GETTING GRAY WITH STEVEN D'ONOFRIO, DIRECTOR, ANTI-PIRACY UNIT, R.I.A.A. (RECORDING INDUSTRY ASSOCIATION OF AMERICA, INC.)
INTERVIEW BY NETTA GILBOA AND ALAN SHECKTER
Steven J. DíOnofrioís office is full of pirate memorabilia. There are pirate flags, copies of seized CDs, and even a pirate troll doll. On the wall are gold and platinum awards (including one for R.E.M.ís Out Of Time and one for John Lennonís Double Fantasy) which the RIAA (Recording Industry of America, Inc.) awards to certify LP sales. There are numerous photos of Steven posing with famous musicians and heís got some laminates including one from the Grammy Awards. Behind his desk was a copy of Zappaís Beat The Boots boxed set, McCartneyís Unplugged, Dylanís The Bootleg Series and the recent book Stiffed.
As is the case with almost every interview we do, this is the longest interview ever done with the RIAA. It took a long time, well over a year, to get Steven to consent to talk to us. I refused to give up. Understandably, as many journalists are out to write smear pieces or they do haphazard, quick reporting, when we confessed that many of our audience were pirates (they record, collect and trade or sell live concert tapes), he was initially hesitant. After reading Gray Areas, however, he cons ented because itís clear we treat all sides fairly. We spent over two hours conducting the interview below and another half hour talking off the record.
I pursued this interview so vigorously because I believe it always helps both sides to listen to each other. Finally, the laws are clearly explained and there is some detailed information on the severity of the problems facing the record industry.
Before we left the RIAAís offices, Steven showed us two videotapes of actual busts. These involved counterfeit cassettes as discussed below. I was unprepared for the sheer volume of what I saw, the lack of attention to quality recording equipment, a nd the greed involved. There is no way the people arrested in those cases were fans of most of the bands they were counterfeiting. There were simply thousands of bands involved and there were hundreds (if not thousands) of tape labels for each of these ba nds. I think that if my first exposure to this subject had been through seeing arrest videos like these I would not want to hear about tape traders. As you know, I think live tapes are great, but this is another matter entirely.
We also looked at some of the actual counterfeit cassettes. At first glance, they look exactly like the real thing. However, as soon as you see the real thing next to the fakes, itís obvious how shoddy the fakes are. We saw shrink-wrap that did not follow the style or color the various major record companies use. We saw record company logos missing, incomplete or with smudged ink. We saw color discrepancies in the photographs and cover art. I saw enough to get physically sick.
Counterfeiting exists in almost every industry. Most of the problems discussed below also apply to movies, books, software, watches, clothing, etc. We hope this interview makes you think twice before supporting counterfeiters in the future.
Netta Gilboa: How long has the RIAA been around and what in general does it do?
Steven DíOnofrio: Since the early 50's I believe; I don't have an exact date. The piracy unit began in the early 1970s about 1970-72. It is a trade association for the record industry. Our member companies are the manufacturers and distributors of pre-recorded music. They account for about 95% or more of the legitimate recordings distributed in the U.S. each year.
GA: Does that include independent record companies or mostly majors?
SD: Absolutely. The majors make up the largest percentage in terms of sale units, but necessarily the largest number of our members clearly are independents. A lot of people do become members and it's a very minimal fee structure, b ased on your dollar volume sales.
GA: And as we'll talk about later, it only takes one recording to have problems.
SD: Yes. It's like anything in life. It takes one theft of anything, so.
GA: How many members would you estimate that you have?
SD: Again, that changes so much day to day because a lot of the independent labels and labels that have one recording out there or five, may not pay their dues for this year and they drop out. Our annual report will give roughly a c urrent amount until the end of last year.
GA: You address pirating, bootlegging and counterfeiting, and I thought we should start probably with a definition.
SD: Okay, sure. Piracy, in a generic sense, is the unauthorized duplication or the subsequent unauthorized sale of recordings without the permission of the owner. That could be a record company or the performer. Then there are three specific kinds of piracy that we refer to in the industry.
One is counterfeiting which is the duplication and subsequent sale of recordings that had been released legitimately by the sound recording owner, or the record company. It copies the artwork, the packaging the trademark, the graphic s. They try and deceive the consumer into believing it is identical to what was released legitimately. There's almost no difference other than sometimes the person who puts it out will not go through all the trouble that some of the record companies do fo r instance, with the insert card or the J-card, they may not duplicate the back, the fold out information, what we call a multiple gate fold, where you have all the lyrics or all the credits. They may just do the front portion of the J-card. That would be a counterfeit.
Pirating can take a few different forms but basically it is the duplication of sounds that had been released legitimately but not generally the packaging. It could be no more than just duplicating the entire sounds of a legitimately released recording without copying the artwork, packaging, the trademark, etc.
Another example might be where someone takes a legitimately released recording and remixes it and makes a dance mix of the same recording. It is legitimately released recordings but they are playing around with something that had bee n released and changing it in a way. Sometimes it may be take the form of the greatest hits compilation that was never released by the record company. It was much more prevalent in the 8 track days where someone would release the greatest hits of Willie N elson or the greatest hits of Elvis Presley and the record company had yet to release those so they saw that as an opportunity to capitalize illegally. But pirates can take other forms. We are seeing it for instance in CD compilations now where the record ings hadn't been released in that format together in a particular country, particularly outside the U.S., and someone chooses to put those together and release the package. Again, they may be the greatest hits of an artist.
And the last one would be bootlegging which we consider again live performances at a concert, sometimes over the air.
GA: How about studio recordings?
SD: I think the public refers to that as a bootleg. In the past and in a very broad sense, it may have been discussed as a bootleg but technically what we refer to as a bootleg would be things that violate a lot of the state bootleg statutes. In many cases, associations abroad and a lot of other organizations may refer to something as a bootleg in the generic sense that it means studio outtakes or maybe a white label recording. In fact, when we deal with counterfeits, a lot of the m edia refer to counterfeits as bootlegs, but from a technical standpoint, from the law itself, it's generally live concerts. Someone going in with a handheld mike. That's a technical legal definition but clearly there are many times you may see general ref erences in the press and so forth to bootlegs and they are talking about anything that's a rare recording that hasn't been released, an outtake or whatever. So, it depends on how you view it, in terms of how you want to define bootlegs.
GA: We would rather stick with your definitions. Which of those three is the biggest problem currently?
SD: Absolutely counterfeiting in the form of the counterfeit cassette. Absolutely where the vast majority, almost all of our resources, are used towards fighting the counterfeit cassette manufacture and distribution problem. There's no question about it. We use very little amount of resource in terms of personnel, dollars and energies in fighting anything but the cassette counterfeit problem.
GA: And the counterfeit cassettes mostly show up in terms of street vendors?
SD: Street vendors, swap meets, flea markets, convenience stores in many inner cities.
GA: I havenít seen any in convenience stores!
SD: Yeah, absolutely. For instance we brought a civil law suit, civil Ex Parte litigation. It's used mostly by for instance, either artists or management companies or the companies such as Winterland who have licenses. When there's a concert and you have all the vendors outside hawking illegal T-shirts around there, they get a seizure order for a limited period of time usually within a few days before and after the concert within a given geographic range of where the arena is. They are allowed to get civil marshals to go and seize the T-shirts that use a trademark or a tradename of the artists, can seize them within that given time frame of that concert and sometimes they get orders that follow the tour around the country. And so i t allows you to deal with vendors and taking away their property.
GA: When you don't know their address.
SD: When you don't know where they are and who they will be that you are seizing property from.
GA: You know that the crimes will be committed.
SD: But you know it's very likely based on affidavits. You show that at the first few concerts venues people are doing that. You show from prior experience in that particular city, that it's a regular practice and you put that befor e the court and make your case and hopefully get your order, if the situation requires it. We've been doing that with counterfeit cassettes because you walk into the streets of New York and on many street corners you see vendors that move from one locatio n to another depending on the day of the week it is and if you wanted to seize that property, you would never know who it is you are going to seize it from on any given day and at what location. So you go in and you'll get these civil seizure orders. That 's been one of our big ways to clear a lot of the street vendor problems in many of the major cities. Obviously vendors are very highly profitable business. Many of them don't pay taxes, they don't have business licenses in many cases.
GA: No rent.
SD: No rent, low overhead. They set up in front of legitimate retailers and even in front of stores that are known as bootleg type stores that may be selling bootlegs and that also sell legitimate products and we actually do have si tuations where there were bootleg stores that complain about the counterfeiters setting up in front of them.
GA: That boggles the mind.
SD: It is kind of funny because they are selling legitimate product also in the stores.
Mainly in inner cities we are finding some of the stores that may sell alcohol, or even a convenience store that's literally locked into a gas station that may have a rack of tapes. Frequently those racks of tapes are counterfeit cas settes. Usually price is one thing you look to. Three to five dollars for a front line brand cassette would usually make you think twice about purchasing it because that's generally below what manufacturers sell the product at. Also many of the packages l ook identical even for different record companies who generally have their own way of packaging the type of cassette they use such as the color of the box. Some use a black back, some use a completely clear, what we call a Norelco library box, some of the m have different kinds of shrink wrap. They all look absolutely identical. Even the graphics look like they are all off centered just the same way and you should think that you may be buying a counterfeit. But you do find that a lot in inner cities.
For instance, in Detroit we had 30-40 mostly convenience stores, where we seized counterfeit cassettes from under Ex Parte seizure orders. We are finding that a lot in inner cities right now. The stores will be selling liquor, or gen eral convenience store merchandise and they have a rack of maybe 200 to 1000 tapes selling tapes at about five bucks each. Those are counterfeits and that's become a bigger problem.
GA: And I hear sometimes if you play those tapes that they are not actually what it says on the box, or they are not the same type of quality?
SD: It depends on the quality control. There's absolutely very little incentive for the counterfeiter to have any quality control because he knows most of the vendors are going to keep moving, so there shouldn't be a big concern on the vendor's part about the consumer returning it. And so frequently you'll find it either has the same recording, the same A side on both sides or the B side on both sides; you'll find the B side might be blank; you'll find that one side may bleed throu gh to the other side so that you may hear the background tracks from one or a portion of the echo from one on the other track. Frequently you'll find tunes missing, sometimes you'll find that there's not the same artist that you think on there because the counterfeiter puts the sound on usually and stamps the product and they may mess up as to which one belongs on which as far as how they stamp them. So that does happen. Sometimes they put the right artist on but there is no quality control and there is n o incentive for them to have quality control, so the sound may very well be muffled. They don't generally maintain their machinery, they use the cheapest tape and they don't use a commercial master but they use a consumer purchase copy that they'll buy at the local record shop as a master and they'll keep running that through at high speed. It takes about a minute to duplicate both sides, and they'll use that continually until literally the master tape just breaks from being run through the machine so man y times at high speed, which obviously puts a lot more pressure on the tape when you are running about a minute to play the entire 25-30 minute program for each side.
GA: And when you are doing it a million times.
SD: And frequently you'll find that they are not making a hundred copies but several thousand if not tens of thousands. We know that not because they keep business records but by the volume of insert cards they have.
GA: What exactly are the laws and how useful are they?
SD: Okay, well there are several sets of statutes. There's the federal statutes, state statutes, you have criminal and civil schemes. The criminal one would be federal copyright law. You also have civil copyright law. That is useful . The statute is a very strong statute in terms of protecting copyright owners. Federal copyright law protects sounding recordings from February 15, 1972 and later for the sounds themselves which is a different right than the graphics that might be on a p ackage or the musical composition right. You have a mirror image generally in 49 of the 50 states for the pre-72 recordings. For instance, the Beatle recordings, at least the initial mixes, would be pre-72 and therefore would be protected on a state level , either criminally or civilly.
GA: Which is the state that hasn't taken advantage of that?
SD: We have never had, as far as I remember, any complaints about any piracy up there. So, we won't go in and ask for a law on a state level if there is no problem for it. We have enough laws on the books, there's no need to go to a state and complain about something and get a statute when there has been no problem there. I've been here 12 plus years now and I don't ever recall a complaint up there. So we've been fairly lucky in Vermont.
GA: Which states have the worst problems?
SD: Okay, well it depends on the type of violation. But for instance, New York now has the street vendor problems, although that has turned around for the calendar year of 1992 law enforcement seized, and we in the civil context sei zed, close to a million pieces from the New York Metropolitan area, mostly counterfeit cassettes. And we really did make a dent. It is still a fairly sizable problem but nowhere near what it was a year and a half ago. And, in fact, now I think with the ex ception of certain streets where we do have problems in New York, if you walked down midtown Manhattan you won't find now the counterfeit cassette vendors as numerous as you would have a year ago. You will still find people hawking watches and a lot of ot her merchandise but I think we have actually made a dent.
California is clearly our leading problem at the current stage, both on an illegal manufacturing side and on a sale side particularly in the swap meets and flea markets. Probably more swap meets and flea markets take place in Califor nia then any place else in the country and it's conducive to selling a lot of unauthorized product not just sound recordings. You can walk into the many swap meets in California and find all kinds of counterfeit merchandise whether it be clothing, watches , whatever.
SD: Movies, probably movies, I don't know if that is as much a problem at the swap meet level as it is with retail stores where they're buying one copy legally and making two or three illegal copies. California though is clearly the biggest problem. No question about it, all the way down the chain from the manufacturing distribution to sale.
We were talking about the federal scheme for post 1972 recordings, state scheme for pre 72 recordings, they are both civil and criminal remedies. The criminal side we talked about, the copyright act, that's a five year felony for the first offense and now the new act is $2,500 value to the recordings, ten or more copies manufactured or distributed within a 180 day period. It's equitable I think for everyone across the board, both for the person who is injured, as well as the person w ho's doing the injuring because he'll know under the guidelines pretty much what's going to happen as far as sentencing.
GA: Plus that particular law has been very publicized because it also affects the computer industry.
SD: Yeah, it's now all copyright infringements, no matter what type of infringement, are the same level. It just becomes a question of the value and so forth and how many copies are distributed with the infringed copy but all of the m are felonies now whether it be a computer program, a motion picture, a sound recording, a book, everybody is on the same level and that's the criminal scheme as far as the sound recordings go.
As we said before there are other copyrights. You can have musical compositions that are infringed and obviously when you counterfeit a recording, you don't pay any royalties to the artists and don't get a license from the record com panies, there's very little chance that the counterfeiter is going to go pay the musical composition owner or file for what we call a compulsory license. Because they just don't do it. They don't want people to know who they are. So you have that right as well. So you basically have three or so rights in a sound recording package. Again that has to do with counterfeiting but generally also applies to pirating also. Then you have the civil scheme which allows you to bring a civil suit as a copyright owner and you can get either actual damages of lost profits with what we call statutory damages which are by statute provided for if you can show willful infringement up to $100,000 per copyright infringes.
GA: So you catch someone with 20-30 CDs or tapes, how does the court figure out what the damages are?
SD: Well, you settle that kind of case. Those are usually not the kinds of cases we bring to the courts. Sometimes we have brought cases with flea market owners or vendors where we literally handed them cease and desist letters, wen t back a month later, same guy is still selling tapes, so we know that we haven't changed his way of doing business. We wouldn't just sue one but we sometimes do that when there's a pocket problem in a particular region. It's not very cost effective to do that, most of those people will be judgment proof and youíll very rarely ever get money out of the transient vendor situation. So we don't really spend much energy there. Usually most of that is done either by the cease and desist route or by some crimin al seizures.
Generally when we set up some kind of project where we are going to sue a number of retailers in an area we put them on notice, most generally have some kind of chart in which if you have X number of tapes that you are found distribu ting or you've sold or we can get books and business records great, most of them don't keep them, so it's based on what we see physically. We will set up some kind of a scheme that would be equitable in terms of how we settle that case. But generally if y ou do go to court on a case, what you have to show is what you can best show from knowledge that you have about the case. It could be an informant that's worked in the factory that knows how many tapes they've been making. Or if there are business books a nd records there that reflect the number of what we call C0's, or what'd you call blank unrecorded tapes and they are buying them custom loaded from a time loader, you'll know how many pieces they were theoretically making. Most of the people that are cou nterfeiting don't also make legitimate product. The tape loader who did a loading for the counterfeiters may load for legitimate clients as well as illegitimate clients but the person who is putting the sound on, very rarely also does legitimate music. So that's another way to tell their volume. Based on that, you would be able to show the court what might be a loss to the industry. But it depends on the case. There's not really one kind of measure of damages. If the person is a recidivist, and you eithe r sued him before and now you are going in contempt, or he's been previously convicted criminally, you have a better chance in terms of statutory damages which are discretionary with the court in convincing the judge that you should have a higher level of damages.
GA: One thing that I am hearing from you is that you try to work with these people with cease and desist letters.
SD: Absolutely. We send out a very large number of cease and desist letters with people on the retail level.
GA: Do any of them work?
SD: We have actually started to have some effect now. In the last three to six months, we revised our letter now. We've actually put together what is a list of demands. So I think that's really helped now because the responses we us e to get were, we've stopped selling them and since you've wrote us the letter, the guy came by and picked up the tapes and we don't know who he is and so it kind of dies. But if in your original demand letter you are saying we would like to know who your source is, please contact us before you do anything with the product. You are still at least still in the loop in the scenario so that we can get back to, which is really what we seek to do, the person who is manufacturing the product. That's the person who is putting it into commerce. That's the person who is creating the problem. That's where we put our energies. We already have enough by the time we've sent the cease and desist letter, we generally will have purchases in hand, to bring the litigation and the lawyers are generally very cognizant to that on the other side and they tell their clients, cooperate, what they really want you to do is just trace you up the chain and that's the end of the case generally with the retailers unless it's been a r etailer that doesn't respond and we wait a few weeks and if they don't change their business practice, if the problem is big enough particularly in that area with a lot of retailers, then we will bring them to litigation. .
So we've covered federal criminal and civil copyright infringement. There are other federal laws trademark laws, both civil and criminal.
GA: We should explain what the trademark covers.
SD: Record company logos, it could cover the band logos, generally when we refer to it in terms of civil litigation, or in the criminal cases, we refer to the record company trademark. And under trademark law, either civilly and tha t was under the Ex Parte program that we talked about before for seizures, civilly you can seize product based on trademark ownership and if it's in an unlawful use meaning that you printed the trademark on product without the authorization of the tradema rk owner, the product can be seized. There are also federal criminal trademark laws that would allow the government to bring a criminal case and make seizures, a search warrant or a site seizure, for the trademark violations and would also allow for simil ar sentences to the copyright law up to five years in prison.
GA: So when you go after someone you can get them both ways at the same time?
SD: Yeah, because it's two separate rights that are being violated. The third one would also be a counterfeit trademark law or the counterfeit label law, trafficking in counterfeit labels and that's an older statute that was revised several years ago. Basically someone literally manufactures and distributes labels that are intended to be affixed to a counterfeit audio recording or an unauthorized audio recording. It's also a federal violation for five years in prison and it could b e audio or video labels. That was meant to get at operations that would do no more than just make the labels and they would say, we are not violating any copyright law, we are not doing any insert cards which would have all sorts of copyright graphics but we, and this is where the industry was using paper labels on cassettes, or now some people just you know stamp the labels and the legitimate industry does, but the counterfeiters will stamp on there, and they'll say you didn't catch me with anything, the re's no music on there and so what you found was happening is someone would put the sounds on, some print company would do the insert cards, and you'd get those two businesses and you'd shut them down. If you didn't
have this other statute, the person that was just merely stamping information on, particularly if you left the trademark off, which sometimes happens, you would have no violation other than showing some general conspiracy and that some times can be difficult.
GA: They are certainly part of the problem.
SD: Yeah, so that was the purpose of the other statute and it was before there was a criminal trademark law also. And that is also the same thing and that frequently happens because the counterfeiters don't usually do business in on e location so if you get them, there's one location that will put the sounds on, there's another location that will have be your print shop that will do the insert cards, and another location will stamp the information on the cassette itself and then you might have a final location that puts it together and then keeps it in a storage room or warehouse facility so that even if you get the manufacturer location...
GA: You don't get all the product.
SD: Right. You don't get all the product and so you don't take them out of business completely. And that frequently happens. We took down a manufacturing operation for instance last year in October and it was a mid size facility, th e law enforcement took a lot of equipment out and it wasn't until late January or so that they got the storage facilities and the storage facilities were nearly 300,000 pieces and had they not gotten that, you know that's an awful lot of product that goes out into the mainstream even if you knock out the manufacturing facility. This is why they try to spread it out as much as possible. That's the purpose of the third law it was to get the other parts of the operation that you might not have been able to get as far being to prosecute people.
And then there's the rest of the state scheme which goes to pre 72 recordings which are basically if you manufactured or distributed without the authority of the owner of the sounds which would generally be the record company, you ar e liable for whatever that state's statute says criminally and it's generally four to five years in prison, up to four to five years so it almost mirrors the federal copyright law for pre 72 recordings. And the rationale behind that is just because someon e duplicates a 1968 recording or 67 recording of the Beatles, and then also duplicating the latest Madonna recording. There's no difference in intent on that person's part, he's doing the same crime.
GA: And he's making the same money on both.
SD: Same money and so why should it be any different just because there's no federal protection? So the state's put in and the majority of the states now have felony legislation that has the four to five years in prison for first ti me offenses.
You also have something on a state level that's similar in many ways to the counterfeit label statute. What that does is say that the state law requires that the true name and address of the manufacturer be put on the outside of the packaging and that has nothing to do with the sounds being legal or illegal. It's a consumer protection type of statute and in fact the original statutes were misdemeanor statutes and they went back to the 1970s in many cases whereby people were making th ese pirate compilations and there were theories that it didn't really violate the federal law because it wasn't protected by federal copyright law which it wasn't on the sounds, but a lot of the state statutes weren't necessarily yet in place and they wer e just trying to confuse things. And so a lot of the states came in with state true name and address statutes so at least you would be able to know theoretically who the pirate is to go back to him to return it if there was no sound on the recording or if the sound was terrible. Obviously, pirates do not put their names on the product because even though they wouldn't violate that law, then youíd know where to find them.
GA: When they are putting nothing on side B, or the wrong thing, they don't want to be found for that either.
SD: Right, exactly. So these state true name and address statutes work on any type of recording whether it be a pirate recording, a bootleg, a counterfeit or even a legitimate recording. And it's more than just a proprietary right, which is what the copyright law and what we call the unauthorized duplication statute for the pre 72 R, they are really proprietary rights meaning that some owner has been hurt. This statute goes beyond that. It's the public that's being deceived here by not having the packaging. Not having the true name and address on the packaging is very much like the counterfeit label, you are trying to deceive the consumer as to the source of origin or not inform him or her at all.
And the third type of state statute would be what we talked about earlier in terms of trying to find bootlegging state anti-bootleg laws which generally require you to get the performers consent to either record and later manufacture or distribute copies of the recordings.
There are also civil remedies on the state level which apply to either pre 72 recordings or the bootleg recordings which are generally unfair competition laws meaning that you are unfairly competing with me because I have the right t o do what I do as a record company or as an artist I have the right to put out the product you don't have the right so you are unfairly competing with me. And just a civil unfair competition law as it would in any other kind of merchandise that you put ou t and don't have a right to put out. That's pretty much in a nutshell most of the laws criminally and civilly. I kind of oversimplified it but at least it gives you background on what we use here either civilly or law enforcement uses criminally.
GA: The one thing that I'm hearing is that the big fish manufacturers know exactly what these laws are and that's why they have several different offices doing this in parts so that you only get part.
SD: Generally the smart ones do. Other ones know it's illegal. They may not know what crime it is that they are committing but they know they don't have the rights to do it, many of them are also dealing in other illegal merchandise , not just counterfeit tapes.
GA: What else have you found?
SD: Well, there's a variety. We've had several cases with the Secret Service because not only were they counterfeiting insert cards but they were counterfeiting money. Drugs.
GA: Drugs sounds like a natural to me.
SD: Quite often. Many times the law enforcement will be going in for drug bust and also find the counterfeiting tape operation and call us up and we then help them put together a search warrant to go back in again. They'll go back s o that they have a nice clean search warrant for a second time. Videos sometimes, more likely a person who bootlegs audio recordings may also bootleg concerts, or concert videos, but you don't find usually too much of the manufacturers of counterfeit cass ettes getting involved in anything else because it's such a clean, nice easy business, they don't have to worry about having a second kind of product. Drugs, and maybe counterfeit money.
GA: The money surprises me but when you think about it, no. It makes sense.
How many investigators do you have, what's the budget, how many more do you wish you had instead?
SD: We have 11 investigators now. I have 6 staff lawyers, 3 of the staff lawyers are based regionally, the investigators are based regionally, mostly where the major problems are, mostly in California and in New York but they are sp read around the country and they have regional responsibilities. Budget I really can't comment on at all. That's just something we just don't comment about.
GA: Bet you wish you had twice the budget, ten times the budget.
SD: Definitely wish I had more budget than I have now because the problem is growing. There are quite a few different issues out there, it's not just counterfeit cassettes.
GA: I've seen the problem grow myself in the last couple of years.
SD: Now we have so many other forms of piracy where people are putting out dance mixes that are not authorized. People are getting out CDs, bootlegs, imports from abroad. We have DJs that buy one legitimate set of records for play a t weddings and restaurants or whatever, then they have ten other DJs that work for them and they make nine or ten other sets of those records that they buy legitimately and put them on tape and then cue them up. That's also piracy because they are buying one legitimate set and then copying them nine or ten times over.
GA: And for commercial use.
SD: And for commercial use, absolutely, that's the thing, and you multiply that by all the DJs that are out there and you know that's a sizable loss of revenue plus the legitimate DJs that are doing it the right way get very unhappy about the guys that aren't doing it the right way. So that's another major, and this didn't exist several years ago and there are more and more problems like that.
GA: Or radio stations looking for out of print records so that one stations copies them for another.
SD: Again, that's not an area that we spend much time on but what you will find now is there "make a tape operation" where they'll buy the one archival copy of old recordings and you'll come in and pay a fee and get a reco rd that might be an old recording that you might not be able to easily find and they duplicate that without any authority from anybody whether it be a record company, music publisher and then sell a copy on a tape to some place and that's happened quite a number of times over the years too. That's a new problem.
GA: Is vinyl bootlegging still going on?
SD: Yeah.The dollar sales are probably in CDs because of the retail price of the CD being higher than vinyl, and I think there's a greater profit margin for the bootlegger because of that. I don't know that I can compare the quantit y of CDs to vinyl as to what we see in the stores and so forth. Suffice it to say when you have a record convention it's a lot easier to truck a few thousands CDs then it might be to truck a few thousand LPs. So we've been seeing CDs more and more and the re's a bigger consumer demand for it. But there's still a lot of vinyl.
GA: And when did these record convention problems start? Because I kind of remember going to record conventions fifteen years ago and they had vinyl.
SD: They've been around since I've been here. I can remember the Elvis Presley conventions in the 80s that you would find bootleg recordings at. In the early 80s, they would have bootleg vinyl, probably even bootleg 8 tracks in thos e days too.
GA: And I haven't seen any counterfeit at the conventions but I do see two other obvious things. One of them is bootleg CDs which are just tapes put on CD and the other one is bootleg audio and video. They are sitting there complete with television sets, VCRs, head phones for you to listen to them.
SD: Yep. You see those out there and it is a matter again of our prioritizing which again goes to the manufacturers, the distributors of counterfeit cassettes. We clearly go after bootleg manufacturers and again that's where it's pr obably best to use the resources but clearly the conventions are there and it's the same thing like swap meets. We canít be tracking down every vendor at every swap meet forever just like every record convention that happens on any given week in any place . Again, we try to emphasize our program on the manufacturing level. Iím talking about someone who has the master tape for the bootleg and he goes either to a broker or a CD plant and says I want 1,000 copies of these. That's where our emphasis will be pu t in terms of going after someone rather than the guy that happens to have one tape and dubs a second copy of it himself at his own place, using a high speed dubbing deck, and he'll keep one in inventory.
GA: Are you feeling that the money is less there then it is in the counterfeits or is it that you are feeling that your clients, the record companies, care more about the counterfeits?
SD: One for one displacement of loss in the industry is in the counterfeit cassette because generally the consumer may be inclined to believe that he's buying legitimate product but he's buying illegitimate product. The consumer wan ts to buy that piece of product. The record company has the rights to put it out and so there is a very close correlation between buying the legitimate product there and getting deceived and buying the legitimate product. Probably he did want to buy the l egitimate product. You can make all kinds of cost arguments if it was $9.00 versus $5.00, but clearly they wanted that piece of product and the record company had the right to put it out. Clearly there are arguments in terms of bootlegging as to whether i t does displace sales or not but really what you are talking about in terms of priorities from our standpoint is what the record companies are hurt the most by. Clearly counterfeiting is the biggest problem. Clearly record companies and artists get distur bed when they spend months of putting out a particular record where they themselves would have an artistic decision and there are an awful lot of artists who have recorded a lot of things that they don't want, for whatever personal reason, released. Just like any other property right, they have the right not to do so. Whether it be an audio recording, whether it be a painter that paints his own picture and then decides not to put it out, you just don't have a right to go out there and steal it. Clearly th e record companies do care about bootlegging. Given the resources we have, where we can put the most energy and get the best cases and do the best job for them? Clearly cassette counterfeiting and if CD counterfeiting became a problem, certainly that woul d be a major emphasis as well. We do put a lot of energy into bootleg CDs because that you can stop at the source. You are dependent on a CD plant to do that for you, with the exception of the portable CDs which are still expensive.
GA: These bootleg CDs seem to be mostly imports, I've heard there's a problem with the foreign copyright laws and that that's one reason why they are allowed to be made in those countries?
SD: Well, in some countries there may be no protection for any sound recording whether it be bootlegs or whatever or they may be very short periods of protection. Or there may be technical reasons why from the sound recording side t hey may not be protectable. But again, I guess we didn't talk about this yet, but when the recordings get brought into the U.S. it is judged by the U.S. law not by the foreign law. If you are going to distribute them here, it doesn't matter where they wer e manufactured. It's a question of whether they were manufactured with the permission of the owner of the sounds and what you do is impose the U.S. law under the Copyright Act as well as under the state laws which say that it was manufactured out the auth ority of the owner, that you violated the rights of the owner, and it could be criminally or civilly liable. Again, it goes to intent. But, a recording could be made totally without any required authorization let's say in a Far Eastern country because the re is no law. The law is very poor and it doesn't apply to that particular recording. Just because it's legal in that country doesn't mean that it's legal here. There's no question that even if it was made without required authorization abroad, once it co mes here it absolutely would be illegal unless the owner gives permission here.
GA: And it will come here because they are not going to sell a million copies in Thailand.
SD: That's right, exactly. They do not make a million copies of Bruce Springsteen's whatever live at whatever for Taiwan because there aren't a million CD players necessarily in the consuming public there. Obviously it is going to b e exported. American music is popular throughout the world but clearly when you are making Country greatest hit packages in Taiwan in the tens of thousands they are not necessarily destined to the Thailand marketplace. In fact, we've had plants that thems elves decided to get into some piracy business. Instead of having the customer come to them, they in the downtime decided to see what the greatest hits are, and to put them out ourselves, and to be the manufacturer for their own marketplace.
GA: Since these CDs are illegal here, why are they imported?
SD: They are not generally available in the marketplace so people bring them in. Perhaps not with the packaging, with the discs saying that they are a different artist other than what appears to be on the discs. So it may be the Bea tles when you listen to it, but when you look at the CD it doesn't have any artwork with it and it's just literally on a spool when it comes in or it says the Beat Brothers. Well, someone who may make it abroad in a plant say in the Far East, may or may n ot recognize those particular artists and they may or may not be deceived as to who it was or wasn't but it then gets brought into the U.S. Clearly the person who is bringing it in knows what he's doing here because he's not intending to have the Beat Bro thers recorded. It's the Beatles and clearly it would allow you to deceive some people in the U.S. You may not be able to get away with it in a plant that would be familiar with the Beatle records.
GA: I never even thought about the fact that that's how they are doing it.
SD: Well, the Beatles are real easy and plants abroad I'm sure in many cases may be familiar with that but when you get to.
new rock Ďní roll bands or heavy metal bands, many of the plants here will have quality control in production. People mastering people here will at least say, that tune sounds familiar. I think itís a popular recording or a famous artis t. That may not be the case in some other part of the world like in South America or in the Far East where all new English speaking language artists may not be recognizable to the people.
GA: I had thought that most of these were coming from Italy and Germany. Is what you are finding is that it's not?
SD: Depends upon what you are talking about. Some bootlegs are coming from Europe, a lot of the pirate CDs are coming from the Far East. Clearly there are a lot of recordings that are coming in bootleg format from Japan.
GA: So the problem really is worldwide.
SD: Yeah. If you are looking at it from that perspective, there are recordings that are made where they may not be deceiving the plants. The plants just feel that it's not a violation of that particular country's laws. They may have checked with their lawyers in those countries and so that in those cases it would actually have the names of the artists on the discs. For instance, we've had a lot of pirate or bootleg recordings over the years or bootleg recordings from Korea. In Korea they won't put the real names of the artists in most cases at the plant but they'll be the bootlegs, and that's been quite a big problem. In fact, one of the biggest sources of bootlegs several years ago was from South Korea. So it kind of depends upon w hat year you are talking about, what plant, what country.
GA: And even what artists.
SD: And what artists. And how well known they are, how familiar they are in that particular region and the bootlegger who actually supplies the tapes again that's who I consider the manufacturer, the bootlegger who supplies the tape s will probably play the game and once he realizes that the plant won't do it, or he's getting a little bit concerned about doing it, he'll try another region of the world and he'll try another scheme. In fact, it's funny when some of the them get rejecte d by other regions of the world, they come back to the U.S. and then we track them from plant to plant. What they'll do is they'll call it "for radio airplay only," "for promotion not for sale" and then put some fictitious mixed name o r artist on it again and then they get the insert booklets made someplace else. But most of the plants here are fairly cooperative, fairly concerned about doing bootlegs or pirates or counterfeits.
GA: It's interesting that they just don't invent their own plant, buy all that equipment and then just keep it all in-house.
SD: Well, in terms of CD bootlegging or piracy, it is still an expensive business to get into. It is still fairly expensive to do per disc in terms of a write only once. Bootlegging them into a CD plan is getting them made for a dol lar or so each which is pretty cheap.
GA: On the other hand with the new recordable machines it's kind of in your house, you own it.
SD: The CDs?
GA: Yeah, and you don't have to go elsewhere.
SD: Are they still expensive though in terms of the blank CDs?
GA: I assume so.
SD: We've had a recording studio that's made pirate CDs in terms of compilations and my recollection was that they ended up selling them retail for 50 to 100 dollars just for one so it must have been fairly expensive for them to get a blank.
GA: But some of the CDs of live concerts are selling for $25-$40 so they could afford to buy one of those.
SD: Except from a bootleggers standpoint, they can do it for a dollar or two dollars. It's a hell of a lot cheaper I think. I don't know comparably what the recordables are but I do think they are fairly more expensive than getting them mass produced at a buck a piece.
GA: I would assume but I would also assume the price is going to drop in two or three years.
SD: That would be a lot more problematic, absolutely.
GA: Overall how much money is involved here? It sounds to me like more than what you count.
SD: In the counterfeit cassette area which is what I can measure the best, it's clearly in the hundreds of millions of dollars. We put out factories last year that were put out of business by law enforcement as well as civil cases t hat we brought, who were clearly putting well over 70 million units, so that's just the number of units and those are the ones we put out of business. So you multiply out the retail value of that.
GA: At what, like five bucks a piece?
SD: Five to ten. Meaning by the time you find it at your local retailer, it may be selling for nine or ten dollars and people in the chain of industry lose that money whether it be a retailer, wholesaler, the music publisher the art ist, or the record company. That's money that is never seen. It is money that no taxes are paid on anywhere in the chain. So that's clearly in the hundreds of millions. Like I said, you can make arguments back and forth in the bootlegging area as to wheth er there are any displaced sales or not but clearly in counterfeiting, where we spend at least 90 percent of our energies.
GA: How many busts do you make a year and of those how many do you outright lose or get settled out of court?
SD: In 1992 just the mere opening of cases, meaning someone called up about a location, there was enough there to at least verify there was some problem in the area, we opened about 972 cases for the whole country for everything.
GA: So would that be when you went in and made a purchase.
SD: It could be anything, enough of that information made it enough to lead us believe that there may be potentially a violation and it may be no more than a consumer saying "I bought at XYZ store and I believe it to be a count erfeit." Where there's a particular fixed location or particular information that would open up a case for us, we would follow up depending on whether we feel it's worth a lot of energy or not.
That's basically the number of cases we opened and based on that you can figure out how many search warrants or seizures occur, how many arrests. So in 1992, we opened up 972 cases. There were 116 search warrants or consent searches, 224 arrests, 1423 sight seizures that meant physically seeing without a search warrant sitting in front of you. For instance, if law enforcement sees a street vendor with illegal cassettes they don't use search warrants.
GA: I noticed on the top of the form all other raids. Do you know what's included in that?
SD: Yes. What that means, at the bottom here if you looked at totals, counterfeit cassettes seize from 1992 would be $2,548,030. What we did was we break out our different civil programs, Ex Parte being one civil seizure program, we ll that's one civil program. The other being a street vendor program which actually is a criminal program whereby retailers are faxed copies of criminal statutes. Many law enforcement officers around the country don't even know, the beat patrolman doesn't know that this law is on the books at a local level. Retailer gets the law, calls up the local PD: "I have a counterfeit vendor selling out in front of my store, it's a problem for me, I'm getting killed. This guy is selling them at 3 to 5 dollars o n the street. I'm getting killed. I've got a problem." They have the law in hand, it makes it real easy for law enforcement to take care of the problem locally and obviously the retailer in the local community who's getting killed and is a major sour ce of the tax base, can do a lot more in a little town in the Midwest then the recording industry calling up from Washington, DC.
GA: He knows what he's looking at.
SD: And he knows that he will be run out of business eventually if he doesn't change it. So that's the street vendor program and we broke those out just to see how the programs have developed since 1990 and 1991. You can see how tho se have grown from 912,000 in 88 to 2,200,000 in 1992. The other thing that you might want to see is, in terms of CD piracy where it grew from 88 from literally us being involved in the seizure of 15 CDs to 38,000 in 1989, 152,000 in 90 and 36,000 in 91 t o 16,000 in 92. And what that basically was was not only the growth of the CD but the problems both from the import side and the domestic side starting to you know increase in 89 and 90 and we've built a program in this area here 89 and 90, whereby we now work with CD plants and educate them about what to be looking for in terms of you know pirate CDs, those kind of things; the way people do business when they are bootleggers meaning that they are dealing in cash, they don't have a way to reach them, they can only reach you, those kinds of things, and it really has helped in terms of them stopping from manufacturing bootlegs or pirate recordings which have really grown. Again it may change, with the portable CDs when people can do it in their homes. < /P>
GA: Or somehow they'll get computers involved in it.
SD: Right, absolutely. Technology is definitely outpacing the problem. Almost every area of life measures piracy. It's hard for I think anyone to keep up with technology these days.
GA: Sure. You have a hotline. How many tips do you get a year, how many do you follow up on and is there a reward for turning someone in?
SD: We get a few dozen a month, there's no question about it. It depends on whether we get a new article out or whether run a piece in the media. For instance, the day we were on Good Morning America, we probably got 50 to 10 0 phones calls in a couple of hours and you may not get another phone call for the next couple of days. So it depends on a lot of the press and the media and how much they are publicizing our 800 number. But regularly probably a few phone calls a week. P>
We don't have "reward programs" saying there's X number of dollars out there. Warners had done that a number of years ago and frankly the information they got was almost worthless. It really didn't work for them. And it's not a criticism of the program but just criticism of the information that people called in, thinking that just saying that they knew this street vendor on 57th and Fifth, that that would get them a reward. Obviously we know there are vendors out there, bu t what we want it to do is hit manufacturers, distributors. What we do have is money for informants. Frequently some of our best cases are made by people calling in, talking about the fact that they have worked with what they believe to be a pirate factor y, and actually helping us get enough information to get probably cause for the factory. Sometimes it's funny though, it's not just people that have worked at the factories, it may be a disgruntled wife, ex-wife complaining about the fact that her husband is involved in piracy. It may in some cases actually be a relative who is actually trying to get the person out of the illegal business before it gets worse for them. Many times they are illegal aliens from abroad, particularly in southern California wh ere they bring them in from Mexico, and as soon as the operation you know gets hit, INS deports the people. And many times they will come back. And they are very much like sweat shops. Kind of interesting we had a raid last year where law enforcement hit the factory and it was in a home. Where the bathrooms from floor to ceiling, the beds, the kids rooms, have nothing but counterfeit tapes in them and there's barely enough places to live and eat and their homes are sometimes in decent neighborhoods. Oh, the sheriff's office was leaving the home and the neighbor said, oh so you finally got that place, we thought there was something going on down there. And they said, they were surprised that there weren't more people being arrested or taken out, and they said did you get the operation downstairs? Well, under a rug, a trap door covered another level with a handful of workers who had several little lamps, no windows, no air, in like this little cubby hole literally with tape machinery almost like a wine cel lar kind of thing. I guess they must have knocked on the door when they had to come up to go to the bathroom or to get something to eat.
GA: That sounds amazing.
SD: Yeah. That's exactly what it is. People that are "desperate for money" particularly from abroad from Mexico and other areas will come in and work under any conditions.
GA: You got to this a little bit before but how does somebody know a bootlegger or a counterfeit recording when they see it?
SD: As a consumer?
GA: As a consumer.
SD: Generally an easy way to look is you got a table and a vendor or in a store and all their products look like it was identical even though one is coming from Warners and one is coming from Sony and one is coming from Polygram but yet the boxes look identical, the way it's packaged the shrink wrap looks identical, the insert cards all look identically on a certain slant because that's the way the machinery was used to print it. So that's one thing. Price is another thing. If it's half or a third of what you are looking for front line product in a retail store, you should be fairly suspicious of what you are buying. You get what you pay for. That's counterfeit cassettes. That's obviously counterfeit cassettes also if you looked a l ittle bit closer you would look and you would notice that the graphics are generally blurry on the insert cards, if you can somehow see the back of the cassette, you would see the same thing because they have to reshoot the graphics. They don't have the original artwork that the record companies have and they have to reshoot it.
GA: And don't they often leave off the names of the photographer and anybody like that who?
SD: From the outside of the packaging you would probably wouldn't notice, only when you opened it and you looked at the J-card the insert card and noticed it was not a multiple gate fold, and it wasn't all the credits and the lyrics , etc. You would know you have a counterfeit but the point is, that may be too late after you've purchased it. Point of purchase the best the thing to do is look at the packaging, if they all looked identical from different companies and the price is half or a third of what it is in a regular retail store, you should be a little bit suspicious. That's generally it for counterfeit cassettes. As far as bootlegs, bootlegs don't generally use the trademarks of the major companies. There are some rare exceptio ns but generally they don't use those. When you see major name artists with labels that absolutely make no sense to you and if you have any knowledge of the particular artist, and who they've been with over the years, you might think that this is an unaut horized release. That sometimes can be a rare exception where there is some early tapes of an artist before they join the major record company but generally when you look in a rack and you see 50 Beatle records and it's not with EMI, then you are not talk ing about the one or two rare exceptions with live tapes that were maybe earlier before EMI may have had the rights, you generally think that maybe these recordings aren't authorized.
GA: I've had conversations with promoters at record conventions and they're like how do I know which of these things are bootlegs and which aren't. And I say, you've got Madonna here from 50 different record labels.
GA: Well, how do I know which ones are real record companies?
SD: Generally people that run record conventions, you have a stronger argument against them than you might have against a flea market owner who doesn't know about all the kinds of merchandise. That's a specialty convention, they run these quite often. It's not like they just run it one week and then next week they are running a car show or something. They run most of these conventions on a regular basis even if they are not as frequent. They'd have some knowledge and many times the promoters are interested in the area. So, I think that that is really a bogus argument, all they have to do is come to us as industries.
GA: Well, they don't want to.
SD: We'd be glad to help them out.
GA: And while you are standing there talking to them, someone says, oh do you know where I can find any bootlegs of shows in New Jersey, and then they eat their words.
SD: Yeah, and it's funny because it's sort of like the argument is made by someone you know magazine sometimes where they say, well we won't accept any ads for bootlegs and then the whole thing is full of bootlegs and I know you wan t to get into that, but a lot of the promoters will say on their license, no bootlegs around here or they put a sign on the front, no bootlegs sold and the first booth you walk into the guy has nothing but bootlegs and in some cases a lot of vendors that sell the stuff at these, will have the bootlegs separated from the "collectibles" or "legitimate" or "promotional" items and stuff like that. So they know what they are doing. There's no question about it.
GA: So a contract that says that the promoter is not responsible for the contents, does not exempt them. If you chose to go after them you could.
SD: You have to show some knowledge on the owner's part and that means putting them on notice. If you had a bootleg convention for instance with a hundred vendors and there was one piece of product in there, you would make a hard ca se to show that the owner knew, but when the thing is nothing but a den of thieves no matter what he says in the contract...
GA: Which is what most of the ones I've seen are.
SD: Right. So a lot of it depends and it's like copyright infringement in general. It's very rare the guy, when you catch someone who is selling infringement copies whether it be straight counterfeit or bootleg, they'll say, oh I a dmit I infringed. So you have to look at surrounding circumstantial evidence and a lot of that will depend on the facts of the case and the case of counterfeiting could be the vendor who is selling it for, you know one quarter of the price or one third of the price and that happens for any kind of item like the guy who is selling the counterfeit Rolex watch for $25. For him to say I didn't know this wasn't a legitimate Rolex that is selling for $2,500 in the store, he'd be hard pressed to make the argumen t that it is a legitimate Rolex that he thought he was selling. Certainly the only argument he could make is he thought it was stolen.
GA: Now here's the opposite case, the bootleg CD sells for way more than a legitimate CD would sell for.
SD: Yep, and in fact many times you'll find that people that sell bootlegs do business differently than other people, not just in terms of cash and everything but will not take returns on those products, yet some of the other stuff they will take returns on and I'm not just talking about the record conventions but stores.
GA: Let's get into the taping aspect. What do you think about bands like the Dead and Metallica that allow taping?
SD: That's up to the artist to really decide themselves. I really can't comment on the Grateful Dead and their relationship with the record companies, but in some cases artists may have already given away those rights to their recor d companies to release those recordings and when you get to the point of then someone puts out a commercial bootleg of the recording, it still would be a violation of the record companies' rights.
SD: But sometimes the record company may be the artist. They may control their own company and I really can't comment on that.
GA: I do notice that there are more and more bands allowing that taping.
SD: Yeah, but it's funny you get some of the same bands without naming any particular one that don't complain about bootlegging go crazy when it comes to counterfeiting. And it could be of their T shirts, it could be of their record s, and it's funny some of the bands that are known for allowing taping sections will come to us and be some of the bigger complainers about counterfeit cassettes.
GA: But by allowing a taping session, they are not losing rights in other areas?
SD: No, not at all.
SD: And again they may not have those rights to begin with in terms of their records. They may have gave those copyrights away to their record companies. So if I got up on stage and said, go put your tape recorders on, jokingly or u njokingly, if I already gave the right away to the record company, they don't have the right to do that necessarily in terms of the copyrights on fixed sound recordings and so forth, and it depends on the case and ...
GA: Are you against the trading of tapes, or do you try to stay out of that whole thing?
SD: That's not an area where we are going to focus any energies on. The only time we might ever get involved is if an artist came to us because a person is advertising in a national magazine like Rolling Stone and the artist happens to read it, and says
wait a minute, they can't do this, this is my rights and I control my recordings and there are some artists they are absolutely very sensitive, absolutely, and I'm sure you know an awful lot of them without me naming names, as to anythi ng they put out there and they take years to release records in some cases because they don't want to put anything where their voice isn't perfect on the recording. A lot of those artists do call up through their management companies or through their law yers directly or through their record companies to do something about those ads and most of the times they are not "trading" but...
GA: Well, let's stick with trading just for a moment.
SD: Sure, sure, sometimes it depends on what you define as trading because sometimes a person says they are not selling but give me a new blank tape or...
GA: Or three blank tapes and I'll give you one.
SD: Or three blanks or give me five dollars per hour for every tape. There are places that call themselves traders and if you read it, that's what they say they are but they charge $5.00 per hour to tape and we've seen it. We do not spend any energy in there unless there are some specific complaints. I can't tell you that I recall one of those coming in in the last few years. That doesn't mean it can't happen that somebody won't complain but it is not where the focus of the industry is in energies.
GA: I'm sure you've seen this Relix magazine. It's been around for 20 years.
SD: Is that the one out of Brooklyn?
GA: Yes. Now Relix started with tape ads before the Grateful Dead allowed people to tape which makes those ads, in my opinion, illegal. So here you have about 300 - 500 ads every issue and the ads include video tapes which the Gr ateful Dead don't allow, spin-off bands which the Grateful Dead don't allow, the trading of Grateful Dead tapes for Madonna tapes or Rolling Stones tapes or other bands which don't allow taping. Are those ads illegal?
SD: Well, if you've got somebody that's selling tapes that aren't authorized by the artist or the record companies, it would absolutely be aiding and abetting in a crime if they are manufacturing them or selling recordings.
GA: This particular magazine sticks to trading.
SD: These are trading?
GA: What some of those people do once they've traded for them, I don't know.
SD: For instance if you look at the copyright law, it says for commercial advantage or private financial gain and that would be subject to interpretation. I've never seen a case really prosecuted on "traders" yet so, I do n't know how the courts would come out as to whether under the law that would be commercial advantage or private financial gain. Now a lot of the state laws also have the same thing now in place in terms of bootlegging as well. And it has yet to be inter preted.
GA: But technically it could be prosecuted?
SD: And again if you are saying the trader is a trader where I give you one tape you give me the other tape, as opposed to I'm getting four blanks for one, then it probably is closer to commercial advantage. I've never seen a case t hat's ever actually ever been even brought to a court on that. So I don't know the answer.
GA: But if the Grateful Dead allowed trading, but if you give me a Grateful Dead tape and I give you let's say a Bruce Springsteen tape or a Madonna tape or a Michael Jackson tape, you are dealing with another artist who doesn't have a policy.
GA: The gray areas.
SD: Unless there is something very unusual in terms of doing something different whereas it's give me a box of blanks for one tape or something, it's not an area really as a practical matter youíll see prosecutions on. We've never s een one like that.
Again, that may vary depending on what you are trading. If someone is trading unreleased tapes and the trader knows that it's going to then be commercially duplicated by a bootlegger and used as a master tape and that person ends up bootlegging it, well then you are going after a person who started as a trader but then became a commercial bootlegger. But to say that law enforcement is ever going to be involved in a situation here or that you are ever going to see someone sue civilly , I've yet to see it in the twelve years that I've been here. It doesn't make it illegal or legal. It's never been tested in the courts yet that I'm aware of. But I really think of the person that is actually not "trading" but charging for hours .
SD: Profiting from their activities is really where anyone should have some concerns.
GA: Okay. Then we've got Goldmine which takes it one step further.
GA: First of all, we have this full page ad here coming from another country of CDs which are clearly not from the proper record companies.
GA: At large dollars and they are looking for wholesale accounts. That one's been running for years.
SD: Wholesale accounts, yeah. I'm just curious to see that one. Does it say it on the bottom here or something?
GA: Yeah, wholesale lists.
GA: They are looking for retail stores and flea market type people to carry them. They've been running that ad in Discoveries and Goldmine for a long time. The artists change from week to week.
SD: Now are these the prices in the right column here?
GA: Although presumably if you want to buy a hundred or two hundred, they'll give you a discount.
SD: Yeah. Interesting.
GA: So the first question is, when a magazine is devoting 10 or 20 percent of its pages to ads like that and then in the back, every issue there's a section that's real blatant in telling you that they have video tapes for sale (show s SD the page) and audio tapes for sale.
SD: Yeah, right.
GA: It's hard to say that that's a trade. They are clearly talking about dollars there.
SD: It seems like blatant sales of bootlegs or pirate recordings. It should absolutely be a standard for publishers to be examining what they are allowing to be sold in magazines illegally.
GA: And the publisher could technically be charged?
SD: We had previously put Goldmine on notice about a lot of illegal acts that they've had in there and probably still have.
GA: At one point I've calculated it to be 40 percent.
SD: They probably still have that little disclaimer that we don't accept illegal ads, right?
GA: Right, and we challenged them on that in our second issue. We invited them to explain.
SD: And what did they say?
GA: They gave no response, (ed. note: see "Gray Matter" column this issue for an update) but right here in the "Gray Matter" section in Issue two we said in the back of Goldmineís advertising classified ord er form it says, "Bootleg policy the sale of bootlegging and counterfeit records and tapes, both audio and video is illegal. Goldmine magazine does not allow the listing of these items in our pages as a matter of advertising policy. Gray Ar eas invites Goldmine to explain the discrepancies and their policy and the law and the dozens of pages devoted to illegal tapes and CDs for sale in each issue." We have not heard back from them and I doubt we will.
SD: It is an area that we need to address whether it be Goldmine or with some of the other publications. This clearly appears to be blatant sale of bootlegs.
GA: Okay. I have two concerns about this. The first concern is that the average person goes into a store, buys Goldmine which is national distribution and assumes this is legal because it's in there and because it's been going on for years. The second thing that concerns me is that the artists are clearly being hurt here.
GA: I mean if someone is spending five hundred dollars on an ad and they are running it 26 times a year and they are running it in more than one publication, that's a full time job.
GA: That's beyond the point of even a dollar a tape or something.
SD: Absolutely and I think it is definitely something we've got to look into and addressing again, not just Goldmine but any others because it has gotten a lot of worse over the last few years.
GA: And also it seems to me that this is where, you are talking about going after the manufacturers, this is the distribution channel. This is where people are getting this to sell it at the record conventions.
SD: Domestically, yeah. The problem as you were alluding to before is that some of these may be imports from abroad and many people are bringing in "one or two" at a time. What I am most concerned about is the fact that yo u have blatant sale of recordings number one and number two is people in here that may be actually selling it domestically from the U.S. That's a big concern. I can't control here what's sold abroad and my counterparts can take action abroad if they have good laws there and the laws are relative to the recordings.
GA: But most of this business is domestic and a lot of these people don't want to go to Relix magazine and trade. When you talk to them and you ask them why are you buying something for $25 and $40 because I'd rather not trade I'd rather just buy it and get it over with.
SD: Like I said, most of our energies do get put into counterfeit cassettes but certainly when you have something as massive as people blatantly advertising.
GA: In full page ads!
SD: In full page ads itís something we need to address again. And, like I said, for a while it had it tempered down, a lot of the magazines including Goldmine but it definitely has gotten worse.
GA: Then we have DISCoveries. Interestingly the publisher of Goldmine originally sold his publication to Krause and he's now bought DISCoveries and he's going to compete directly with Goldmine. He has rein stituted all of the stuff that is in Goldmine now in DISCoveries which really didn't have much of it before and so again, we have full page ads, this one selling video tapes (shows the page).
SD: Okay. I guess itís the same, I'm not reading through it now but if you are saying that it's the same.
GA: But it's the same, you can see the format that's exactly alike, you can see the size of the publications is the same.
SD: Okay, let's just look at some of these. (looks through the ads) Yeah. That's something we need to address.
GA: And then, of course, because these things are allowed to exist and because they are everywhere and people assume they are fine, then you have Rolling Stone getting into this.
SD: (Chuckles) Where?
GA: Well, they are just starting. They've gotten into it in the last couple of months in 1992 and so obviously if something isn't done about that, soon those will be ten and twenty pages.
SD: Absolutely and I think you are right.
GA: And I think my question to you is when am I going to see it in Time and TV Guide?
SD: We absolutely need to make more of a statement but again I go back to the fact that we do not spend our major energies in terms of this but this is a way to kind of address it at the source which is where people are buying i t and definitely I think we need to do more then we are doing in terms of publications.
GA: Okay, fair enough. Then I brought you one other thing which blew my mind and after those, believe me it's hard to shock me. It seems to me that this kind of combines counterfeiting and bootlegging and piracy. Here we have a CD pu rchased in 1993 for $6.99 at Camelot. Camelot is a huge chain at least on the West Coast.
GA: And there are a number of real interesting things about that one.
SD: Yeah, I don't know this disc at all.
GA: Okay, well first of all it started as a cassette tape.
GA: Then the same company that had it as a cassette tape put out a version in 1991 called Preflight by Jefferson Airplane and now they've put out a new version of it and the new version has a song added which is from the 1989 Jefferson Airplane reunion tour so that's a live song and then we have actual studio cuts dating back to 1966 and 1968 and then we have something that is made to appear like a legitimate Jefferson Airplane album which seems to me like itís a counterfeit. Same company has also put this one out called Woodstock Festival so you can really see that once they have a recording, they market it in a lot of different ways and in a lot of different countries.
You have two Jim Marshall photos and he's not credited and I can assure you that Jim Marshall is a well-known respected enough rock photographer. He would not allow someone to use his work like this without crediting him. So it's ver y definitely not a legitimate recording. It's also called live but it has studio cuts on it, there's a lot of attempts here to confuse the buyer and the $6.99 price again is way too cheap for a CD and, my suspicion is that Camelot really doesn't know, tha t this came in from a distributor who was also fooled, but it shows the extent of the problem that you can find it in mall stores that are trying to be legitimate and trying to be careful.
SD: Well, Iíll have to get a copy of this one so that I can check out the recording honestly. There's really not much I can say because I don't know about the release.
GA: But does it look from what I've described that it might absolutely combine all three counterfeiting, and piracy and bootlegging?
SD: Well, the basic assumption is that itís unlicensed.
GA: Definitely unlicensed (ed. note: we later confirmed this with Jack Casady, a band member).
SD: Yeah, but once you assume that, bootlegging because you said there's a live cut on here.
GA: Oh, a lot of live cuts.
SD: A lot of live cuts and again it goes back to assuming that.
GA: Right. You also have straight studio cuts stolen directly off LPs.
SD: Like a pirate then.
SD: And the graphics used then would have been photographed by a famous photographer so that it may appear to be like a counterfeit then. Again, it all goes back to whether or not you made the assumption that it is unlicensed and th at I don't know without going to the record company who controls the rights. But again, unlicensed, I should say that, but I don't know that honestly. What we do in a case like this, is we have the disc and we would send it to the record companies to do a n AB analysis for the tracks that literally were from legitimately released recordings. We would then ask them that once that they have the AB they would then duplicate their actual masters, then we would ask them to do is to check the licensing on this b oth here and abroad where it may allegedly had been manufactured abroad.
But if you looked at the disc sometimes they tell you what mechanical collecting society might have allegedly been paid for this. That would give you a better idea as to where the licenses were and the collecting society may be able to tell you where the company was that supposedly put this out and that would be a way to track whether there was any even mechanicals being paid on it abroad.
GA: Although since this is a national chain, obviously you can go to the chain and ask them.
SD: No, I'm talking about now going back to the manufacturer, not just the retailer where you bought it from.
GA: But the retailer can give you the distributor and the distributor can give you the manufacturer, hopefully.
SD: Yeah, but you may be able to track it the other way around which is, if you look at the disc and it says, made in EEC and it says a particular collecting society was paid and sometimes they stamp that on the disc.
GA: You can open it if you want. I just wanted to make sure it was sealed so you could realize it came from Camelot.
SD: Okay, sure.
GA: Because of the Camelot label on the top.
SD: (Opening the CD) Okay, it was sealed. It doesn't tell you who the mechanicals were paid to on here.
GA: Another hint that I might be right.
(ed. note: We later found dozens of other CDs by this company featuring artists such as Steely Dan, Billy Joel, Santana,etc. We also found them in several other West Coast chains besides Camelot.)
SD: Actually, Creative Sounds is a company we are familiar with here that you may probably be familiar with now if you've read Stiffed.
SD: Okay, you should get your hands on this.
GA: It's a book about the music business called Stiffed by William Knoedselseder and it's from Harper Collins. Since you can't bust everybody out there, what about spending more time and money on education?
SD: We had looked at that, particulary in terms of counterfeiting, over the last couple of years in terms of some public campaign without there being a real hook. I think they think that the audience is such a wide one the education campaign would have to be so large that you do need some major hook. What we are looking at right now is we are looking at the possibility down the road now of some kind of device or some kind of security device that would allow the record company to be able to give the consumer some level of security as to the source in which the tape came such as a particular security device which people are now familiar with for instance with holograms. We are actually looking at those possibilities right now and if t here is something like that so that the consumers can know that there is something that they can identify more than just looking at blurry graphics that would allow I think for a much more massive campaign.
GA: I was thinking of that in terms of the software piracy associations, they run ads that say don't copy that floppy and explain why it's illegal.
SD: Would that help in terms of here because most consumers aren't copying the product themselves?
GA: Oh, sure they are.
SD: For commercial distribution?
GA: No, no for personal use from a friend and most people that buy things at record conventions assume it's totally legal. In some cases they are certainly young enough and naive enough they might think they are buying something from a national record company.
SD: Again, the amount that you would probably get in terms of education and what you have to spend in terms of energy of money probably wouldn't be as fruitful as if you put the people out of business and I think that's where the in dustry has put most of the resources. If there is some kind of hook such as some kind of security device to insure legitimacy of source, I think that may be when we look at public education.
GA: And where you get a lot of free publicity.
SD: Exactly. And you would have people looking at those things rather than just you know turning the page because it doesn't interest them. But if you have the artist for instance saying, my latest release is going to have this kind of thing on it, look for it and the consumer doesn't see that on there think there's going to be a lot more interest than if you know it came from a big record company where they'll just turn the page because the ad doesn't interest them.
GA: What about the solution of having the record company simply release more live product? I know that doesn't do anything for the counterfeiting.
SD: Sometimes the artists don't allow it, sometimes they do allow it and it becomes a case by case basis, it's really hard to address the issue.
GA: Do you think though that Frank Zappaís Beat The Boots and the Grateful Dead's answer there with the Vault releases helps?
SD: They were making statements. Dylan and Paul McCartney were doing the same thing, they were making statements and McCartney chose to release his so quickly because he felt that they would be bootlegged anyway. So the question is though, then what happens? We have seen this before because then the bootleggers come out with a version of that because it may have been cuts that he chose not to release or there might have been another take. So, the more records you put out there the m ore tapes you make or perform and it's just another opportunity for somebody to capitalize on it. Sometimes because "they are fans" and sometimes because it's money in their pocket and it's greed. And probably there are some bootleggers that we' ve seen out there that probably do believe they are doing a service to someone because they love the artists so much but in many cases those artists don't want to see the stuff out there and they really are hurting the people who they really care about in terms of affinity for the artist. In some cases it is pure greed and nothing else and they couldn't care less.
GA: They don't get the titles right.
SD: While they're in jail they are still writing their bootleg operations through their families and we've seen that. So it varies tremendously in terms of the people's intent here but the whole point here is regardless of whether y ou have good intent or bad intent, it's like anything else. You are taking somebody else's property, something that they've worked their whole lives for and seriously if you feel that strongly about it and you don't go and take something else of somebody else's particularly when it's a physical object. You don't take somebody's car because you love that car and so I don't go into your garage if you have a brand new car and I don't have a new car or something, and just take your car and ride around.
Yet people think they can do that with music and you don't, it's just, I don't know why people feel that way about it. You do see people you know when they are even convicted they still feel like they had a right to do that for whate ver reason. There are plenty of other intangible properties where people steal it and they know they are stealing it and you don't see that. For some reason with music, people seem to feel that it's okay to do bootlegs. I've never seen anyone sincerely a rgue that with a computer program they had a right to do that because it was creative, or with a book they had a right to counterfeit the book in the Far East because it was a creative process.
GA: Or even Rolex.
SD: Rolex. The same thing with a watch because I'm a jeweler and I love to duplicate watches but with bootlegs people make these arguments all the time, I don't see how they are any different, you know then they are with any other k ind of merchandise that's out.
GA: That's a very good point.
SD: People try to do the same thing with bootlegs but it's the same thing, they are ripping somebody else off and they are just using that as a justification. Most of the times, particularly the manufacturers, these are people if th ey weren't putting out bootleg concert tapes they are going to throw their money in something else. They would be selling drugs or selling something else. Many of them do. In fact we've had many busts where they are taking out the operation and they are a lso taking a lot of drugs not just for their own smoking but the sale purposes because of the quantities.
GA: I get a lot of letters from readers and comments from the general public that people who sell tapes don't make more than pocket change. It's really hard to argue with someone who doesn't want to believe you. Anything that you can say to that?
SD: Are you referring to bootleg tapes?
GA: The Goldmine ads and the record conventions and the street dealers. There's a lot of feeling that nobody's profiting on this so what it's only a few bucks.
SD: Well if they weren't profiting they wouldn't be doing it, number one in most cases. From what I've seen, people do this as a living, whether it be through the ads, or whether it be at record conventions. A good portion of what t hat person makes as income is tax free income, which raises the stakes even more. Probably the retailers don't make as much as distributors, who don't make as much as the people who cause them to do manufacturing, but clearly they are the people that allo w the manufacturers to stay in business and it's just like the counterfeit cassette street vendor. Certainly if you popped ten of them you are not going to stop the problem, you have to get the people in the top out of business and they are merely doing t he work of the counterfeiter who doesn't want to put his neck out on the street and certainly they are not making the profit that somebody on the top is but as long as there continues to be people to do that, you are going to continue to have the problem with the bootleggers supplying them or the counterfeiters supplying them. Certainly the bootlegger or counterfeiter generally he himself or herself did not get on the street because they don't want to put their neck on the line, they want to insulate them selves two and three people down from the ultimate vendor who is absolutely out on the forefront. You can see him, if law enforcement wanted to, they could bust him every day if they wanted to and they're the visible people and the only way you are ever g oing to get unless you've got somebody inside the factory, you are ever going to get someone who's putting the stuff on the street to start from the bottom and trace it all the way up.
GA: But clearly if people weren't buying the merchandise, it wouldn't be manufactured.
SD: Sometimes as you say though they'll buy it not knowingly, whether it be a bootleg or whether it be a counterfeit and so they are deceived into buying it. So the question is if you don't have it available there's no way that they can be deceived.
GA: Good point.
SD: It's the same thing like drugs too. Do you say, okay, people want it, so you allow it to happen, people are hooked on the drugs or do you stop it from being sold? You know, there's a lot of ways to look at the alternatives.
GA: But again we have strong drug laws and it doesn't stop anybody from wanting drugs.
GA: The problem is really that people want to buy the recordings.
SD: You've got to look at it from more than one approach and then as you mentioned before consumer education is another way of looking at it too and I think though not as cost effective unless we have something to grab onto some kin d of focus and like I said some kind of anti piracy security device might help in that area so people know that it's authentic goods coming from a certain source.
GA: We've talked about the past. We've talked about the present. What's in the future for the next five years? Do you see things getting better or getting worse or just changing totally?
SD: I think we are now better equipped to work with a lot of the technology than we were before as the formats are changing now in terms of DCC, mini discs and CDs in terms of being able to identify where they are being made. As lon g as we can work with the technology as opposed to working against it, I think we are going to make major inroads in counterfeiting. Obviously when you get to a situation where a person can write only once in a very cost reasonable, very quick way to do it, technology starts working against you but there are ways also to work with that some of which we are developing right now.
For instance abroad, IFPI which is the International Body of Trade Associations recording industries the International Federation of Phonograph companies abroad. To make a long story short, half signed an agreement for instance with Phillips whereby the companies and plants abroad going to start putting in some kind of indicia as to where the discs are being made. Something in the master process and the manufacturing process and that's actually been in the trades particularly in Euro pe. So that you'll know more about where the plants are, we are working with a lot of the plants here and almost all of the plants in the U.S. identify the plant name on it, so even if the recording is "illegal" you'll know where it was made and go back to the plant, and the plant then tells you who the customer was and so forth. So the technology can also work with you and it isn't as easy in terms of other formats as in terms of vinyl or cassette but as we are moving into the new technologies and the digital delivery, there's a lot more ways now to tell where the source came from and so I think that, there's some hopeful signs as well as some other signs which are not as hopeful when you have a situation where someone can do it in their home w ith a very cheap piece of equipment. For instance in CDs right now, still the mastering equipment is extremely expensive. So you can have a smaller number of plants to do the mastering right now then you have plants just doing the manufacturing because it has taken up to recently several million dollars just to get into the mastering process of CDs. That may change though again. Because there is equipment that we've become aware of that may make it almost a fraction of that cost to get to the mastering pr ocess. So a lot of it will be dependent on the technology and how we are able to come up with ways to work with it.
GA: But it's something you think about all the time?
SD: Absolutely something we think about. We are very concerned about the new formats. With CDs and some of the other technologies we'll be able to deal with it before the product hits the street and in fact many of our CD piracy cas es here, whether they be pirates or bootlegs, the bootlegger thought he was getting away with them being manufactured but what was actually happening was at the time of delivery, there were busts. And we've had that almost as a regular course of business now so that the person who goes into bootlegging and thinks oh the plant did it, I got away with it, little does he know when the delivery actually occurs to his home, the person who's delivering it may be a law enforcement agent who executes a search war rant at that time right after the delivery. So it's kind of an interesting thing and you've never seen that before in any other format but you do see it with the CD format now.
GA: How can our readers get in touch with you?
SD: 1-800-BAD-BEAT. (1-800-223-2328 are the number equivalents). Locally in D.C. itís 202-775-0101. They can ask for our investigative head, Frank Creighton, and if he's not available feel free to call me, but Frank would be the bes t person to give a phone call to.
GA: And do you want to give an address if they want to send something?
SD: Yes. RIAA (Recording Industry Association of America, Inc..), 1020 19th Street, N.W., Suite 200, Washington, DC 20036.
GA: Thanks so much for your time and for clarifying all these complex issues!
SD: Thank you for the opportunity!