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Note: I wrote this article in 2003. I published it in a magazine I was editing, the APRS Handbook 2003. Since then, things have moved on considerably in music peer-to-peer file sharing, but I have included the article here because the film industry is facing the same issues that the music industry faced back then, and some of the same lessons may be drawn. – Steve Parker

The Recording Industries Association of America (RIAA) is directing a great deal of anti-piracy activity into Latin America, where the long-thriving market in duplicated music cassettes has transformed in recent years into a mammoth industry in bootlegged CDs. Few people have sympathy for these pirates: the oft-repeated mantra ‘copyright is theft’ seems a perfectly justifiable description of this illegal market.

Yet opinions are not as clear-cut on the subject of ‘pirates’ who surf the high seas of the internet. For while it is self-evident that if a consumer buys a bootlegged copy of a CD they are unlikely to buy a legitimate version, there is divided opinion as to what extent downloading MP3 files damages recording industry profits. And when it comes to legislative moves to place limitations on file sharing, the record labels face fierce opposition from within the computer industry. Many see RIAA and Hollywood digital rights management (DRM) initiatives as so wide-ranging as to threaten the idea of peer-to-peer file sharing – an all-important pillar in the industry’s future profit-generation plans, and the cornerstone of legitimate sharing of files. Computer industry representatives have been seen at conventions sporting ‘DRM is theft’ badges.

In the middle of this stand-off sits the music consumer. And while there may be those who download free music files from the internet as a means of appropriating music while avoiding paying the requisite fees, the airwaves of the net are abuzz with disgruntled consumers who claim that listening to web radio and downloading MP3 files is the only method of sampling music that doesn’t feature on increasingly homogenised radio playlists. They claim the ability to sample first should lead to increased rather than decreased legitimate music purchases. They point to other examples where rights holders have opposed technology because of unfounded fears, and draw analogies with VHS home recording, which had a far from negative effect on Hollywood profits. They cite further grievances with the recording industry, such as increasing CD prices and the relentless promotion of disposable carbon-copy bands rather than innovative musicians, which leads to a fair degree of cynicism about the recording industry’s claim that MP3 accounts for the entire fall in record industry profits – when other industries lay falling profits at the door of economic downturn. Whatever the rights and wrongs of internet music distribution, if the recording industry responds to it in the wrong way it runs the risk of alienating its customers while thwarting genuine pirates; of throwing the baby out with the bathwater.

The case against piracy

The recording industry undoubtedly has a strong case. Its members find musicians, provide the capital, promote and market the artists and produce the physical media that carries the music. In return the law grants them rights over the essential product: the music. Anyone who acquires this music without permission – and without giving the rights owners their fair cut – leaves themselves open to the accusation of theft.

They are backed in their action by many leading artists – particularly among the multi-platinum set. This group has potentially the most to lose from piracy and the least to gain from internet exposure – they’re the ones who critics claim have a virtual monopoly on radio airplay, after all. Elton John’s reported statement is fairly typical:

“I am excited about the opportunities presented by the internet because it allows artists to communicate directly with fans. But the bottom line must always be respect and compensation for creative work. I am against internet piracy and it is wrong for companies like Napster and others to promote stealing from artists online.”

And, indeed, the industry may have a fair point: even if it could not be shown that MP3 had damaged record sales, they own the rights, so if they don’t want their music travelling across the internet, then there is a case for saying that they have the right to say ‘no’. Period. However, the counter to this is the issue of ‘fair use’, something enshrined in copyright law. Does lending a CD to a friend to see if they like it before they buy their own copy constitute ‘fair use’? Many would argue ‘yes’. Does listening to an MP3 file before deciding if you want to buy the music yourself constitute fair use? Hmm possibly. This is the grey area – and the moral argument is likely to depend on whether the industry can prove that MP3 downloads are in fact not for the purposes of ‘sampling’, but are instead responsible for the slump in legitimate music sales.

The industry’s response to the issue has been a series of legal and technological initiatives. In the UK, the AACP (Alliance Against Counterfeiting and Piracy) brings together the combined might of 15 UK organisations, including the BPI (British Phonographic Industry), BARD (the British Association of Record Dealers) and FACT (the Federation Against Copyright Theft) – organisations with, according to the BPI, a combined turnover of Ł200 billion. And they have allies within government. If the AACP is correct, copyright infringement cost the industry Ł8.5 billion in 2001, albeit down half a billion on the year 2000 loss. This represents a possible Ł1.5 billion loss to the UK treasury in VAT revenue, and the legislature has responded with a tightening of the law. The Copyright etc and Trade Marks (Offences and Enforcement) Bill – a private members bill – received Royal Assent in July. The law increases the maximum penalty for convicted offenders from two years to ten and increases police powers of investigation. Yet its main thrust is against illegal bootleggers, not the murkier area of internet music distribution.

In the US, Congress is tackling the internet issue directly, and is currently discussing a bill to limit peer-to-peer file sharing, the move that is bringing it into conflict with the computer industry, not just the pirates. The Consumer Broadband and Digital Television Promotion Act 2002 (CBDTP) essentially gives the industry one year to develop a universal digital rights management technology – a ‘flag’ that identifies copyrighted digital content and prevents it from being illegally copied. This standard will also be incorporated into new hardware. Senator Fritz Hollings, proposing the bill, claims it will protect the consumer against restrictions on fair copying – such as time-shifting TV programmes – but opponents disagree.

Vast numbers of responses to the Senate during its consultation period have been negative, and many of the comments reflect scepticism over the protection of first amendment rights and fair use. They claim that the purchase of a music CD entitles them to copy it for in-car use, for instance. Many also argue that ‘fair use’ includes copying a CD they have bought legitimately to their computer so that they can listen to it on their PCs. Yet if the technology is as restrictive as the bill proposes, then this too will be inhibited.

The other main objection raised to the bill is what it might do stifle the computer industry. The CBDTP appears to suggest that all computer hardware and operating systems will have to comply to a digital rights management standard. Microsoft, which is already developing such technology, may stand to gain from the bill. But other operating systems owners, such as Linux, may not be willing to incorporate such technology, when their ethos promotes the free exchange of files and information. Many in the computer industry feel that the legislation is far too wide ranging and that it will inhibit so much that is legal in order to stop one small element that is illegal.

The third objection is a practical one: that such technologies have never worked in the past and will not work in the future. If a piece of data can be played, eventually someone will find a way to copy it.

Measuring the real threat

Controversial legislation aside, the crux of the current debate about internet piracy is determining just how badly MP3 sites are hitting record sales. Research on the subject is released almost weekly, and there is a fairly even split between those that say it is harming the industry and those that say it isn’t. Two typical and often-cited reports are the Forrester Research report and the Hart report.

The Forrester Research Inc report of early August suggests that free music downloads are not hurting the music industry. It claims that those who download the greatest number of free music files are also those who are most likely to purchase legitimate CDs. It puts the reason for falling revenues on factors such as the economic downturn and on the lack of diversity in radio playlists. However, the research favoured by the RIAA is the May report by Peter D Hart Research Associates. The survey interviewed 860 consumers aged between 12 and 55 who had internet access. It concludes that consumers are buying fewer CDs and downloading more free music. It is with the backing of reports such as this that the RIAA is fighting its campaign. However, the RIAA has been criticised because it refuses to release the full report, insisting that the information it contains is proprietary.

This lack of consensus about the exact effect of free downloads on sales is crucial to the debate. If MP3 hurts CD sales, then it hits everyone in the business. If it doesn’t, then the question arises: why does the industry so vehemently oppose what is happening on the internet? The BPI claims it, “supports all technological advancements – including the MP3 format – that are revolutionising the way music can be distributed. The BPI does not, however, support unlicensed MP3 sites that violate artists’ and producers’ rights.”

It resists claims that it wants to censor the internet: “The BPI wants to ensure that music fans and consumers reap the benefits of the internet. Record companies are excited about, and are actively pursuing the vast opportunities of the internet. Protecting the copyrights of artists and record companies on the internet is not censorship.”

So what exactly is the industry actively pursuing with regards to the internet? Well, there is the Elton John-style “allowing the artist to communicate directly with fans”, of course, but there is very little currently in the way of presenting music for fans to listen to or to purchase. This isn’t really surprising: if fans can download free music, labels must fear there isn’t much of a market to be had from placing paid-for music on the net.

Future revenues

The industry has presented many figures to back up its calls for legislation, but for many commentators it hasn’t yet proved convincingly that MP3 has hurt its bottom line. It may therefore be that the campaign against internet piracy is not so much about protecting current revenues as ensuring future revenue streams. The industry is changing, largely due to technologies such as the internet, and these changes are so wide-ranging that they threaten the current structure of the industry. Critics claim that the internet is an inevitability and that instead of fighting it the recording industry should be embracing it. But if the industry wants to embrace it, it feels it must first rid it of piracy.

So in some ways the internet piracy debate is something of a side issue. The central issue is the shape of the music industry of the future. And a lot of the opposition to what the music industry is trying to do with the new technology stems from what it is doing currently. You could sit in front of your computer for a year and still not get through a fraction of the messages posted on the internet complaining about the prohibitive cost of music; the lack of diversity; the ‘playing it safe’ mentality; and, above all, the lack of access to non-prescribed music due to the corporate take-over of radio.

The UK Communications Bill contains some worrying challenges to musical diversity, even though its avowed aim is to promote diversity. At present no single company can own more than 15 per cent of the total number of potential commercial radio listeners and the rules also ban ownership of more than one commercial national radio licence. The new proposals do away with both rules, which commentators believe is likely to signal a rush towards consolidation.

Critics of the bill fear that UK radio could become ‘Americanised’ – that is, major local radio stations all playing the same Top 40 hits from a central playlist. The bill is still in discussion and is unlikely to become law until next year. There is still fierce debate about several points, but for the consumer, the key outcome must be the opportunity for greater musical diversity, not less.

The fear as far as the internet is concerned is that if the web comes under the control of corporate interests, then internet radio and music sites will reflect the wider world, with its diminishing diversity and inability to access music on a request basis.

Artists – for or against?

Some of the wilder arguments of the pro-internet freedom lobby could be dismissed as paranoia. But there is a growing band from within the music industry that is opposing the major labels. Whereas big name acts such as Madonna, Elton John and Eminem are publicly backing the RIAA, many sub-platinum artists are frustrated with the record labels, seeing internet radio and file sharing as often the only means of marketing their material if they get rejected from the Top 40-dominated radio playlists.

Few are more vocal than The The’s Matt Johnson, who has had a core album-buying fan base of around three-quarters of a million for around 20 years. A one-time outspoken critic of piracy, he became so frustrated with his label’s unwillingness to promote his latest album once they discovered it wasn’t getting radio airplay that he offered free downloads of selected tracks from Naked Self on his own website, as a means of self-marketing. He, like many artists, believes that the industry is at a crossroads, and that technology offers for the first time the opportunity for artists to promote themselves without having to sign to a major label. His sentiments find favour with artists who, for years, have believed they are only receiving a tiny proportion of the money they should earn from record sales and touring.

In an article entitled The The Versus The Corporate Monster he vehemently attacks the majors, and expands on the point that the internet poses a threat to the labels because it gives the opportunity for artists to self-promote and sell their own work:

“Through their short-sighted arrogance and greed, the major label media conglomerates are sowing the seeds for their own destruction. Artists are now poised to come off the nipple of the major labels and finally stand on their own two feet. With this greater responsibility will come a greater workload, but artists can finally become masters of their own destiny.

“New technology, both in cheap, high quality recording equipment and the tremendous potential of the internet, means that it’s possible for musicians to fund their own recordings, own their own copyrights, distribute their own music and control their own careers. The audience will begin to deal with the artist direct and the middle men will be cut down to size.”

US singer-songwriter Janis Ian has been making records for over 35 years. She agrees with the notion of copyrighting material, but also believes that by attempting to limit internet distribution, the majors are rejecting a technology that they should have embraced at its inception. She cites the way that book publishers have tackled the issue, and sees this as a more constructive approach that would yield great benefits to the recording industry.

“The music industry should be rejoicing at this new technological advance,” she writes in an article entitled The Internet Debacle – An Alternative Way. “Here’s a fool-proof way to deliver music to millions who might otherwise never purchase a CD in a store. The cross-marketing opportunities are unbelievable. It’s instantaneous, costs are minimal, shipping non-existent – a staggering vehicle for higher earnings and lower costs… As an alternative to encrypting everything, and tying up money for years (potentially decades) fighting consumer suits demanding their first amendment rights be protected (which have always gone to the consumer, as witness the availability of blank and unencrypted VHS tapes and cassettes), why not take a tip from book publishers and writers?

“Baen Free Library is one success story. SFWA is another. The SFWA site is one of the best out there for hands-on advice to writers, featuring in-depth articles about everything from agent and publisher scams, to a continuously updated series of reports on various intellectual property issues. More important, many of the science fiction writers it represents have been heavily involved in the internet since its inception. Each year, when the science fiction community votes for the Hugo and Nebula Awards (their equivalent of the Grammys), most of the works nominated are put on the site in their entirety, allowing voters and non-voters the opportunity to peruse them. Free. If you are a member or associate (at a nominal fee), you have access to even more works. The site is also full of links to members’ own web pages and on-line stories, even when they aren’t nominated for anything. Reading this material, again for free, allows browsers to figure out which writers they want to find more of – and buy their books. Wouldn’t it be nice if all the records nominated for awards each year were available for free downloading, even if it were only the winners? People who hadn’t bought the albums might actually listen to the singles, then go out and purchase the records.”

Good production under democracy

Of course, there has always been a love-hate relationship between artists and their record labels, but never before has the artist had the technology and the infrastructure to ‘do it for themselves’. This might ‘democratise’ music as the proponents claim, but it too has its dangers. An artist may have the technology on his home computer to create an album, promote it over the internet, and send out CDs to an eager public. But if the artists bypass skilled producers and recording studios, we could be left with a wider range of badly produced second-rate music.

It is important that good producers and recording studios remain at the centre of music production, and the record labels – which have the greatest access to these – need to nurture a wide range of new artists and steer them in the direction of professional production. This is why, in absolute terms, the record labels and their representative organisations have a right to take what steps they deem necessary to protect their assets; however, if they tackle the issue badly they may alienate both their customers and potential future artists (revenue). This is the self-interested reason why they may need to rethink their approach to technology.

The way forward

In a future where Rupert Murdochs own the playlists, and transitional and easily controllable musical commodities are created and marketed through tie-ups with light entertainment TV programmers, many music customers may feel they are losing out. In an ideal world, the best future for an industry is one where its customers are given what they want in a way that is affordable, but yet still protects the revenue of artists and all those connected with music production.

This is likely to be best satisfied if the following aims are pursued:

• Greater musical diversity
• Greater ability to sample all music (via the internet or through a much greater diversity of broadcast radio stations)
• High production values
• Fair pricing
• A fair deal between artists and distributors

Neither pirate anarchy nor total corporate control of entertainment can achieve these aims. However, the tighter the labels and their representatives squeeze, the more that is going to slip through their fingers. The recent trend of signing and marketing fewer and fewer, but bigger and bigger artists may be unsustainable in the age of free information flow – new artists and consumers will fight them all the way. If they continue down their current path, they may succeed, through legislation, in controlling much of the new distribution channels. But they run the risk of creating a two-tiered music system – one dominated by themselves, with light entertainment TV series tie-ins to their newly manufactured artists, control of traditional radio output, and the potential of huge rewards for those artists lucky enough to fall under corporate control. The other tier will be the artists who produce their own music and sell it at gigs or via whatever distribution technology they can legitimately use. Independent labels could thrive in this future, or else be squeezed between DIY artists and corporate entertainment packages. The danger for the labels is that consumers might start hearing some of this DIY music and realise it’s actually quite good. So what their legislation will have created is a new musical market over which they have absolutely no control.

A more intelligent approach might be to work with the internet now. By combining strategic partnerships with self-produced artists or recording studios, who use free time to act as ‘A&R’ companies in their own regions, with internet ‘sampling stations’ that offer free downloads of selected tracks by new artists, they can market vastly more bands, extremely cheaply, and thus charge far less for CD compilations or downloads. The feedback from consumers will show them exactly which artists are popular and need to be supported and promoted further.

Most people don’t want to be criminals. And criminal activity often increases when reasonable people feel they are being criminalised unfairly. By treating its music lovers as customers, rather than criminals, the traditional recording industry has the opportunity to thrive and expand in the new technological era.

Piracy on the internet

Steve Parker