Record Pirates' Treasure Is Too Big to Bury; They're Swindling the Stars Out of Millions

updated 04/20/1981 AT 01:00 AM EST

originally published 04/20/1981 AT 01:00 AM EST

When the music industry talked about Sam Goody and the Record Pirates, it sounded like just another New Wave rock group. But those were the headliners last week in a Brooklyn federal court where the East's big Goody retail record chain and one of its vice-presidents were accused of knowingly buying and selling thousands of counterfeit tapes.

Those allegations called attention to a multimillion-dollar international scam that has hit pop music where it lives—in its profits. The roster of buccaneers includes: music business fifth columnists who produce and distribute the counterfeits; organized criminals with growing interest in sharing the illegal profits; even fans who tape songs from the radio or off records they borrow from friends. Whatever their methods, they fleece a financially troubled business of royalties.

One trade source estimates the loss by performers and the legitimate recording industry at $1.1 billion worldwide, without even considering the impact of home taping. So it's no wonder that stars like Billy Joel, Kenny Rogers and Gene Simmons of Kiss are among those encouraging prosecution of counterfeiters, who duplicate records and tapes and their packaging; bootleggers, who illicitly record live performances; and pirates, less surreptitious rip-off artists, who simply copy a record or tape and resell it in a self-designed wrapper. (Collectively, all the illegal copiers are sometimes referred to as pirates.) The problem is so endemic and the task of stealing a sound so fundamentally easy that those affected despair of putting a stop to it. Explains Rogers' manager, Ken Kragen: "It's like a blob—you push in one side and it bulges out on the other."

Rather than abjectly surrender, the music industry, already slowed down a few rpms by the drag of a struggling economy, has collaborated with some unlikely allies. The Justice Department began tracking down pirates in 1977, and FBI investigators won the 1980 Record Industry Association of America (RIAA) Cultural Award for the "protection of culture and intellectual property." To justify such rhetoric, a squad of warrant-bearing agents swept down on an Elvis Presley convention in Memphis last August, confiscating more than 2,000 bootleg and counterfeit LPs from three major distributors. The raid was one of 30 by law enforcement authorities in 15 states that resulted in the seizure of $55 million worth of illegal tapes, records and electronic duplicating equipment in 1980. According to Jules Yarnell, head of the RIAA's anti-piracy squad, more than 600 million of the two billion recordings sold in the U.S. last year were unauthorized in one way or another. "Some artists sell more records on the pirate level than legitimately," he says. "Others work for years to get to the top and have a hit. Charlie Rich was like that. Pirates skimmed off much of the profit from his Most Beautiful Girl in the World."

An FBI spokesman claims that organized crime has played a limited role in U.S. pirating so far. "These aren't ordinary street muggers and bank robbers either," he says. "Most of the pirates are insiders—disc jockeys, say—who may have contacts with wholesale distributors." However, the International Federation of Producers of Phonograms and Videograms, which recently ended a special session on piracy in Geneva, has concluded that organized crime is deeply involved.

Whatever the truth, the Goody trial showed that many performers are disgruntled. A galaxy of stars had been expected to testify. Among them were Joel, Olivia Newton-John, Paul Simon and Robin Gibb, whose work had turned up among the 106,000 apparently bogus tapes found by federal agents and allegedly traced to Goody. Ultimately, though the others submitted depositions, Joel was the only musician to appear. He spoke out vehemently against the low fidelity of counterfeits but professed to know little about how much money he'd lost. He did recall, however, that he received $1.02 for every copy sold of his 1977 album The Stranger, and $1.05 for every copy of 52nd Street one year later. (The Stranger has sold 7.4 million copies worldwide; 52nd Street, 6.4 million.) Industry sources speculated other stars preferred not to testify to avoid questioning about their personal finances.

Even among those who didn't appear, though, feelings are running high against the counterfeiters. Says Gene Simmons of Kiss, whose Double Platinum was among the impounded Goody loot: "I don't call guys who steal our work pirates. That lends too much romance to what they do. They're thieves." While observers outside the industry sometimes find it difficult to sympathize with performers who have gotten rich quick, RIAA lawyer Kenneth Geil sees it differently. "Everyone loses," he says. "The artists lose a minimum of a dollar on every bogus album that's sold. The careers of some of them aren't as long as you'd think, so it hurts. Also, a lot of the profits of rock music are used to support not-so-popular music, like classical. The songwriters are being denied royalties, the retailer trying to operate legitimately is forced to compete with retailers who are engaged in criminal activity, and the public loses because it's getting an inferior product."

The larceny isn't confined to the world of rock. Joe Talbot, past president of the Country Music Association, estimates C&W loses $125 million to counterfeiters annually. "Any time you've got huge sellers," he says, "whether it's in pop, R&B or country, you'll have a problem with piracy."

Bootlegging, on the other hand, is indulged in primarily by music aficionados. Some bootleggers go so far as to smuggle tape recorders into concerts in pieces, then reassemble them inside. Usually traded at rock flea markets, the albums fetch prices of from $8 to $350. Bruce Springsteen concerts are so widely bootlegged that in one 1979 New Jersey raid, unauthorized recordings of a dozen of his concerts were found. "We don't actively go looking for bootlegs," says Springsteen's lawyer, Peter Herbert, "but if we get a tip we'll go after them."

Home taping, of course, could have a devastating effect on the music business. In Britain, record sales have plummeted, while sales of blank cassettes have increased dramatically. "It's a cancer," says John Deacon, director general of the British Phonographic Industry. "Profits are slashed, and home taping is the reason." Happy to capitalize on the phenomenon is Malcolm McLaren, who once managed the Sex Pistols. He put together a band dressed as swashbucklers and called it Bow Wow Wow. The pop pirates' debut single was called C-30, C-60, C-90 GO (in honor of the recording times stamped on all blank cassettes), featuring the lyrics: "Every time I get a brand-new show/Off the TV, records and radio/I breeze with the sleaze on my cassette." Philosophizes the cosmic-minded McLaren: "In an age of technology, the kid stealing his culture from the radio can feel like a hero."

In the U.S., too, blank-tape sales are an industry bugaboo. While counterfeiting, piracy and bootlegging violate various state and federal laws involving copyrights, racketeering and mail fraud, it has never been established whether taping a borrowed record for personal use is legal. "The problem is simple," observes Kiss manager Bill Aucoin. "Records cost $8.98 and blank tapes cost $1.98." Yet a marketing study in 1979 by CBS Records concluded that the vast majority of blank-tape buyers also buy records, and that only 20 percent buy nothing but blanks. Officials of Arista Records have nonetheless notified retailers their company will participate in no ads in which blank tapes are mentioned.

While complaints about piracy are in abundant supply, solutions to the problem are harder to come by. Beyond threatening retailers and distributors with prosecution, major record companies have contributed nearly $2 million to an RIAA war chest, used for investigative purposes. Warner Brothers maintains a $100,000 bounty fund for information leading to conviction of counterfeiters. To discourage off-the-radio taping, the industry has been able to persuade many stations to refrain from the once-widespread practice of playing LPs without commercial interruption.

Technologically, too, the record companies are planning a counter-offensive against piracy. Among tactics being used: special stickers or dye in the packaging of legitimate records that would be obvious to distributors and consumers alike. Under development to discourage home taping is a scramble signal that would be inaudible on records but would register on tape if the performance were transferred. Industry officials are also hopeful that buyers will try to avoid counterfeit recordings once they learn how to recognize them. While the jacket printing of some counterfeits is fuzzy and some pressings are substandard, illicit material has become increasingly sophisticated.

If all else fails, the companies will surely compensate for their losses by raising prices. Says Kiss drummer Simmons: "I don't need another million dollars, but the ones finally hurt are the consumers, who have to pay more and more for their records." In the long run, blank tapes may be no bargain either. Joe Smith, board chairman of Elektra/Asylum Records, favors a royalty levy to be applied to such tapes, making blanks as expensive as pre-recorded cassettes. The companies and artists would share in the proceeds in proportion to their share of the market.

Does such a strategy smack of over-reaction? Sam "The Record Man" Sniderman, owner of a Canadian retail chain, says of home taping: "I remember 40 years ago when they brought out the wire recorders and the Nervous Nellies said it would save the 78-rpm market. That didn't occur. Then the same sob sisters predicted doom with the magnetic tape recorder, but they couldn't have been more wrong. The fact is, when sales are healthy, the industry is smug, and when the market is soft, it scurries around looking for a villain." When it comes to counterfeiting, though, Silverman is as furious as anyone else. He calls it a "criminal rip-off." Country singer Charlie Daniels agrees. "These people are taking bread out of others' mouths," he declares. "They're getting paid for something someone else created."

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