Artists (and labels) are not paid royalties for their downloads, nor are they asked if they would like their tracks hosted and sold. It is an entirely criminal black organization taking advantage of Russia's historical non-signatory status on international copyright accords and the general impossibility of pressing a claim in Russia via any legitimate legal autority.

Makes me miss Napster...

Yeah, after some digging I sort of figured that was the scoop. Case in point -

Museekster: Are artists compensated for the downloads and how does this work in Russia?

Allofmp3: We pay monthly deductions to ROMS. The distribution of the royalties to the authors fully depends on ROMS. ROMS (as well as RAO) distributes the royalties based on sales amount.

So the lax copyright laws in Russia, I assume, means that their ASCAP/BMI sort of institutions are toothless and collecting pennies that never make it back to the source.

Couple of issues, of which that is one. Foreign licensing is very spotty in general, and artists usually don't get paid from it, which is why labels license their work to other labels in foreign countries: partly for royalty reasons, and partly of course for promotion reasons. Russia is not a participant in any legitimate publishing plan, and so whatever entity is theoretically collecting royalty is probably neither empowered to do so or inclined to pay any money out.

Also, they are paying miniscule royalty under a dodge in the Russian law which defines listening to a sound file on your computer as essentially being a personal experience. In their questionable view, they are not selling you the track, they are just letting you listen to it, thus no payment. This is of course ludicrous.

The more central issue, however, is that a copyright owner has control, by law, over copyrighted material (to some degree). In other words, you may not sell my product unless I agree that you can, or unless I contract with someone else to handle sales and they make a deal with you (this is not for used merchandise, it's for First Sale material). The Russian site simply steals the stuff and sells it, without permission or notification. It is bad news.

Why is it different from Napster or Kazaa or whatever (services I pretty much support, although I rarely use them now since we're not allowed to connect from the broadband office)? Simple: the p2p networks are fueled by the members, regardless of the current state of legality, and there is no one charging for the music. Copyright violation it may be, but pirating it's not. The Russian site is, in essence, manufacturing fake products from original material. No different than if they were printing up phony CD's and selling them in the subways, except they are doing it in bulk and from overseas. Bad people.