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Internet Piracy: Recording Industry Lawsuits

Recording Industry Lawsuits

Eric Garland
Chief Executive, Big Champagne
Thursday, January 22, 2004; 1:00 PM

The recording industry's latest attempt to stop illegal digital music swapping targets 532 defendants, the largest amount of people it has sued so far. Eric Garland, chief executive of Big Champagne, tracks Internet "file sharing" in the United States and overseas.

Garland and washingtonpost.com reporter David McGuire were online Thursday, Jan. 22 at 1 p.m. ET to discuss Internet piracy.

A transcript follows.

Editor's Note: Washingtonpost.com moderators retain editorial control over Live Online discussions and choose the most relevant questions for guests and hosts; guests and hosts can decline to answer questions.

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David McGuire: Hi Eric, thanks for joining us today. Your company, Big Champagne, tracks the usage of peer-to-peer networks pretty closely. What does your research tell you about what effect, if any, the recording industry lawsuits have had on downloading?

Eric Garland: We use an empirical measure -- that is, the number of nodes (people/computers) logged on to file sharing networks simultaneously (at any given time), and the number of files available. By that measure, the rate of _growth_ in file sharing may have been affected, but there has been no net decline in recent months. On the contrary, the popularity of file sharing is at an all-time high.

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Alexandria, Va.: Is your company able to determine the level of P2P use by non-U.S. Internet users?

Eric Garland: Yes. File sharing "know no borders," in a sense. It is a truly global phenomenon, growing in all of the OECD countries dramatically, year over year.

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Ann Arbor, MI: I'm not a huge fan of the RIAA lawsuits, but it seems to me that they don't have much of a choice. These are they only things that have made a dent in the glut of file swapping. You do acknowledge that the suits had some effect, right?

Eric Garland: Yes, clearly the suits have had a tremendous impact, effectively stigmatizing music downloading. The Pew study demonstrated this remarkable and immediate shift. And certainly some segments of the file sharing pop have been deterred in great numbers (AUS head of household, at home users, for one example), but with all the media attention, it seems clear that for every user dissuaded, there is another user (or two!) just beginning to use file sharing software, so there has been an ongoing net gain.

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Springfield, Illinois: To what extent do you think the legitimate music swapping services out there today - i.e. iTunes and Napster - are making honest people out of users of Kazaa and other P2P networks?

Eric Garland: Great question. It is very early to make a prediction, because there are relatively few users of the paid services (iTunes et al) by comparison to the P2Ps. Apple wants to sell 100 million songs in their first year. Conservatively, there are more than ten times that number of songs downloaded every _month_ on P2Ps like Kazaa. What that means is that the legitimate marketplace is still quite fledgling -- even if every single iTunes user were a reformed Kazaa user, you wouldn't see that shift because it would represent a small fraction of one percent. Having said that, though, here's my conjecture: most iTunes users are also Kazaa users, because they are early adopters and online music fans. In other words, rather than thinking that there are two types of people, honest people and scoff-laws, we believe that there are two types of people: those who have discovered online music (in _all_ of its forms)...and those who have not, yet.

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Arlington, Va.: How should people know what numbers or surveys to believe? The RIAA says downloading is down; NDP and you say it is up. What gives?

Eric Garland: Remember the story of the blind men feeling the elephant? The man holding the tail said, "an elephant is like a rope!" while the man holding the ear said, "no, an elephant is like a fan!" Of course, they were both right and wrong altogether.

I think that surveys are in some ways no different. There is truth in every observation, but without a lot of contextual information (or read in a screaming wire story headline -- FILE SHARING UP! NO, IT'S DOWN!), each study becomes meaningless.

Now, having said that, I have seen little evidence that all of these studies are really in conflict:

Survey studies (like the Pew report) tell us that people are no longer _admitting_ that they download when asked by a telephone survey company. This is important, and a win for the RIAA, as it indicates that people now _know_ that the RIAA wants them to cut it out, they have been "educated" and they no longer brag about all that free music. However, this doesn't mean that they don't download, only that they do it more quietly. We call this a gap in the "say/do," and it is typical when it comes to socially stigmatized behaviors like alcohol consumption or illegal drug use. Now music downloading has joined the ranks!

Of course the other broad category of P2P study is empirical: what do we _see_ people doing? Here, companies like BigChampagne and NPD agree, based on similar methods, that file sharing is on the rise. We differ in our conclusions about _why_, however. NPD suggests that file sharing dipped in the summer following the announcements of pending RIAA litigation. We, however, have seen similar declines in use in previous summers (when there was no threat of lawsuits) and believe that perhaps people are just getting a little sunshine in July and August, rather than swapping tunes.

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Washington, D.C. : Seems like the popularity of Tivo and other digital recording devices would have led to the sharing of not just music and movies but also television shows online. Are we seeing that sort of thing happening on the P2P networks, or through swarming technologies like BitTorrent? If not, why not? Thank you.

Eric Garland: Absolutely. Feature film and television are the fastest _growing_ media on file sharing networks. While the number of MP3 files still dwarfs movies and TV, bit for bit there may now be more film swapped online than anything else.

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Arlington, VA: With the use of high speed internet and routers making sometimes 3 computers able to surf the net at the same time, how does the RIAA get an IP address? Don't they change each time a connection is made and how can a distinction be made between different machines on one hub?

Eric Garland: I should be clear: our company does not work with the RIAA in their enforcement efforts, so I have no particular insight into their methods. Your question, however, points to one great difficulty that the industry faces.

In short, I think that a few hundred (soon to be a few thousand) lawsuits are intended to educate and dissuade (like speeding tickets), but it is not their intention to hunt down every last infringer.

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strange question but...: Is there any possibility that there are "secret" or underground p2p networks out there that are doing a brisk business in trading but are unknown to the authorities or the music industry? Sort of like a p2p speakeasy? I guess if there were it wouldn't be a secret, but maybe?

Eric Garland: Certainly. Remember that any two (or more) networked computers can be used to swap files, and therefore there are at least thousands, and likely many more, "mini-P2Ps" that are underground and there to stay. Keep in mind that a great deal of file swapping takes places locally, meaning the users of the network are not even _on_ public internet, and will therefore remain truly anonymous.

Again, I think the RIAA clearly intends to try to reverse the growth of massive widespread online infringement -- this is a war on the scope, not on every last file swapper.

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Waco, Texas: Hi Eric,

Can you talk about some of the less visible methods the entertainment industry is using to crack down on file-sharing, and whether those methods are working?

Eric Garland: Honestly, I don't know much more than what I read in the papers about the so-called "self-help" measures that the RIAA and member companies are rumored to be taking. Certainly no one talks openly about the technology war (bogus files, DOS attacks, etc.).

Users tell us that these methods are _not_ working, in the sense that if there is a demand for a particular popular song, it remains readily available online.

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Arlington, VA: Do you have any opinion on the estimated dollar value loss that the music industry attributes to online piracy? They say you can see it in lost cd sales, etc., but would you say that they're highballing the amount? They quote many millions of dollars. I am just not sure that's true.

Eric Garland: It's a bit like counting angels on pinheads. There is no question that the traditional record business (CD sales) continues to decline.

There are so many obvious contributing factors: pricing, competition from other popular entertainment products like DVDs and games, the ever-shrinking playlists on commercial radio (limiting exposure to new music), the end of the vinyl replacement cycle, limited title availability at retail...the list goes on and on.

Music downloading is certainly a major factor, but it is impossible to put a precise dollar value on the loss. I think intuitively we know that every MP3 downloaded is _not_ a lost CD sale, but that the more songs consumers download, the fewer CDs many of them buy.

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Washington, D.C.: Has your company been employed by the RIAA or similar groups to measure peer-to-peer activity?

Eric Garland: We report on P2P activity to commercial radio groups (we have a deal with Clear Channel division Premiere Radio), with major labels, major label artists, their management -- really every facet of the business has an interest now in what is popular online.

So, we work for (or have worked for) nearly all of the RIAA member companies in one capacity or another, but not for the RIAA. I believe that they are discouraged (maybe even prevented?) from working with companies like ours directly for anti-trust reasons.

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Boynton Bch, FL: Do you, or other organizations you know of, track the very large realm of Internet Relay Chat? In recent years, since a Wired! article called IRC the next big replacement for the original Napster, an extremely large filetrading underworld has grown there, in some places with entire networks dedicated to filesharing.

Eric Garland: I think that a number of the "anti-piracy" technology companies (those that report copyright infringement and assist copyright holders in enforcing online rights) focus on IRC.

Our company is at present focused on the very mainstream phenomenon that is popular P2P file sharing communities, like FastTrack (Kazaa, Grokster), iMesh, eDonkey, Gnutella, etc.

At this point, the behaviors and tastes of IRC users don't yet reflect the mass marketplace. Or, to put it another way, IRC users are often more sophisticated enthusiasts whereas the tens of millions of Kazaa users in this country include the soccer mom, her college-aged daughter, and sis's junior high school baby brother.

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strange question: the sequel: So with the speakeasy concept in mind, would you ever even dream of venturing a ballpark figure about how many file sharers there REALLY are out there?

Eric Garland: Some very good survey work has been done in this area by Ipsos-Insight (formerly Ipsos-Reid) as well as Forrester (we contributed to their last study), among others. In this country, most agree that the _total_ number of file sharers numbers about 60 million.

In our observation, the USA consistently accounts for between 55 and 60% of users worldwide. So sure, I'd venture a ballpark figure: I think there are likely 100 million people sharing files.

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Dulles, Va.: Can illegal file-trading conducted on small P2P networks be tracked?

Eric Garland: Without explicit permission from each user (think of a TV viewing family with a Nielsen box), only public Internet activity can be tracked.

So if you want to swap files locally (sit in the office and swap with your wife in the kitchin), you're probably pretty safe LOL!

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Washington, DC: Other than illegal P2P networks that consume massive amounts of storage and clog up bandwidth around the globe, what else is pushing the demand for internet hardware?

Eric Garland: More than P2P networks, hardware demand is driven by digital media. People like the idea of music, movies and photos that they can acquire online, manage on the desktop, export to portable devices and take on the go.

I believe P2P is really a facilitator, or a symptom of this desire, and a pretty efficient model at that.

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David McGuire: Following on a previous question. Can you quantify for our viewers the growth of file-sharing abroad? How does it compare with U.S. usage?

Eric Garland: Overall, the population of file-sharers in the USA continues to represent just shy of 60% of what we see globally, so the rate of growth in and outside of the US is comparable.

However, I should note that the growth of individual communities like eDonkey, first popular in western Europe, is greatly accelerated. eDonkey is best known for film and television content: the number of simultaneous users has soared from about 600 thousand (Dec. 2002) to more than 1.8 million (Dec. 2003).

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Washington, D.C.: How can the P2P model be adopted by legitimate copyright holders for the distribution of their works?

Eric Garland: This is my favorite question, because I think it leads us directly to solutions to "the P2P problem," which is really just "the internet problem."

We now live in a world where people can and will exchange information, globally and instantaneously. There's no turning back the clock on that.

Now, remember that to a computer, music is just information -- bits and bytes. Unless we unplug the internet (as one music industry executive suggested, facetiously), here's the deal, in layman's terms: stuff is gonna get passed around.

P2P is just distributed computing -- in many ways the internet is just a vast P2P network. Computers are linked (networked) and users communicate. Because of this underlying (scary) fact, the tools of massive infringement also include Microsoft's Outlook (email) and AOL's Instant Messenger (IM). Clearly the technology is here to stay.

So the mandate is clear: _charge_ for the distribution of copyrighted material online without naively believing you can control (or stop) that distribution.

Just think for a moment about the model for commercial radio. The music goes where it will, and artists and other rightsholders get paid.

Thanks for all the good questions.

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David McGuire: Unfortunately we're out of time. I'd like to thanks Eric Garland for taking the time to join us today and our audience for asking so many thoughtful questions.

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