VKontakte & Universal Music Close to Anti-Piracy Deal

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Social networking giant vKontakte is reportedly close to doing a licensing deal with Universal Music. 'Russia's Facebook' has been embroiled in legal action with the label after failing to tackle rampant piracy on its platform, but according to insiders the companies are now close to settling their differences.

For many years, social networking giant vKontakte has been branded one of the world’s worst facilitators of copyright infringement.

The site, often dubbed ‘Russia’s Facebook’, has clashed with copyright holders everywhere, and has even found itself the subject of intense criticism from the U.S. Government.

One of vKontakte’s longest running disputes has been with Universal Music. Like several other recording labels, Universal has put the social network under intense pressure to curtail infringement on its platform.

Patience ran out two years ago when the label filed a lawsuit at the Saint Petersburg and Leningrad Region Arbitration Court. Since then the case has flipped both ways, first with a partial victory for the labels, then a Court of Appeal ruling in favor of vKontakte.

After Universal filed another appeal in May, the case looked like it might drag on, but according to a report from Russia’s Vedomosti, peace is on the horizon.

Citing two sources within vKontakte parent company Mail.ru, the publication says that negotiations to strike a licensing deal with Universal are advanced and an announcement is imminent.

According to the insiders, the companies are in the “final stages” of approval and confirmation of the deal could arrive before the end of the week.

The scope of the licensing/anti-piracy deal appears to be broad, encompassing not only vKontakte but other Mail.ru ventures including Classmates (Odnoklassniki) and My World. These sites are the three most popular social networking platforms in Russia and where millions of tracks are downloaded for free.

So what’s in it for Universal? Currently, it appears that the record label is being guaranteed a minimum fee of $8m over three years. However, there is also a revenue sharing arrangement under discussion which could see Mail.ru companies make money when their users sign up for a premium music subscription package.

There is some speculation that an announcement could take place during this weekend’s VK Fest music festival but the sources warn there are still some legal complications to be ironed out.

In the event that confirmation of the deal is pushed back, the suggestion is that the parties could announce an “agreement of intent” instead, with the final details to be hammered out during the next few weeks.

If Universal does indeed sign on the dotted line, it will be in good company. Mail.ru already has annual licensing deals in place with Sony Music ($2m), Warner Music ($2.5m), distributor The Orchard, plus a handful of local publishers. Adding the world’s largest music company into the mix would largely complete the circle.

Assuming the Universal deal goes ahead, Mail.ru is initially expected to spend around $7m per year on music licensing, a huge amount considering that the entire Russian digital music market was worth just $23.5m in 2015.

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