Internet Piracy Sails On

By Robert MacMillan Staff Writer
Monday, June 13, 2005; 10:21 AM

Combatants and spectators in the Internet piracy war are checking their watches right about now. They're waiting for the Supreme Court to issue a decision that could shape the future of how people in America get their entertainment.

If you're reading this, chances are that the court decided not to release a ruling today in the MGM vs. Grokster case. The court typically releases its decisions around 10 a.m. Eastern Time, and as each week passes without a ruling, everyone with a stake in -- or a beef about -- the case gets a little more nervous.

The ruling is important because it could be the last word, at least for a while, on whether Internet file-sharing networks should be held liable for sucking millions of dollars out of the entertainment industry by creating havens for pirates to swap illegally copied versions of movies, music and software.

On one side, the Hollywood studios and the world's largest music labels say that the makers of file-sharing software should be punished for creating the means for pirates to thrive online. On the other, the software makers say they created products with legitimate uses, even if most people use them to violate copyright law. The artists and consumers, meanwhile, set up camp on whatever side proves most morally -- and financially -- expedient (See our backgrounder on the case).

This, of course, is the traditional summary of where everyone stands. A report just released by the Organization for Economic Cooperation and Development (OECD), meanwhile, says that file-sharing networks are not the sole culprits in the recording industry's problems, and that they could become effective music distribution channels.

"The report said it is difficult to establish a causal connection between the rise of file sharing and a drop in music sales. While the music industry's revenues fell 20 percent from 1999 to 2003, other factors, such as illegal CD copying, might have played a role in the decline, the OECD said," according to an article that ran on today. "The report recognized the value of fledgling online stores like Apple's iTunes. Last year represented a "turning point" for legal music downloads, the study said. However, online music distribution only accounted for 1 to 2 percent of music revenues in 2004. The OECD expects to see that climb to 5 to 10 percent of revenues. But growing online sales will depend on expanding catalogs to appease demand and sway illegal downloads, the OECD said. The report also suggested exploring new distribution methods, beyond what the OECD called traditional... transactions."

That line of thinking would send most file-sharing software makers rummaging for their best digital copy of Beethoven's Ninth. If the Supreme Court decided that their primary reason for being was to enable a crime, their only hope of survival would be to marry their accuser. Several file-sharing operators indeed have tried to persuade some of the big labels to embrace them, but outside the somewhat different case of Napster and Bertelsmann, this has not happened.

Wired quoted Adrian Strain of the International Federation of the Phonographic Industry on the entertainment companies' overall feeling toward file-sharing networks: "The report does not recognize the vast proportion of the use of P2P [peer-to-peer] services that is infringing copyright. ... (It) fails to acknowledge the extent of the damage that this does to the legitimate industry and oversimplifies the issues surrounding DRMs (digital rights management) in the development of the online music sector."

Doesn't sound like peace is about to break out, does it?

You could argue that the entertainment nabobs aren't in much of a mood to parley with anyone when you consider a recent report from the NPD Group that says more people have "large video files" on their home computers. They're probably not home videos either, as the New York Times reported: "Some files might have come from movie-downloading services like CinemaNow, said Russ Crupnick, president of NPD's music and movies division. But others were clearly not obtained legitimately, he said, including many movies not yet shown in theaters. 'You see things on people's computers that there's no legitimate way they belong there,' he said, because they had not yet been commercially released."

It would be interesting to determine what percentage of those files contained the words "Revenge" and "Sith," especially if the NPD Group were spying on Forrester Research editor and publisher Jimmy Guterman. In a piece written for the Boston Globe, Guterman described his quest for Star Wars satisfaction:

"Like thousands of patriotic Americans, I spent Memorial Day weekend illegally downloading a copy of the new 'Star Wars' movie. I was shocked by how quickly I was able to locate a copy on the Net (less than five minutes) and how long it took for the whole thing to end up on my computer (two days and change -- talk about holiday weekend traffic). There were no secret passwords, no locations known only to the cognoscenti. All I had to do was Point, Google, Pilfer."

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