End of piracy lawsuits an early gift to music lovers

For many Americans, it was an early Christmas present.

Friday, the Recording Industry Association of America announced it is ending its five-year campaign of suing people who share music via the Internet.

The RIAA declared victory, but to anyone reading between the lines, the triumphant bluster seemed a lot more like an admission of defeat. Although the RIAA claimed its lawsuits were necessary to save the music industry, no data indicates the suits had any impact on people’s behavior.

According to the Wall Street Journal, the RIAA initiated legal proceedings against 35,000 people — ranging from college students to grandmothers — during its war on music piracy. That number, however, was a just small fraction of the 19 percent of Internet users estimated to have shared music via peer-to-peer networks. So, unsurprisingly, fear of being sued wasn’t much of a deterrent. You might as well worry about being struck by lightning. From 2003 to 2007, that 19 percent figure remained virtually constant, and the number of songs downloaded actually increased.

Most of the RIAA’s targets settled out of court, and, ultimately, the RIAA spent more on legal fees than it recovered from shaking down defendants.

Yet, the RIAA’s president, Cary Sherman, claims the suits were a success. In an interview with CNET.com, he points to the spectacular growth of authorized downloads from for-profit sites like iTunes. But all that proves is that a lot of consumers are willing to pay for digital music — if, of course, the big music companies are willing to offer it.

During most of the past decade, the music industry hurt itself by not selling music downloads. Instead, the RIAA sued Web sites like Napster to prevent people from sharing songs. Then, when peer-to-peer software made it possible for computer users to share music with each other directly, without needing centralized hubs like Napster, the RIAA went after individuals.

When that didn’t work, the music companies finally, grudgingly, started entering into agreements to sell music downloads online, first through iTunes and, later, through sites like Amazon.com and MySpace. But by then, many of that pesky 19 percent were already used to not paying for music. And the music industry had only itself to blame.

Still, selling music downloads has become big business, even as sales of compact discs continue to fall. Who wants a bunch of CDs littering the house when you can store thousands of songs on a computer or iPod?

According to NPD Group, paid music downloads rose 29 percent in the third quarter of 2008 compared to the same period in 2007, with iTunes and Amazon gaining 2.8 million music buyers, or about 15 percent of Internet users, CNET reported. Two major music labels, Warner Music Group and Universal Music Group, reported strong gains in digital sales, with Warner posting a 27 percent increase in the third quarter. Universal reported that its digital sales more than made up for the continued decline in CD sales.

Not coincidentally, as the music industry finally began offering legal downloads, the number of people illegally downloading music finally started to creep lower in 2008, falling to 14 percent, according to NPD.

Does that look like the result of the RIAA’s lawsuits, or the result of the RIAA’s members finally getting around to offering a legal alternative? Consumers aren’t greedy, and they want their favorite music artists to make money, even if that also means giving money to the music labels that wanted to sue them.

Nevertheless, the RIAA says it still plans to send warning letters to Internet service providers when it discovers computer users who are major copyright violators. The RIAA wants ISPs to limit or block Internet access for repeat offenders. But I have to wonder, is an ISP more likely to heed the RIAA or its own paying customers?

Somehow, I doubt the RIAA’s new strategy will be any more successful than its old one. And with legal downloads becoming easier to get, I also doubt it will matter much either way.

Digital downloads remaking music industry

The British rock group Radiohead has found a business model that Priceline pitchman William Shatner could appreciate: name your own price.

Radiohead’s latest release, “In Rainbows,” went on sale this week as a digital download via the Web site inrainbows.com. The band’s contract with EMI having lapsed, Radiohead is cutting out the middleman. With no pesky record label in the way, Radiohead can sell its music however it wants.

And right now, Radiohead wants its fans to decide for themselves what they think the band’s music is worth.

I bet Radiohead makes a mint. In fact, with no record label to take a cut, I bet the band will make more from “In Rainbows” than from its previous releases.

Unlike Metallica, which waged war on the music-sharing Web site Napster in 2000, Radiohead is embracing the Digital Age. If you don’t want people pirating your songs, you’d better give them a reasonable alternative.

Radiohead gets it. The rest of the recording industry doesn’t. The Recording Industry Association of America persists in suing its customers, most recently a Minnesota woman ordered last week to pay an outrageous $222,000 in damages for downloading and sharing 24 songs on her computer.

The RIAA claims illegal file sharing is bankrupting the American music industry and costing people their jobs, although at least one study, by Felix Oberholzer-Gee and Koleman Strumpf published in The Journal of Political Economy, disputes that.

More to the point, the people sharing music online probably are improving the country’s overall economic welfare.

Writing recently at his blog, Marginal Revolution, George Mason University economist Tyler Cowen said, “In the past most people didn't much like or listen to most of the music they bought, or in any case most of the value came from their very favorites. ... So if people can sample music in advance, and know in advance what they will like, music sales will plummet. This will be a sign of market efficiency, not market failure.”

Even if file sharing is costing the music industry the hundreds of millions of dollars the RIAA claims, it’s because most of its music isn’t worth paying for. People sample songs online and download their favorites so they don’t get stuck paying for compact discs containing only one or two good songs.

If the music industry is worried about its profits, it would do well to lower the price of CDs. And musicians would do well to make better music, not just one or two hits per CD for every 10 duds.

But if the RIAA’s member labels are slow to learn, others are eager to drag them into the 21st century.

Amazon.com has joined Apple’s iTunes in selling legal music downloads online. And while Amazon doesn’t have as extensive a music library, it has overtaken iTunes on two fronts. First, Amazon’s music is less expensive. Second, and more important, all of the songs at Amazon are available without Digital Rights Management.

DRM, embedded in most of the music iTunes sells, limits what you can do with your own music files after you’ve paid good money for them. Apple’s Steve Jobs says he wants to do away with DRM, but so far he hasn’t forced the issue. So, the only label to offer DRM-free music via iTunes is EMI, Radiohead’s former label.

But there is still a catch: iTunes charges more for EMI’s DRM-free music.

Still, with competition like Amazon around and bands like Radiohead going directly to their fans, I bet Apple will get the message. Apple isn’t as slow on the uptake as the RIAA.