Music Giants Launch Digital Platform in Russia

Two of the world's biggest music giants and two Russian record labels launched a wholesale digital distribution platform in Russia on Thursday, a market dominated by piracy across the entire entertainment industry.

Warner Music and Sony BMG said they had formed a new business called Digital Access with Russian industrial group, Access Industries and music labels Soyuz and Nikitin Records.

The new Moscow-based platform will distribute music, full-track audio downloads, ringtones, video clips and color images into both Russia and the Commonwealth of Independent States, a grouping of 12 ex-Soviet states. Digital Access is expected to officially start trading during the fourth quarter.

As a wholesale offering it will work with rights owners, content providers, mobile operators and on-line stores in making music available from the companies' extensive catalogues rather than dealing with consumers directly.

"This is a strategic investment that we believe will play a pivotal role in unlocking the potential of the dynamic Russian music market," said Warner Music International Chairman and Chief Executive Patrick Vien.

Financial terms were not disclosed.

Warner Music entered the Russia market late last year with a deal to supply songs and ringtones to Russia's No. 2 mobile phone operator Vimpelcom and music companies have been signing deals with mobile phone operators, partly as a way to try and combat widespread piracy in the country.

Earlier this month, U.S. lawmakers branded Russia and China as the two biggest copyright thieves in the world.

The International Intellectual Property Alliance, which represents movie, software, music and book companies, has estimated that its members lost $2.18 billion in Russia in 2006.

Digital Access Chairman Oleg Tumanov said the new platform would try and establish relations with all market players interested in developing a legitimate digital content market in Russia and the CIS to help shape standards and business models.

Access Industries is a New York-based conglomerate focused on media, real estate, natural resources and chemicals headed by Russian-born American industrialist and founder Len Blavatnik, a billionaire who made his fortune in the oil industry. Blavatnik is also a director of Warner Music.

Sony BMG, the world's second-biggest music company, is home to artists such as Justin Timberlake, Christina Aquilera, the Foo Fighters and Michael Jackson. The business is jointly owned by Germany's Bertelsmann AG and Sony Corp.

Warner, home to artists such as Madonna, Eric Clapton, Genesis, James Blunt and the Red Hot Chili Peppers is the world's fourth-largest music group.

The initial line-up of international music heavyweights does not include EMI Group Plc, the world's third-largest music company or Universal Music, the largest music company in the world owned by French media giant Vivendi.

Digital Access said it plans to aggregate material from other content providers.