The RIAA's justification for its strong-arm tactics against alleged file sharers is simple: file sharing acts as a substitute for music purchases and is directly and primarily responsible for plummetting CD sales (which are down 14 percent from last year). I've argued in the past that the entire drop can't be blamed on piracy, and one Harvard study suggested that piracy is having no effect at all.
This week, Billboard published an article about a study commissioned by the Canadian government that investigated the connection between file sharing and CD sales. The surprising conclusion: the most active file traders on P2P networks actually buy more CDs than their less active counterparts. This seems to suggest that the recording industry should abandon its crackdown and embrace P2P networks.
But wait: economist Stanley Leibowitz at the University of Texas, Dallas, has posted a well-reasoned critique of the Canadians' methodology. Essentially, the more active file sharers are the same people who are most interested in music, and therefore the most likely to be buying large volumes of CDs. So, of course you'll see an increase in both measurements--CD purchases and file-trading activity--simultaneously among the same users. To correct for this "simultaneity effect," you have to measure the overall volume of file sharing over time across all types of users--casual to extreme music fans--and compare it with CD sales over the same period. If you do that, Leibowitz claims, you'll see a direct correlation between file sharing and reduced CD sales.
Another problem that seems obvious to me: by focusing on P2P networks, these studies (and the RIAA) ignore other types of file sharing that I think are much more prevalent, such as burned CDs and flash drives. Ten years ago, very few CD collections included music recorded on CD-Rs. Today, almost every collection does.
Also, these studies strike me a bit like investigating why the horse escaped and arguing whether it's because somebody left the barn door open by accident or on purpose. The industry knows its predicament--it's very easy for customers to get recorded music for free. The interesting question is how (and whether) they can adjust their business models to stay viable and relevant under these new conditions.
The bad legal news continues for the recording industry.
After yesterday's ruling that the RIAA owes an Oklahoma woman nearly $70,000 in attorneys' fees, the European Union's top court today said that European ISPs are not required to disclose the names of subscribers whose IP addresses have allegedly been linked to illegal activity on file-sharing networks.
In the case at issue, a group of Spanish music producers filed a legal complaint about Spanish ISP Telefonica, which refused turn over IP addresses of apparent Kazaa users. Telefonica maintained that Spanish law required it to turn over these addresses only in criminal cases or matters of national security. The Spanish court overseeing the case asked for an opinion from the European Court of Justice, which essentially backed Telefonica, saying that this information did not need to be turned over in civil cases.
This opinion's not a legally binding ruling, but if the Spanish court accepts the opinion and rules accordingly, this could form the basis for similar decisions throughout the EU. This would mean that recording industry representatives would either have to convince criminal investigators--the police--to go after file-traders (unlikely), or would have to come up with some other technical method (possible) without violating the EU's stringent privacy laws (very difficult).
Meanwhile, in the U.S., the RIAA continues to spend a lot of money to get very little in return.
ZuneScene, a fan site devoted to Microsoft's portable music player, is reporting on a Microsoft patent filing that describes a system for compensating Zune users for sharing music wirelessly.
(Credit:
Microsoft)
The idea: if I send you a song, it expires after 3 days or 3 plays, regardless of where I got it from (my own CD collection, a file-sharing network, a Zune Marketplace download). If you decide you like that song and buy it from the Zune Marketplace, I get a small commission--probably points good for buying other songs from the Marketplace.
This isn't news: Engadget reported on it back in November, and the patent filing is from December 2005. But ZuneScene does make one interesting point that earlier commenters missed: this system would allow Microsoft (and content owners) to earn money from the huge traffic of free files on file-sharing sites and elsewhere. Zune applies copy-protection technology to formerly unprotected files, and if users decide to pay the bill, suddenly there's monetary value where there was none before. Sounds pretty appealing for content owners.
It's an interesting idea, and it certainly could help make Zune's sharing features a little less lame--the 3 days/3 plays restriction is a non-starter, but if I get a kickback for sending you a song, I might be a little more inclined to do so. But I haven't heard any confirmation that Microsoft's planning to do this, and I know there's a long list of other features they're considering adding.
For what it's worth, ZuneScene's also reporting that the next-generation Zunes--an 80GB hard drive model and smaller flash-based model--are in production and will go on sale some time in the next couple months. Again, I've heard no confirmation from Microsoft on this, but it makes sense that they'd want to get the next iteration out in time for holiday 2007.
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