Tic Tic Bang has shown that there is room for competition in the local music industry. Glynis O’Hara reports
TWO idealistic young men, who loved what South Africans might call alternatief (alternative) music, have proven that being big in the distribution business is not necessarily better.
Anybody who knows anything about the music industry will know that distribution is a crucial part of the mysterious process that makes an act a hit. After all, if the public can’t easily find a CD or tape in the shops, it won’t sell, will it?
Tic Tic Bang, owned by Gary Herselman (39) and Mladen Pulijis (27), is a thriving business. But they don’t see themselves as the guys who sell the “weird” music. Indeed, they really dislike that label, wanting to sell as widely as anyone else.
The local music they distribute tends to be created by white artists, in English or Afrikaans, but that’s not all they’re interested in.
Their catalogue includes Sankomota’s first album, Lesego and the Kalahari Surfer and Duncan Senyatso. They are open to any new township product. The Afrikaans music, naturally, outsells the English, there being a captive, enthusiastic market for it.
South African English music has always had an uphill battle against American and British bands, and, in fact, local music quotas for broadcasting are in place to give a hand to this market, not “ethnic” music.
Tic Tic Bang’s acts include Urban Creep, Koos Kombuis, Jennifer Ferguson, Robin Auld, The Sunshines and new boy on the block Henry Ate. They import CDs from 20 labels overseas, including Sterns, the African music specialists; and 4AD. And they’ve opened a commercial design division, to produce CD sleeves.
“Gary and I both come from extensive retail experience [Pulijis was at Look & Listen for four years and Herselman at Hillbrow Records for 12], so we know where the cracks in the pavement are,” says Pulijis.
“We also knew,” adds Herselman, “we could survive on selling lower amounts per title because we were such a small operation.”
Neither has any commercial training at all and they employ an outside firm of accountants to keep tabs on cash flow, debits and credits. They’re reluctant to reveal figures, but say their turnover has doubled every year since they started. They now employ 10 people.
“The problem with widening distribution,” says Pulijis, “is that you have to break the perception that South African music doesn’t sell in mainstream places [such as CNA outlets or supermarkets]. But there have been huge inroads this year.
`There’s been a lot of attention given to South African music, and I think record companies are putting more into domestic promotion owing to the bad exchange rate and the return of the majors [Sony, PolyGram, BMG] under their own names. They are investing in local recordings, on top of the domestic companies like Gallo, which has always been there.”
Herselman agrees, but adds that there definitely are acts they’ve handled that another record company would not have.
The company now supplies to 100 independent stores and 100 Musica outlets around the country.
“The CNA in KwaZulu-Natal phoned us up and said they wanted Urban Creep in their stores, whatever headquarters said, which was great. It’s very difficult to get into the CNA. But this is progress.”
Tic Tic Bang is also known as the company for rave music, he says. Record companies should reinvest the money they make out of international dance compilations into promoting that market.
“Essentially we’re in the market for breaking acts,” says Herselman.
Are they putting their perceptions of quality above market forces? “Look, we’d rather give quality, but we know we HAVE to sell as well – and that’s where the sleepless nights come in! But we want the artists to be good and have long-term potential and not just die with the second album,” says Herselman.
They did run into a problem recently. “We got hit very heavily with a customs delay. It was all part of an Asami [Association of the South African Music Industry] thing, they wanted every parcel checked. They were looking for piracy and apparently they did find quite a bit.
“But a sizeable part of our income comes from imports, and it affected us radically. We were delayed for weeks, and it’s the kind of product that people want immediately, so we lost impulse-buying. But we will overcome it – we have three years of doubling turnover annually behind us, so we know we’re on to a good thing.”
@How hackers can rob banks safely
Robbing a bank these days can be as easy as opening your laptop. That is what many banks worldwide are discovering and attempting to prevent. David Gow and Richard Norton-Taylor report from London
CARLOS ARARIO, head trader at an Argentinian firm, Invest Capital, picked up the phone and called company director, Roberto Barbosa. “You had better get down here,” he said, “we’ve been raided.” Barbosa stared with horror and disbelief at his screen in his Buenos Aires office. Some $200 000 had disappeared from his firm’s account with Citibank, one of the world’s biggest banks, overnight.
“We were very, very surprised when we opened the cash management account. There were four wire transfers made out of that account without our authorisation and anonymously sent to four unknown destinations.”
Barbosa alerted Citibank executives at 111 Wall Street, New York. That was August 1994. For the rest of the year, Citibank’s anxiety made its Argentine client’s problems appear minor as its executives watched in panic while nearly 20 of their accounts – worth about $10 million – were plundered.
Citibank’s marketing department proudly offers the transfer of funds in any currency straight into a client’s account “quickly, easily and cost-effectively” as part of its “wide range of international banking facilities”.
The world’s fifth-largest bank hastily assembled a “war-room” on Wall Street and from it watched impotently as its clients’ money flowed quickly and easily, and at no cost, into accounts in California, Latin America, Finland, Israel, and the Netherlands.
According to United States court indictments, Citibank accounts held by Indonesia’s Bank Artha Graha, Argentina’s Banco del Sud, and Invest Capital SA, were raided, with tens of thousands of dollars assigned to accounts set up elsewhere.
Citibank began a global detective hunt as the bank realised it was in danger of acquiring a new image as victim of the world’s first grand larceny via cyberspace.
Others who have hacked into computerised cash transfer systems were insiders. The hit on Citibank is presented in the US as an outside job. It may have been perpetrated by the Russian mafia exploiting the poverty and disenchantment of high-flying technocrats under post-Soviet capitalism.
At the centre of a continuing Citibank-FBI investigation is Vladimir Levin, a 29-year- old Russian computer programmer and former biotechnology student from St Petersburg. He is accused by the US authorities of being the person who hacked into the bank’s computers and carried out the attempted multi-million-dollar fraud from a laptop at the St Petersburg offices of AO Saturn.
That is a shabby software and accountancy firm run by a group of mathematicians and scientists who were losing out on the Croesus-like wealth enjoyed by the entrepreneurial Russian “nomenklatura” and criminal elite.
“The salary at the Institute [St Petersburg’s Technological Institute] I was receiving was very low and I was too ashamed to ask for money from my parents,” says Levin. Computers, he says, were “one of the symbols of perestroika. Unfortunately, since perestroika there was so little money being given to research and science a lot of scientists left Russia and went to other countries where money was more available.”
Citibank’s war-room traced an unauthorised money transfer – allegedly the result of Levin’s hacking – to banks in Switzerland and St Petersburg. But the saga did not end there.
Evgueni Korolkov – a Russian who moved to the US for a better life – set up two Californian companies, Shore Co and Primorye. His wife, Ekaterina Korolkova, opened personal accounts at the San Francisco branches of the Sumitomo, Pacific Union, Great Western, and Wells Fargo banks as a conduit for cash from unauthorised Citibank transfers.
In August 1994, Korolkova was arrested by FBI agents as she tried to withdraw stolen money from one of her accounts which, they had discovered, was the destination of some of the Argentinian money.
She agreed to co-operate with the FBI, which persuaded her to enlist her husband, a former employee of AO Saturn, to help track down the perpetrators. The FBI told him they would treat him and his wife leniently if he played ball and gave the name of the hacker. He pointed the finger at Levin.
Desperate to find hard evidence linking Levin to the crime, the FBI also contacted the Russian police. An official St Petersburg police video of what it claims to be the contents of AO Saturn’s office shows computers, guns and Levin’s passport.
Meanwhile, Russian mules – charged with picking up stolen money from foreign accounts – were arrested elsewhere as Citibank managed to recover a little over half the $10-million loss it initially feared.
Among them was Vladimir Voronin, who was arrested in the Netherlands where he was about to collect $1-million from Rotterdam’s ABN-Amro bank. “It was not because I liked to do it, I had to do it,” he says. He was extradited to the US where he pleaded guilty; in return he agreed to co-operate with the investigation.
A programme on British television’s Channel 4 last week revealed that, about a year before the alleged Levin conspiracy was plotted, another hacker – known only as Megazoid – was the first Russian to break into Citibank’s computers.
Megazoid, a mathematical wizard obsessed with computers, remains anonymous for fear of criminal gangs anxious to acquire his skills, which he claims enabled him to navigate the Citibank network undetected for months, penetrating secret files, using a computer and modem he bought for $10 and a bottle of vodka.
But he also claims to know the origin of the attempted $10-million scam. Megazoid, it is alleged, did not work alone. One of his fellow hackers, a regular surfer on the Internet, got drunk and depressed one night – and sold the secrets of how to break into Citibank for $100 and two bottles of vodka.
The buyers are said to be the mafia, which allegedly used AO Saturn and, claims Janet Reno, the US attorney general, in a formal extradition request, Vladimir Levin. On March 3 last year, Levin was arrested at an airport near London. Levin, who proclaims his innocence, has spent the past 21 months in a British prison, and is fighting against extradition to the US.
He has told his lawyers, who are seeking his return to Russia: “I have never committed any crimes and I do not wish to be sent to America, a country to which I have never been, where I have no home, no relatives, no friends and no money with which to defend myself. I consider my detention here in England to be both illegal and a breach of human rights.”
The significance of the alleged conspiracy, with some of the players tried and convicted, some released, others on the run and yet more unknown, goes beyond the issue prompted by Megazoid’s “career”. It highlights the vulnerability of financial institutions’ computer systems.
Mike McKenna, former Citibank vice-president in charge of technology, talks openly of “years of neglect” during which the bank amassed 10 000 employees in technological services, 1 500 consultants, and, most tellingly of all, 3 400 subsidiaries in almost 100 countries. And, he relates, virtually each daughter-firm, certainly each country, had its own protocol for accessing the network.
Five years ago there were 200 home-grown protocols, what he describes as “an orchestra with many people with different violins playing different tunes”, rather than a full-scale symphony in which strings, horns and percussion talk to each other.
The Bank for International Settlements, Bank of England and the Bundesbank have recently issued warnings about the threat posed by electronic money and open-access computer networks like the Internet bulletin boards. There is even talk of “off-planet” banking – banks on Saturn and Jupiter reached by satellite.
“These transfers can take place from anywhere,” Dietrich Snell, a New York attorney told one of the many US court hearings on the Levin case. “You have the right user ID and the right password and the right computer equipment, the hardware, and as long as you know what you’re doing on the computer, you can get into the system literally anywhere.”
Says Bill Marlow, a banking security consultant: “Let’s put it in perspective – the average bank robbery nets you $1 900, gets prosecuted 82% of the time and you could get shot. With a computer you see $250 000 and get prosecuted less than 2% of the time … these figures are staggering. It’s safer to go and buy a computer than a gun.”
Citibank said in a statement last week that it had lost less than $400 000 in the scam. “No customers have lost any money,” it said, adding that the accounts that were hacked into were not encoded.
It has installed an access control system, Des-cards, which uses passwords altered after each time they are used. “Citibank,” the statement said, “is a leader in the financial services industry in fraud prevention.”