Play Taps for Music Pirates

The record industry's new all-out assault on file sharers is bound to cripple P2P networks. It may also finally spur good, legitimate services

By Jane Black

Each day more than 4 million computer users trade more than 866 million digital files on KaZaA, the world's most popular file-sharing network. But how many will log on tomorrow?

Until June 25, the thought any fewer would log on would have been laughable. But on that day the Recording Industry Association of America (RIAA) launched its most serious attack on illegal file-swapping yet. Beginning immediately, the RIAA will begin gathering evidence and preparing lawsuits against individuals who illegally offer to share "substantial amounts" of copyrighted music over so-called peer-to-peer (P2P) networks, such as KaZaA, iMesh, and others.

Declared RIAA President Cary Sherman at the press conference announcing the crackdown: "People have been educated and reeducated. They understand this is wrong. There is no longer any justification or excuse for downloading illegally." By mid-August, the group expects to file "several hundred" lawsuits, and it intends to keep filing them "until people get the message."


  Of course, the RIAA's message has been loud and clear for years. And yet all previous attempts have done little to stop the growth of P2P networks. More than 230 million people have downloaded KaZaA's software, making it the most downloaded software in history. And more than 2.6 billion copyrighted files are illegally swapped by computer users around the globe every month, according to the RIAA.

"They feel that they have no other option than to escalate the warfare against piracy by taking the battle into the enemy's homeland," says Phil Leigh, a digital-music analyst at investment firm Raymond James. "To their thinking, the step [is] inevitable and unavoidable...just like Vietnam."

In this war, however, the RIAA will win. Spreading fear may not be good PR, but it gets the job done far more efficiently than suing faceless software companies. And contrary to conventional wisdom, that could ultimately be good news for digital music. As long as file-sharing is rampant, music labels, artists, and songwriters have little reason to invest in or promote the creative, flexible digital services that music lovers crave.


  The RIAA's dragnet has two goals. First, it hopes to deter huge numbers of file-traders by prosecuting the most egregious pirates. This tactic has already worked, albeit on a smaller scale. In April, the RIAA filed a multimillion-dollar lawsuit against four college students who allegedly ran on-campus mini-Napster networks that allowed users to share copyrighted music and movies. The day after the suit was filed, 18 other student-run networks voluntarily shut down to avoid attracting attention (see BW Online, 5/5/03, Big Music: Win Some, Lose A Lot More?).

Several file-traders contacted by BusinessWeek Online who (obviously) requested anonymity said they planned to stop sharing huge number of files immediately. "Don't underestimate the deterrent of enforcement," the RIAA's Sherman warned at the press conference.

Second, the RIAA knows that if it can scare away file-sharers in droves, it will also succeed in undermining the P2P networks, which rely on users making songs and other digital files available for others around the world to download. Typically, any file downloaded over one of these networks is automatically put into a "shared folder," which other users then have access to. If, tomorrow, thousands of users each move hundreds or thousands of files from their shared folder to a private part of their hard drive, the network will become less functional. Users will have fewer songs to share -- and fewer computers to connect to, which could slow downloading times for the remaining intrepid file-traders.


  Upon hearing the news of the RIAA offensive, a spokesperson for Australia-based Sharman Networks, which owns KaZaA, said in a statement: "It is unfortunate that the RIAA has chosen to declare war on its customers by engaging in protracted and expensive litigation, when the problem of copyright piracy on peer-to-peer networks can be solved with existing software and business partnerships between the record labels and the providers of peer-to-peer software."

Of course, ending illicit file sharing won't be the end of the music industry's blues. The RIAA claims that the $2 billion drop in sales from 1999 to 2002 is directly attributable to P2P file-sharing. And though these networks have undoubtedly played some role, it's clear that rising CD prices, fewer titles, and the sluggish economy have played a part (see BW Online, 2/13/03, "Big Music's Broken Record").

Moreover, it's not a given that file-traders with nowhere to go will head for the legitimate music services (see BW Online, 4/22/03, "Web Music Gets Its Act Together"). They're still not good enough -- or cheap enough -- to attract a mass-market audience. Music lovers want to be able to create playlists and listen to them whenever and wherever they want, not just at designated PCs or certain types of MP3 players.


  Even Apple's popular iTunes service, which is now available only to Macintosh users and sells hundreds of thousands of songs each week, puts some restrictions on how downloaded music can be used (see BW Online, 4/30/03, "Steve Jobs, the Pied Piper of Online Music"). And some digital-music fans are already experimenting with encrypted P2P services as a way to slip through the RIAA's net.

Still, it seem clear that better legitimate services will arrive only when file-trading is held at bay. Only when these free services are no longer viable will music labels, artists, and songwriters have the incentive to invest in or promote a new generation of paid services (see BW Online, 4/22/03, "Digital Music: Still Scores Left to Settle"). "I would argue that you would get better range, better quality, and better choice if you do pay the creator something," rock star Peter Gabriel said in a statement of support of the RIAA's initiative.

After suing hundreds of customers for illegal file-trading, the music industry will have no choice but to prove him right.

Black covers technology for BusinessWeek Online in New York

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