Ordinary Gweilo

Sunday’s SCMP had a story about CD Wow (subscription required):

A group of British record companies is suing a Hong Kong firm for £41.13 million (HK$638 million) in royalties it was ordered to pay by an English court.

The companies are asking for the enforcement of a settlement agreement with Music Trading Online (HK), which runs an online mail-order music business called CD-Wow. Music Trading lists a Kwun Tong address as its head office. Customers of CD-Wow in the UK would order CDs and DVDs which would be sent to them from Hong Kong.

The 2004 settlement agreement came about as a result of legal action brought against Music Trading by Indepeniente, XL Recordings, Wildstar Records, Mercury Records, EMI Records and Sony Music Entertainment and its United Kingdom subsidiary.

In all, 15 firms took issue with Music Trading’s activities, and the seven record companies listed on Friday’s writ in the High Court are representing the interests of the others.

The companies alleged Music Trading infringed their UK copyright by providing parallel imports of CDs manufactured outside the European Economic Area without paying the appropriate royalties. Under UK copyright law at the time, it was illegal to import an item without the copyright owner’s express permission if its manufacture in Britain would have incurred royalty payments there.

The issue had been set to go to court, but the settlement was arrived at before trial. However, last November, the companies successfully sued Music Trading for breaching certain conditions of the agreement. The English High Court ruled the firms could individually sue the company for damages over those alleged breaches. Those damages would be in addition to the sum claimed in Friday’s writ.

The writ seeks payment of the settlement amount, interest and costs.

I also found another (more detailed and freely available) story on the same subject:

The BPI has also come under fire from an unexpected source – the organisation’s ex-director of anti-piracy David Martin, who retired last year. He suggests that artists are not losing out on any royalties if the CDs were genuine.

“Whether you sell a CD in Hong Kong or wherever, ultimately the royalties of that sale, if it is a genuine CD, will go to the record company and the creator of the work," Martin said.

“In my point of view the efforts should be expended against the people committing ‘real’ crimes such as counterfeiting and piracy.”

Well, yes indeed. 

Striking another blow are market analysts, who also reject the BPI’s assertions that CDs are not too expensive in the UK. Mark Mulligan of Jupiter Research said: “Sometimes the music industry just doesn’t help itself. With music sales plummeting there has never been a better time for the record labels to start garnering a little sympathy. But then they go and do something like this.

“With music sales declining the labels need to be doing everything they can to foment sales. CDs are still too expensive. If the labels insist on trying to maintain CD prices then they’ll lose sales and force many consumers into choosing between either not buying or going to a file-sharing network.”

But the BPI insists that pricing schemes have to be different for each market due to several factors, not least of all the average income of locals.

“The British record business accrues British costs employing British workers to develop British artists. Record labels therefore set British prices that allow them to cover those costs to stay in business,” said the BPI spokesman.

“Average incomes are much lower in South-East Asia, and record companies have a choice of surrendering the market entirely to piracy and not sell there at all, or reduce the price to a level that the market can support.”

CD Wow has pledged to continue providing consumers "the cheapest possible music" and intends to continue to "fight the laws that are in place to help record industry bosses rip off music lovers" but whether its prices will stay low remains to be seen.

I had thought that CD Wow were simply avoiding VAT by shipping from Hong Kong, and I hadn’t realized that there were other issues with the way they operate.  For me, the biggest advantage is that they don’t charge for shipping (worldwide, not just from Kwun Tong to the New Territories).  Every time I order from Amazon I resent the cost of delivery.