File Sharing
In the past few years the RIAA got a lot of attention in the media because of lawsuits raised against consumers for illegal file sharing. Since I was a missionary in Argentina when the issue initially exploded, I did not become aware of the problem until the post-Napster days. Since then, however, I have made some observation about the recording industry’s conduct and have written the following. I have not provided links to all of the newspaper sources cited, but I’ve given the references.
Myths
In November of 2003, Chris Schricker, Pressy Olivares, and Nicole Feller joined the growing list of whipping boys and girls in the divisive and heavily argued war between the music industry (whose legal interests have been represented by the Recording Industry Association of America, or RIAA), and the masses of copyright infringers benefiting from the pioneering technology of peer-to-peer (p2p) file sharing. They made the list by doing what nearly 60 million other Americans do (Armstrong, 3): downloading and sharing copyrighted music over p2p networks. Their reward: costly lawsuits at the hands of the RIAA.
These lawsuits, which the music industry has deemed a last, undesired result, have fallen under heavy criticism, and they have caused the public to question the motivations of the juggernaut, multinational corporations that have championed them. According to the American Statesman Newspaper, “the lawsuits have also earned the recording industry plenty of criticism as well. The trade group sued a 12-year-old honor student who lives in a New York City housing project, a story that received international media attention and outrage” (Kreytak, A1). The RIAA’s answer to this type of criticism has been to disseminate a series of myths which do not hold under careful scrutiny:
1. P2p file sharing has been responsible for billions a year in lost revenues.
2. The RIAA is protecting the rights of the artists to collect their royalties.
3. The RIAA is protecting creativity and innovation in general, which would not exist without financial incentives.
4. The lawsuits, by curbing illegal sharing of music on p2p networks, will restore the music industries waning profits.
Each of these myths is part of an elaborate public relations campaign launched in anticipation of, and in the wake of the lawsuits. The vehicles for distribution have been internet pop-ups, television commercials, pre-movie spots at the cinema, and a barrage of public statements from spokespersons and lawyers. They are not myths in the sense that they are completely false. In fact, they represent generalities that most people will probably agree with. However, they are myths as spoken by the RIAA, because they are not the whole story behind the copyright holding conglomerate’s battle against p2p file sharing networks, software, and individuals. An in depth, individual exploration of each of these so-called myths will illuminate important issues in the p2p war, and will give the average citizen a fuller spectrum of information to act on as the future shape of music listening and distribution is revealed. Most importantly, citizens will see that the music industry law suits are not based in any of the above reasons. Instead, they have a broader motive for attacking p2p networking.
Myth 1: P2p File Sharing Is Responsible for Billions a Year in Lost Revenues
Spokespersons for the RIAA have made very large statements with respect to the lost revenues due to illegal file sharing. One writer from the Los Angeles Times points out that “Last year alone, piracy was blamed for siphoning about $10 billion from global music sales” (Leeds, C1). That is a staggering figure, giving an average of approximately $2 billion a year since the birth of Napster in 1999. Others have been more conservative in their estimations. For example, Elizabeth Armstrong, from The Christian Science Monitor gives a figure of $700 million lost to file sharing (3).
It is impossible to deny that music industry revenues have steadily declined in the last three years. Most agree that the figure of 8% for the drop in CD sales is accurate (Graham, D6). Since CD distribution bears a heavy portion of the revenue winning burden for the music industry, that 8% represents a large percentage of total lost revenues for the industry. That percentage, while admittedly large, cannot account for the astronomical estimates given by the RIAA.
Furthermore, to attribute such a large burden of the revenue loss to one source (file sharing) is unrealistic. The recording industry could hardly expect to have rising, or at least stable numbers, while the rest of the economy has been in a three year recession. Sales for hundreds of different industries declined, and jobs were cut. An industry specializing in non-necessity items was not going to avoid profit loss as well.
Besides the downturn in the economy, New York Times writer Neil Strauss points out other factors that should be partly to blame for declining profits in the music industry. For one thing, “the introduction of CD’s in the early 1980’s encouraged consumers to replace their vinyl records with copies in the new format, but that sales spike has since abated” (C1). Now that record at cassette owners have been able to complete their old libraries in CD format, they are most likely not going to buy many more albums released by new artists that do not appeal to them.
In addition to that, Strauss says, “since the rise about three years ago of the now-defunct Napster, the first popular file-swapping service, a culture has been created in which getting songs online is simply part of the music experience. As a result, even sharply cutting the price of CD’s, as Universal has proposed, may not necessarily be effective in bringing people back to record stores” (C1). In other words, a revolution has occurred. Mp3 players have begun to gain market share and the convenience and freedom of music on-line has hurt packaged media such as the CD albums much more than freeloading in itself. After all, many music lovers only want the songs they want, not albums containing one hit padded on all sides by mediocre material. Mixed CD’s and mp3 players containing any fathomable combination of music are much more satisfying.
The factors discussed above clearly show that p2p piracy, while one element of music industry profit loss, cannot be blamed for $2 billion in lost revenues. Given the share of lost revenue it probably represents among all other things (not all of which have been discussed here), it is difficult to imagine that the recording industry would be willing to commit so many resources, and lose so much goodwill in litigation against its own consumer base.
Myth 2: The RIAA is Protecting the Rights of Artists
Aside from the matter of lost revenue, “since the Recording Industry Association of America began its campaign against file-sharing services and unauthorized song swapping online in 1999, it has offered one chief justification for its actions: downloading songs is stealing money from the pockets of musicians” (Strauss, 1.1). And in fact, many artists have been vocal in opposing illegal file sharing. Bands like Metallica appeared publicly to denounce unauthorized downloading, though they claimed other reasons not related to money: control over the material distributed, and insuring a quality product. Subsequently, and in harmony with those statements, Metallica began offering hundreds of downloads from its own archives, and the chance for registered fans to share their Metallica music on Metallicavault.com. The large print on the homepage states with exclamation: Dowload, Share, Kick A–!
Besides Metallica, many other artists have been vocally against illegal file sharing. However, an equally vocal group of artists has openly stated that the RIAA has not, nor has ever had interest in protecting the profits of musicians: “‘I don’t have sympathy for the record companies,’ said Mickey Melchiondo of the rock duo When. ‘They haven’t been paying me royalties anyway’” (Strauss, 1.1).
Many other artists and their managers have claimed to receive little in the way of royalties. In extreme cases, such as with 80’s rap ensemble A Tribe Called Quest, groups end up owing the record distributor money even with high volume sales. Like many acts, they relied heavily on concert ticket sales revenues.
Of course, some artists have been hurt by the low album sales of recent years. One very prominent performer, Steve Miller, has talked in several interviews about his royalty revenues falling by 80%. He has blamed file sharing, but he has neglected to consider that he has not had a significantly popular studio release since “Abracadabra” in 1980. But, besides Steve Miller, other more modern artists are being hurt, and some of their loss can surely be due to file sharing. However, considering the record labels’ general treatment of most artists on their rosters, they are not losing sleep over musicians losing revenues. And they are not mobilizing teams of litigators to secure royalties for those musicians.
Myth 3: The RIAA is Protecting Creativity and Innovation
One of the things that makes our country great is creativity and innovation. Since the Industrial Revolution, technology, commerce, and living standards have constantly improved because of the efforts of intelligent and innovative people. And without a doubt, many of these people were driven by profits. In fact, the U.S. economy is designed to encourage and protect (within some limits) exactly that. Unfortunately, the RIAA is not suing fans to protect this worthy principle. As a matter of fact, their aggressive effort to eliminate all p2p software does the opposite.
How the RIAA could actually impede creativity and innovations can be understood in the context of an important item of legislations that they are lobbying strongly for: The Induce Act. This act is an attempt to amend certain aspects of copyright law. The Induce Act stems from failed efforts (not just by the music industry) to challenge the Supreme Court’s ruling in the Betamax case (Sony Corp of America v Universal City Studios Inc. et al). The Betamax decision, given in 1985, stated that developers of equipment capable of facilitating copyright infringement were not liable for that infringement. In addition, equipment that could be shown to have significant legitimate use could not be banned for reasons of facilitating copyright infringement.
The Induce Act seeks to skirt this ruling by arguing that certain technologies induce copyright violation, such as p2p software. In this way, the act would again place responsibility on developers or providers of those technologies. Michael R. Graham, a partner at Marshall Gerstein & Borun LLP, a Chicago-based firm specializing in protecting intellectual property has commented on the act, “At its worst, the Induce Act would enable expensive challenges to any technology which enables any type of copying, distribution, or use of copyrighted materials — from P2P software to computers and CD copiers to photocopiers to typewriters to printing presses to pencils” (34). Obviously, such a situation would stifle technological creativity and innovation.
In another interesting, but equally telling case, Princeton University Professor Edward Felten and some of his colleagues were threatened by the RIAA with a lawsuit if they published their findings on how to break encryption on CD’s (Harmon, C5). Creating and breaking encryption have been extremely important fields in computer science, and an attempt to suppress very important findings is more evidence that creativity and innovation are not part of the RIAA’s agenda.
In addition to the stifling effect that the RIAA could have on technological innovation, another argument should be considered: In recent years, the computer world has seen the advent of a generation of creative, intelligent programmers who have pushed computing to new levels, and not for the sake of profit, but for the sake of creating reliable tools not offered by Microsoft or Apple. These innovators have built upon open source operating systems that are superior to the commercially available, expensive Windows and OS lines, and have created a range of tools rivaling everything offered at high prices by the large companies. And they have offered these tools open source: free.
This point is important for two reasons: First, it demonstrates that creativity and innovation reach beyond money. People do not need the hope of getting rich to want to invent and improve. Second, the type of people who have offered their powerful tools for free may not have the resources to continue creating if they faced massive litigation in the event that one of their software tools were found able to facilitate file sharing. So, the point is clear that just as in the case of protecting artists, and blaming billion dollar lost profits, the RIAA is not worried about protecting creativity and innovation. They want to stop it.
Myth 4: The Lawsuits will Restore Waning Profits
One of the most puzzling reasons that the RIAA has given for the lawsuits is that they will deter illegal downloads and restore sales. In fact, the RIAA claims that downloading has been cut in half, whereas executives from p2p distributors have claimed that users have simply left the target networks and moved to new ones. Whichever is the case, clear minds can predict that CD sales are probably not going to drastically improve even if less people download. This is where calculating lost revenue becomes so precarious: a downloaded song does not represent lost revenues. In other words, just because someone downloads a song does not mean that they ever would have bought it had it not been available for free.
The RIAA has not addressed questions such as this properly. Who in the recording industry believes that CD’s are going to return to their early 90’s peak sales? In fact, even industry insiders have had to face the fact that the world is different now. A substantial number of fans want music in a different kind of package now: binary units. They want the virtual 1’s and 0’s that make up computer-think and the freedom it offers them in their music files. Jane Hughes, a professor at Brandeis University’s International Business School said in U.S.A. Today, “What the RIAA doesn’t get is that you can’t put the cat back into the bag; once consumers have had a taste of freedom, creating their own play lists and burning individualized CDs to suit every possible spectrum of tastes, there’s no going back. The difference between shoplifting and downloading is that you can easily buy the product you want instead of shoplifting it. News flash for the RIAA: You can’t buy the individualized CD you want, not anywhere, not anyhow” (A21). Like Hughes, many have felt frustration with the inability to legally get what they want.
In that light, the music industry has begun to wrangle with p2p networks about possible alternative solutions. Some solutions presented to the RIAA have included granting blanket licenses to p2p companies, who in turn charge monthly fees, or per-song fees. Though small labels have embraced this, major labels have been very reluctant. They have made unrealistic demands, and have sought ways to retain centralized control of distribution. So, the legitimate on-line music sites today do not approach the p2p model. They are databases of songs on central servers provided by the company (such as ITunes).
Conclusions and Insights
The record labels have the right, as any business, to make money. And the reasons they have given, and which this paper has addressed, would all be strong justifications for litigation. However, at least these four main reasons the RIAA has given for the lawsuits do not add up. They do not seem to meet the state goals, and so the observer is left to wonder: why do they file those lawsuits? If the record companies realize, like everyone else, that the paradigm of music distribution has shifted, then why do they insist on creating only partially true pretexts and risking the loss of many customers to litigate copyright breakers?
In truth, the RIAA’s reasoning for attacking fans has some of all of the above reasons as a motivation. However, it seems that something greater is at stake: the distribution monopoly that music labels have long held. The p2p issue is not an issue of profit for labels. It is an issue of survival. If artists do not need labels to distribute their music, artists may not need labels at all. The free ability to distribute copies of music certainly is attractive to artists.
This is the reason that most recording companies have rejected adaptation to p2p distribution. They see their role diminishing as artists find the ability to record and distribute their own music in the future. Existing online models, such as ITunes, which the recording industry has embraced, offer many advantages that fans of music want. But, they still allow for strict control over who distributes what music on what centralized servers. Losing that control is not a prospect large record companies want to risk.
The problem of distribution is further compounded by a seemingly tangential issue: copyright life. In Europe this issue has jumped to the forefront of copyright owners’ minds because rights to recorded material last 50 years from the date of recording, after which they become public domain. An article in Managing Intellectual Property points out this key consideration for music recorded 50 years ago: “As soon as records such as these are in the public arena, the original repertoire owner, while still retaining ownership of the master tapes, will no longer own the right to the recordings and will receive no income from anyone issuing them to the public. Nor will the performers on the tracks have the right to be compensated” (Mulcahey, 32). Therefore, recording labels will stop collecting revenue on material in Europe very soon for music libraries such as the Beatles and Elvis Presley.
This is a heavy threat to record labels, since they rely on royalties, in addition to sales, from copyrighted material. Americans may decide to import their music from Europe. Granted, most copyrights that are soon to expire are most likely not strong revenue winners, but several “classic” acts from the period continue to be a source of royalties for the copyright owners.
This is a circumstantial support to the argument that retaining ownership of distribution channels is a driving motivation for the lawsuits against p2p file sharing. After all, if one of record labels’ two main sources of profit (copyright royalties and distribution revenues) is about to be compromised, they may have incentive to retain the other.
That may have been in the forefront of each RIAA member’s mind: how to get back a defunct monopoly on distribution. How can record distributors be relevant in the new age of p2p, where they are gradually losing control of copyrights, and where distribution is cheap and automatically available to all. That is why they fight so hard. It is not just about profits, artists’ rights, or protecting creativity. It is about surviving as an industry. That is what underlies the lawsuit campaign. It is better to lose the fans of today in order to secure existence tomorrow.
Here are the references for those who are interested:
Armstrong, Elizabeth. “As Music Adapts, Consumers Win ; New Record-industry Lawsuits Can’t Buck Larger Trend: Music will Cost Less and be in Digital Form.” Christian Science Monitor 10 Sept. 2003: 3.
Graham, Jefferson. “Music Industry Weighs its Options ; Lawmakers Want to Hear Proposals for Fighting Piracy Without Lawsuits.” USA Today 29 Sep. 2003: D06.
Graham, Michael. “The Danger of an Industry Backlash”. Managing Intellectual Property 143 (2004): 32-36.
Academic Search Elite. Ebscohost. Kingwood Coll. Lib., Kingwood. 02 Dec. 2004
Harmon, Amy. “Executives Can See Problems Beyond File Sharing.” New York Times 07 June. 2001: C1+.
Hughes, Jane. “Free CD Downloads: Recording Industry Can’t Put this Cat Back in Bag.” USA Today 24 Sept. 2003: A21.
Kreytak, Steven. “Music Lawsuits Filed in Austin ; Five Central Texans Targets of Crackdown on Song File Sharing.” American Statesman 01 Nov. 2003: A1.
Leeds, Jeff. “THE LABELS STRIKE BACK; One Voice on Piracy; The Five Major Labels Cast Competition Aside to Fight Illegal Downloads.” Los Angeles Times 10 Sept. 2003: C1.
Mulcahey, Andrew. ” Record Companies Rocked by Loss of Rights.” Managing Intellectual Property 144 (2004): 31-34.
Academic Search Elite. Ebscohost. Kingwood Coll. Lib., Kingwood. 04 Dec. 2004
Strauss, Neil. “Executives Can See Problems Beyond File Sharing.” New York Times 09 Sept. 2003, late ed.: C1+.
Strauss, Neil. “File-Sharing Battle Leaves Musicians Caught in Middle.” New York Times 14 Sept. 2003, late ed.: 1.1+.