Monday, July 02, 2007

Russia shuts down

The music download website whose activities threatened to scupper Russia's entry into the World Trade Organisation (WTO) has been shut down.

The site,, was quietly closed as the Kremlin sought to end criticism from the United States that Russia was failing to clamp down on music and video piracy.

However, an alternative site run by the same Moscow company has already emerged. MediaServices says that is legal under Russian law, using many of the same arguments advanced in support of

Customers found last week that would not load on their computers, while others who went through its Russian web address were greeted by a message saying that it was closed "for maintenance". A former employee confirmed to The Times today that it had been shut down under pressure from the Russian authorities.

Susan Schwab, the US Trade Representative, singled out during talks last year on Russian membership of the WTO and said that closure was a non-negotiable condition of entry.

She and German Gref, Russia's Minister of Trade and Economic Development, signed an agreement in October in which Moscow pledged to shut down the site, which contains one of the world's largest online collections of pirated music.

Russia also promised to target other Russian sites that distributed copyright material illegally. insisted that it was a legitimate business because it paid royalties to a Russian organisation that collected fees for distribution to copyright holders.

It argued that it was helping to prevent piracy by offering an alternative to free file-sharing sites. Western music companies refused to accept the fee, arguing that the Russian Multimedia and Internet Society had no right to represent their interests.

The site had been under investigation for two years by the Russian Interior Ministry. A bigger blow was struck in January, when Visa and MasterCard told MediaServices that they would no longer process payments for

The site had attracted 5.5 million subscribers buying songs for between 10 and 20 US cents each, compared with 99 cents at Appleā€™s American iTunes store and 79p in the UK.

Most customers were in Russia, but it was estimated to be the second most popular download site in Britain after iTunes. It was set up in 2000 by six computer programmers, who initially developed the site for their personal use then built it into a business earning a reputed $30 million a year.

The site looks virtually identical and claims to offer thousands of albums by popular artists for around 15 US cents per song. Bon Jovi's latest disc, for example, was on offer for $2.11.

MediaServices said that the site was registered with the Russian Licensing Societies, which it claimed had the right under Russian law to "grant licences and to collect royalties for the use of music without necessarily obtaining permission from the copyright owners".

The company's website said that it paid 15 per cent of proceeds to the licencing societies for distribution to copyright holders. It added that it was considering an additional payment of 5 per cent to performing artists, whether or not they owned the copyright, "despite no legal requirement to do so".

Nobody from MediaServices responded to attempts by The Times to establish how long the new site had been in existence and how it differed legally from

Russia and the US signed a bilateral agreement on Russian membership of the WTO last November after 12 years of negotiations. Russia is the only major economy that is not a member of the WTO, which has 149 members and aims to boost the global economy by lowering trade barriers.

Russia hopes to complete bilateral negotiations with other member states in time to enter the trade body at the end of this year.



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