[acid-jazz] From the economist: lawsuits and the music industry stubborness

From: ZeroGravity Sessions (zerogravitytribe_at_yahoo.it)
Date: 2003-09-12 16:57:29

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    The music industry has filed more than 250 lawsuits against individuals
    who, it claims,
    have illegally downloaded copyrighted music on to their computers.
    The industry reckons that online piracy is behind a big drop in music
    sales and the lawsuits are part of a
    broad strategy to combat it.

    TWO years after the music industry finally succeeded in shutting down
    Napster,
    the company that launched the craze for swapping music files free over
    the internet,
    it is making good on its promise to go after the individual pirates
    too.

    On Monday September 8th, the Recording Industry Association of America,
    which represents the five music multinationals,
    filed 261 lawsuits against individuals who, it says, have illegally
    collected around 1,000 songs apiece through
    file-swapping programs like Morpheus, KaZaA and Grokster.

    The legal action, which comes after months of painstaking and
    controversial investigation,
    is just one part of a broader strategy to define a future for the
    industry whose products
    are widely available for nothing, thanks to such programs.

    Last week, Universal Music Group, which is owned by France’s Vivendi,
    slashed its wholesale prices,
    enabling music shops in America to sell new-release compact discs for
    as little as $10 and still make a profit.
    And there is constant chatter in the industry that two or more
    companies will merge in an effort to spread huge
    overheads over a bigger revenue base.

    The advent of the internet—and the software and hardware that enable
    users to download music with a few clicks
    of the mouse or to “burn” CDs—has had a devastating effect on the music
    industry.
    Shipments of recorded music have dropped by 26% since 1999.
    The industry has responded with price rises, and so revenues have
    fallen by “just” 14%.
    The industry focused first on shutting down Napster, and then went
    after file-sharing services
    without a central directory, like Grokster.
    But a court ruled in April that Grokster was not violating copyright
    law by distributing peer-to-peer (P2P) file-sharing
    software, which also has legitimate applications.

    The industry is appealing that decision and, in the meantime, is going
    after software users.
    Over the summer, it has sought information on individuals who are
    sharing files from internet
    service providers and from universities. (Students, with little money
    and a lot of time and internet savvy,
    are among the keenest file-swappers).
    And it has used sophisticated investigative techniques to try to
    distinguish files that have been swapped
    illegally from those downloaded legitimately.

    These tactics have proven controversial. In Massachusetts, two
    universities (the Massachusetts Institute of Technology
    and Boston College) managed, if only temporarily, to postpone the
    industry’s request for information on a technicality.
    And civil-liberties campaigners are concerned about the level of access
    the industry has to individuals’ computers.

    The industry has run a high-profile, two-pronged campaign to persuade
    users and their parents of the wrongs of file-sharing.
    Some music executives have dubiously tried to equate P2P file-swapping
    with “piracy to pornography”.
    Andrew Lack, chief executive of Sony Music Entertainment, told the New
    York Times: “As a guy in the record industry and as a
    parent, I am shocked that these services are being used to lure
    children to stuff that is really ugly.”
    Music companies have also encouraged universities to include warnings
    in campus magazines and in orientation sessions
    on the criminality and potential penalties of illegal file-swapping.
    The industry has also sought to persuade listeners that without
    profits, it will not be able to invest in finding
    and promoting the bands of the future.

    But many music-lovers think the industry is just being greedy.
    Monday's lawsuits were greeted with a torrent of complaints in internet
    chat-rooms and on radio shows.
    Fred von Lohmann, a lawyer with the Electronic Frontier Foundation, an
    online civil-liberties group, criticised the industry
    for going after “12-year-old kids and grandparents” in an interview
    with the Wall Street Journal.
    In a tacit admission that such targets make for bad press, the RIAA
    quickly settled with the mother of Brianna Lahara,
    a pre-teen file-swapper, for $2,000 (much less than the $750 to
    $150,000 per song that it is seeking from other defendants)
    and a grovelling apology.

    Music consumers point out that the industry has hardly helped itself by
    taking its time to make music available online
    legally. Only this summer did EMI, a British music group, allow part of
    its Rolling Stones catalogue to be downloaded legally
    Songs by the Beatles are still not available legally online.
    A number of music companies are dabbling with subscription services,
    but these have failed to smother the free file-swapping
    sites.

    Can the industry find a subscription model that music-lovers will use?
    The most important development in music downloading in the past year
    has been the advent of Apple’s iTunes software
    and online service. This offers a compromise business model that both
    the industry and music-lovers might be able to agree
    on.
    It allows music to be sold on a per-track basis for a low price, and it
    is widely seen as the industry’s best bet going
    forward. It is already being imitated by other services.

    Meanwhile, music companies continue to look flat-footed compared with
    other industries affected by piracy,
    such as the movie business. Warner Brothers slashed the price of its
    DVDs a few years ago, spurring an upsurge in sales.
    A side-effect was that some DVDs ended up being cheaper than CDs,
    making the CDs, which are typically shorter and have
    no visual content, look distinctly overpriced.
    Universal Music Group’s price cut last week was in part a belated
    attempt to close this gap.
    It now hopes to compete with the likes of Wal-Mart, a low-price
    hypermarket giant which sells CDs at a loss to stimulate
    sales of high-margin goods.

    But it looks as if the music industry will also resort to old-fashioned
    consolidation and cost-cutting to preserve profits.
    EMI tried to merge with Warner Music three years ago, but the European
    Commission blocked the deal.
    EMI has also been linked with Bertelsmann’s BMG music arm, though BMG
    is now expected to pair off with Warner Music,
    part of AOL Time Warner, with which it is in exclusive talks.

    With so many other things to worry about, and so many online pirates to
    chase, it should come as no surprise that those
    talks are going slowly.

    =====

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