Infringement is an almost unavoidable byproduct of the intuitive use of these products, in part because infringement is a legal term that has little practical meaning for most of the consumer population. Most people are not lawyers - thank goodness — much less lawyers steeped in the hazy complexities of copyright law. Often, infringement is not dependent on an act but on the intent accompanying that act, or on an additional subsequent act. For example, Mr. Chairman, burning a backup copy of my Norah Jones CD is not an infringing act, but that same act accompanied by an intent to give it to a third party turns it into infringement, and if I sell it to that third party it elevates it to commercial piracy.

If Hilary Rosen and Jack Valenti could wave a magic wand and make P2P disappear from the face of the earth, digital copyright infringement wouldn't miss a beat. That wouldn't even halt Internet infringement. P2P software is largely just a combination of two common digital technologies; a search engine and a file transfer capability. And it is hardly the only efficient means for
transmitting media files across the Net. As the New York Times later revealed, the 2002 Grammy Awards demonstration of "P2P piracy" was actually a demonstration of the highly efficient file transfer capabilities of AOL's Instant Messenger software.

P2P and Creators: Promotion or Displacement?

Mr. Chairman, you are well known as an advocate for artist rights. Your courageous inquiries into unfair contract and labor practices affecting musical artists were a source of hope to the creative community last year.

The Internet has now delivered us into an era of unprecedented artistic abundance and the promise of direct connectivity between artists and their audience. If artists are able to realize the full possibilities of digital reproduction and distribution technologies they can translate this empowerment into greater freedom and enhanced economic rewards. In the potential new entertainment industry paradigm, traditional record companies as well as new market entrants will continue to provide such important functions as financing, production, and touring, but the balance of power between record labels and artists will shift toward the musician. On the other hand, if record labels succeed in stifling technological innovation and limiting new competition, and successfully transfer their physical goods business model to the virtual landscape of the Internet, then the future for most musical artists may be even bleaker than the present. In that unwelcome scenario, artists would have failed to realize the potential freedoms and riches of the digital era and find instead that the disadvantageous record club compensation model has become the standard for Internet remuneration.

A big question right now is whether P2P file sharing promotes or displaces sales of the primary record industry product, the compact disc (CD). While the record industry constantly tries to place almost the entire blame for modest recent declines in CD sales on P2P file sharing, they ignore a variety of other and far more plausible causes. These include massive consolidation of the major record labels and the significant financial debts that accompanied that merger wave, the end of the vinyl LP to CD conversion era, commercial radio consolidation, and a shift in consumer preferences from pure audio media towards the audiovisual. While CD sales have declined about ten percent in the last two years, DVD sales doubled in just the past year - leaving the corporate parents of the big record labels and movie studios better off overall. That consumer preference shift has been exacerbated by the record industry's inflexible pricing practices. Many media observers have noted that today one can buy the DVD of an entire movie, with better quality audio and a host of additional features, for less than the CD of that movie's soundtrack.