US embassy cable - 05BRASILIA239

UNCLAS SECTION 01 OF 02 BRASILIA 000239 
 
SIPDIS 
 
STATE FOR WHA/BSC, EB/TPP/MTA/IPC:SWILSON 
STATE PASS TO USTR FOR SCRONIN, LYANG AND BPECK 
USDOC FOR 
4322/ITA/MAC/WH/OLAC/WBASTIAN/JANDERSEN/DMCDO UGALL/DRISCOLL 
USDOC FOR 3134/USFCS/OIO/EOLSON/DDEVITO 
NCS FOR DEMPSEY 
 
E.O. 12958: N/A 
TAGS: KIPR, KCRM, PGOV, ECON, BR, IPR & Biotech 
SUBJECT: Brazil Copyright Piracy:  "ISTO E DINHEIRO" 
ARTICLE ON NEW LOW-COST CD 
 
REF: 04 BRASILIA 2557 
 
1. The January 26 "Isto E Dinheiro" article set forth in 
paragraph 2 (below) describes a low-cost CD alternative 
that its inventor hopes will put Brazilian piracy out of 
business. 
 
2. Begin Unofficial Embassy Translation 
 
Headline:  Ralf, the Saviour? 
 
A low-cost CD with only three tracks and cardboard cover. 
That's how country singer Ralf promises to end the pirates' 
party. 
 
Brazil was once the sixth largest phonographic market in 
the world.  Now it's in 12th place.  In the last three 
years, two thousand points of sale for CD's were closed, 
half of the jobs directly linked to the music industry 
disappeared and, in 2004 alone, the damages to the sector 
reached US$250 million.  The villain in this story can be 
found on almost every corner: the CD pirate, who sells 60% 
of the CD's sold in the country.  That's the version told 
by the recording companies who won't admit that charging 30 
Reals for a CD has something to do with the problem.  In 
any case, Ralf, of the duo Chrystian & Ralf, says he has 
the solution.  He invented the SMD (Semi Metallic Disc), an 
alternative to the conventional CD that plays on any 
equipment and is cheaper than the pirated version.  "I 
would be very proud to arrive in the USA and tell them that 
a Brazilian put an end to piracy", said the father of the 
idea. 
 
Ralf already invested 3 million Reals in the project.  The 
secret of the low cost of the SMD, which will be sold at 4 
 
SIPDIS 
Reals, is in the number of songs "injected" and the 
packaging.  He stores from three to seven tracks (why have 
more if people buy a CD because of a hit they hear on a 
soap or the radio?) and that's why the metal part of the 
disc is smaller.  What's left over is a plastic 
circumference where the technical information of the work 
is printed.  In this way, the insert can be eliminated as 
well as the plastic box, substituted by a cardboard cover 
with the words to the music and artist's photo. 
 
"No one buys pirated products because they like to.  The 
only way to complete with pirates is with price", said 
Cristina Monteiro, director of producer Radio Media System, 
who bought the license to manage the SMD patent for ten 
years.  The new CD isn't equipped with a security system 
that prevents production of homemade copies.  "But it's not 
worth it, because it's cheaper than the pirated version 
without being pirated and has the quality of an original 
CD.  Besides, the price is printed on the cover so the 
vendor can't increase the price," said the executive. 
 
The first artists launched will be country duos Marcelo & 
Gabriel and, of course, Chrystian & Ralf.  Afterwards, 
other styles, like rap and gospel music, will follow. 
There are also SMDV (film storage) and SMDG (games) 
projects.  Expectations couldn't be more optimistic. 
Cristina forecasts that by 2008 the SMD will capture 40% of 
the national market.  And that piracy will fall to 20%. 
 
End Unofficial Embassy translation. 
 
3. Comment.  While the SMD may offer an interesting vehicle 
for delivering low-cost music to the economically 
disadvantaged - which are a large portion of Brazil's 
population given the country's 30 percent urban poverty 
rate - it's questionable that the mainstream music market 
will embrace the three track per disc limit, among other 
features.  However, pricing, as providing an incentive to 
purchase pirated goods, is a topic Brazil's new National 
Council to Combat Piracy and Intellectual Property Crimes 
is expected to discuss in coming days. 
 
Danilovich