File Sharing: Who’s Getting Hurt?

Somewhere right this instant, as you read these words, John Doe is using the internet to download copyrighted music. He might not understand to legality or the morality behind his actions. Undoubtedly, he isn’t concerned with the record label or the artist; he just wants the song he heard on the radio earlier. Even if he has considered the plight of those he is taking the music from, he know that neither is going to coming beating at his door, guns blazing, or are they?

This past April the Recording Industry Association of America began its latest round of lawsuits against file sharers by announcing intent to pursue lawsuits against 405 college students who were allegedly distributing copyrighted material over the i2hub network. This assault on the ever changing music market has become the RIAA’s response to the perceived threat that illegal downloads pose.

“Somewhere along the way, record companies figured out that it’s a lot more profitable to control the distribution system than it is to nurture artists,” wrote Courtney Love, lead singer of the band Hole and widow of famed rocker Kurt Cobain, in an essay published by in 2000. “And since the companies didn’t have any real competition, artists had no other place to go. Record companies controlled the promotion and marketing; only they had the ability to get lots of radio play, and get records into all the big chain store. That power put them above both the artists and the audience.”

The RIAA, a trade organization which represents the four major labels and in turn about 95 percent of the music industry, began taking legal action against users of file-sharing networks on September 8, 2003. Unable to stop the services providing access to downloads, they took aim at the users, hoping that the fear of legal action would create a chilling effect. While use of file-sharing networks quickly plummeted after this first group of suits was announced, traffic on the networks returned to normal shortly. The record industry was in a slump. Between 2002 and 2003, the industry claimed that sales had dropped by 7 percent and blamed internet piracy over peer-to-peer networks for the decline.

The RIAA’s feelings are outlined in a statement in a RIAA press release, “Within the Internet culture of unlicensed use, theft of intellectual property is rampant. The music business and its artists are the biggest victims, and ultimately consumers suffer also. Unauthorized Internet music archive sites (using multiple formats, such as .wav files, or MP3 files) provide illegal sound recordings online to anyone with a personal computer. Music can be downloaded and played indefinitely, without authorization of or compensation to the artists.”

However, not every that the RIAA speaks for would agree.

“It’s not piracy when kids swap music over the Internet using Napster or Gnutella or Freenet or iMesh or beaming their CDs into a or music locker,” wrote Love in her essay, “It’s piracy when those guys that run those companies make side deals with the cartel lawyers and label heads so that they can be “the labels’ friend,” and not the artists’.”

“Peer-to-peer” file sharing was introduced to the majority of the world with the release of Napster in the fall of 1999. The software allowed users, or “peers” to connect to each other to share music. At its height, Napster boasted 26 million users and a quick search of files would allow users access to virtually any song they could have ever wanted. A new era was ushered in almost overnight. Though music piracy certainly existed on the internet before Napster, it hadn’t entered the realm of the computer novice until now.

Contradictory to statements made by the RIAA, attributing the advent of file-sharing to a decline of music sales, music sales have actually gone up. Nielsen, the same company that tracks TV ratings, tracks music sales with SoundScan. This system tracks music sales at the point of purchase; it only counts items as they enter the hands of customers. The numbers collected by Nielsen during the same time as the RIAA’s so-called decline of record sales indicate a 10.5 percent increase in sales.

“Record companies don’t understand the intimacy between artists and their fans. They put records on the radio and buy some advertising and hope for the best. Digital distribution gives everyone worldwide, instant access to music,” wrote Love. “There were a billion music downloads last year, but music sales are up. Where’s the evidence that downloads hurt business? Downloads are creating more demand.”

The inconsistency between the Nielsen data and the RIAA’s reported decline is the result of different methodology. Nielsen’s data tracked individual sales, where as the RIAA’s numbers are based on units shipped to stores. Essentially, if the label sent fewer records to “store A” this year, but “store A” sells more records than last year the still RIAA reports a loss.

Soon after its release, Napster was sued by a collection of record companies, who were outraged at Napster’s complete disregard for copyright law. The service made no initial effort to prevent its users from distributing copyrighted materials, though later some filtering was enabled in an attempt to quell demands of the major labels. However, users quickly got around this by mislabeling their mp3 files. Beatles became “Beetles,” and similar changes were made to numerous artists’ names.

The centralized nature of Napster, and thus its direct participation in allowing users to share copyrighted material, would eventually lead to its downfall. After a year and a half of legal battles, courts ruled on March 5, 2001, that Napster had to stop the transfer of copyrighted materials on its network. After exploring numerous possibilities, Napster shut itself down completely in July of 2001.

Despite the fall of Napster, other services have continued to spring up. Learning from Napster’s mistakes, these new networks developed themselves in such a way to escape legal action under current laws. Though, a case currently pending before the Supreme Court, MGM v. Grokster could change that. A decision in favor of MGM would overturn the principle of Sony v. Universal, in which the court ruled that a distributor cannot be held liable for users’ infringement so long as the tool is capable of substantial non-infringing uses.

Mark Cuban, a billionaire made rich off internet technologies he developed, and currently the owner of HDnet, a high definition channel available on Direct TV satellite services, and owns the rights to numerous syndicated TV shows, has been very outspoken about the Grokster case.
“If Grokster loses, technological innovation might not die, but it will have such a significant price tag associated with it, it will be the domain of the big corporations only,” posted Cuban on his personal blog.

Innovation is the key to providing bands with better marketing, so that they can reach a larger audience, and so the audience can reach them. This has already been seen thanks to actions taken by internet pirates.

In 2000, British art-rock group Radiohead was preparing for the release of their fourth album, Kid A. The band had not yet had much success on the US charts, despite having released one of the most critically acclaimed albums of the 90s, OK Computer. Their music was thought to be too challenging for most listeners, and as such not much marketing was put behind the new record. Then the unthinkable happened.

Months before the albums scheduled release it began showing up on Napster. Record executives were reasonably freaked out; this was the first leak of its kind in the digital age. Many were concerned that the leak would hurt sales dramatically. The millions who had downloaded the record might not want to spend $18 on a new CD of “challenging” music. As it turned out, this was not the case. Kid A reached #1 on the Billboard album charts in its first week, completely smashing expectations, as the band had never cracked the top 20. File sharing had brought a niche album into public view and the public in return had bought the record as soon as they could.

The band’s producer, Nigel Godrich later commented on this situation during an interview with British news paper, The Guardian.

“It has affected me directly but it’s the same as when I taped my friend’s records as a kid – all of which I later bought anyway!” said Godrich, “You’re never going to have the relationship with a file that you have with a CD. With Radiohead’s Kid A in America, a lot of people heard, and then bought it because of Napster.”

Despite everything, record labels have continued to resist fully embracing file-sharing. Getting a free, legal, full length recording from a band on a major label is almost unheard of. Digital music is sometimes available, but virtually always in the form of a secure streaming media, which can not be downloaded for later play.

Since the record companies have not catered to the desires of many by offering free official downloads many have resorted to resolving the issue by downloading illegally. Although many people continue to use the current crop of well established file-sharing software, the numerous suits the RIAA has filed against members of the general public has created a chilling effect. After the first round of suits, traffic on most sharing networks was cut in half before climbing back to normal numbers.

Additionally, many from the internet’s elite group have moved on, forming private servers that serve a small, but largely active community. In this tier, early leaks of albums are considered the norm and usually provide a trickle down into the larger more public networks. These are the people who are taking the advanced promos off the label executive’s desk and putting it on the internet.

In a discussion on the subject of file sharing, on one such group’s website, many users explained how downloading music had changed their lives.

“The advent of file sharing has opened me up to songs, artists and even entire genres that I would more than likely not have even heard of had I not seen a recommendation, and thus decided to give them a sample,” said one user, “Sample being the operative word; nine times out of ten, if I like the initial song, then like another song or two, I will go out and buy the album.”

“Downloading lets me hear new music I otherwise wouldn’t, and I end up either buying stuff I like or other material from those artists,” explained another user, “I’ve bought way more CDs since I started downloading stuff.”

However, although many users are content with their own practices of downloading tracks, not everyone is completely guiltless about their downloading.

“I think it’s a bad practice because the bottom line is that it’s stealing, especially since 99 percent of all file sharers are thieves,” admitted one user, “Those of us who are ‘honest thieves’ don’t make up for all the people that haven’t bought a CD since the days of Napster.”

Still, the record industry has refused to budge. While addressing the crowd during his acceptance of the University of Massachusetts Amherst Eleanor Bateman Award for Distinguished Scholar in Residence this past April, Steve Berkowitz, a senior vice president at Sony Legacy Recordings told the crowd numerous times that despite the actions of many, there was “No ambiguity in US copyright law.” Berkowitz would concede no ground, going so far to tell one member of the crowd that having owned an album in the past did not entitle a person to download tracks in the present.

“I think that moving to an online system is where the future lies in music distribution,” said Sullivan, “This would alleviate many of the problems associated with physical media, such as rack space, available copies and even the overhead necessary to create and manufacture the packaging. It would also serve to put independent record companies on more equal footing with the RIAA members.”

At the end of the day, the industry is about money. The industry tied to its old methods, failed to see the digital wave coming, and by the time it reached shore it had turned in to a 40 foot tidal wave. Although significant progress has been made by the RIAA members in regard to digital distribution, the industry is still far away from going full throttle with the new medium.

“The present system keeps artists from finding an audience because it has too many artificial scarcities: limited radio promotion, limited bin space in stores and a limited number of spots on the record company roster” wrote Courtney Love, “The digital world has no scarcities. There are countless ways to reach an audience. Radio is no longer the only place to hear a new song. And tiny mall record stores aren’t the only place to buy a new CD.”

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