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Does the Pirate Bay’s Demise Signal the Beginning of the End of Torrent Sharing Sites?

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In the latest chapter of the Pirate Bay torrent sharing site saga, Swedish gaming company Global Gaming Factory X (GGF) has acquired the site for $7.8 million.  According to an interview with TorrentFreak, GGF CEO Hans Pandeya plans to implement a system where content creators will be paid for their work, thus honoring copyright laws.  In another TorrentFreak interview, Pirate Bay founder Peter Sunde acknowledged site users' disappointment with moving to this model, but that “I’d rather see The Pirate Bay die in a chance of becoming better, than just dying.”

This acquisition is just the latest in the Pirate Bay's ongoing legal battles.  In April 2009, Pirate Bay founders Lunde, Fredrik Neij, and Gottfrid Svartholm Warg, along with financial backer Carl Lundström were found guilty by the Swedish courts for copyright infringement.  The team was sentenced to a year in prison and $3.8 million in fines, but vowed to appeal.  After an unsuccessful appeal for a new trial, the team as well as GGF announced the deal.  Why would a company want to acquire a troubled site?  The statistics are staggering: over 28 million users trade files at any given point, making it the number one most used torrent site of 2008, according to TorrentFreak.

Now that The Pirate Bay will transform into a legal format, the question remains: will this move affect other torrent sharing sites?  Virtually every popular service, including IsoHunt, Demonoid, BTJunkie, and TorrentSpy, has been temporarily shut down or, at the very least, has been issued cease-and-desist orders.  The Recording Industry Association of America (RIAA) continues to sue torrent sharing site owners as well as individual users of these services.  Despite these legal threats, torrents continue to survive, even thrive, on the Internet. 

Clearly technology has brought a seemingly new set of problems to the entertainment industry.  Content creators who own the rights to their own work should be paid accordingly.  But what about consumers' rights?  According to TheNextWeb, after having been denied a new trial, Sunde planned to file charges against the Swedish government for violation of human rights.  Denying users access to certain sites, Sunde argued, violates Article 19 of The United Nations' Declaration of Human Rights: “Everyone has the right to freedom of opinion and expression; this right includes freedom to hold opinions without interference and to seek, receive and impart information and ideas through any media and regardless of frontiers.” 

Recent events in Iran support this statement—through Twitter and YouTube, Iranians exposed the violence and the government's suppression of protesters.  What was the Iranian regime's first act?  Trying to bar access to the Internet, as they understood its ability to reach the world in seconds.  Of course, freedom of expression differs somewhat from the right to download files.  But denying access to sites smacks of censorship, which undermines the Internet's purpose of freely distributing information. 

An equally important question remains—how did Internet file sharing boom in popularity?  Consumer rebellion against high CD prices is a major factor.  The average CD can cost up to $16; according to a 2004 analysis (cited in Rolling Stone) by the independent research firm Almighty Institute of Music Retail, the money breakdown for a $15.99 CD is the following:

$0.17 Musicians' unions
$0.80 Packaging/manufacturing
$0.82 Publishing royalties
$0.80 Retail profit
$0.90 Distribution
$1.60 Artists' royalties
$1.70 Label profit
$2.40 Marketing/promotion
$2.91 Label overhead
$3.89 Retail overhead

Note that, contrary to public opinion, the artist does not receive the bulk of a CD’s proceeds.  The majority goes to the middle man, or retailer.  Thus, in the current price scheme, the customer and even the artist can lose money.  iTunes used to sell all singles for 99¢, but in April 2009 prices rose to a three-tiered system: 69¢, 99¢, or $1.29.  This move appeased music labels who complained about having no control over pricing standards.  Due to this new policy, more albums, such as Green Day’s 21st Century Breakdown, retail at $14.99 on the online music store.  Angry at ever-rising costs, consumers have turned to torrent sharing sites, in part, to protest these ever-rising prices.

As mentioned earlier, fast-moving technology such as faster Internet connections and CD burners have brought a seemingly new set of problems to the recording industry.  In reality, music piracy has been a concern since the 70s, reaching paranoid heights in the 80s with high-bias, low-noise blank tapes readily available.  As Hank Stuever wrote in his 2002 Washington Post article “In the Digital Age, the Quaint Cassette Is Sent Reeling into History’s Dustbin,” blank cassettes were supposed to ruin the record industry, the way almost every technological shift is, at first, supposed to ruin the record industry.”  Obviously this dire prediction never was realized, which may also be true for peer-to-peer file sharing.  In a 2009 Norwegian study, 2,000 online music users 15 and older were surveyed on whether they purchased music that they had initially downloaded for free.  The results: these users were 10 times more likely to pay for music, making so-called pirate sites a large resource for digital sales.  While the study draws from an admittedly small sample, it shows some evidence that torrent-sharing sites may not necessarily destroy the music industry, just as blank cassettes failed to do so. 

In the end, will the Pirate Bay’s rebirth as a legal service affect the torrent file sharing sites?  Will the RIAA’s lawsuits scare consumers away from downloading free music?  History suggests that users will find alternative ways to share music, most likely without bringing down the entire recording industry.  In addition, winning a lawsuit against the Pirate Bay’s founders will not guarantee better communication between the RIAA and consumers—if anything, fans will be more determined to swap files covertly, just to rebel.  Also, while music companies may have won this round, what new technologies are just around the bend?  Will CDs eventually go the way of the cassette?  The current standard, the MP3 format, may be eclipsed by another format not yet realized. 

No easy answers exist, and most likely more battles will be fought in court.  But the peer-to-peer file sharing controversy at least sparks discussion about ownership, proper artist compensation, freedom of Internet access, and the problematic relationship between fans and music labels.  Paradigms have shifted, and dialogue is crucial. Technology has blurred many of these definitions and dividing lines, and all parties need to collaborate to ensure that everyone—music companies, artists, and fans—receives a fair deal. 

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About Kit O'Toole

  • http://www.whalertly.com/wordpress Robert M. Barga

    The thing is, as the big players disappear, people are going to run out of areas to go

  • Al Sussman

    I’m old enough to remember all the examples of old media paranoia. TV was going to kill radio and heavily damage attendance for movies and theatre. Then, VCRs were going to completely kill movie attendance. Cassette dubbing decks were going to kill the record business. Same with CD recorders and, later, computer CD burning software. And remember the Mini-Disc? None of the dire predictions came true so, while I know less about bit torrent sharing than I know about video games (which is next to nothing), I suspect that won’t destroy an industry already rotting from within, much like those now-unplayable CD-Rs a lot of us recorded a decade or less ago.

  • http://www.whalertly.com/wordpress Robert M. Barga

    50 billion a year indicates real harm

  • Blackskunk

    If music wasn’t such a rip-off, then people wouldn’t use P2P so much. £2.50 is a reasonable price to pay for a CD… no more. If you rip people off, they will rip you off!
    What goes around , comes around. Fact.
    If CD’s are really worth what they sell for initially, up to £15.00. Then how come stores can sell the same CD for £4.00 years later and presumably still make a profit.
    Also, when the rich are getting richer and the poor are getting poorer, fact, and music continues to become more popular, people can’t afford to pay £15.00 every time they want a new album.
    Music industry, the ball is in your court!
    Stop ripping us off!

  • Brian aka Guppusmaximus

    50 Billion could be lost for a lot of reasons as there is no evidence that “file-sharing” is the only cause.

    The music industry have been hurting themselves financially for a while now by pandering to the popular formula & overcharging the consumer for an inferior product. But, no one gets to sue the music industry for ruining technology,do they? It’s a well known fact(and as the article has shown) that artists thrive from concert & merchandise revenue and,even, quite a bit from “word of mouth”. The RIAA is only masquerading their frontal assault with the motive of artist concern so they can protect their assets because they are desperate & are having a hard time justifying their existence. I’m not for taking away anybodies’ livelihood,BUT,just like newspapers, the music industry didn’t invest in their future & are now paying the price. Unfortunately, under this deceit they are destroying the future for this great tool, the internet. If people are always just going to be concerned about monetary gain as opposed to what benefits a culture & progresses technology then we will always be on the losing end.

  • Kit O’Toole

    Thanks for all your comments–this will continue to be a controversial issue, and as some of you have pointed out, the music industry needs to deal with it in a reasonable manner.

  • http://ruvysroost.blogspot.com Ruvy

    A cousin of mine owns his own label. He is a musician, a musician’s musician even, and is thorougly aware that you can’t rip off the public without expecting them to rip you off. What comes around goes around indeed.

    The issues in my mind are fair compensation for the artist, and reasonable prices for the consumer. All the rest can be worked out without burdeneing the consumer too greatly. The key is for the musician and the label owners (preferably indepoendent artists themselves, like my cousin) to be fully aware of technology as it comes down the pike, and before it comes off the exit ramp. The key, as always, is to cut out the middleman as much as possible.

  • Kit O’Toole

    Very true, Ruvy–cutting out the middleman does seem to be the key. Thanks for your comments!

  • Kabanzai

    Personally, I believe that the file share saves me money even as I spend more.
    So many times I’ll get a file, then delete it right away because this ‘awesome looking’ program or sound.. Is really just crap.
    As well as the fact that I base things to buy on as .. ‘Do I use this alot? Then I’ll buy more of it so I can get more!’ .. ‘Do I really not care for this after the first thirty minutes? Toss it!’

  • hf37h

    While I don’t condone stealing in the common sense. I do condone “sharing” electronic data. In a society that has been unwillingly forced into the electronic age, its the least these corporations can do. Not everyone can afford to buy a bunch of software. And not everyone would want to have loves money enough to. I don’t. And that is why I get all mine 100% free.

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