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MTV-Billboard Asian Music Conference

2 June 2000


FACE THE MUSIC

Ladies and Gentlemen,

As a teenager living in the Big Apple, I used to follow the American Billboard charts like many of you follow the NASDAQ Index today. I had dreamed, like other kids, that I would get on the charts some day, but unfortunately, my musical adventure never took off. Therefore, I am extremely pleased today to have the opportunity finally of associating myself in some way with Billboard which, unlike me, has flourished into a worldwide music phenomenon dealing with all walks of the industry.

I would have enjoyed spending my allotted time today talking with you music experts and raving about some of my favourite artists. However, as the Commissioner of the Hong Kong Customs, I am limited by my portfolio. It is not my intention to be boring today, but I am afraid that my subject is not going to be as exciting as talking about Marvin Gaye and his music, but I hope, nevertheless, to capture your attention for the next few minutes.

I do not intend to recite ad nauseam the enforcement regime that has been so successfully practised in Hong Kong. It is certainly a good story, and we would like very much to share it with you. Instead of taking up your precious time here today, we have set out the key features of this story in a fact sheet which you could collect on your way out and read at your leisure.

To set the scene, I would like to present a couple of statistical snapshots, which capture the essence of our success here in Hong Kong, to highlight the difference we have made in the past year. A year ago, there were over 1,000 retail outlets of pirated CDs, each carrying on average some 5,000 CDs and operating over 12 hours a day. This translates into a market with the availability of some five million CDs at any one time. About a quarter of this quantity falls in the music category. A snapshot today would reveal a market of fewer than 100 retail outlets, each carrying on average some 1,000 CDs and operating fewer than three hours a day. This translates into a market with the availability of 100,000 pirated CDs.

I shall leave the interpretation of these figures for you to decipher, but clearly the shrinkage using whatever parameter is substantial. I have seen the industry's figures on the extent of piracy in Hong Kong. I know this is not the proper occasion to debate which calculation methodology is the more accurate. The only point that I would make is that it is just overly simplistic to equate piracy to the difference between a company's estimated business level and the actual business level for the year or the cumulative sum of suspected lost sales in the previous years. This gives no regard to the prevalent economic situation nor the quality of your products nor the effort the enforcement agencies have put into their work. Rather than dwelling on what could have been lost, why not concentrate on what is being achieved in a positive way? I am sure this is not the end of this debate but I thought I should set this out once and for all before turning to more important things, like what we are doing about copyright piracy in the digital era.

Looking ahead, I am sure you will agree that the biggest challenge to us all is no doubt the possibilities posed by the advent of the internet. You have poignantly set the scene by describing the internet age as a 'bittersweet' experience for the music industry. Indeed, the digital technology today has made it possible for a much wider range of music to reach a much wider audience in a much shorter period of time than ever before, but it has also provided a convenient avenue for piracy. While the internet world has greatly accelerated the development of information technology, it has also helped to facilitate the exploitation of intellectual property rights. These are serious issues that do not come with a ready set of solutions, but it does not mean that we should simply just abandon the technology and go back to vinyl 78s and the good old turntables. We must face the music together.

In anticipation of likely developments in the cyber environment, we in Hong Kong Customs have set up an Anti-Internet Piracy Team last year to deal with criminal activities in this sector. The internet language does not come naturally to Customs officers, nor I think the music industry, as the internet age dawns upon us, but we can certainly help each other on this score. To help us stay tuned to the latest technology, we called upon the assistance of the industry which is much closer to the leading edge of the business. This partnership is crucial not only in helping to raise our awareness of the principal trend and the availability of the leading technology, but also to facilitate our investigation and prosecution.

As for us enforcers, we need time and resources to equip ourselves with the necessary skills before we can do our job properly. We need to train our officers on the ground. We need to provide them with the proper hardware and software. We need to change the long-held modus operandi with the use of new tools. Only with all these modifications would we be able to begin to make an impact in the new environment. Indeed, after months of preparation, our team was able to score their first cyber hit with the help of the industry. In April this year, we arrested two men for supplying pirated computer software on an internet website, and we are now proceeding to prosecution. Meanwhile, working with the industry, we are seeking out other infringements.

The basic investigative techniques we have employed in this case are technology neutral using our usual modes of operation and taking full account of societal interests, like privacy and protection of civil liberties, but the tools are state of the art stuff. The lessons that we have learned urge us to keep pace with the rapid movement of computer technology. We shall do so. At the same time, we are also in the process of disseminating the newly acquired knowledge to a wider segment of our Customs force so that everyone concerned would be sensitive to the potential of this new dimension in areas in which they are responsible. We are also sharing this knowledge with other interested administrations as well.

Intellectual property is essentially a private economic right, the safekeeping of which rests with its owner. It is encouraging that the music industry is taking a proactive role as vigilant monitors for their own rights. You are the keepers of your own future. If you do not take any security measure for your own property, it would be futile to call us when theft has already taken place. I am happy to see that since IFPI in Hong Kong has issued warning letters to unauthorized MP3 websites, most of them have already closed down. That is a clear signal that your effort is being recognized.

It is also gratifying to note that cooperation within the music industry is progressing. Technology wise, there have been talks of developing common electronic safety devices for encoding to guard against illegal downloading activities. No matter how technology can help guard against theft, the best way is still to eliminate the desire to steal. Setting out authorized websites where music can be legally downloaded at reasonable prices will, I believe, reduce the temptation of piracy. Record companies must establish new business models that would protect on the one hand the industry's own copyrights but also offer true value to consumers while allowing them to choose and organize their music on computers. A new price structure and a new distribution modality are but a couple of the critical issues facing the music industry today.

I would also call upon members of the information technology sector to stay alert against accepting suspicious patronage, and to report to us any suspected piracy activities on their websites. I appeal to them for their cooperation with us to provide information that would assist us in the investigation of internet piracy and on our request, in closing down websites that are connected with piracy offences. In the cyber world, the internet service providers are the community's watchdog.

We must also expand our vigilance to the regional as well as the international level. I understand that the G8 has been working for some time on a model of cooperation. This is positive indeed, but this will take time and will require a great deal of effort to reach down to the less developed countries narrowing the technology divide. Unfortunately, like all multilateral agreements, the G8 product will likely take on the lowest common denominator which might not be good enough. Moreover, in the real world, it would be unrealistic to assume that we can impose an international penal code tomorrow, while we need to secure today cooperation from our counterparts around the world so that we can trace the criminals and collect the evidence in real time.

Instead of waiting for a satisfactory, supranational solution, I would urge the industry to adopt a regional approach making use of your excellent worldwide sales network to facilitate the investigation and prosecution of internet piracy cases. Without your help, local enforcement agencies with well defined jurisdictions would be constrained in pursuing criminal activities which are committed across borders or in several countries at the same time. Cyber criminals can surf across customs boundaries unobstructed and undetected, hiding behind countless links and leaving no trace. They can easily conceal their evidence in 'data havens' where their acts are not considered to be criminal. They can also arbitrage between administrations exploiting those which are lacking in legislation, resources and expertise to track them down. What we need is a modernized framework for assistance and cooperation, and you, the industry, would be in the best position to spearhead this effort in facilitating the establishment of such a network.

In closing, I wish to reiterate the importance of the mutual cooperation between the copyright industry and Customs. We all realize that fighting piracy in the cyber world will be no easy task, but I urge you to join hands with us in progressing forward to meet these new challenges. In the forefront, our dedicated officers of the Intellectual Property Investigation Bureau are ever ready. To further augment our commitment to fight this battle, the Customs Special Task Force will be extended for another six months until the end of the year 2000 at which time we shall reassess the situation.

We have achieved a great deal so far, but much work still needs to be done. Keep up the vigilance and give us your continuing support so that we can give the pirates their final shove off the gang-plank.

Thank you.

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