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Cable reference id: #07MOSCOW5352
“All of them, those in power, and those who want the power, would pamper us, if we agreed to overlook their crookedness by wilfully restricting our activities.” — “Refus Global“, Paul-Émile Borduas

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Reference id aka Wikileaks id #129541  ? 
SubjectStyle Records--pioneering Russian Music Industry's Fight Against Piracy
OriginEmbassy Moscow (Russia)
Cable timeFri, 9 Nov 2007 15:03 UTC
Extras? Comments
Hide header UNCLAS SECTION 01 OF 02 MOSCOW 005352 SIPDIS SIPDIS STATE PLS PASS USTR SDONNELLY, JGROVES, SMCCOY, PBURKHEAD NSC FOR MWARLICK DOC FOR JBROUGHER, MEDWARDS, AND JTHOMPSON E.O. 12958: N/A TAGS: ETRD [Foreign Trade], KIPR [Intellectual Property Rights], RS [Russia; Wrangel Islands] SUBJECT: STYLE RECORDS--PIONEERING RUSSIAN MUSIC INDUSTRY'S FIGHT AGAINST PIRACY ------- Summary ------- ¶1. (SBU) As high piracy rates and changing business models increasingly challenge the traditional way the music industry conducts business in Russia, a prominent Russian recording company, Style Records, is using market incentives and diversification to ensure its future survival. While taking the lead to press for greater GOR enforcement action against piracy, the company is simultaneously pursuing civil action against pirates in Russian court. End Summary. ¶2. (U) Econ M/C and Econoff met on October 30 with Oleg Lobov, General Director of Russian recording label Style Records (the fourth largest in Russia), to discuss Russian music industry trends and IPR issues. As the chairman of the National Federation of Phonogram Producers (NFPP), the local sister-organization to the International Federation of Phonogram Industries (IFPI), Lobov also provided an overview of the Russian recording industry's coordinated anti-piracy strategy. ------------------------------- Diversification Key to Success ------------------------------- ¶3. (SBU) Lobov, fresh from a business trip to Europe, was the picture of a confident, Western-oriented business executive looking to diversify his company. Acknowledging that the music industry is undergoing major Internet-induced restructuring, Lobov told Econ M/C that he and his business partners plan to invest actively in retail shops, movie companies, and Internet portals in the next three years to ensure the long-term growth of the company. Style Records has also partnered with Billboard magazine to launch its Russian version, and hopes to put together the Billboard Music Awards show in Russian in the next year or so. ¶4. (SBU) Lobov said that part of that strategy is not only to cater to Russian-speaking consumers in Russia and the CIS countries (with expansion plans in Ukraine in particular), but also to produce English-language albums by Russian artists for the U.S., European, and Japanese markets. As he put it, &Western majors do not need the Russian market to survive, but Russian record companies absolutely need the Western markets.8 One of the European trip's purposes was to promote arguably the hottest singer under the Style Records label, Sergey Lazarev who joins the growing rank of Russian pop stars who consider English-language songs a necessary part of the formula for success. ¶5. (SBU) One of Style Records, most successful diversification projects to date is Nastroyenie, a chain of multimedia stores selling legitimate CDs and DVDs. Launched in 2005, Nastroyenie currently has about 100 branches in Moscow and 20 in St. Petersburg, with plans to open 22 in Samara by the end of the year. Its business model, according to Lobov, is to respond to consumer needs for clean, nice shops, relatively low prices, and good customer service. By locating stores at easily accessible places such as in shopping centers, near metro stations, and on street corners, Nastroyenie/Style Records hopes to lure shoppers away from pirate stands by offering a better shopping experience at slight higher, but still reasonable, prices. (N.B. The strategy seems to be working. When Econoff and Econ FSN visited one of Nastroyenie,s flagship stores one Monday afternoon, they found the place fairly humming with shoppers browsing the aisles and trying out video games at game consoles.) -------------------------------------- Industry Acting to Shut Down Pirates --------------------------------------- ¶6. (SBU) Lobov told us that there are now fewer pirate shops in Moscow due to stepped up law enforcement activities, but across Russia, the situation remains problematic with pirated music CDs accounting for a high percentage of sales. However, as supermarkets and large chain stores increasingly start to carry legitimate optical disk products, the situation is likely to improve further. At the same time, Internet piracy is a growing concern, especially among younger consumers. MOSCOW 00005352 002 OF 002 ¶7. (SBU) Lobov said the Russian music industry, through NFPP, is attacking piracy in a coordinated three-pronged approach: 1) working with the Russian government, rights holders, and other governments to affect change in IPR legislation and improve law enforcement efforts; 2) changing mind sets about piracy, both the pirates, and the consumers,, through ad campaigns and industry promotional events; and 3) taking civil action against pirates to send the message that the industry will no longer tolerate their activities. ¶8. (SBU) In that regard, Lobov said NFPP has been active in pressing for needed amendments to Part IV of the Civil Code, which will come into force as Russia's overarching civil IPR legislation on January 1. In addition, the leading Russian recording studios, including Style Records, Gala Records, Universal, and Sony BMG, have jointly sued in arbitrage court five Russian pirate websites:;;;; and This coordinated action follows the April, 2007 court victory by Style Records and Gala Records against pirate website, as well as Style Records, victory against rogue collective management society FAIR. ------- Comment ------- ¶8. (SBU) Oleg Lobov belongs to a young, modern generation of Russian business executives who firmly believe that Russian economic interests are tied to international markets. Moreover, he is an adherent of the formal, rules-based economic activity found in the West and has taken on a leadership role in fighting IPR piracy in Russia through market incentives and industry-initiated legal actions. While law enforcement action is indispensable in the fight against IPR violations, it is likely the market-based industry initiatives that will have a more lasting effect on the piracy problem in Russia. End Comment. BURNS



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