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Piracy, changing preferences challenge PH music industry

By: - Business Features Editor / @tinaarceodumlao
/ 12:05 AM March 18, 2014

(First of two parts)

Regine Velasquez-Alcasid’s album, “Hulog Ka Ng Langit” under Universal Records Corp., was certified Platinum by the Philippine Association of the Record Industry (Pari) in December 2013 for having sold 15,000 copies.

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On the other hand, Gary Valenciano’s “Gary V Sings … Just For You”, also released by Universal Records, was awarded a Gold certification in January 2013 for selling 7,500 units. So did Bamboo Mañalac’s “No Water No Moon” album under Polyeast Records that was certified Gold in February 2013.

Had Asia’s Songbird come up with the album between October 1989 and July 2002, she would have needed to sell at least 40,000 units to accomplish the same feat; 30,000 units if from August 2002 to October 2007; 25,000 units if from November 2007 to March 2009 and 20,000 units if from April 2009 to April 2011.

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Valenciano and Mañalac, meanwhile, would have needed to sell at least 20,000 units, 15,000 units, 12,500 copies and 10,000 units for the same periods.

But these days, as many music lovers continue to shift away from buying compact discs given technological changes that have made it possible to get entire albums from the Internet for free, to sell even just 7,500 copies to earn a Gold certificate and 15,000 for a Platinum is an accomplishment worthy of much celebration.

The Diamond certificate, meanwhile, has become more rare than ever.

Indeed, only a handful of albums have managed to receive the coveted Diamond certification since 1990, when Pari, a nonstock, nonprofit group composed of recording companies and organized in 1972 to promote and develop a legitimate and viable local music industry, began certifying recorded music in the Philippines.

Diamond level

The first album to be awarded the Diamond certificate was Jose Mari Chan’s “Constant Change”, which was released by Universal Records in 1989. In that year, a Diamond certificate meant sales of at least 400,000 units, more than twice the 150,000 units required as of May 2011.

Chan followed up this singular accomplishment with another Diamond in 1995 for his album “Christmas In Our Hearts”, which was also released by Universal Records.

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The other albums that were awarded the prized Diamond certification are Nina’s “Nina Live” (2009), released by Warner Music Philippines in 2005; Christian Bautista’s “A Wonderful Christmas” (2010), released by Universal Records and Sponge Cola’s “Araw Oras Tagpuan” (2011), also released by Universal Records.

The last three albums, however, got the Diamond certification for selling a minimum of 200,000 units, which is just half of what was required of Chan’s two record-breaking albums.

That the standards for awarding Gold, Platinum and Diamond certifications have been drastically lowered since 1990 is symptomatic of the radical and painful transitions that the recording industry supporting Original Pilipino Music is going through.

According to a report on the state of the music industry to be presented during the Pinoy Music Summit 2014 on March 19, the recording companies’ revenues have taken a substantial hit over the past decade due to the steep decline in album sales, mostly in compact disc form, with just a small percentage accounted for by vinyl records.

The report, a copy of which was furnished to the Inquirer, showed that from the peak in 1999, when total industry CD sales reached P2.7 billion, sales have slumped to just P699 million in 2010, for a revenue dive of 75 percent in just 11 years.

Revenues of the major recording companies reflect the steep drop in album sales, from which the bulk of revenues traditionally came.

The report prepared by the convenors of the Pinoy Music Summit led by the Filipino Society of Composers, Authors and Publishers (Filscap) and the Organisasyon ng Pilipinong Mangaawit (OPM) show that from 2004-2011, revenues of Alpha Records plummeted by 285 percent, based on available records at the Securities and Exchange Commission.

Star Records’ CD sales, meanwhile, plunged by 82 percent from 2004 to 2012, while that of Vicor Records dove by 74 percent from 2005 to 2012. GMA Records’ revenues sank by 54 percent from 2006 to 2012 while Universal Records’ sales were almost cut by half from 1999 to 2012 at 46 percent. Warner Philippines, on the other hand, suffered a 37-percent decline in revenues from 2005 to 2012.

It is not surprising then that the recording industry has shrunk considerably.

The Intellectual Property Coalition of the Philippines, in a report entitled “The IP Coalition Report I: Copyright in the Philippines 2004,” noted that there were 38 record companies in the Philippines as of 2004, providing livelihood to more than 15,000 people, including composers, singers, musical arrangers, musicians, technicians, recording studio personnel to the employees of record bars.

As of the latest count, Pari’s membership is down to just 15 corporate and 15 associate members and rampant music piracy has been identified as a major factor behind the ongoing attrition in the local recording industry.

The IPC Report of 2004 cited Pari’s 2002 report on music piracy in the Philippines that said “the Philippine music industry was a thriving industry before the vicious tentacles of music piracy choked it to near collapse.”

A 2001 report by the International Intellectual Property Alliance, a US-based private sector coalition composed of trade associations representing US copyright-based industries including recording companies, indicated that the Philippines was “rapidly becoming a central battlefield in the increasingly intense campaign against optical media piracy in Southeast Asia; but the country remains ill-prepared to fight this battle.”

‘Heavily infiltrated’

“The Philippine domestic market remains heavily infiltrated by pirate products in all segments, from software to audio-visual, music to books,” said IIPA, which in that year recommended that the US Trade Representative elevate the Philippines to the Priority Watch List due to the high incidence of intellectual property rights violations.

It reported that optical media piracy took root in the Philippines in 1999 and flourished and grew in 2000, wreaking havoc on industries that rely on intellectual property such as the local music recording industry.

IIPA said that the production, distribution and sale of unauthorized music CDs, video CDs and CD-ROMs “dim the prospects of success for authors, musicians and other creators, both Filipino and foreign; it distorts the Philippines domestic market for copyrighted materials, damaging legitimate retailers, exhibitors and other distributors.”

It estimated trade losses due to piracy in the Philippines at a total of $139.5 billion in 2000, mostly in the form of illegally reproduced books and software.

Losses due to the pirated sound recordings and musical compositions that year was pegged at just $1.3 million but it said that as much as 33 percent of musical compositions and sound recordings sold that year were pirated, almost double the 20 percent in 1999.

Alarmed by the extent of piracy in the Philippines as well as the pressure exerted by the United States, from which many of the copyrighted material in the Philippines comes from, the government took significant strides to address piracy such as the raids on popular sites where pirated materials are sold, such as the public markets in Quiapo as well as Greenhills Shopping Center.

This and other government actions prompted the US Trade Representative to lower the Philippines in the Watch List in February 2006, based on the promises that the government made to improve IPR protection.

The IIPA supported the move but again recommended in 2009 that the Philippines be elevated once more to the Priority Watch List on grounds that the piracy situation in the Philippines “worsened” in 2008.

“In addition to physical piracy (CDs, DVDs, CD-ROMs, photocopies and book reprints), the legitimate market for foreign and local Philippine copyright material was decimated by Internet piracy [mainly peer-to-peer], mobile device piracy, camcording piracy, retail piracy, optical disc production and pay TV theft,” it reported.

It estimated trade losses due to copyright infringement in 2008 at a total of $222 million, of which $117 million was accounted for by pirated records and music, which was estimated to account for a high of 83 percent of the total market, an increase from 80 percent in 2007, 62 percent in 2006 and 40 percent in 2005.

Mobile device piracy

IIPA reported that mobile device piracy “exploded” in the Philippines in 2008 with vendors in the Philippines having dedicated booths and stalls in shopping malls openly downloading to mobile phones and MP3 devices and flash drives hundreds of songs, both foreign and local.

“The practice is so open and blatant that many retailers advertise the sale of pirate downloads on banners outside their premises. Moreover, staff in major retail outlets in even high-end shopping malls will take customers from their salesrooms to nearby piracy retail outlets to load the devices after sale,” said IIPA, which again stressed the growing problem of piracy through mobile phones in its 2014 report.

It is no wonder then that the recording companies that are still alive despite the onslaught of music piracy have become very much wary about investing in local new talent given the uncertainty that the market will accept them.

Aside from the fact that the recording companies are already faced by the debilitating problem with piracy, it also has to contend with the marked preference of the local market for foreign music as indicated by data from Filscap, which administers the public performance and reproduction rights of both local and foreign composers, lyric-writers and music publishers.

Filscap data cited in the industry report showed that in 2011, 58 percent of its annual collections were remitted abroad to pay for use of foreign songs, such as in concerts, on television shows, as piped-in music in resorts, hotels and bars.

In 2012, this increased to 62 percent and rose even higher to 66 percent as of the end of last year.

Launches of records featuring local, homegrown artists have thus become far less frequent as record companies promoting OPM have to fight for a share of a shrinking pie.

Without a lot of excess cash in the coffers, they are more likely to invest in surefire hits, which often means producing albums of people who already have an established following, such as television or movie stars who have the extensive marketing muscle of television or movie networks behind them.

Celebrity singers

This helps explain why in 2013, the best-selling albums that got multiple Platinum certifications featured celebrities with strong followings mainly outside the music world, such as actress Julie Anne San Jose, who is part of the stable of GMA 7.

Her eponymous album produced by GMA Records dominated sales and was given eight times Platinum certification. Actor, singer and image model Daniel Padilla likewise came up with an album last year that went on to be recognized for selling at least 30,000 units.

When the recording companies do invest in new acts, they take steps to minimize their risk.

In 2009, for example, Universal Records invested in a “new” artist Noel Cabangon, who was then 45-years-old and more known in alternative music circles.

Universal Records general manager Kathleen Go said the company took him in as it believed in his talent and in his captured market.

But to help ensure acceptability and hedge his bets, his debut mainstream album “Biyahe” relied almost entirely on surefire hits already accepted in the market such as Rey Valera’s “Kahit Maputi Na Ang Buhok Ko”.

Since the potential market already knew the songs, Universal Records believed that there was a great chance that the market will also accept the singer.

Universal Records was not wrong and the gamble paid off with Cabangon’s “Biyahe” eventually earning a double Platinum, with the follow up “Tuloy Ang Biyahe” getting a Gold certification from Pari.

“The market already dictates what they want from the producers. The older generation really wants the old songs revived in a modernized way or the artist’s own rendition,” she said, adding that the primary market for CDs is composed of those at least 30 years old.

Admittedly, however, that is the kind of risk that record companies such as Universal Records cannot afford to make too often given the expenses associated with producing a record.

Pari estimates that a record company, on average, needs to sell an average of 5,000 units of a record to recover the cost of production, which is quite a challenge given the business environment.

This is why from a high of about 12 album releases a year, record companies these days produce only an average of six a year, as the cost of producing an album does not only include paying for the artist, songs, musicians, studio and post production work, but also the marketing and promotion expense to ensure that the product reaches the target market.

Indeed, it has never been more difficult for Original Pilipino Music to flourish in the mainstream. (To be concluded)

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