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Message for the Music Industry

For the industry, the best news about the Supreme Court ruling is that both music and technology companies can move forward with a clearer understanding of what the rules are.   It is time to get to work.  There is a fantastic opportunity for all parties to come to the table and establish some standards and bang out a digital music license that embraces the new technologies and allows the legitimate market to grow.  If the music companies continue with their strategy of scorched earth litigation and refusing to work with the P2P companies, they will miss the chance to negotiate a forward looking license, without congressional intervention.

While the music companies may feel that they won a tremendous victory, the reality is that their customers are turning away in droves. The day after the decision there were more than 5 million people online trading files.  If the music companies do not provide an authorized way for people to get music the way they want to, music fans will simply continue to get the music for free.  People need to realize the immense monetary and political power of the entertainment industry and fight back against inflated prices, limited distribution and being told what they can and can’t do with their music.  As a music consumer you should demand that the music industry stop suing their own customers and come to the table and negotiate a digital license for music that embraces the new realities of the digital marketplace.

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MGM vs Grokster

All eyes are on the Supreme Court, with a decision in this important case predicted as early as next week.  The Electronic Frontier Foundation (EFF) is defending StreamCast Networks, the company behind the Morpheus
peer-to-peer (P2P) file-sharing software.

Twenty-eight of the world’s largest entertainment companies
brought the lawsuit against the makers of the Morpheus, Grokster, and
KaZaA software products, aiming to set a precedent to use against other
technology companies (P2P and otherwise).  The case raises a question of critical
importance at the border between copyright and innovation: When should
the distributor of a multi-purpose tool be held liable for the
infringements that may be committed by end-users of the tool?

The Supreme Court’s landmark
decision
in Sony Corporation of America v. Universal City Studios,
Inc. (a.k.a. the "Sony Betamax ruling") held that a distributor cannot
be held liable for users’ infringement so long as the tool is capable
of substantial noninfringing uses. In MGM v. Grokster, the Ninth
Circuit found that P2P file-sharing software is capable of, and is in
fact being used for, noninfringing uses. Relying on the Betamax
precedent, the court ruled that the distributors of Grokster and
Morpheus software cannot be held liable for users’ copyright
violations. The plaintiffs appealed, and in December 2004 the Supreme
Court agreed to hear the case.

"The copyright law principles set out in the Sony Betamax case
have served innovators, copyright industries, and the public well for
20 years," said Fred von Lohmann, EFF’s senior intellectual property
attorney. "We at EFF look forward to the Supreme Court reaffirming the
applicability of Betamax in the 21st century."

Read more from the EFF and get ready for this extremely important decision.

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More support for Music Distribution via P2P

Online music distribution is set to grow significantly over the next
few years, forcing industry to reconsider their business models and
posing regulatory challenges to governments, according to a new OECD
report on the digital music industry.

A ‘re-evaluation’ of music distribution needs to happen to achieve a
balance between consumers’ desire to access digital music and the
industry’s copyright protection concerns…. Instead of paying a set fee to download an individual song, music
downloads might become part of a subscription package from a cable
television company, internet service provider or mobile-phone carrier,
the OECD said.

  • A key requisite for the creation of efficient online music
    delivery is a competitive and wide-spread access to broadband
    infrastructure. The delivery of online content also necessitates new
    technologies and an environment that facilitates the creation,
    acquisition, management and delivery of content. Effective and secure
    (micro)-payment systems are needed.
  • Alliances between content providers, broadband and technology
    providers that come up with new business models play a critical role in
    driving the adoption of licensed content services.
  • A diversity of interoperable content, standards and hardware are
    likely to prove most beneficial to efficient online content markets.
    With vertical integration, lock-in of consumers to certain standards,
    and difficult access to certain content, an environment where small and
    innovative players can compete should be maintained.
  • The OECD notes the importance of government actions to take steps
    to address online piracy. Around one third of Internet users in OECD
    countries have downloaded files from P2P networks. While, in principle,
    file-sharing software is a new and innovative technology, piracy is an
    important impediment to legitimate online content services. The most
    important is to find equilibrium of available legitimate and innovative
    uses of new technologies and the necessary protection of associated
    intellectual property rights (i.e. copyrights).
  • The Internet already provides new forms of advertising at lower
    cost, lower barriers to entry for artistic creation and lower costs of
    finding new talent. However, the effects of authorised and unauthorised
    file-sharing and digital music services with pay-per track offers on
    artists and the music supply are not yet obvious and need further study.

Read the Organisation for Economic Co-operation and Development Report

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Internet Piracy Sails On

"The report said it is difficult to establish a causal connection between the rise of file sharing and a drop in music sales. While the music industry’s revenues fell 20 percent from 1999 to 2003, other factors, such as illegal CD copying, might have played a role in the decline, the OECD said," according to an article that ran on Wired.com today. "The report recognized the value of fledgling online stores like Apple’s iTunes. Last year represented a "turning point" for legal music downloads, the study said. However, online music distribution only accounted for 1 to 2 percent of music revenues in 2004. The OECD expects to see that climb to 5 to 10 percent of revenues. But growing online sales will depend on expanding catalogs to appease demand and sway illegal downloads, the OECD said. The report also suggested exploring new distribution methods, beyond what the OECD called traditional… transactions."

Read the article.

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Digital Train Leaving the Station

As TVT’s chief executive officer, Steve Gottlieb, puts it: "Manufactured pop culture is disintegrating before your eyes as the Net takes hold," and the nimbler, less risk-averse indies are best positioned to take advantage of the digital transformation. While the majors look at P2P file sharing, podcasting and other forms of digital distribution and see thieves, pirates and the willful disregard of copyright, the indies increasingly see a chance to connect directly with their customers – and an opportunity to steal a march on the Big Four. As Gottlieb points out, independent artists now account for 30% of internet radio play, and labels such as Artemis Records (Steve Earle, the Pretenders) have been distributing files over P2P networks for over a year. Add the fact that podcasters, at the wheel of the fastest-growing media phenomenon around, almost universally avoid major label music due to potential licensing infractions and it starts to look like there’s a digital train leaving the station – and the majors aren’t on it.

Read more in Digital Music News

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Some See Benefits of File Sharing

Independent labels use networks as a way to reach consumers, not necessarily make money.

"…To many independent labels, the main goal is simply to introduce music fans around the globe to little-known artists who have no chance of being played on commercial radio stations. The payoff they hope for in the long term is greater CD sales; any downloads they sell on the networks are icing on the cake.

"It is small, but everything starts small," Chief Executive Daniel Glass of Artemis Records said of his company’s revenue from Kazaa and other popular file-sharing networks. "To not be part of it is insane."

Read the whole article from the LA Times here

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Forbes – Music Like Water

Forbes_80_100

People should pay for their music the way they pay for gas or electricity.
Forbes Article 2005

More people are consuming music today than ever before, yet very few of them are paying for it. The music recording industry blames file sharing for a downturn in CD sales and, with the publishing companies, has tried its best to litigate this behavior out of existence, rather than try to monetize the conduct of music fans. These efforts are fingers in a dike that is about to burst. Digital media are interactive, and people want music that they can burn to CDs, share and use as they wish. The music industry should instead look at turning this consumer phenomenon into a steady stream of cash–lots of it.

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