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WASHINGTON, D.C. —  The wild, wild West of Internet anarchy that was the first decade of the new century has a new sheriff.  And she paid a visit to the 10th annual Future of Music Policy Summit with a  badge bearing a 33-point strategy for restoring law and order.

The summit concluded Tuesday after three days of presentations and spirited dialogue among tech heads, policy makers, artists and recored-label executives plotting a new future for the music industry. But it was a visit by President Barack Obama’s new copyright czar, Victoria Espinel, that was the talk of the conference.

The music industry’s implosion has become a cause that even the federal government can’t ignore because the same issue – unfettered exchange of Internet files – has bled into the movie and publishing industries. Now any intellectual property that can be digitized can also be shared/stolen/cannabalized within seconds of hitting the Internet, and multibillion-dollar businesses — most of them with roots firmly planted in the pre-digital 20th Century — are crying foul.

At the Future of Music summit, Espinel waxed rhapsodic about the artistic community, echoing the Obama adminstration line that American innovation and intellectual property are key to its economic recovery.  But without directly indicting consumers, she outlined a strategy for containing file-sharing that suggested that many digital music fans will need to alter their behavior or else risk being cut off from the Internet at the very least.

Espinel noted that 95 percent of file-sharers consume music “illegally” — that is, they traffic in copyrighted music files that are readily available on the Internet. Does that mean tens of millions of Americans are technically “criminals” by federal standards? Espinel didn’t directly answer.

When questioned about the apparent disconnect between government policy and the way many American citizens behave when using their computers or cellphones, she merely insisted that there is “no inherent conflict” and that “the majority of consumers don’t want to engage in illegal content.”

She added that the administration would focus its crackdown on Web sites distributing illegal content, particularly those attempting to profit from it via advertising or subscriptions. But that’s a small percentage of the problem.

The rest of the conference took a more conciliatory approach, attempting to engage the way ordinary citizens/music consumers actually behave (regularly downloading music in their homes without checking into the nuances of copryight) and searching for ways to turn that behavior into a revenue stream that could eventually trickle down to artists.

“Everyone here is a file sharer,” said David Touve, a professor at Washington and Lee University. To restrict people from sharing files would compete against the basic design of the Internet — “and good luck with that,” he added.

“The last thing we need is more sticks” to beat down file sharers, said Eddie Schwartz, president of the Songwriters Association of Canada. “We need to find legal ways to file-share.”

The most popular trend is to insist the Internet service providers become part of the solution. A number of European countries have enlisted service providers to police their customers; those who engage in illegal file-sharing have their Internet access restricted or cut off.

“You can’t get revenue until you get the ISP’s to the table, by force if necessary,” said David Basskin, president of the Canadian Musical Reproduction Rights Association. His agitation was palpable, reflecting the attitude of many license holders and content providers tiring of seeing certain technology companies profit from music without cutting in content providers on their profits. Among the many examples derisively cited were the Google search engine that leads consumers to an illegal music file, or the Apple iPod that stores countless music files of dubious origin.

“If you are making money off artist content you have to ask yourself whether you are helping that artist pay his mortgage,” said Jesse von Doom of CASH Music, a nonprofit that creates tech tools for artists.

Steve Marks of the Recording Industry Association of America, which represents the major labels, said, “It’s not a secret that all content holders are interested in pursuing deals with ISP’s that make sense.”

That could mean the imposition of additional fees on Internet users, which opens up another set of issues: Who would collect the fees and who would distribute them not only to license-holders but to the artists themselves — often the bottom of any revenue food chain? Those questions are crucial, said Jim Griffin, a longtime tech consultant.

“Until we know how to properly distribute the money, is it even worth doing?” he asked.

These reasonable doubts clamored for space with anxious content creators and license holders who want to see revenue streams open up as soon as possible. No one questioned that music still has considerable value — more people are listening to more music than at any time in history. But how to turn that stream into a river of green for artists remains unresolved.

Wading into the middle of this decade-long debate is Victoria Espinel, copyright czar. Though she wields considerable power, she has a daunting job ahead of her reconciling a legion of business interests all looking for a stake in the new digital money pool and a nation of consumers who are used to getting their music for free.

Espinel was appointed by Obama earlier this year as the nation’s first-ever U.S. intellectual property enforcement coordinator.  A few months ago she introduced a strategy for dealing with Internet file-sharing  (or “smash and grab” as it was described by Vice President Joe Biden), which has been linked to a 50 percent decline in music-industry revenue over the last decade.

From Greg Kot – Chicago Tribune

A friend just sent over this post on how the newly elected Chairman of the Entertainment Retailers Association,  said that illegal P2P filesharing is the greatest challenge facing entertainment retailers and urged members to lobby Government for a crackdown on a problem he said “is bleeding our industry dry”.

Speaking at the association’s annual general meeting, Quirk said, “Too often the debate over illegal filesharing is portrayed as an ideological battle, but for us this is a commercial matter. Illegal filesharing is damaging our businesses, both physical and digital, on a daily basis, and the Government needs to tackle it swiftly and decisively in order to protect jobs, businesses and investment.

“First the filesharers targeted the music business and the Government did nothing. Now the filesharers have come again for TV and movies. Unless action is taken the filesharers will come for computer games, books, in fact anything which can be digitised and what will be at stake will be not just the entertainment industry but huge swathes of the UK economy. We need action now.”

Read more of this insanity here at Mi2N

Well now…

I was visiting with my Dad last weekend and thought of an interesting parallel between digital music and encyclopedias.

When I was a kid, my father had a summer job going door to door selling Comptons Encyclopedias.  He would carry a couple of these huge books under his arms and try and get the husband or wife to buy the complete Comptons collection for the kids.  This was big business and my dad made a healthy living during the summer.

Well, over the years the encyclopedia book business began to dry up.  To start it all off, Comptons put their entire encyclopedia library on a CD-ROM and sold it via a new company they formed, called Comptons New Media.  They put the CD-ROM in a chipboard box and sold it at Comp-USA,  Software Etc and other retailers for $200-$300.  It became big business for a while in the early 1990’s, and Comptons New Media flourished and was eventually purchased by the Tribune Co for a lot of dough.

It didn’t take long before some hackers cracked the CD-ROM and then pirated versions of the whole enchilada began making their way into stores and online outlets.  By now, of course, the multi-volume Comptons Encyclopedia Book business had gone the way of the dinosaur, and countless pavement pounding salespeople were no longer going door to door selling encyclopedias – and the entire book business basically went away.  Gone in a matter of a few years.  I think they still sell some to schools somewhere.

The same thing soon happened to Comptons New Media as digital competitors emerged, from Microsoft “Encarta” and others, and soon price competition and the internet gave way to this information moving online for free.

Now we have something called “Wikipedia”.

The information contained in the encyclopedias is still being researched and published and edited by now, tens of thousands of people who put it online in a living, dynamic format.  By and large, no one is getting directly paid to do this work, yet no-one can dispute the fact that society in general is benefiting from Wikipedia and other community-based information resources.  You might even notice that there is a lot more information being produced and updated and cross referenced than ever before.  This is all without the infrastructure of the past (ie Comptons) being in-place anymore, and almost no money changing hands.

Just like Comptons, the record industry digitized all of its assets and put the entire thing out there for the public to enjoy.  And just like Comptons the record industry in now suffering from price erosion, shifting formats and piracy.  They can try and hang in there and bash the problem away with legislation, or they could seriously consider other methods of delivery and renumeration, or they could sell off their remaining assets and shut down.  No matter what, the game they have played is over, caput.  Time to face the music and change.

There are no guarantees in business that things will remain the same.  Indeed, the only real constant is change and businesses that try and hold onto the past will be crushed by their own weight and failure to adapt, or in some cases, to just shut down.  Nothing is forever except change.  People should stop complaining about it and start working on creating a future that benefits us all.

Do I know exactly what that future is going to be?  Of course not.  I wish I could say with certainty but I can’t – for now.  But I think it will look a lot more like wikipedia than comptons encyclopedia sets.

THe RIAA is claiming to be ready for a change of strategy, trading the hammer it has been using to sue individual file sharers – for kind of a hired gun. I think the strategy the RIAA is outlining is better than their previous position, though not the ultimate solution that I think we will end up with. Nevertheless, this is movement in the right direction.

“The decision represents an abrupt shift of strategy for the industry, which has opened legal proceedings against about 35,000 people since 2003. The legal offensive did little to stem the tide of illegally downloaded music and it created a public-relations disaster for the record industry, whose lawsuits targeted, among others, several single mothers, a dead person and a 13-year-old girl.

The RIAA now plans to try an approach that relies on the cooperation of Internet-service providers. The trade group said it has hashed out preliminary agreements with major ISPs under which it will send a series of emails to the provider when it finds a provider’s customers making music available online for others to take.”

Number one – lets see if this actually happens, and

Number two – lets hope the ISPs will see first-hand the value in obtaining blanket licenses to permit the trading of music files online, rather than becoming the hired thug of the music industry…

Read the whole Wall Street Journal article here.

If you look at how people are getting their music these days you see that the companies fighting for the people who pay for music are battling over an ever-smaller piece of the pie.

NPD Market Research’s annual survey of Internet users, which is some 80 percent of the population these days, found that 10 percent of the music they acquired last year came from paid downloads. That is a big increase from 7 percent in 2006. But since the number of physical CDs they bought plummeted, the overall share of music they paid for fell to 42 percent from 48 percent.

How people acquire music 2006 and 2007

Most people are getting music from their friends — either burning CDs or ripping digital files. And despite the record industry’s crackdown, there is no reduction in the number of people of peer-to-peer file sharing service.

“The number of people who do peer to peer in 2007 versus 2006 has been stable,” said Russ Crupnick, who runs NPD’s music service. “The number of files taken per users has increased significantly.” This is because of the shift of many users from Limewire to BitTorrent, which makes it easier to download whole albums.

How people listen to music

Quite surprising is the continued strength of AM/FM radio. People listen to music on the radio more times per week than any other method. Listening to music on a computer has the third largest number of people, followed by listening on a portable device like an iPod.

The music labels will look at this data and say, “If we just stick with the CD and the Apple model we are in deeper trouble,” Mr. Crupnick said. Yes indeed.

Read more from the New York Times.