Russia’s Mail.ru Is Pirate No More After Reaching Music Deals

  • Social-media site operator settles Universal Music litigation
  • Its VKontakte site was labeled ‘notorious’ by U.S. government

Mail.ru Group Ltd, the Russian social networks operator long considered a “hotbed” of film and music piracy, has reached a licensing agreement with Universal Music Group, giving it legal access to work from all three of the world’s three biggest record labels.

The accord, announced Friday, settles outstanding litigation with Universal and follows earlier deals with Warner Music Group in April and Sony Music Entertainment in 2015. Mail.ru will work with all three labels to generate revenue from their works, according to a statement. Its social network VKontakte, which is bigger than Facebook in Russia, has been on the U.S. government’s Notorious Markets list since 2012.

Mail.ru said in an e-mail that it hopes to soon be removed from the U.S. list, though it declined to say whether its issues involving movie rights were fully resolved. The company has been cooperating with Hollywood studios to strip out unauthorized content and share revenues from ad-supported shows.

VKontakte, started in late 2006, allowed users to listen songs and watch movies downloaded by others for free. The U.S. has referred to it as "the largest single distributor of infringing music in Russia as well as a hotbed for online piracy of movies."

The company’s social networks also include Odnoklassniki and My World. They will try a variety of ways to monetize the licensed music, according to Mail.ru. The company said it plans to develop a mobile application for music with partner United Music Agency.

"Following the removal of legal barriers, we can now create new products based on VKontakte’s music service that users will value,” VK.com Chief Executive Officer Boris Dobrodeyev said in the statement.

The agreement with Universal Music includes music videos, suggesting users may soon see artists video on VKontakte and Odnoklassniki. That would help the company generate advertising revenue and challenge Google’s YouTube, BCS Financial Group said in note to clients.

Vedomosti reported earlier this week that Mail.ru, controlled by billionaire Alisher Usmanov, and part-owned by Tencent Holdings Ltd. and Naspers Ltd., will need to pay about $9 million a year to music publishers.

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