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The Digital Rights Debate

Wayne Rosso
president of Grokster
Tuesday, June 24, 2003; 10:00 AM

Wayne Rosso is the president of Grokster a West Indies-based company that offers free peer-to-peer file-sharing software. Founded in 2001, Grokster estimates that it has more than 10 million users worldwide. Rosso will discuss the state of online music, the rise of Apple's iTunes and other pay services, and the future of file sharing.

Rosso took your questions on Tuesday, June 24. washingtonpost.com tech policy reporter David McGuire moderated the discussion. 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 Wayne, thanks for joining us. You and some of your colleagues successfully fought off a recent legal attack from the recording industry. Could you tell us a little bit about that case, what the judge ruled, and where things stand today? A federal judge cleared the entertainment companies' bid to appeal this week, right? Wayne Rosso: Thanks, Dave. Happy to be here. In regards to the case, the judge determined that Grokster software was no different than a VCR in that the technology has enough substantial uses other than copyright infringement to hold that Grokster is not liable for any infringement on the part of its users. Just as Sony is not responsible if someone uses one of its VCR's to make illegal copies of a movie. However the judge ruled taht the person who does use the technology for infringing upon copyrights can be held responsible responsible. The case has been cleared for appeal and is set for the 9th Circuit. We're very confident that we will prevail on appeal as well. Overall, I'd rather be in our position than in that of the RIAA & MPAA. They have an uphill battle and we're winning.

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Washington, DC: This week's circular for computers on sale at the local retailer pushes the high-end machines as well suited for downloading music. How big a factor in clogging up chips and gobbling up storage has free music been in the growth of the desktop hardware market?

It is my understanding of copyright history that the biggest factor in protecting copyrighted material is the ability to package the work into a "container" that can't easily be copied and to keep the price low. For example, the quality of duplicated VHS cassettes, cassette tapes, and books are far below the licensed products available for sale at a price which makes bootlegging on a large scale unprofitable. By contrast, I can't buy a copy of Bobby Darin singing "Beyond the Sea" for anthing less than $17.99. But I can buy a desktop for under $500.00 that'll get that and a whole bunch more other stuff for free. So why do distributors fuel the piracy boom with high prices?

Wayne Rosso: Well, it not just music that's fueling at CPU upload. You must bear in mind that the faster that machines become, the more powerful the software must be to run on those machines and thus the bigger the program which takes up more hard drive space. It's a neverending arms race.

Your question is simple. The copyright holders feel that they are losing so much revenue to downloaders that instead of embracing the technology, their only answer is to raise prices to compensate for their losses. They just don't understand that the Internet is a volume business and that if you lower prices for online sales you'll make up for your losses in the increased volume. Plus they have an overiding desire to control the distribution channels, which they can't do on the internet. They're perplexed.

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Washington, DC: You guys won the first round in court, but you don't really expect to beat the RIAA's lawyers at their own game, do you? I'd imagine they can drag this out and bleed you guys dry, whether they win or lose.

Wayne Rosso: Well....its up to the Supreme Court as to who will ultimately win, if it goes that far. Make no mistake. There is an end in sight to the legal fight. And we will prevail.

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Kissimmee, FL: I read something a little while ago in which a peer to peer provider had to give up the name of a user who was downloading. how do you feel about that and would you do it?
Thanks

David McGuire: I think this question refers to the case in which Verizon and Earthlink were forced to turn over to the Recording Industry Association of America (RIAA) the names of subscribers using peer-to-peer services. How does that tactic effect you?

Wayne Rosso: I think that its terrible. Fortunately, Grokster is in no position to identify any of our users. The action was based on a law called the DMCA, which many scholars feel is totally unconstitutional. I suggest that you contact your congressman and senators and demand that they repeal the DMCA.

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Mi Wuk Village, California: Have you read the book All the Rave, by Joseph Menn, about Napster? If so, can you comment on its accuracy. Its getting very mixed reviews on this issue on Amazon.

Wayne Rosso: haven't read it yet.

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Baltimore: Who are your "allies" in the technology industry?

Wayne Rosso: Good question. They're afraid of us. They're wimps.

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Washington: Do you ever feel guilty? I know a lot of small-time artists who lose money (and maybe a meal) when someone downloads a song instead of buying it. It's pretty obvious that the success of downloading is eating into record sales. Does that bother you?

Wayne Rosso: Not at all. We don't do the downloading or copyright infringing. It's the users who do. And most indie artists are dying to have their music downloaded. We at Grokster offer space on our start page, which is very valuable and that we could sell for lots of dough, to indie artists for free. I don't feel guilty about that at all. We do everything that we can to help the indie artists and record labels.

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Bethesda, MD:
Ummmm, How do you guys make money? Does it have anything to do with all those nasty little parasites that you dropped on my computer when I signed up for your service?

Wayne Rosso: yep..afraid so. what do you want for nothing anyway? we have to make some money in order to stay in business so that you can have the right to share files. we'll be offering an ad-free and adware free version for sale soon.

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David McGuire: I know the subpoena offensive by the RIAA doesn't relate to you directly, but are you concerned that it could cut into your user base, if a few big name ISPs start forking over the names of their customers who share files? Wayne Rosso: not really. they can't subpeona 57 million users in the US and there seems to be safety in numbers for the users. Plus, our users are fearless. And they're much smarter that the RIAA will ever be!

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Billings, Montana: I use KaZaa all the time (sorry Wayne) and have almost stopped buying CDs. I just don't see the point. If someone builds a better product, I'd be stupid not to take advantage of it. Why should I care what happens to a multimillionaire rock star?

Wayne Rosso: I ask myself the same question often. It's very hard to sympathize with a spoiled rock star. But you should buy your music. It's just the right thing to do.

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Dupont Circle: But P2P digital filing it -not- like Sony and VCRs, because serial copies can be made without degradation in quality. Doesn't it matter that behind RIAA, the MPAA, and corporate rights-holders are artists who need income and royalties? Copyright was put into the Constitution as a way to preserve the rights of artists. Is there any concern that this will force out the untested, struggling musicians and artists?

Wayne Rosso: We believe incopyright protection. I do not believe, however, in the content holders campaign to control those copyrights in perpetuity and to keep them from entering the public domain. I don't know about you, but I happen to like that fact that I own the works of Shakespeare and Melville. They are trying to rob us of our culture.

And no. P2P offers a very powerful distribution tool that is a blessing to indie artists. We are a boon for them. Not the opposite.

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Conyers, Ga: Mr. Rosso , I was wondering how services like yours continue to remain open after peer-to peer providers like Napster get shut down? Is there a difference between what you provide and what Napster did or is there some loophole in the laws?

Wayne Rosso: No loophole. Napster had a central server where they could keep track of all of the files tradede on their system. Thus they had the ability to filter out copyrighted works. We do not have a central server and do not have any knowledge of who our users are and what they're tarding on the network.

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Alexandria, VA: You say that you aren't the one doing the downloading or breaking the law - that's your users. But we all know what people are using your service for. Aren't you just closing your eyes to the obvious so you can turn a buck on somebody else's work?

Wayne Rosso: We're notg turning a buck on someone else's work. We make money from people downloading our software. Just as Sony makes money off of selling a VCR to you, if you choose to run off multiple copies of a movie and sell them, we have no knowledge or responsibility for that and we don't make a nickle from you.

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Stinson Beach, CA: Do you believe artists should be able to earn money from their recorded music, or do you think the very idea of copyright has been outmoded by the Internet?

Wayne Rosso: I by all means that artists shoudl earn money from their work. I just feel that copyright law needs to be updated for the Internet and that copyright owners, most of whom are multinational corporations, need to own those copyrights forever.

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David McGuire: That's an interesting technological distinction between your service and Napster. Does not having a central server affect the functionality of your service, or was Napster just naive to bring those files in house? Wayne Rosso: Napster was first generation. It was precisely due to the fall of Napster that etchnologists started thinking of building networks that do not need central servers. And our service not only doesn't need one, but works wonderfully without one!

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Alexandria, Va.: I don't buy your legal argument. No, your service doesn't commit music piracy. Yes, it can be used for LEGAL purposes. But your users certainly use it to steal copyrighted material. Your argument sounds like the NRA's -- Grokster doesn't steal music, only thieves steal music...

Wayne Rosso: Funny. I call the RIAA teh NRA of show business. If you believe that, then give back youyr VCR.

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Baltimore: C'mon Wayne, aren't Intel and the other hardware types in your corner on this one?

Wayne Rosso: Not that I know of, I'm afraid. And I'd tell you if they were.

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David McGuire: A viewer asked about the ethics of file sharing. Notwithstanding your beef with the recording industry, do you worry that some of the smaller artists you mentioned are getting squeezed between file-swapping services and the recording industry business model? Do you think you have any responsibility to help alleviate that pressure? Wayne Rosso: We ceratinly trying to help the indie artists in every way possible. We never charge an indie artists a dime for any promotion or marketing that we do for them. We did a very successful promotion for Insane Clwon Posse which was credited for the first week chart success of that last album and did not charge them a penny. If we do that for ICP, we certainly do it for smaller artists.

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Fairfax, VA: How can you believe in Copyright Law in America? Everytime a big company like Disney wants to hang to its Mickey Mouse Copyright, it tramples through Congress and the Constitution.

Wayne Rosso: I agree with you. But Copyright do have to be protected. Imagine if it were you and your copyright was being stolen. You'd be pissed. But the user has rights too. And that's what's being trampled.

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Arlington, Va.: What do you make of the demise of Napster? The company is apparently in a dormant stage, waiting to re-emerge as a pay service. Is its potential rebirth going to impact your file sharing service?

Wayne Rosso: I doubt it. I think that many people will go there expecting the old Napster and when they find that its a pay service will leave. It will certainly be successful at first, just due to the curiousity factor. But then it will die down because it will be just like every other pay service. What's the big deal?

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Free the Mouse!;: Perpetual copyright is not a good thing. But many things traded over file-sharing networks are not Shakespeare or Melville, so that justification falls flat. What would you propose as a compromise between the different stakeholders?

Wayne Rosso: compulsory licensing. Funny. If you own a beauty salon and play the radio in it, they force you to buy a license.

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Washington, DC: Your arguement is identical to that of the NRA. Grokster doesn't steal music, only people steal music. But Grokster and handguns make stealing music and killing people a lot easier.

Wayne Rosso: The same applies to a VCR. So get rid of your VCR if you feel that way.

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Burke, Virginia: I have yet to download music or movies, but hear your company's name lumped in with Napster and Morpheus. Are the services similar?

Wayne Rosso: Essentially, yes. But unlike Napster, we have no central server and have no control over the network. If we were to stop distributing Grokster today, the network would continue on.

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Arlington, VA: The pay services really seem to compete on features and prices. How do you compete with other file-sharing services? From what I've seen one's the same as the next.

Wayne Rosso: Well, there are huge technological differences. There's no question that the network that we're on is far faster and more reliable than Gnutella.

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DC: I am independant musician, who had a popular download on Napster a few years ago. We gained no more success from the free distribution online, and at the end of the day, I still feel as if my music was essentally stolen from people sharing files online.

How can you look artists in the face (probably you don't even bother) and basically steal their hardwork? It's incredibly hard for the artist (not talking about the record labels) to make money - even popular artists. Your technology enables people to steal.

Doesn't this bother you?

Wayne Rosso: Once again, we have no control over how people use our software. Your beef is with the users. If a person makes a several copies of your CD and distributes it amongst their friends, are you suggesting that we go into that person's home and seize his computer or CD burner? The root of the problem is the CD burner, or more specifically ripping software (note Roxio was never sued). Without those tools no files would ever be availble for tarding to begin with.

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Arlington, Va. : I saw a story recently that said Kazaa wants to be the official online distributor for the entertainment industry. Any chance it'll succeed?

Wayne Rosso: slight. they've pissed off too many people.

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David McGuire: Some of our readers raise a good point. It's kind of tough to tell one P2P service from another. How do they differ (technologically, legally) and why should users shop around? Wayne Rosso: they basically are either on the Fasttrack network, which Grokster is, or Gnutella. Peopel will generally use more than one program. If they can't find a file on Beashare, they'll usually find it on Grokster. or vice versa.

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Portland, OR: Do you think any P2P service has a chance of attaining legitimacy by linking with the record industry?

Wayne Rosso: yes.

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Washington, DC: No, I'll keep my DVD player that cost me $60. I don't have a problem with Grokster or handguns, except that like music, good handguns cost too much too. All these laws to protect people just end up costing the average consumer more somehow.

It's like safety and protecting people have become a license to steal. Why won't the recording industry license their songs through an online jukebox service? Those pennies would really add up for the one-hit wonders who are well into retirement now.

Wayne Rosso: Well said. And that's something that I've been arguing for quite a while now. It's just that record companies have buried their heads in the sand for so long that its ruining their business. I'm a firm believer in government enforced licensing at a reasonable rate so that the copyright holders are renumerated and that teh consumers win as well with reasonable prices. CALL YOUR CONGRESSMAN AND SENATOR!!!!!

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David McGuire: Wayne, I've heard you talk about some sort of ISP tax that would compensate artists when their songs are downloaded over free file-sharing services? How would that work? Is it realistic to suspect such a scheme could be enacted? Wayne Rosso: Unfortunately the entertainment lobby is so person that it will be very difficult to do this. But there are several alternatives. One is a minor "tax" of say $1 a month on every internet users bill to cover the costs of downloading. That money would go into a fund to be administered much the same as ASCAP or BMI work. There are many other solutions as well. But nothing beats a blanket compulsory license. P2P should be licensed just like radio is.

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Somewhere, USA: I'm crazy about Grokster, but I'm worried you guys will go the way of Napster. How are you doing in your battle against the recording industry goons? I know you won one case, but it seems like they'll stop at nothing to either shut you down on clog your service with junk.

David McGuire: This viewer raises another interesting point. Outside of the courtroom, what tactics have the recording industry used against your service?

Wayne Rosso: We have some surprises in store for them. :-) And the P2P's are organizing a lobbying effort in Washington. Stay tuned for the announcement sometime in July or August. We'll need your support!

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David McGuire: Could you elaborate on your answer to Portland? How would a P2P service cross the divide to link up with the recording industry? Wayne Rosso: Given the court decision in our favor, I look upon Grokster as being the plumbing pipes in a house delivering the water. A paid service could ride within Grokster that would be the bottle of Evian sitting next to the kitchen sink. We could offer, and encourage, users the ability to buy the music they want. They could sample on Grokster and buy on Grokster. we'd love to offer the users such a service. And we'd make it hipper than iTunes.

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DC: Fair use laws generally only extend to making mix tapes or CDs - not copying entire albums to distribute for free. If the software industry can seize computers of those who steal software, then yes, I believe that right extends to the music industry.

Generally when people share music with their friends, a personer connection is made to the music and hopefully an artist gains a new fan. But file sharing online de-personalizes the experience. No one gains anything but the theives how download the music. Don't you think your company assists these theieves?

Wayne Rosso: No more than Sony assists people in illegally copying Columbia Pistures' movies.

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David McGuire: I'm sure you've watched with interest as Apple's iTunes service has attracted business and generated media attention. What do you think of the new breed of pay services? Will they grow to mount a legitimate challenge to peer-to-peer networks? Wayne Rosso: Frankly, I hope that they do gow and prosper. It would be good for everyone. Although I don't feel that they will ever pose a seriosu threat to P2P. It's just too powerful a technology and you can get so much legal material on them that you can't find elsewhere.

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DC: Apple is gaining much success from the launch of the iTunes store. It would seem that given an OPTION people won't steal music. So, how can you say that your service doesn't assist people in committing a crime? You could have just as easily launched a pay-per-download service.

Wayne Rosso: Not so. We've tried for a very long time and the record companies would not talk to us let alone license to us. We would love to offer our users a paid service as well.

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Arlington, Va.: Do you think the days of free filing sharing are numbered? It seems that there is more pressure from the music and recording industry and from congressional lawmakers to blast file-sharing -- unless it is a paid service.

Wayne Rosso: I don't really know the answer to that question. But we're winning the legal battle, and we're taking the fight to Capitol Hill. There are bigger issues here than file sharing....it also pertains to your individual rights. And copyright holders are trying to trample on them. Please contact your congressman and senators and tell then to lighten up.

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Lansing, MI : Hi, I was just curious as to whether you think that peer to peer sharing (free of charge) will ever stop?... With all the legislation going on recently, it seems like the end is near... I am just not sure how they will ever be able to to stop it completely. What are your thoughts?

Wayne Rosso: The genie is out of the bottle. You can't outlaw an entire technology. Bear in mind that the US Military used P2P technology on the ground in Iraq during the war

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David McGuire: Unfortunately, we're out of time. I'd like to thank Wayne Rosso for joining us and our viewers for submitting so many thoughtful questions.

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