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There is much to take into consideration if you want to come up with a solution for file sharing that would satisfy all players in this battle. Let’s start considering the origins so we can discuss a way out of it.
It all started years ago with the invention of a new codec to digitalize music that would generate a really light file with high quality. The creation of the MP3, along with the popularization of the internet, unleashed an unstoppable force so that those who weren’t quick enough to take advantage of the technology are now running behind and trying to stop it.
When the MP3 hype started in 1995, there was NO PLACE available to buy that type of file online. Suddenly, there was this new market, this new demand and no suppliers for that market. Then, all the magic started to happen: this new market started to supply itself through file sharing. You would simply rely on you buddies to send you songs you didn’t have through the internet, songs they liked and thought you might like too.
In June of 1999, internet users and college kids welcomed Napster, the first widely used p2p file sharing program. The creator of Napster, Shawn Fanning, simply wanted an easier method to find music online other than searching IRC (chat and newsgroups) or Lycos. Napster had central servers to connect users hooked to the network through a song search. A list of songs shared by all became available and actual file exchange was done directly between each user machine.
This consumer behavior could be understood as a natural result in view of a new technology (internet and MP3) and the non-existence of an alternative to acquire MP3 files.
Napster users had a list of reasons to use the new tool and some of the reasons related directly to what was happening in the music industry at that time. Some users claimed the late 90’s invasion of “Best of” with only 1 or 2 new songs in an attempt to make fans buy a CD with 90% of songs they already had bought previously was unfair, versus the possibility of downloading just the new one online.
Other reasons for Napster use varied: some consumers believed that the quality of new albums had decreased by the mid-1990s and they preferred getting the one hit song only without having to buy an entire album. Others, liked the chance to find songs that were normally hard to find, like unreleased tracks or songs recorded live (bootlegs). Some even justified downloading digital copies of recording they had already purchased in other formats before the CD.
Whatever reasons people had to download music from other people, the file sharing fever became massive and record sales took a big hit. A huge share of profits was disappearing and lead artists began to react furiously to Napster and its community.
In 2000, Metallica filled a lawsuit against Napster and its users for file-sharing their songs. A demo of “I Disappear” was circulating online before it was released. During the court battle that lasted several months, fans even created a website called “Pay Lars” in response for the band’s action. Several major artists used the same argument, and the music industry sued Napster for contributory and vicarious copyright infringements under the US Digital Millennium Copyright Act (DMC Act).
The court found Napster and its users guilty and the company shut down its services in July 2001.
RIAA also filled a lawsuit against one of the first MP3 player manufacturers. Rio PMP300 player and Diamond Multimedia were accused of encouraging the copying of music illegally. RIAA lost that one in 1998, 3 years before the release of Apples sales winner iPod.
Promotional Power
Just as information and content, music is has been naturally distributed or shared online since its early stages. It is the biggest market place ever thought to exist with a huge popularity power effect.
Along with the fact that file-sharing was hurting the music industry record sales, for some artists, the effect was actually the opposite for others. Music fans sharing files online were actually promoting their songs and stimulating their sales.
Notorious cases like Radiohead and Dispatcher are there to prove it. Radiohead, had their entire record “Kid A” available online 3 months before its release date and, in spite of the fact that it has been download by millions before, the album captured the number one spot on Billboard 200 sales chart on its debut week. The fact that the band has never hit the top 20 charts in the US and that “Kid A” is an experimental album with no singles and received relatively little radio airplay, its safe to say that the unexpected popularity and high sales is related to the immense promotional power the word of mouth music fans can have when it comes to promoting an artist on the Internet.
For many artists not signed to major labels, making their songs available online for free is the way to go for distribution.
The music industry went to great lengths to take users and p2p file sharing software and websites to court, but did not create an alternative to file sharing on time.
ITunes was introduced in 2003; 2 years after the iPod and several years late to the MP3 file sharing party. Sony, one of the first to make music download available online at the beginning of 2000, was charging $3.50 per song and only made available part of their catalog. If you were looking to buy an album from Sony online music store, you would pay $42 for a set of 12 songs.
Even today with millions of iPod owners using iTunes to buy songs and records, the virtual music store model as is, is far from being an option for downloaders, mostly because each song comes with DRM (Digital rights management) which restricts the usage in different mediums.
Understand that “quality” can absolutely overcome “free” in several instances. The Amazon MP3 store offers, in general, songs 10% cheaper than iTunes with a high quality compression file that is free to be used multiple times in different mediums (players, computers, CDs). The buzz it creates for the average download guy is that, this is a winning situation over the hassle of (not always) finding songs online and sometimes long-waiting downloads with no quality guarantees.
Assuming that most users will not stop file sharing, even with all the risks implied and all the potential lawsuits, it is the role of the music industry to come up with a new business model to explore the advantages of having consumers distributing their “product” freely among people with similar interests.
The music industry needs to figure out a way to profit from free music distribution because their chances of realistically combating file sharing through lawsuits are slim. On the other hand, it is absolutely right that the artist gets paid for their creation. It is their talent, their inspiration and they deserve all the credit for it, but it is undeniable that the concept of what is copyright infringement (that previously were NOT associated with you recording a tape from the radio or your buddy down the street recording his favorites for you) related to distribution might have suffered a twist with the technological revolution we faced in the last decade. The direct sales of records might have dropped but the exposure possibility created has proportionately risen.
What is positive about free music distribution?
1- Record label costs with manufacturing and shipping of CDs decreases and music reaches a much wider audience. Cost x benefit winner.
2- High profits would switch from CD sales to packed venues and extended tours. Artists would become more popular once you got to know them by having access to that “song” that was free.
3- Branding is another way to make profit; based on the artist’s popularity.
4- Just like a video-clip, the song is a marketing piece to sell concert tickets, t-shirts and whatever else the artist in interested in promoting.
5- Online Advertising on the artist’s official website. Imagine if a mainstream artist decides to offer their album online for free on their website? Who wouldn’t want to sponsor the page or advertise on it? Imagine how many people would visit the page? What if you could offer a 5 second video ad before the actual free download of each song?
The point is, with all the changes that have lead us to the point that we are at now; fighting against the reality of the situation is not a solution. Instead, adapt to them, understand the new environmental conditions, be ahead of them and be innovative to keep your business running.
Consumers may be not spending money on music directly as they once did back in a time when the main vehicle to access music was through a CD purchase in a retail shop, but be sure that those same consumers are spending money on related products that will allow them to enjoy the experience of listening to music. So where did the consumers money go? To multiple mp3 players, to high speed internet connections, to concerts tickets of artists they would never known if songs weren’t available online.
Clearly, Internet Services Provides (ISP) benefit hugely from file-sharing. They advertise their services pretty much on broadband and fast download features. That is an example of a new market, a new business that emerged from P2P. Users are willing to pay extra money for guaranteed fast speed connections mostly for download purposes.
New relationships, new markets, and new technology have changed how business is done in the music industry. Innovation and evolution are here to re-define and challenge the usual players, not to create enemies. Do not pit music fans against their favorite artists or lock up college kids in prison, but allow more profitable/extended world tours or to expose new/independent artists to the public.
