Russian Web Site Sells Songs by the Megabyte

An online store based in Moscow is selling music downloads by popular artists like Norah Jones, Usher, Prince, Outkast and scores of others for 1 to 2 cents per megabyte of song.

What's more, the downloads are free of restrictions, and you can choose their format: WMA, AAC, MP3 or even direct copies of CD tracks with so-called lossless codecs.

Huge Savings

Paying by the megabyte for music can result in huge savings for consumers, according to Charles Wright, a reporter for the Sydney Morning Herald in Australia.

In an article published in the newspaper, Wright disclosed that over a period of a few weeks, he purchased 4.74 GB of MP3 music -- about 968 tracks -- for US$48.65 from the Russian site, Allofmp3.com. A similar buying spree at Apple's (Nasdaq: AAPL) iTunes store -- which isn't available Down Under -- would cost US$958, he wrote.

Something that good must be illegal, right? Apparently not.

Legally Licensed

According to Museekster.com -- a self-described legal music services portal -- Allofmp3 has signed an agreement with an intellectual-property watchdog group, the Russian Organization for Multimedia & Digital Systems (ROMS), which gives the Web site the right to sell music downloads.

Museekster stated that under Allofmp3's license agreement with ROMS, the Web site pays fees to the organization for downloaded materials that are subject to the Russian Federation Copyright and Related Rights Law.

Museekster explained that ROMS is a member of an international confederation of authors and composers called CISAC. ROMS manages intellectual rights in the Russian Federation. All third-party distributors licensed by ROMS are required to pay a portion of the revenue to ROMS, which distributes most of the money to the appropriate artists.

RU Paranoid?

Whether Allofmp3 is legal or not, any online business with an "RU" in the domain name sets off alarms in the skepticism zone in many a Web surfer's wetware.

"Sites found with that country code designation are notorious for identify theft," Michael R. Graham, a partner with the law firm of Marshall, Gerstein & Borun in Chicago, told TechNewsWorld. "It's very much like the Wild West over there, and you are taking a risk giving over your personal information."

"Russia is one of the most serious piraters of copyrighted material in the world," Eric Schwartz, vice president and special counsel of the Intellectual Property Alliance (IIPA) in Washington, D.C., told TechNewsWorld.

Red Mob

He said his organization has identified 18 plants producing optical discs engaged in illegal production of music, video and gaming material. "That means that they're licensed to produce some discs and they're overproducing them, or they're not licensed to produce them at all," he explained.

However, in his short experience with Allofmp3, reporter Wright opined: "There is no indication in our dealings with Allofmp3.com over several weeks that this is one of those dubious enterprises so much loved by the Russian mafia."

He added that while doing business with the Web site, he hasn't seen any abuse of his credit card information.

Baffling Economics

Nevertheless, the economics of Allofmp3 baffles some observers.

"6.8 cents a song doesn't even cover the royalties that other services pay to record labels, which makes me highly suspicious of the legality of the content they are selling," Jarad Carleton, an IT industry analyst with Frost & Sullivan in Palo Alto, California, told TechNewsWorld.

He explained that legal sites -- excluding Wal-Mart (NYSE: WMT) -- have had a hard time getting below the 99-cent-per-song range due to royalties they must pay to record labels and the infrastructure costs they incur to have an online music store.

While there are reputable Russian companies on the Internet, he observed, he cautioned consumers about giving an unknown Russian Web site their credit card numbers.

"If you are tempted to do such a thing," he said, "it would be smart to use a one-time credit card number generator that only charges the amount you specify before your purchase, such as that offered by MBNA."