«Prepared for Caribbean Export Development Agency Barbados April 2001 CHAPTER ONE INTRODUCTION The rapid growth of an intellectual property and ...»
As a result of the level of infringement and the inadequate protection and enforcement of intellectual property the Dominican Republic, along with five other countries, has been placed on the US trade representative (USTR) Priority Watch List on the request of the International Intellectual Property Alliance (IIPA), a US based lobby group. Under the USTR Special 301 provisions the Dominican Republic could lose its duty-free trading privileges under the Generalized System of Preferences, which would affect 4,000 products (Lannert 2000).
Copyright law in the Dominican Republic is based on its 1986 Act. The law does not afford adequate protection for rights holders in several areas. One of the key concerns is that the law does not give copyright owners the right to obtain and conduct civil ex parte searches which is called for under TRIPs. As such existing legislation does not meet the standards required for TRIPs compliance that the government is obliged to meet as a member of the WTO. The Dominican Republic has been updating their legislation and institutional capacity in recent years. They acceded to the Berne Convention in December 1997. In March 1997 the government established an inter-agency anti-piracy group (COPAL) to address complaints through the public prosecutor’s office, seize illegal works and close infringing businesses. In July 1998 the government established an office to deal with intellectual property matters in the District Attorney’s Office. There is also a Copyright Office called ONDA (Oficina Nacional de Derechos del Autor) which registers copyright contracts but is not empowered to act on complaints. ONDA is awaiting a presidential decree that would give it greater enforcement powers.
Another area that is problematic is the institutional capacity for collective administration of copyright works and the remuneration of authors, composers and producers. There is one copyright society in operation, SGAE-Dominicana, an agency of the Spanish collection society SGAE. It has approximately 1,000 members, 300 of whom are active commercial music authors. Over 90% of Dominican authors are also members of ASCAP and the remainder are members of BMI, SGAE or SESAC. SGAE-DOM is essentially a one-man operation at present. The organization does not have the resources and the administrative machinery to monitor the use of works, the market leverage to negotiate with the main users, to collect licenses from music users and to ultimately distribute royalties to right owners. SGAE-DOM is a member of the international body CISAC but is unable to honour its reciprocal obligations, which is to monitor, collect and distribute on behalf of international repertoire.
The market potential for a copyright agency is very good given the large number of radio stations (66 FM and 67 AM stations, see appendix 1), hotels (there are 541 hotels, see appendix 2), bars, discotheques and colmados (mom and pop stores) that are all heavy users of music. Music can be heard almost everywhere in the Dominican Republic. A large percentage of it is local repertoire. For example, an estimate puts local airplay at 70% (Austerlitz 1997). This means that when the institutional capabilities are in place Dominican authors should be able to collect reasonable royalty income. As it stands it is the radio stations that are paid payola by local record producers and artists. Foreign record producers and their local distributors claim not to pay any payola. Some industry personnel argue that this has worked to the advantage for local repertoire.
Payola is well entrenched in the Dominican music scene, at home and in the diasporic markets. It acts like an additional tax on the recording industry and thus a major barrier to profitability and market entry. What several recording companies have done to combat this problem is to establish radio stations. Karen, Ringo and Juan & Nelson have all opened radio stations to promote their investment in sound recordings.
FESTIVAL TOURISMCarnival and the Merengue Festival are the two main cultural events on the tourism calendar of the government body responsible for Tourism (la Secretaría de Turismo). Another significant event is the Festival of Latin American Music hosted by the private sector firm Cervecería Nacional Dominicana, brewers of Presidente beer. The Merengue festival in Santo Domingo is held in July and there are also other festivals of gastronomy as well as exhibitions of handicraft and fruit. Puerto Plata too hosts a weeklong Merengue festival at the beginning of October on the Malecón, La Puntilla. The city hosts a cultural festival, which features arts and crafts exhibits as well as traditional dances and music of several genres, including Merengue, Bachata, Blues, Jazz and Dominican Folk. Sosua also hosts a Merengue festival in the last week of September.
Initially, the Merengue Festival was sparked by the interest of Puerto Ricans who would visit Santo Domingo to enjoy Merengue during a week of festivities in their own country (fiesta nacional). Lured by Merengue, the festival took shape from about 1967 and has attracted not only Dominicanos living abroad but also a wide cross-section of international visitors. The festival is a celebration of Dominican art and culture extending from merengue to local food, sweets, craft and art. The Tourism ministry endeavours to promote the informal economy through community participation and links this to the continued success of the festival.
The Merengue festival is an outdoor event held from the last week of July for ten days. The popular Malecón in the capital Santo Domingo, is closed off and it is here that the Merengue gala unfolds. Organized and coordinated by the Tourism Ministry (Secretaría de Turismo) the Merengue Festival receives considerable support from the private sector, which sponsors bands and concerts throughout the festivities. The main merengueros Eddy Herrera, Sergio Vargos, Hector Acosta, Milagro Hernández among others, appear at various shows under the patronage of small bars and liquor houses as well as large corporate sponsors like the Cervecería Nacional Dominicana, brewers of the popular beer, Presidente.
The Festival is organized on a budget of 3 million pesos, approximately US$187,000.006 whereas the budget for Carnival ranges from 5 to 6 million pesos (US$312,000 to US$ 375,000). The Ministry of Tourism co-sponsored a Merengue Festival in New York in July 2000, the aim being to promote Merengue internationally, given the rising popularity of Latin American music. In addition, there are plans to decentralize the festival so as to incorporate other parts of the country, particularly the tourist-oriented areas. At present, it is unsure whether tourists actually leave the resort areas like Juan Dolio and Puerto Plata to participate in the festival in Santo Domingo. It is unsure too, just how many visitors arrive in Santo Domingo for the festival since visitor arrivals are not disaggregated to specifically measure this. However, it is noteworthy that in 1999 the month of July had the highest number of arrivals through all airports. In 1998 and 1999 the month of July had the highest number of arrivals through the Santo Domingo airport, which is where most visitors for the festival would arrive. The data for 1998 indicates that the month of July received 40% more visitors than the average monthly arrivals and 28% more than the average for the traditional peak winter season months.
The most important development affecting the prospects for the Dominican music industry is the rapid growth in the Latin music market and the increasing demand for Latin or Spanish language recordings. It is important to note that Latin music is defined as music that has at least 51% Spanish language. This means that several of the hits by artists like Ricky Martin, Enrique Iglesias, Marc Anthony, Jennifer Lopez are not counted as Latin music. What this group of artists has done is to take Latin music into the English mainstream markets, especially pop music.
Based on available data the Latin music market can be understood in the following geographic zones: Latin America, the US Hispanic market, which includes Puerto Rico, the Iberian peninsula, i.e. Spain and Portugal. The first market segment refers to music sales in Latin America, which is dominated by three territories: Brazil, Mexico and Argentina account for over 60% of the market. The Latin music market has doubled between 1991 and 1999 and is valued at US$2.4 billion or 6% of global sales. The market peaked in 1997 at $2.6 billion. The last two years have seen declines in sales of 9% in 1998 and 5% in 1999. Main cause for the drop in sales was the economic downturn in the region, especially in Brazil, which accounts for over 45% of the Latin American market. Another reason cited is the sharp rise in CD piracy. This is a The exchange rate: 16 pesos = US$1 significant development because CDs accounted for 86% of sales in 1999 and have been rising quickly (IFPI 2000).
The next most important market in terms of value is that of Spain and Portugal.
Together they have a market valued at $816.3 million (1999). Spain, the larger market, is the world’s eighth largest music market with sales of $639.5 and a global market share of 1.7%. As table 4 shows, Spain and Portugal have been experiencing steady growth throughout the 1990s except for above average growth in 1998 and declines in 1999. There is no data on music sales by genre.
Consequently, it is difficult to ascertain what share of the market is Latin music.
However, there is information on repertoire origin for the years 1995 to 1997, which shows that in the case of Spain international repertoire has been in decline relative to domestic repertoire. In contrast, international/domestic split in repertoire has remained relatively steady in Portugal. While most of the international repertoire is of Anglo-American origin an increasing share of the market is moving towards Latin music, according to industry analysts (Berne 1999).
The US Hispanic market is another growth market. The US Hispanic population is estimated to be 31.7 million with an aggregated income of $340.6 billion. The group is expected to rise to 35 million by 2003, which will make them the largest
minority in the US. Most of this population is concentrated in six states:
California and Texas account for 50%, New York, Florida, Illinois and Arizona share 25% while Puerto Rico has approximately 12%. The Hispanic population is relatively young - half the population is under 24 years of age compared to 35% in the non-Hispanic population (RIAA 2000).
TABLE 4 MUSIC SALES & REPERTOIRE ORIGIN, SPAIN & PORTUGAL, 1995 - 1999
According to a recent RIAA survey (2000) of the US Hispanic music market, sales are concentrated such that 27% of the population account for 68% of the music sales. Two consumer groups are responsible for these purchases: “Young Hipsters” who are in the age group 14 - 29, and the “Still Grooving” those between 30 and 54 years old (see appendix 3). This market buys and listens to a lot of music and is heavily influenced by what they hear on radio (67%). They also do most of their music shopping outside of traditional channels, for example, at independent stores (“mom and pop” shops) (24%), mall stores (19%), music clubs (16%) as well as flea markets, nightclubs and/or concerts (6%).
Sales in this market for 1999 are estimated to be $626.7 million (up 10% on 1998) or 4.3% of the US market of $14.6 billion (see table 5). For this market Spanish music (Spanish Pop, Ballads and Tropical) (63%) is the genre of choice followed by Easy Listening (20%) and Rap/Hip Hop (13%). In terms of sub-genres, US Hispanics preference is for Spanish Language (Pop and Ballads) (44%), Mexican (24%) and Merengue and Salsa are tied for third spot, with 8% each (see tables 6 and 7). This genre breakdown aligns with the industry categories for Latin music which are Pop, Tropical (i.e. Salsa and Merengue) and Regional Mexican.
The Puerto Rican market deserves special mention even though it is captured under the umbrella of the US Hispanic market. As discussed earlier, the Puerto Rican music market is large relative to the size of the population because it has the strongest per capita sales in Latin America. It is also the only marketplace in the US where Latin repertoire dominates on the radio stations and in the record stores. These factors have made Puerto Rico the marketplace for breaking new Latin acts.
An important feature of the Latin music market is the role of the various firms.
As shown in table 8 the major firms account for approximately 80% of the music market in the major Latin American markets (Argentina, Brazil and Mexico) and in the US Latin market. Sony, which has a large Spanish repertoire, is the overall market leader, particularly in the US where they enjoyed a significant jump in market share in 1998. These gains are largely attributable to the sales of Ricky Martin, Colombian act Shakira and film star Jennifer Lopez. UMG is second with a strong position in the Brazilian market. In 1998 independent firms had an average of approximately 12% in the three Latin American markets. Their share of the US Latin market is above average at 14.2%. Firms such as Fonovisa, RMM, Plátano, Karen and more recently, Caiman, are the key players in this sector of the market.
ECONOMIC IMPACTIt is difficult to ascertain the exact contribution of the music industry to the economy of the Dominican Republic. The data available to this study does not present a picture of the economic flows in several of the core aspects of the music business. For example, there is no solid data on soundcarrier exports and there is none on copyright royalty income because most artists with active repertoire are members of overseas collection societies.
The best available indication of the value of Dominican exports comes from the RIAA survey of Latin music consumers in the US. That survey estimates that Merengue accounts for 8% of the market from a consumer preference. This does not give an indication of actual sales. An analysis by genre still has to be conducted. However, it is possible to extrapolate from this data to suggest that Merengue’s value in the US market is 8% of US Latin sales of $626.7 million. This works out to be approximately $50 million.