Nickel Music Downloads Fight Piracy Culture in Vietnam

Vietnam’s biggest music websites will begin charging users to download songs, signaling progress in intellectual property protection in a country with one of Southeast Asia’s highest piracy rates for digital content.

Six sites that serve an estimated 23 million users, or about a quarter of the population, will charge 1,000 dong (5 cents) per song starting Nov. 1, according to Hanoi-based MVCorp. The fees will initially apply to about half of all Vietnamese recordings, and talks are underway with Sony Corp. and Universal Music Group Inc. to make more music available for download, according to MVCorp and one of the website operators.

“Changing the mindset of twenty-something million people does not happen overnight,” Phung Tien Cong, deputy general director of MVCorp, which helps the Recording Industry Association of Vietnam manage recording rights online, said yesterday in an interview. “As long as we ensure good quality and services, people will pay.”

The successful implementation of the agreement would be welcomed by foreign investors in a market where the flouting of intellectual-property laws is seen as a barrier to trade development, said Adam Sitkoff, executive director of the American Chamber of Commerce in Vietnam.

“It’s a step in the right direction,” Sitkoff said. “In order to create a knowledge economy, Vietnam has to do better in enforcing intellectual property rights. It’s not just digital media that’s at question here. It’s the whole mindset of whether it’s OK to buy counterfeit goods, be it videos and music or shoes and shirts. It’s a mindset and it needs to change.”

Illegal Downloads

Globally, an estimated 95 percent of music downloads are unlicensed and illegal, according to Alex Jacob, a London-based spokesman for the International Federation of the Phonographic Industry. Before the agreement, almost all music downloaded in Vietnam was illegal because the operators of websites and mobile-phone applications weren’t licensed to provide the service, Cong said.

Vietnam has the second-highest rate of illegal software downloads in Southeast Asia, behind Indonesia, according to a report by the Business Software Alliance, an industry group based in Washington, D.C. About 81 percent of software was pirated in Vietnam in 2011, with a commercial value of $395 million, according to the group.

The piracy rate has declined 4 percentage points from 2009, according to the BSA. By comparison, 86 percent of software was pirated in Indonesia, 72 percent in Thailand and 55 percent in Malaysia.

The new download fees in Vietnam are part of an agreement between MVCorp and the website operators signed Aug. 15, MVCorp’s Cong said. The association represented by MVCorp comprises recording companies, and about half of all music produced in Vietnam would be covered by the agreement, he said.

Sony, Universal

NCT Corp., which says it has a 35 percent share of Vietnam’s online music market with 2 million daily users, is negotiating with Sony (6758) Music and Universal to secure download rights for international artists, said Nguyen Minh Kha, the company’s vice president. NCT already has agreements with Sony and Universal to stream songs on its website, Kha said. The company plans to reach an agreement on downloads this year and start charging for international music in early 2013.

Sean Yoneda, a Sony spokesman based in Tokyo, referred questions to the company’s New York offices and representatives there weren’t immediately available to comment. Universal representatives weren’t immediately available.

“Foreign songs will be a very complicated issue,” said Nguyen Thanh Son, marketing manager of 24h Online Advertising Joint-Stock Co., which operates the Nhac Vui music website. The company would need to reach agreements with other locally-run websites before it could impose fees on international music downloads, Son said.

‘Very Civilized’

“This new framework is very civilized, helping the websites, musicians, and those working in the music industry to have more income to produce better-quality products,” Son said.

The agreement was spurred by a regulation that took effect this month that holds companies accountable for protecting the copyright of songs on their sites, including content that’s uploaded by users.

MVCorp expects that 5 percent of the country’s 25 million online music users will pay for digital downloads by the end of the year. If a user downloads five songs a month, monthly revenue from legal downloads may reach 6.25 billion dong, according to Bloomberg calculations.

‘New Habit’

The website operators said download fees may spark an exodus of users to smaller music websites not bound by the agreement. That’s one reason why fees are low, Cong said.

“We’re starting to get users to form a new habit so we can’t push the price up too high,” he said. “Young people will change their mindset when they join the workforce and deem time more valuable. They won’t mind spending a few thousand dong for the service these websites provide.”

Charging fees may help websites that are struggling to cover operating expenses with advertising revenue, Kha said.

Payment methods will include pre-paid cards, text messages, and direct deductions from mobile-phone accounts, MVCorp said.

The music website operators are concerned that payment fees imposed by mobile-phone service providers may be too high, limiting profit margins on music downloads.

Vu Thi Hai, who uses the Nhac Cua Tui, or My Music, website, said the 1,000 dong fee is “not expensive,” and says she’s willing to pay even more.

“I don’t mind paying because that amount of money is not too much for a piece of art,” said Hai, a 25-year-old who works for a real estate company in Hanoi. “If payment isn’t difficult, it’s OK with me.”

To contact Bloomberg News staff for this story: Diep Ngoc Pham in Hanoi at dpham5@bloomberg.net

To contact the editor responsible for this story: Lars Klemming at lklemming@bloomberg.net

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