The combination of inexpensive speedy computers with burgeoning storage capacity, the wide availability of high-speed Internet connections, and the public’s growing familiarity with digital music formats (like MP3) and the portable hardware on which to play them (such as Apple’s iPod) have set the stage. Add to that the recording industry’s decision to license most of its musical inventory to a growing number of paid online services, including Apple’s iTunes, RealNetworks’ Rhapsody, Napster of Roxio, MusicMatch, BuyMusic.com, BestBuy, and Wal-Mart, and the conditions are in place for computers to be an exciting and thriving source of music for consumers and a growth business for the industry.
The clear leader in the field so far is Apple’s iTunes, with more than 25 million tracks downloaded at the new industry standard price of $.99 per song and $9.99 per album, close to a million and a half iPods sold, aggressive marketing deals with AOL and Pepsi, and glowing PR for Apple for having created the model of a digital music service that works.
As an alternative to the pay-per-song model, Sean Ryan of RealNetworks predicts a subscription download service in 2004. “The idea is that consumers can download as many songs as they want, and move them from one device to others, but at the end of 30 days, if you don’t pay the subscription fee, the songs go away,” he told the NY Times. “You’ve got a portable music player that can fit 10,000 songs on it? Come on. No one will spend $1 a track filling it.”
Good point – in fact until recently it seemed unlikely many would be willing to pay for music over the Internet at all.
How We Got Here
Not too long ago you bought music on vinyl, tape, or CD and if you wanted to make a copy for portable use in your car or Walkman or to share with a friend, you manually recorded it, typically onto cassette. But then the Internet dawned and with it the digital communication age and a fundamental shift in the nature of copying and sharing.
A digital copy of a song can be reproduced any number of times without wearing out or degrading in quality, and made available over the Internet, can be freely copied any number of times by any number of people. No wonder the original Napster file-sharing service so freaked out the music industry when it was launched as a free music clearinghouse in 1999. (The industry has blamed unauthorized sharing of music for slumping sales of CDs ever since, but this view fails to take into account the overall poor state of the economy, the rise of rival entertainment sources like DVDs and games, the release of fewer CDs, the end of the vinyl-to-CD conversion, and simple consumer dissatisfaction with industry product. Some studies have even appeared to indicate file-sharing increases CD sales, but it’s all open to interpretation and is probably close to an overall wash.)
The industry succeeded in shutting down brash Napster with litigation, but this led to the development of services like Kazaa and Grokster, which unlike Napster, do not host MP3s on their own centralized computers, but function as searching and linking tools between their millions of customers, who make music files available for copying from their own computers.
This is “peer-to-peer,” or P2P, and while this technology has been tainted by the unauthorized sharing of copyrighted music and movies, the software enabling it is important – picture networks of freely shared ideas facilitating scientific research, software development — all kinds of collaborative efforts — and the general dissemination of information.
After the courts refused to shut down the new decentralized services earlier this year because they possess “significant non-infringing” uses and because they don’t host any unauthorized files themselves, the Recording Industry Association of America (RIAA) decided to sue individual file-sharers, in other words, its customers.
Since September, 382 people have been sued nationwide. At least 220 computer users have agreed to pay settlements, averaging several thousand dollars apiece. “The legal actions taken by the record companies have been effective in educating the American public that illegal file sharing of copyrighted material has significant consequences,” opined RIAA President Cary Sherman recently in a prepared statement. “Consumers are increasingly attracted to the host of compelling legal online music alternatives. These lawsuits help to foster an environment that provides a level playing field for these services to succeed.”
Maybe, but the RIAA’s campaign has also drawn a tsunami of criticism on various grounds, especially its attempts to force Internet service providers (ISPs) to disclose personal information about subscribers suspected of being illegal file sharers without prior court review. SBC Communications Inc. and the American Civil Liberties Union are separately challenging the RIAA in court over this issue. On December 19, the U.S. Court of Appeals for the District of Columbia overturned a trial judge’s decision to enforce copyright subpoenas against Verizon, making it much more expensive and cumbersome to sue individual file sharers. The appeals court said the 1998 copyright law, the DMCA, doesn’t cover file sharing networks. The law “betrays no awareness whatsoever that Internet users might be able directly to exchange files containing copyrighted works,” the court wrote.
The campaign has also drawn customer boycotts and acts of defiance such as this http://www.downhillbattle.org/riaa/ one recently conducted by the Downhill Battle organization.
Washington has also taken note. Sen. Norm Coleman (R-Minn.) voiced three concerns about the campaign in an online chat in late-October. “First, the broad grant of subpoena authority has the potential to sweep in folks who may not have done anything wrong,” he wrote. “Second, the civil penalties in this area, including fines up to $150,000 per song, are clearly excessive. They can be used to intimidate and threaten folks who may or may not have done anything wrong. Finally,” he concluded, “I also have concerns about the impact on personal privacy protection. The technology used by the RIAA and P2P networks has the potential to undermine personal privacy protections.”
Taking heart from legislators like Coleman, a new nonpartisan political organization called Click the Vote, headed by digital entertainment veteran John Parres, has just emerged to focus a spotlight on, among other things, “the copyright industry infringing upon personal freedom, consumer rights and the efficacy of the Internet [and its] heavy-handed use of the judicial system … all in the name of security and defending the rights of copyright holders.”
Morality and legality notwithstanding, an awful lot of smart people think suing customers is just plain stupid for an industry that is, after all, just selling entertainment. Attorney and author James F. Haggerty expressed this in a recent USA Today editorial.
“They relied on the long-established legal mantra, ‘protect our intellectual property at any cost,’ with little thought to that tactic’s public effects,” he wrote, noting in the short run that the campaign would probably reduce unauthorized file sharing. “But suing their own customers? A customer base largely made up of cynical teens and twentysomethings already skeptical of hyper-aggressive corporate greed? In this media age, legal maneuvers that once worked so well behind courtroom doors can have embarrassing long-term consequences now that they’re under the glare of the public spotlight.”
As a result, a once compliant media turned its attention to horror stories of a multi-billion dollar industry suing cyber-averse grandparents and preteens living in subsidized housing for potentially millions of dollars each. Industry mouthpiece Billboard complained about the media coverage in October.
“Recent news coverage of piracy lawsuits has been unfairly critical of the record industry. That a few teenagers have been involved in the cases is beside the point. The real issue is that downloading copyrighted music is stealing, pure and simple.”
The only thing wrong with this statement is everything: people are being sued for uploading (making songs available on the network) not downloading (retrieving songs from the network), file-sharing may be copyright infringement but it isn’t stealing, and the term “piracy” generally refers to activity that makes money from other people’s copyrights, like say, making and selling counterfeit CDs, not sharing music files over the Internet.
If music is still available for free via the file-sharing services, why pay at all? The most practical advantage the pay services have is the user experience on the free services. As Apple’s Steve Jobs said recently, “You type in a song name, you don’t get back a song – you get a hundred, on a hundred different computers. You try to download one and … the person has a slow connection, and it craps out. And after two or three have crapped out, you finally download a song, and four seconds are cut off because it was encoded by a ten-year-old.” Don’t forget the pop-up ads and spyware, the moral ambiguity of unauthorized file-sharing, and the fact that you may get sued.
iTunes has proved that people are willing to pay a reasonable amount for a clean and predictable music downloading experience. An interesting hybrid service is launching in the new year in the UK. Playlouder MSP is calling itself a “music service provider,” providing users with their broadband connection and allowing them to download as much music as they want legally, sharing only licensed tracks from the labels signed up with the service. In return for licensing their catalogues, record labels will receive a portion of the subscription fee.
Since we measure what we deem important, the fact that Nielsen SoundScan now monitors individual song sales on the paid download sites is highly significant – it reported $3.2 million worth of individual tracks in October, more than double the number sold in July. Technology-oriented research company JupiterMedia predicts digital music downloads will total $1.1 billion in ’04 and $3.2 billion in ’08. Worldwide music sales were $32 billion in 2002.
Although many issues are yet to be resolved and “free” is tough competition, with increasing availability, decreasing prices, and increased public awareness, 2004 is the year paid music services will turn the future into the present.