State of the MP3 Address, Part 2

Here’s part two of my article on peer-to-peer networks, file trading and the evils of the music and movie industries from the Yaletown View (and, apparently, the Kitsilano View). As I said last month in the introduction to part 1, my geekier readers are probably more familiar with these topics than I am, but some of you in the general populace might enjoy it:

Last month, I discussed the history of file-sharing from Napster to Kaaza. Additionally, I described the various tactics that the Recording Industry Association of America (RIAA) and the Motion Picture Association of America (MPAA) have used try to put a kibosh on it. From suing 12-year-olds to tiresome ads before movies, the RIAA and MPAA have dealt with Napster and its successors in all the wrong way. They’re employing the same panicked approach that has failed repeatedly throughout the twentieth century. Radio, television and the VCR are all technological innovations that the music and movie industries originally fought, but eventually proved to earn them enormous amounts of money.

Recently, the music industry has finally agreed to offer their customers legal download services. Unsurprisingly, the most popular of these services is offered by a company famous for technological revolution.

The iTunes store from Apple opened about 10 months ago, enabling customers to purchase and download digital copies of songs for US $0.99 each. The iTunes store has sold 30 million songs since it opened. That number sounds pretty impressive, until you consider that that’s the equivalent of about 2.5 million CDs. Or consider that roughly three billion songs are downloaded from file-sharing networks every month. 30 million sounds a drop in the digital ocean.

The iTunes store isn’t available to Canadians yet. However, you may have seen ads for They’re flogging digital music north of the border, and just sold their 1 millionth song. That’s only about 80,000 CDs worth of music. I think Vanilla Ice still sells more records than that.

Part of the problem with these legal download services is something called digital rights management (DRM). To thwart copying, DRM limits how you can use your downloaded files. DRM typically restricts where you can listen to music, how often you can transfer that music among computers and other devices and who you can distribute that music to. DRM is what makes some popular CDs unplayable in computer CD drives, and what prevents you from buying a DVD in Paris, bringing it home and watching it in Vancouver.

As Cory Doctorow, spokesperson for the Electronic Frontier Foundation (EFF), is fond of saying, “no customer got out of bed this morning and said, ‘Damn, I wish there was a way I could do less with my music and videos.’

DRM has a history of failure. The most recent example is floppy disks. In the late eighties, software companies tried to prevent users from copying the floppy disks that contained their products. Often these approaches would render the floppy disks useless, frustrating their customers. Eventually, manufacturers gave up on ‘copy-protected’ floppy disks.

On the other hand, open formats earn companies money. The introduction of the audio tape and the VCR caused great tumult for the music and movie industries. Imagine their surprise when these formats turned into massive new revenue streams.

So, if legitimate DRM-based download services aren’t the right approach, what is? Consumers continue to illegally download files, and corporations continue to sue them. How do we break the cycle?

The EFF has an idea. They want consumers to receive the same kind of deal that radio stations enjoy. They want consumers to pay a small, monthly ‘voluntary licensing fee’—say, US $5—to the music industry. In return, file-sharing music fans will be free to download whatever they like, using whatever software works best for them.

This approach has appeal for everyone involved. Consumers no longer have to fear litigation, and can build deeper, more robust file-sharing networks than ever before. The RIAA receives brand-new, recurring revenue, and doesn’t have to waste more resources penalizing their customer base.

The EFF is throwing around some pretty heady numbers. The estimated gross revenue of the recording industry is about $11 billion. If the 60 million Americans who currently use file-sharing software paid US $5 a month, it would translate into $3 billion of pure profit—no CDs to ship, no online retailers to cut in on the deal, no payola to radio conglomerates—for the music industry. Clearly, not all 60 million people are going to opt in. If one-third of file-sharing Americans bought into this service, that’s $1 billion in net profit. People are willing to pay for music—they’ve been doing it for 100 years.

With every revolution in technology, the entertainment industry has had be dragged, kicking and screaming, to the money tree. Though their unwillingness to learn from past mistakes is astounding, I’m hopeful that someday soon they’ll recognize that file sharing is a blessing, not a curse, for their industry.

Written by dbarefoot

Darren Barefoot is an author, speaker and digital strategist. He’s the co-founder of Capulet Communications, and co-author of “Friends With Benefits: A Social Media Marketing Handbook”.


  1. Wow. You must spend quite a lot of your evenings on that PC of yours Darren. Do you write for any newspapers ?

  2. There is another aspect to sue-’em approach of the record companies and artists that want to clamp down on file trading. Yes, it’s mostly about the money, but it’s also about control. As a user of peer-to-peer services, one of the best things I liked about Napster in its heyday was how easy it was to find unreleased tracks, demos, bootlegs, and all sorts of other material that the original artists probably didn’t authorize for public consumption.

    Even a flat-fee system such as the one we’re talking about here doesn’t address that issue, nor mash-ups like Danger Mouse’s famous Jay-Z/Beatles “Grey Album,” which the Beatles’ Apple Corps company didn’t license music for.

    Now again, as an end user, I may not care about that, but some artists do.

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