Meet the New Generation

Latin Trade, Jan, 2000 by Peter Hudson

Argentine musicians are out to crush their oppressors--the major record labels--with online distribution.

HE HAS NO RECORD DEAL, HAS never performed live and most of his compatriots have never heard of him, but Lucas Tirigall is arguably one of Argentina's most popular musicians.

Since Tirigall, under his stage name Lucas TC, posted his dance track on the Internet, eager fans have downloaded "Need for Speed" 1.8 million times from mp3.com, a leading online music site. He topped the site's charts for four months, until a redesign saw his song filed away under "Argentina," a category that receives little attention.

Such success is remarkable for someone who describes music as "just a hobby." But that may yet change. Based on his Internet popularity, the German division of Universal Music Group--one of five major world labels along with EMI, Sony, BMG Entertainment and Warner Music Group--and several minor record companies have offered Lucas a record contract. Significantly, he turned down the offers and plans to launch his own digital record label, Gigavibe. "The idea is to eliminate all the intermediaries," he says.

That an unknown artist could distribute millions of copies of a song without the help of a major label, and then go on to spurn their offers, heralds a major revolution in the music business. Both Lucas and the wave he is riding owe their success to MP3, a new digital format that allows web surfers to e-mail, download and play dense, high-quality music files quickly and easily (see sidebar). The innovation has spawned thousands of sites on the Internet and scores of programs for locating, downloading and playing MP3 files.

Better than sex? After "sex," "MP3" is the term most often entered at search engines by web users looking for sites, according to worried record execs. The action has led to claims that the Internet music market will move billions of dollars within the next five years and threaten the survival of the big labels.

For now, however, sales are a trickle, not a flood. More often than not, web surfers download their music free, often in breach of copyright--another threat to traditional record sales. Music companies are fighting a backguard action against piracy with attempts to come up with their own digital distribution system that they can control. MP3, however, has the support of the Internet masses and companies are already selling portable devices to play the music.

If anything, the potential for MP3s is greater in Latin America, where CDs, tapes and records arrive months after their U.S. release and with a heavy markup. Brazil, the largest market on the continent, is still wedded to local music. There, English-language music accounts for only a tenth of sales. But U.S. companies have a lock on the region's two other main markets--Mexico and Argentina--with two-thirds of sales.

Clueless. For fans impatiently awaiting the next major release, so much the better if they can get it faster and cheaper across the Internet. "New York has marvelous things on the street. Here the only way to get it is through electronic commerce," says Charly Alberti, formerly the drummer for Soda Stereo, one of Argentina's most successful rock bands and a pioneer of music over the Web. "I don't know a single Latino who doesn't want to buy from abroad." That may not be enough for MP3s to revolutionize the local industry in the short term says Alberti, but "within one or two years, you're going to feel it."

Meanwhile, the old music business has not even fully digested the impact of music videos on the traditional copyright payment structure. Small wonder that the industry majors have yet to brace themselves for the impending MP3 takeover. "They don't give it much importance," says Marcelo Mingrone, tracking manager at the local publishing division of EMI.

Peer Music, an independent U.S. music publisher with 30 worldwide branches, is one of the few exceptions. The company established a web presence last year with Digital Pressure, its online music business, allowing downloads of its artists' music in return for a credit card payment. Jennifer Racca, Peer's Argentine director, is today negotiating with local TV stations and independent music companies to add to that online repertoire. But she recognizes that her lead is not being followed by the majors: "They are very scared that they are going to stop making money. That immobilizes them." Both Mingrone and Racca reckon there has been a lack of clear leadership from the Sociedad Argentina de Autores y Compositores de Musica (SADAIC), which is responsible for collecting and enforcing copyright payments.

SADAIC's official stance is that the organization is "studying the latest developments." But it has yet to work out how to charge royalties to local radio stations like Rock & Pop that are transmitting their shows live over the web. U.S. and European industry groups have set up Internet watchdogs, like London-based Market Tracking International, to monitor MP3s sold or downloaded and check for illegal copies. Its Argentine counterpart still focuses heavily on the third of the market owned by traditional piracy.