Parks Associates Blog

Friday, October 05, 2007

Music & Lawsuits

With the first court-case over file-sharing now on the books, Parks Associates thought it would be appropriate to make a few observations about music piracy and the music industry. Here is the take from two of our analysts:

John Barrett

The RIAA’s efforts have made a difference. Relative to other countries, the U.S. has been a success story in terms of anti-piracy efforts. A substantial number of consumers habitually download pirated tracks (~20% of broadband HHs) but the number habitually purchasing legitimate tracks is comparable. This stands in sharp contrast to Canada where the copyright laws have made it difficult to prosecute file sharers. There, the number of consumers downloading pirated tracks far exceeds the number making purchases.

The RIAA needs a long-term strategy. There should be no delusions that a barrage of lawsuits will provide a permanent solution; piracy will persist indefinitely. Music sharing is not a new phenomenon; digital technologies have simply made it easier and improved the quality of pirated copies. The music industry should thus consider the long-terms costs and benefits of pursuing legal action.

A multi-pronged approach to piracy is necessary. Since it is only feasible to prosecute a small percentage of all file sharers (the total number exceeds 14m HHs), the true value of the lawsuits is their psychological impact i.e. the extent to which they scare consumers into using legitimate services. News reports and high-profile cases thus help fight piracy by raising awareness. Yet lawsuits will become less noteworthy over time (they are still something of a novelty today). This will reduce their effectiveness in combating piracy and make it all the more important for the music industry to have alternative means of fighting piracy such as public awareness campaigns that stress the economic consequences of piracy and free, advertising based music services which provide a ‘costless’ alternative to piracy.

Harry Wang

The lawsuits won't solve the problem: The lawsuit is largely a PR effort of the music industry to warn those file-swappers to stop or reduce file-sharing activities. RIAA expects neither the file-sharing activities to disappear nor the fines and compensations to re-coup the industry's lost revenue.

The legal action on individuals is not the best approach: The lawsuits sadly put individuals under the media spotlight. Choosing legal action targets based on file-swapping volume without considering individual's unique circumstances could rally public sympathy to the defending individuals and damage RIAA's public image further, if the trade group does not handle the situation carefully. for the industry to stop illegal activities, the best approach is to target illegal file-sharing networks through international collaborations on copyright law enforcement, but different interpretations on copyright protection in different countries make such efforts slow going. Pursuing individual violators is the last resort perhaps even in RIAA's mind, but lack of more effective alternatives in the near-term, the RIAA has to pick up this weapon.

The long-term solution for piracy requires a basket of steps: 1) put content protection on CDs or find a way to prevent music tracks from being massively uploaded to file-sharing networks, so future music tracks will not easily find way to the file-swapping networks; 2) give consumers more options to enjoy music through a wide variety of digital music distribution channels (copy-protected); 3) collaborate with international community to curb piracy on a global scale. 4) educate consumers to respect copyright and get used to copy-protected content; and 5) closely monitor the music industry for any violation of DRM abuse cases.


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