For use of information media - Not an official record

15 December 2004

The contents of this Report must not be quoted or
summarized in the print, broadcast or electronic
media before 15 December 2004, 17:00 GMT

Musicians in developing countries have much to gain and little to lose from the digital and Internet technologies that the major international recording and publishing industries view as the core enablers of piracy. But to realize those gains they need more control over the copyrights to their recordings and compositions, UNCTAD argues in the E-commerce and Development Report 2004 (1), released today.

Digital and Internet technologies and music are a near-perfect match. Earlier 20th century technologies brought music to growing audiences and helped boost artistic creativity. Those technologies have long since been superseded, and music has now run away from its guardians - the recording and publishing industries - to cavort with appreciative and distant audiences on the Internet´s peer-to-peer (p2p) networks. But do all these exciting new developments really offer any positive creative and financial propositions for musicians?

UNCTAD´s report explains that traditional sales of recorded music are often insufficient to cover production costs and leave musicians in financial peril. Artists are also left with little control over their work, having forfeited the rights to their compositions and recordings under standard industry contracts. According to industry sources, only 5-to-10% of all recordings recoup the advances paid to artists and become profitable. Thus, on top of losing their rights, many musicians also accumulate debt.

Going live

For most musicians, particularly those from the developing world, the fact that well-attended live performances, rather than CD sales, can provide their most reliable source of revenue must be a decisive consideration when they reflect on how to use digital and Internet technologies in managing their own businesses. Radio and television remain the most powerful means for creating mass interest in musical products and personalities. But these media can be tapped into by only a tiny minority of artists. The Internet, by contrast, enables anyone with a computer to make themselves and their music accessible to millions. Many musicians may be performing abroad, in remote markets, and thus it is doubly important that they maximize the use of technology back home to create the interest in their music that will attract the biggest possible (and most profitable) live audiences abroad.

Audience "discovery" has usually been promoted by the mainstream music industry as a marketing exercise to support CD sales, but those sales rarely generate net recording royalties for musicians, the Report notes: of an average 12% royalty paid on a $16 CD, the artist is left with about 4.10%, after deducting producer´s fees, "cost of packaging", "free goods" (giveaways) and withholdings for unsold stock. The industry has been shy about using digital and Internet technologies due to concerns over piracy, and the development of these technologies outside the music industry has been subject to systematic litigation by the major companies. Sharing of copyrighted materials on the p2p networks (including innovators like Napster and MP3.com and newer, more resilient players like Kazaa and Overnet) has been successfully prosecuted because it amounts to unlicensed redistribution beyond the scope of what can be considered "fair use". Having invested significant time and money in legal proceedings and in lobbying and marketing against p2p, the mainstream industry is unlikely to embrace these technologies any time soon. Clever use of the diverse palette of digital technologies and the Internet will thus require an independent approach and greater, if not full, control by artists of their own creations, the Report warns.

Talent counts; but who benefits?

Digital technologies have had a great impact on the economies of music production. High-quality recording and production tools running on commodity PCs are widely available at prices that have become realistic for artists in many developing countries. A number of free and open source software tools for music creation and production are being continuously refined and provide advantages from an access, learning and cost perspective. Thus, the cost structure of music production is shifting towards paying for human ability and know-how, rather than for equipment and facilities. The history of the international recording industry shows that developing countries are full of talent and ambition and that technology has assisted in the globalization of country genres, such as the Brazilian and Jamaican varieties. The question remains as to who ultimately benefits, and how technology can tilt the odds in favour of artists and musicians in developing countries.

The total earning capacity of a musician will depend on optimizing the mix of revenues coming from recording royalties, composition royalties, merchandise sales and live performances. As the UNCTAD report points out, technology has effects that are perceived and real, as well as positive and negative, on each of these revenue sources. Actual physical piracy - the production and distribution of counterfeit CDs and tapes - is clearly damaging. But the "majors" in the international recording industry insist that Internet-based and p2p technologies damage sales of CDs as well, although recent research casts some doubts on these claims. But because the majority of CDs do not recover the advance paid to artists, musicians do not earn much either, and thus the issue of perceived losses due to Internet technologies and p2p-related piracy is a moot point.

Retaining copyrights is fundamental to exploring alternatives and embracing new technologies. Policy efforts, says the E-commerce and Development Report, should support the discovery of musicians and musical cultures using the Internet and digital technologies and avoid generating anxieties about losing out on possible but actually improbable stellar earnings from international CD sales. While modern systems for copyright protection and royalty collection are needed in developing countries to develop strong national markets and interact with the international entertainment industry, policy makers, music industry professionals and musicians should give careful thought as to the extent to which stronger copyright law and protection works in the interests of both creators and audiences.

Artists should also consider whether improved discovery and performance income are not in fact preferable to income from royalties, which frequently proves to be minimal. To that end, the use of Internet technologies, including p2p file-sharing, online distribution, and adopting open or public licences, such as those proposed by the Creative Commons initiative, warrant consideration.

See also UNCTAD/PRESS/PR/2004/039 for a more general look at Internet use by developing countries.


1. The E-commerce and Development Report 2004 (Sales No. E.04.II.D.42, ISBN 92-1-112653-3) may be obtained from UN sales offices at the addresses below or from UN sales agents in many countries. Price: US$ 45.00. Customers wishing to obtain quotations for large quantities should contact the sales offices. Please send orders or enquiries for Europe, Africa and Western Asia to United Nations Publication/Sales Section, Palais des Nations, CH-1211 Geneva 10, Switzerland, fax: +41 22 917 0027, e-mail: unpubli@un.org ; and for the Americas and Eastern Asia, to United Nations Publications, Two UN Plaza, DC2-853, New York, NY 10017, USA, tel: +1 212 963 8302 or +1 800 253 9646, fax: +1 212 963 3489, e-mail: publications@un.org, Internet: http://www.un.org/publications .

For more information, please contact:
UNCTAD Press Office
T: +41 22 917 5828
E: unctadpress@unctad.org
G. Feraud
T: +41 22 917 2042
E: genevieve.feraud@unctad.org


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