The most recent Supreme Court ruling on this controversial issue was in the case of MGM v. Grokster. Reversing the opinions of both the district court and the Third Circuit, the Supreme Court found that, though the software could be used for both infringing and non-infringing purposes, the companies “induced” its users to infringe copyright. Even though the software may have had substantial non-infringing uses and may thus have passed the Sony test, the court unanimously felt that the software was created with the intention of allowing users to infringe copyright for the profit of the company . While these file-sharing networks were shut down as a result of the ruling, the government did not seek prosecution of users, many of whom had shared less than $1000 dollars worth of copyrighted works and were thus not criminally liable under the current U.S. code. And while the government may have had a shot at prosecuting the creators and marketers of the software itself, as their product had been found to induce copyright infringement, with damages likely totaling thousands of dollars, a federal case was never made of it. Grokster was shut down, and numerous file-sharing networks popped up in its place, while legal digital distribution networks gained popularity as well, filling the gap left by the popular illegal networs. The war on piracy continued despite this dramatic ruling, and the complaining on behalf of the record companies has yet to cease.
Call#: Van Pelt Library HV6773 .H56 2006
In the later chapters of the book, Hinduja utilizes crime theories in effort to discover why people participate in illegal file sharing. While much of his analysis is similar to the suggestions of other piracy studies, he makes one interesting proposal that is worth noting: “Even if [the students] do view downloading and shoplifting in a similar light, it is also possible that the former is considered a “smarter” and more admirable crime, and therefore attracts much more participation.” He does not provide further inquiry into the suggestion, but it still provides an interesting perspective on the issue.
Hinduja also proposes that a new business model must be developed that takes advantage of the digital dissemination of music. He also suggests, as many supporters of a new business model would contend, that if a new model had been created and implemented immediately following the explosion of the MP3 phenomenon, the industry may have grown tremendously during this period (not to mention the negative reputation that their anti-piracy campaigning has bought them).
Hinduja also provides anecdotal evidence supporting the success of online music distribution in establishing loyal fans and further sales. He mentions Tom Petty’s distribution of free full-length MP3 tracks from his 1999 album prior to its release in exchange for access to email addresses of fans. This produced a database of Tom Petty fans that was easily accessible for marketing uses.
Perhaps the most important suggestion in this section of the book is that a “more harmonious relationship with the consumer population should result as the industry demonstrates that they are willing to work with the public to satisfy their music needs…rather than opposing any change to the status quo.” This statement is exactly what my thesis is all about, a new less-brash response to file sharing by record companies who have a lot to gain from acceptance of the new technology.
Call#: Van Pelt Library KF2979 .L47 2004
In Chapter 5 of Lessig’s book, he presents both sides of the piracy argument, yet suggests that p2p sharing is unlike true piracy and that there is potential to create a way to protect artists and allow the sharing to survive. Lessig proposes that four types of sharing occur on p2p networks, only one of which is legal, though three of the four remain beneficial to society despite their technically infringing nature. Lessig posits that the benefits of these three non-harmful piracy methods may outweigh the harms of type A sharing, and cites numbers released by the RIAA itself to support his argument. In 2002, the RIAA reported that CD revenues had fallen 6.7 percent, falling from 882 million CDs sold to only 802 million. During this same time period, the RIAA estimated that 2.1 billion CDs were downloaded for free, about 2.6 times the number of CDs sold. However, Lessig points out that, if every download were a lost sale, then the industry would have had a 100 percent drop in sales, not the mere 6.7 percent drop reported. Based on this data, Lessig concludes that there is indeed a huge difference between downloading a song and stealing a CD, a fact the RIAA does not want students to know.
Lessig also criticizes the RIAA’s demand that Napster be able to filter out 100 percent of infringing content when Napster was only able to promise 99.4 percent. He suggests that the war is not on copyright infringement but on file-sharing itself, with copyright used as an excuse. Under the zero-tolerance policy demanded by the RIAA, we wouldn’t have VCRs, or Xerox machines, neither of which seem so harmful today. Lessig does not promote piracy, but suggests that its detractors allow the technology of the internet to develop before pouncing on the technology and preventing it from maturing to its potential. This means that the anti-piracy scare campaigns and pressure for swift legislation go by the wayside while the internet reaches its full potential and an efficient way to promote and distribute content is developed.
Call#: Van Pelt Library HV6773 .H56 2006
Though this book is biased against internet file sharing, it provides a good background on some of the issues that arise when dealing with the topic. Hinduja provides a difference between file sharing and CD stealing that neither the detractors nor supporters of file sharing had thought to mention, perhaps because it is so obvious. Theft of digital property over the Internet is much easier and quicker than physical theft. He goes on to attempt to liken the two, claiming that the desire to innovate and develop creative works can be stifled if the rewards are less than anticipated, but there is a clear argument against this. That is, most artists struggle for years making absolutely no money before “making it,” and even then there is no guarantee of survival. These artists cannot anticipate that the returns will be high, because the likelihood of this to be the case is so low. It is in fact, these artists who struggle for years for no money who benefit from file sharing, as it enables them to share their work and develop a fan base without the stifling influence of a giant record label. Thus, for these artists, the same harmful peer-to-peer network that supposedly squelches the desire to innovate actually stimulates it. It provides the possibility that their work will be heard, which would otherwise be unlikely.
Though the author is against file sharing, he admits that digital intellectual property is characterized as a public good. Its utility is not decreased when the property is shared. It is also an “information good,” with a marginal cost of production of about zero. Though the author describes these factors as augmenting the attractiveness of the commodity, he informs the reader that because of the attractiveness, the music industry refused for years to embrace the format changes and introduce it into their business model. This seems at first to make little to no sense, until we consider the historical resistance to change in this industry.
Hinduja further describes the government’s general resistance to legislate on the matter of punishment for copyright infringement, suggesting that a reason for this is that most individuals lacked the capacity to violate the laws. This is no longer true, and perhaps the government should step in and make their position on the matter known. This potentially contradicts Lessig’s argument that the technology must develop before rules are made concerning its use.
In this short but informative article, the Chronicle of Higher Education describes the RIAA’s back to school video campaign on college campuses. Though the article is clearly biased against the RIAA, it makes important points about the falsities that the RIAA campaign presents to college students as truths, citing the critics including the Consumer Electronics Association and Public Knowledge. The video tells students to beware of anything free, ignoring fair-use laws that allow students to copy music for productive, scholarly and home use (fair-use rights that the RIAA would take away as quickly as they could find a DRM code that doesn’t destroy computers). This article provides a nice companion to “Combating Internet Piracy on College Campuses,” the statement of RIAA president Cary Sherman to the House of Representatives Education and the Workforce Subcommittee later the same month. Though the RIAA is clearly making productive advances in accepting and finding a way to use technology productively (iTunes is a good example), the complaining about piracy has not ceased. In his statement, Sherman denounces colleges for not doing enough to stop piracy on campuses, alleging that the new online marketplace that the recording industry has integrated into its business model is threatened by the toleration on campuses of illegal file-sharing. Sherman offers to university administrators the same bogus anti-piracy website lauded in the video, www.Campusdownloading.com. It seems that, despite a moderate embracing of the internet by the recording industry, the scare tactics remain, both to college students and the colleges themselves.
This article, from the International Journal of Operations and Production Management, discusses the impact that the Internet has had on the distribution of music. It provides a description of the historical supply model, a static music industry, which has not had much chance for change in the past hundred years, despite the obvious technological advances in the end product. In concluding its analysis of how the supply chain for music has changed as a result of the Internet and piracy, the paper states that, while piracy may have a lasting negative impact on record labels, it could have an offsetting positive impact on artists and consumers, two major players necessary for a successful industry.
The first implication of the Internet is the dissolution of a need for a physical distribution chain. This should make it easier for smaller firms to enter the market, undermining the dominance of the Big Five record companies who previously held control of the market.
The article further suggests that the internet provides a direct link between artists and consumers, allowing both increased bargaining power, though record executives interviewed as part of the study believed that the record company would remain a powerful player in the industry. The authors propose that artists could make the same revenues as they did through the record companies (where 85-90 percent of revenue goes to the label) by selling their songs themselves, while consumers can demand lower prices. The former effect does not seem to have happened yet, but time will tell if the music industry faces more changes than we can currently imagine, though the continued bullying by the record labels could provide the push that artists and consumers need to disown them forever.
This paper, from Communications of the ACM, studies the music industry’s response to piracy in terms of technological innovations with the potential for achieving a loyal, internet-based following. The article asks the following questions: “1) do record labels with greater exposure to piracy move faster to embrace technology?; 2) do these record labels invest in designing richer web sites and what features of web sites are viewed as more important? And 3) Which forms of music distribution are more prevalent?”
The study looked at 128 record labels, all of which appear in the Billboard magazine listings, between the summers of 1998 and 1999. The study first found that record labels exposed to piracy were quicker to create websites, an early embrace of technology. These websites also were more interactive than those of the late adopters. The authors of the paper suggest that labels exposed to high amounts of piracy did make concerted efforts in these early years to establish websites that would retain customers. As far as e-distribution of music went, many sights offered full-length low quality recordings of their songs in Real Audio format, a complementary form of music distribution that did not replace the need for MP3s or hard copies of CDs. While high-piracy labels favored this low fidelity e-distribution technique, it did little to diffuse the acceptance of the MP3 as a standard for consumers of the industry.
The paper ends with an optimistic paragraph: “If there is a silver lining in the battle between the music industry and MP3-based music piracy, it is that this particular open standard has pushed the key players to embrace technology…It remains to be seen if they can find a formula for adopting this new technology while maintaining their financial performance.” Three years later, it seems that iTunes and other legal download services have filled this niche, a fact that is promising both for the record companies and consumers.
In this paper from the Journal of Business Ethics, Robert Easley discusses some of the issues that arise in the wake of the conflict between record companies and copyright infringers, who are concurrently some of the same customers who the record companies hope to sell their music to. The ethics of how each party responds are an important consideration in determining the correct approach to this controversial issue. Ethics have always been at issue in copyright decisions. Easley questions the motives of the recording companies who own the music copyrights, noting that the music industry actually has more to gain than lose by embracing the new innovations. He questions if the battle against music piracy is “holding back the evolution of the music industry towards an ultimately beneficial embrace of the possibilities inherent in electronic distribution of music.”
Easley also comments on the threat to the record labels that electronic distribution would bring. Now that it has become clear to consumers that the marginal cost of distributing an electronic version of a song is next to nothing (consumers can do it for free, albeit illegally, on P2P networks), it is likely that consumers will demand lower prices for electronic versions of music. Consumers are understanding of the fact that music should cost money, yet many are just unwilling to pay the high prices that record labels demand, after years of minimum pricing policies. He also cites both anecdotal and factual evidence to support the fact that consumers would be willing to pay for online music if it was made legal, user-friendly and affordable.
On an ethical level, Easley questions if the pirating of music is unethical in addition to being clearly illegal. Is it possible, he questions, that piracy is an act of civil disobedience, in response to the excessive scope of copyright protections and unnaturally high prices? Easley leaves this question up to the reader, positing another question to the record companies: is it ethical for the companies to sue their own customers, stopping the expansion of what will likely be a social good? The answers remain unclear, but these questions provide interesting considerations directly relevant to my thesis.