AllofMP3 Shuttered by Russian Govt. Thoughts

By Richard Menta 7/3/07

This time last year was one of the top 1000 sites on the Net according to Alexa. Now the news is coming from the London Times that the Russian Government has finally shut down the once popular paid download site. This comes as no surprise.

The interesting thing is that to this day no one really knows if AllofMP3 was operating legally within Russian law or not. The Russians certainly never tested it in their courts. Even if the service were legal all this time it stopped mattering once the record industry got the commerce departments of several nations to help them stop it. Once the US made the shut down of AllofMP3 a pre-requisite to Russia entering the World Trade organization (WTO) its days were numbered.

The site has been down for a week now, but AllofMP3 has experienced extended downtime before. This time it appears to be permanent. There won't be a fight to revive it.

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One clue is that's parent company MediaServices has been pushing users to switch over to a new, essentially identical, site they created called supposedly operates under different licensing arangements, which the representatives of MediaServices also claim is legal. The prices on the new site are higher, tracks sell for between 20 and 30 cents a piece, but are still considerably less than iTunes $0.99 downloads. Of course the average salary in Russia is a fraction of what it is here in the states, so the lower prices may be legit as they reflect terms targeting a less affluent regional audience.

And that may be the real issue here as the Internet is not a regional, but a global distribution mechanism. When Americans go overseas to countries where we have a favorable rate of exchange, certain expensive goods here can be acquired downright cheap over there. The point is you have to go overseas to get the discount. But, you don't have to go to Russia to shop at either or MediaServices always claimed they only marketed to Russians, but they gladly took money flowing in from other countries.

Apple can utilize the inequity of overseas markets to hire Chinese workers at $40 a month to pump out iPods that sell for $300 a piece, but if a foreign company works within its own laws to sell twenty cent tracks to Americans and Brits we hear cries of intellectual property theft.

Now mind you it is quite probable that AllofMP3 was every bit the illicit service that the IFPI claimed it was. It is also possible that the Russian government sold out a service that fully complied with their existing laws, because that was part of the cost of entrance into the WTO. WTO membership will have far reaching implications to the future Russian economy. In comparison AllofMP3 is nothing but a flyspec.

Really, does it matter that AllofMP3 is gone? When you look at the plethora of tracks on the average iPod only a fraction of the tunes are paid downloads. As Paul Resnikoff pointed out in his recent commentary of Digital Music News:

But four years after the iTunes Store launch, the unbridled optimism surrounding paid downloads has mostly been tempered. Predictions of a digital offset have failed to materialize, and the iPod revolution happened without an accompanying explosion in online music sales.

A look at the average iPod proves the point. In a discussion related to ongoing European regulatory scrutiny of the iPod+iTunes music ecosystem, Steve Jobs noted that only a small percentage of iPod songs are purchased from the iTunes Store.

Still, AllofMP3 succeeded at selling music and they did it in a world where millions file share. It did it by selling tracks at far more reasonable prices, selling tracks without digital rights management, and selling them in several different formats including the OGG, MP3 and ACC and FLAC codecs. If is important it is not just because it became a test case of international trade in the digital era, but because it served as a model for what a compelling paid download site should look like.

Other MP3 stories:
iPhone Reselling, Why it Will Fail.
iPod Killers for Summer 2007
- 38 new portable players

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