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Bruce Iglauer :: Effects of international piracy on American independent record labels

On Thursday, May 26, 2005, Alligator Records president Bruce Iglauer testified before the Committee On Small Business in Washington, D.C. to a group of representatives including Donald Manzullo (R-IL), Danny Davis (D-IL) and Melissa Bean (D-IL).

The complete transcript of the testimony:

I founded Alligator Records by myself, 34 years ago, in Chicago, the world capital of the blues. It was fueled by my passion for the blues, a uniquely American music full of emotion and history. I founded Alligator in a one-room apartment with only $2500 and almost no experience in the record business. I built my artist roster from among the blues men and women who performed in the little clubs in Chicago’s South and West Side African-American ghettos. Over the years, with a roster of extraordinary talent, Alligator has built a catalog of 230 albums, recording blues artists from all over the USA. I’m very proud of the fact that literally hundreds of musicians, songwriters and their families have been able to survive and thrive, as a result of the work that Alligator has done to bring them to a worldwide audience. After 34 years, royalties from the sales of our recordings are not only supporting the artists and songwriters, but their children and grandchildren.

The music that Alligator records is not pop music—it will never be embraced by the multi-national companies that market the hits. Alligator is like literally hundreds of other small, independent labels across the country that record blues, jazz, traditional folk music, classical, spoken word, gospel, bluegrass and more. It is dedicated to recording and preserving music of great cultural importance. Because there is an audience for this music, but not a huge one, it has become the province of the independent labels like ours. No one in the independent record business is getting rich, but because we’ve developed a core audience around the world who love our genres of music, we’re able to survive and continue recording this valuable music that we love. Unfortunately, the survival of companies like mine is being threatened today on a worldwide basis by piracy.

The last several years have been extremely tough ones for my industry. The piracy of our music, physical and online, has been the major reason for our problems. In rough terms, the combination of growing global physical piracy, easier Internet piracy and illegal CD burning generated a 20% sales decline since 1999. In the case of Alligator, the decline in income since 1999 is closer to 35%. I’ve had to cut back on the number of recordings we release and lay off staff members, because of the decreased worldwide market for legitimate recordings as a result of piracy.

The impact of the music industry revenue crash has been profound, in human and creative terms. There are hundreds of small record companies in the United States that add to America’s culture—and our cultural diversity—and that have been severely affected by this wave of piracy. Successive rounds of job losses have occurred in our companies—small and large. And there have been additional job losses associated with the closing of literally thousands of retail stores.

Yet the creative cost may be even more troubling. Artist rosters have been slashed dramatically as companies no longer can afford to carry as many developing artists as they’d like to. Piracy robs the music industry, whether it is the major labels or the independents like Alligator, of the capital it needs to invest in those developing artists. The result? Fewer artists are finding the financial support they need to put food on their table.

American recordings are sold all over the world. For my company, our international business is about 25% of our overall income. Sales of American recordings in the rest of the world add significantly to our nation’s trade balance and ultimately to our national welfare. Our nation’s welfare is reduced and our composers, artists and all the employees of record companies—small and large—suffer when foreign governments permit our recordings to be pirated in their countries.

When it comes to ripping off American sound recordings, China is one of the worst. The magnitude of record piracy there eclipses any other country. China is potentially the biggest market in the world for American music…maybe even bigger than the USA. With the growth of the Chinese economy and the huge population, the potential for massive sales of American music in China in the next few years is great. It could be a huge boon to independent labels like Alligator. It is not a matter of “if” our music will be pirated in China, but rather “when.” Once that happens, this expanding market will be lost to Alligator.

China has made some limited progress in terms of improving its anti-piracy laws; it runs lots of “raids” and seizes lots of illegal products. But more deterrent penalties are almost never imposed and piracy continues to thrive. The challenge for all of us, as Americans, is to get China to impose penalties on large-scale pirates operating there that truly discourage such piracy. Unless and until they do, not much is likely to change.

The U.S. Government must press China harder to strengthen their anti-piracy enforcement regimes. The current systems in these countries do not work. Unless the U.S. uses each and every option available to it, we will continue to face the same situation we do today for the foreseeable future—overwhelmingly pirate markets and lost opportunities for legitimate US companies. Without wanting to sound melodramatic, I sincerely believe that the survival of the American independent record industry is absolutely dependent on stopping worldwide piracy of music.

published 31.05.2005© 2005 jazz news :: home page

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