later this year.
Australia-based Guvera remains the only foreign operator in Russia's streaming segment.