Oct 1, 2003 12:00 PM, By Blair Jackson

Can I please see a show of hands, Mix readers, of how many of you have downloaded and/or “shared” files from sites such as KaZaA, Grokster, Morpheus? C'mon, don't be shy. You're among friends. Everyone does it. Nothing to be ashamed of. Okay…let's see…that's 25, 26, 27….93, 94, 95….

Wait a second! What are those sirens?!! Someone's at the door? Oh shit!

BOOM! BOOM! BOOM!

“This is the RIAA! All you guys with your hands up. Keep 'em up! Cuz you're busted!”

No! Y-y-you can't do this! These are good people, Sgt. Drebbin! They just wanted a little music…(sob, sob)

“Aw, tell it to Carey-Sue Sherman, buddy! In fact, you're comin' downtown, too, Mr. Smart Alec Mix writer. Looks like you're all going to be doing your ‘swapping’ in the Statesville Pen from now on…”

•••

In the months since we published our May 2003 “What Can Save the Music Industry?” issue, outlining some of the problems — and possible solutions — for the widespread economic (and psychic) malaise, there has been a dizzying amount of activity on a number of fronts.

The most visible — and some would say, most disturbing — recent development in the war between the industry and the “pirates” who steal music (and, increasingly, films) from the Internet has been the RIAA's decision to target people who have shared music files online and threaten prosecution. Copyright laws allow for damages of $750 to $150,000 per song, so that could potentially bankrupt many people, if convicted; at the very least, legal fees are likely to be astronomical. So far, the number of people singled out has been infinitesimal in the grand scheme of things — fewer than a thousand, when literally millions of people avail themselves of the free sites — but it has generated a tremendous amount of heat and, of course, publicity. The RIAA is under no illusion that going after individual swappers is going to stop the practice, but the very fact that the prosecutions are happening, and that they seem to be random, has had a chilling effect on many people; no doubt, the main intention of the RIAA move: “Oh, my God, if they're not just going after the big guys, could this happen to me?” Answer: Yes.

Predictably, this has created an uproar, not just among the accused and thousands of others who may be sweating a bit, wondering if their previously unassailable online swapping practices might land them in a heap o' trouble, but among civil libertarians, who cite possible abuses of privacy laws by the RIAA in their zealous pursuit of names and e-mail addresses of scofflaws. In fact, in mid-August, it was announced that the Senate Governmental Affairs' Permanent Subcommittee on Investigations was planning to hold hearings looking into the record industry's war against online swappers. Senator Norm Coleman, a Republican from Minnesota, demanded that the RIAA provide copies of all subpoenas issued to ISPs, asking for particulars about their subscribers; information about how the RIAA was obtaining its evidence against swappers; and details about privacy safeguards the RIAA employs when gathering information in order to protect “the rights of individuals from erroneous subpoenas.”

Coleman said, “Surely, it was not Congress' intent when it passed the Digital Millennium Copyright Act to short-circuit due process protections, relegate a U.S. District Court to providing ‘rubber-stamp’ subpoenas, enable the music industry to collect information about consumers with little or no restrictions, and place numerous average customers at risk of bankruptcy.”

The Senator added that he was concerned that the RIAA campaign could target innocent people — such as parents or grandparents — whose computers are being used without their knowledge for file swapping, and not noted that many people who use the free services are not even aware that they are breaking the law.

Coleman, who was a rock roadie in the '60s, is the latest hero of the anti-RIAA forces, despite his contention that he recognizes “the very legitimate concerns about copyright infringement”: “This is theft. But I'm worried that the industry is using a shotgun approach [to finding offenders].” Boycott-riaa.com has become a clearing house for information about the fight against the industry organization's efforts; meanwhile, the brazen free online swapping sites continue to grow and even trumpet their success: At the top of Morpheus' homepage in mid-August, a banner announced: “113,170,000 DOWNLOADS TO DATE.” What it does not say: “AND NOT A CENT PAID TO ANY ARTIST OR SONGWRITER.”

It should be noted, too, that the vast majority of Congress members strongly support the artists' and record companies' complaints on this issue, and some of them are downright militant on the matter, favoring a major crackdown on the file-sharing sites and/or users. Orrin Hatch — a conservative Republican senator from Utah, chairman of the powerful Senate Judiciary Committee and a recording artist himself — noted at a hearing in mid-June that he endorsed a new technology that gives two warnings to a computer user about his/her illegal online activities and “then destroy[s] their computer. If we can find some way to do this without destroying their machines, we'd be interested in hearing about that. If that's the only way, then I'm all for destroying machines…There's no excuse for violating copyright laws.” He later modified his comments a tad, saying that “I do not favor extreme remedies, unless no moderate remedies can be found. I asked the interested industries to help us find those moderate remedies.”

On the technology front, the PAN Network, which lays claim to being the birthplace of online digital audio (what hath PAN wrought?), recently introduced anti-piracy Web software called Nabster. Once it is installed on a Website, the company's patent-pending Digital Interactive Fingerprinting (DIF) technology imbeds a “digital fingerprint” into a file as it is transmitted to the end-user. According to the Music Industry News Network, the fingerprint is “extremely small and virtually undetectable except by the DIF system as it scans the Internet searching for unauthorized copies of files containing DIF fingerprints. These fingerprints contain a forensic link to the identity of each individual who legally downloads a media file from a site where Nabster is installed. The privacy of each individual is fully maintained unless, and until, a file they legally downloaded subsequently appears on an authorized Website or P2P network.” The company notes that Nabster is not, strictly speaking, a watermarking nor a copy-protection system, but they believe that used with other DRM (Digital Rights Management) tools, it can add more protection for copyrighted files.

The other major development since our May issue has been the rise of bona fide, reasonably comprehensive pay-downloading sites on the Internet, several of which appear to be catching on in a big way, even as the free sites continue unabated. The success of Apple's iTunes, which was launched in the spring and available only to the four or so percent of all computer users who have the latest Apple OS, surprised everyone. According to the company, in the first three months of its existence, the iTunes Music Store sold 6.5 million downloads from its storehouse of about 200,000 songs. The cost per download is $0.99 per song, with many albums available for $9.99, well under the price of most CDs. Additionally, iTunes has managed to snag its share of exclusive tracks, including a live Avril Lavigne package.

With Apple suddenly raking in big bucks and getting so much great publicity, it's no wonder that the action on the PC side accelerated quickly. Launched on July 22 was BuyMusic.com, which offers PC users the ability to download songs for $0.79 to $1.49 and albums from $7.95 to $12.79. The site boasts 300,000 available songs from all five of the major record labels (as well as many indies); so far, early indications show that it is doing quite well.

RealNetworks' Rhapsody claims to have a catalog of 350,000 tracks (and counting with its recent acquisition of Listen.com), including more songs from independent labels and more exclusives than the other services. However, unlike iTunes and BuyMusic, Rhapsody requires a subscription fee of $9.95 per month for unlimited streaming and the right to burn tracks at $0.79 each. MusicNet@aol has a tiered subscription structure based on the differing usage needs, ranging from $3.95 to $17.95 (which includes access to the greater AOL service).

Though it's too early to predict how things are going to shake out in the pay-downloading arena — and whether, as some suggest, other significant players might emerge — there are several issues that are likely to become flashpoints in the war: What sort of burning rights will users have to the tracks from each service? Will it vary from artist to artist? Device to device? Will the variability of pricing of individual songs become more widespread as different artists start to cut deals with this or that service? Will the battle for “exclusives” eventually drive up the price of downloads?

Those last two issues should be watched carefully, because, already, there is intense jockeying to sign up certain artists whose catalogs have not been available for pay-downloads so far — witness the Rolling Stones, who signed a deal in mid-August to make more than 40 albums and some 500 tracks available exclusively to Rhapsody for a period of a few weeks, before the catalog goes out to other pay services. If this sort of dealing becomes prevalent among upper-echelon artists, then it's easy to envision a world where there are high-priced bidding wars for the new songs and albums of specific artists, and the pay sites will most likely begin to pass on the expense of their “exclusives” to the customer; in other words, you might pay more for a track from, say, a new Bruce Springsteen album than from some unknown indie band. It will not take artists long to determine that they can write their own ticket in this world and eventually restructure their contracts with their record companies to give them more money per download. So if Barbra Streisand thinks that she, personally, should get “x” amount per song, then the downloading sites will have to base their own pricing to reflect that. Maybe on a site where there is a fixed low-price-per-song, those Streisand tracks becomes loss leaders; more likely, though, is that everyone will have tiered pricing, just as there is for live concerts. Right now, the labels are bending over backward to get as much of their catalogs online to cash in on this first rush of pay-downloading euphoria. But just watch: It's going to get very strange, very fast. The question then will be: Will pricing policies drive people back to the free sites, which, in case you haven't noticed, still aren't going away?

---

Blair Jackson is Mix's senior editor.