WALK INTO a record shop and buy a copy of Donna Summer, Andy Gibb or Paul Simon on tape. Depending on the store, the chances are as high as one in four that you are buying a counterfeit.
That is why the Recording Industry Association of America, meeting in Washington last week, presented its annual cultural award to the FBI. It represents a sober, bottom-line judgment that the bureau has done at least as much for the record business as Beverly Sills, who got the award last year.
The bottom line got lower in 1979, when a financial crunch drove some record companies out of business, others into deficits and quite a few executives into unemployment. Part of the blame can be put on higher prices and an uncertain market, but industry insiders claim that record bootlegging, pirating and counterfeiting are turning profit into loss. According to RIAA estimates, counterfeiters grossed $400 million last year in the United States, and pirates grossed another $100 million to $125 million. These figures should be at least doubled to estimate what pirating and bootlegging cost the legitimate recording industry in displaced sales.
Tapes have the highest number of counterfeits at about 25 percent of copies available. The percentage is lower on discs, which are more complicated to produce; and if you're buying a string quartet by Arnold Schoenberg, you can be sure it's not counterfeit. Criminals never bother with classics and seldom with pop records below the top of the charts.
One of the all-time top sellers in the counterfeit industry is the Beatles' "Let It Be," which has sold an estimated 10 million illegal copies through the years. Counterfeiter John Lamont of Upper Darby, Pa. -- a Beatles specialist -- boasted after his conviction, "I'm the fifth Beatle. I pumped out more product than they did."
The RIAA's first successful prosecution of a record pirate dates back only to 1970, although the problem is much older. In that year, in Tennessee, Robert Richard Schultz (also known as Bob Richards) was convicted for pirating (among other records) Iron Butterfly's "In-A-Gadda-Da-Vida." Since the copyright status of recorded sound was not clearly defined at that time, he was convicted of transporting records with counterfeit labels across state lines. Since then, Congress has extended copyright protection to cover sound recordings produced after Feb. 15, 1972, and prosecution has been made much easier.
Jules Yarnell, special counsel for the anti-piracy unit of the RIAA -- who once ran a one-man operation -- now has three assistants, also attorneys, and a booming business in lawsuits.
"In the last 10 years," says Yarnell, "there have been thousands of convictions for pirating and counterfeiting -- sometimes with as many as a dozen in one case. And from its undercover work on record-pirating, the FBI has picked up leads to all kinds of other crimes."
A variety of activities are often lumped under the general term "piracy," but these are the four most common ways of cheating musicians and the recording industry:
Bootlegging, at its simplest, means making your own recording -- by taping it from the radio or sneaking a portable tape recorder into a concert hall. It can be quite sophisticated -- for example, there are now wireless microphones that can be brought into a hall and transmit the music to recording equipment in a van outside. (There was once, according to legend, a record store in New York where opera-lovers could go on the morning after a Metropolitan Opera performance and buy a recording of it. The singers in these productions were reportedly among the store's best customers.)
But more often than not, the sound of a bootleg is unsatisfactory. In most jurisdictions, bootlegging is not treated as a crime, as long as the material is not copied and sold (though it is certainly wrong to make an unauthorized copy of copyrighted material). Record companies are attempting to have laws passed which would add a surcharge to sales of blank tape for a royalty pool to be divided among composers, recording artists, publishers and record companies.
Piracy is copying recorded material and selling it without trying to create the illusion that it comes from the original recording company. Pirated records are frequently sold in plain white covers, or with a stock photo that does not duplicate any existing legitimate recording. Pirates enjoy the advantage of being able to feature more than one artist from competing labels -- Johnny Cash and Charley Pride, for example. Pirate records are so easy to detect that they have been driven out of most record stores, but they are still sold on street corners, in flea markets, etc.
Sound-Alikes are records in which one artist or group tries to duplicate the sound of another. It can be legal, provided the proper royalities are paid and the material is not mislabeled.For example, a singer whose voice has the same defects as Bob Dylan's can put out a recording called "Songs of Bob Dylan" and even have a picture of Dylan on the cover. In some prosecutions for piracy or counterfeiting, the defendants have pleaded that their records were actually sound-alikes. Sometimes the resemblance is amazingly close, but the FBI has developed sophisticated equipment that can tell the difference, even when the original artists does a self-imitation.
Counterfeiting is outright copying of the record and its package, with the intention to deceive buyers, record companies and sometimes retailers. Counterfeiting has been a growth industry in recent years, partly because of a crackdown on piracy but also because of higher market potential: People who would never buy a pirate record will buy a counterfeit unknowingly. It is clearly illegal, sometimes uses highly sophisticated techniques, and last year grossed an estimated $400 million in sales. It is the primary target of copyright-enforcement efforts by the FBI and the legitimate recording industry.
Working under colorful code names such as "Operation Turntable" or "Modsound" or "Coptape," where they set up a dummy record shop and start making contacts with the underground, FBI agents have been able to film the delivery of illegal recordings, have inspected factories where they are mass-produced and have taped conversations with pirates that are not a matter of public record.
On one of these tapes, George Tucker, the proprietor of a custom record-processing firm in New Jersey called "Super Dupers," bragged about how he had turned out 200,000 copies of the "Saturday Night Fever" soundtrack and complained that he had lost his shirt making large quantities of the "Sergeant Pepper" movie soundtrack before it was released. "I don't know who lost more on that record, the counterfeiters or us," said Bob Edson, senior vice-president of RSO Records. "The anti-piracy unit brought RSO a pirate copy of 'Sergeant Pepper' three weeks before it was released," Yarnell recalled.
John Jacobs of the Department of Justice, a prosecutor in some of the Anti-piracy cases, tells the story of Tucker with an air of satisfaction. "Now," he says, "we are tracing his product through major outlets."
Do these outlets include the enormous Sam Goody corporation in New York, whose president and vice-president were recently indicted for knowingly dealing in counterfeit tapes? Jacobs will not discuss a case that is still open, but he is willing to talk on general principles:
"The name of the game is price. Everybody in the business knows what a product sells for. If someone offers you vast quantities at low prices, you have to know it is not legitimate.Maybe it fell of a truck, but more likely it was hijacked or counterfeited. It it's a current hit product, you know he's not stuck with it -- and, anyway, unlike other industries, record manufacturers will take back what you can't sell."
This policy in the record business was the downfall of Goody's, which allegedly returned more than $1 million worth of counterfeit tapes (including the "Saturday Night Fever" and "Grease" soundtracks) for credit. And in fact, Jacobs insists that some counterfeits are so good that even the record companies can't tell they aren't genuine.
While Jacobs, Edson, Yarnell and his assistants are talking, Don Zimmerman, president of Capitol Records, walks into the room. "Are you being hit on "The Knack?'" Edson asks. "It's hard to tell," Zimmerman answers. "Which one of these is good?" Edson asks, handling Zimmerman two casettes of the "Saturday Night Fever" soundtrack. "This one," says Zimmerman. "That's the counterfeit," says Eson, "and it looks better than the original. I'm going to hire some of these guys when they get out of prison."
But he might not be able to afford them: The counterfeiting business is a lot more profitable than legitimate recording. Zimmerman explains why:
"The real cost to a record company isn't in manufacturing records. It's in developing talent, producing the record and promoting it. The pirates don't have any of these expenses, and they don't have to gamble on the records that lose money, which are the majority. All they have to do is take their pick from the top of the charts, and they never have to worry about a dry season."
Edson recalls production costs of $1 million for a Bee Gees record -- just in studio time, to get the right sounds on the master tape. "The average production cost for a low-budget record is $125,000," he says. "But the only cost a counterfeiter has is for his materials -- he can produce records for about $1 each, and he's not even taking a risk on that if the counterfeit is good enough to be returned to us for credit. "The counterfeiters were able to make a profit wholesaling the two-record 'Saturday Night Fever' album for $3.50. We had to charge about $6.75 wholesale."
Edson's company has worked out a new system to detect 8-track counterfeits. A small window is cut in the cardboard box that contains the cartridge, and inside that window the company name "RSO" is stamped into the cartridge in raised lettering. "That makes it easy to tell the counterfeits right now," says Edson, "but after a while they'll catch up with us and we'll have to do something else. They have access to the same kind of equipment we do."
Technically, the counterfeiting of t apes is not difficult, though the packaging is harder to duplicate exactly. Equipment for duplicating 8-tracks or cassettes can be and has been set up in vans, to give the manufacturer mobility. Stamping discs and printing album covers requires heavy, elaborate equipment, and the work is often done in large factories with millions of dollars worth of equipment and lots of employes. Sometimes these places also do legitimate printing and record-processing as a front.Jacobs remembers raiding counterfeiting plants with "lines of slaves and winders (duplicating equipment) stretching as far as the eye could see."
Sometimes the sound of counterfeits is primitive. There are 8-track tapes on which can be heard the noise of the stylus that made the master copy from a disc -- and some cassettes have been packaged, just to be returned for credit, without the counterfeiters bothering to put any sound on the tape. Yarnell recalls that he was able to tell some early counterfeit copies of "Let It Be" "just by picking up the record. The counterfeits were made of reprocessed vinyl and heavier than the originals. Sometimes you would see little bits of paper sticking up out of the grooves, because the labels were chopped up with the vinyl when the old records were reprocessed."
But on the whole, the quality standards of counterfeits seem to be rising. Some counterfeiters, apparently, have even been able to get masters smuggled out of the legitimate companies' plants -- or perhaps to obtain them from custom processors who subcontract the work from smaller companies. This concern with quality may be a sign that counterfeiters are establishing stable relations with their distributors, taking pride in their product and worrying about customer complaints. According to a perhaps legendary story, at least one counterfeiter has been given a gold record by his clients for selling more than a million copies of a hit record.
"Digital recording will make it worse," says Don Zimmerman. "You won't be able to tell any difference at all."
Pride in the product sometimes takes curious twists. Jacobs recalls one counterfeiter who flooded the market with copies of Todd Rundgren's "Runt." "We wondered why he was working so hard on a record that wasn't going anywhere, until we caught him and discovered that 'Runt' was his nickname. Later, when Rundgren became popular, the counterfeits were the only copies of 'Runt' on the market."
Sometimes, according to Yarnell, counterfeiting operations have been tied with organized crime, and even with narcotics. "At one point, a certain narcotics ring had a distribution setup involving 8-track cartridges. An envelope of heroin or cocaine would be put inside an empty 8-track case, and it would be packaged under a fictitious name -- a sort of code word, so that nobody would ask for it accidentally. You could ask the clerk in a record store for 'Jules Yarnell Sings in the Bathub,' let us say, and he would reach under the counter and get your drug, and an agent could be standing next to you and not know what was going on."