Triple setback for music giants' global jihad

Neither sticks nor carrots are working

The music industry's war on file swapping has suffered major three setbacks in recent weeks, and today's rebuff by a Canadian federal court is only the latest tactical defeat.

We're now seeing indications that not only are the legal threats not working, but neither are the carrots of "legitimate" music download services, which even after a year of hype, comprise less than half of one per cent of the "illegal" P2P downloads every day.

Earlier today, the music industry's global enforcement body the IPFI, of which the RIAA is a member, said it is threatening to sue over two hundred file swappers in Europe. The IPFI has targeted 120 alleged P2P users in Denmark, 68 in Germany and 30 in Italy, using a combination of cease and desist letters, direct copy infringement claims and reports to the police, we reported.

But in Canada, where 29 people have been targeted, the jihad has already hit a bump. On Wednesday a Federal Court judge ruled that use of the Kazaa P2P network didn't constitute copyright infringement, against the wishes of the plaintiffs, the CRIA (Canadian Recording Industry Association), which had sought to identify the users.

"No evidence was presented that the alleged infringers either distributed or authorized the reproduction of sound recordings," Judge von Finckenstein decided. "They merely placed personal copies into their shared directories which were accessible by other computer users via a P2P service."

The ruling is the third major setback for the music giants in recent days. A study released on Monday showed that peer to peer file swapping network don't harm CD sales, or at best, have a negligible impact. Professors Oberholzer-Gee and Strumpf concluded that it takes 5,000 downloads to reduce CD sales by one.

A study conducted two years ago attributed the decline to lower production; music sales typically fall when the economy is doing poorly, and consumers have less discretionary spending. In fact, a 2002 survey by Forrester Research reached the same conclusion and urged the labels to monetize the P2P networks and increase playlists.

Earlier this month, Apple said that its iTunes Music Store would miss its target of 100 million music downloads by between 30 and 50 million. This and similar services such as Napster are the preferred options of the pigopolists: but for every song purchased and downloaded from iTMS, 260 are downloaded from the P2P networks, according to the RIAA's own figures. And despite an avalanche of press for the new DRM-encumbered services, and the threat of fines, the number of P2P users is again on the increase.

But most ominously of all, a survey by Ipsos-Insight reports that 22 per cent of US downloaders over 12 had bought music last year. Which shows that people have tried the new 'legitimate' online DRM music services and found them wanting.

By emphasizing threats and litigation the music industry is risking a long-term backlash when different compensation models are eventually introduced.

We wrote about two such models recently, from Jim Griffin and Professor William Fisher at Harvard, who discussed a range of flat-fee options. Both would involve de-criminalizing what the industry calls 'piracy' on order to ensure the artists get paid. Professor Fisher's detailed plans factor in a loss of 20 cent to download music sales. But if the industry is not losing sales to downloads, or if it's losing sales due to its own incompetence, the public is far less likely to want to compensate it at all.

If the RIAA and globally, the IPFI, can convince us that they best represent artists in the digital age, they may be yet earn that role. But if the public concludes that the record biz is looking for corporate welfare, it may be a case of the boy who cried wolf once too often. ®

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