File Sharing's Future

In the wake of the Supreme Court's Grokster decision, peer-to-peer music file sharing companies are either going legit or dying off. Washington Post staff writer Frank Ahrens was online to discuss the trend. He examined the issue in an article on Saturday .

A transcript follows.

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Frank Ahrens: Greetings, all.

Thanks for tuning in today.

Last week, I wrote about the changing landscape of the peer-to-peer file-trading services (P2P for short) in the months following a summer Supreme Court decision that said they are liable for the criminal activity of their users.

In lay language, that means if you download copyrighted songs without paying, not only can the music industry sue you, they can now sue whatever Web site you use--Kazaa, LimeWire, Grokster, and so on.

This is akin to the music industry persuading the federal government to shut down the original Napster back in 2001, which gave rise to these P2P networks.

So, in headline-ese, the Empire has Struck Back again.

Let's go to your questions and comments.

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washingtonpost.com: June Supreme Court Ruling Taking Toll on Music Sharing (October 1, 2005)

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Washington DC: Frank - Thank for the very informative article. I'm curious - do you think that backbone network providers should be held responsible or liable in anyway for this type of activity?

Frank Ahrens: I don't think, I'm just a reporter.

Hahaha!

I will tell you what the Supreme Court said: The P2P sites argued that they are no different than VCRs that people use to tape their favorite shows, which is covered under the concept of "fair use." Their precident was the so-called Betamax case of 1982 (I believe) when the Supreme Court said the intention of these new recording machines was not to break the law.

However, the music and movie industry argued, and the Supreme Court eventually agreed, that it's hard to thing of NON-illegal uses for P2P networks, therefore Betamax does not apply.

I think P2P networks will, in the future, have tons of non-infringing uses, but right now, they are used pretty much for swapping movies and music which generally are copyright-protected.

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Alexandria, VA: Hello,

Would you happen to know, what the price would be for file-sharing services in case P2P's go legal?

Thanks,

Frank Ahrens: I wouldn't but I could wildly speculate, so here goes.

There are a couple of models. Recently, an Internet service provider in England struck a deal with Sony-BMG so that new broadband customers are allowed to use the pipeline to download movies and music from any source--iTunes, Grokster, legal, illegal--and they pay a monthly fee for the content as part of their bill to the Internet service provider.

Or, they could follow the micro-payment model. Some P2P advocates think that in the new world, Apple's iTune's price of 99 cents will seem too high.

Possibly, it will break down into a subscription or a la carte plan, much like the current legal services.

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Melbourne, Australia: The prospect of these P2P services going legit will cause inconvenience in the short run but no great disadvantage in the long run. Users who are willing to pay for their downloads will go legit along with the new services and those who are not willing to pay will simply migrate to other P2P networks that either based in other countries (bittorent) or networks that are not centralized at all (limewire/gnutella). By crushing the for-profit p2p companies, the music industry will only encourage non-profit open source projects that have no single organization to sue. As long as the law is biting technology's dust, consumers will be the winners.

Frank Ahrens: Good point.

And it's worth noting this comment comes from Australia, home of the Sharman Networks, parent company of Kazaa, which has been the most popular P2P network over the past couple of years.

Yes, there is a jurisidictional issue. The U.S. has been the leader in enforcing intellectual property rights simply because it has so much to lose--entertainment is a significant part the U.S. export market.

But the movie and music industries have begun to be more successful getting foreign governments to play along. The movie industry has an office in Asia headed by a former Scotland Yard cop whose job is to investigate pirate operations and persuade local officials to go on raids.

And in your country, Melbourne, a court recently ruled that Kazaa IS responsible for the criminal activities of its users.

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Berkeley, Ca.: As a record producer who's produced a bunch of albums for major labels and indies, I can say from personal experience that P2P networks rob me and bands of money. In 2000 after having finished an album for the group Third Eye Blind for Elektra Records -who by the way is now out of business].We paid to have the number of illegal downloads tracked. That week we sold 30k records and had 300k file "sharing" of the single. And that was back in 2000 when stealing was just starting to be popular. I also produced the album "Spend the Night" for the Donnas on Atlantic records, one of the most downloaded albums of 2002/03,yet the album only sold 430k copies. Just under the amount were the group and I begin to get paid royalties. I'm sick and tired of hearing other people say that they are somehow entitled to mine and others hard work. It's real dollars for guys like me who make a living on the royalty system and when you don't pay for our work you are stealing from us. Call a spade a spade, who wants to pay for anything if you can get it for free right in your own home? Go try that with a doughnut from 7/11 or on a biker plumber who you called to fix your toilet. It's simple, stealing is when you take something from someone who wants money for it and you don't pay them Jason Carmer

Frank Ahrens: Thanks for the excellent comment.

There is a perception among habitual song-stealers that they are sticking it to the Man, or getting back at record companies that have been gouging them on CD prices (indeed, a number of labels did settle a price-gouging charge a couple of years ago) but the problem is that it equates to random redistributive justice.

Here's a for-instance:

One night when I was back in college, some guy on the dorm floor burst into the TV lounge and announced, "The Coke guy forgot to lock the machine!"

Kids in the lounge did not run to the machine; instead, they ran to their rooms, grabbed their PILLOW CASES and then descended on the Coke machine, emptying it in seconds like locusts.

As I was a budding journalist, I observed and asked questions: "Why are you doing this?"

The answer was unanimous: "You know how many times I've lost money in a Coke machine?"

"This Coke machine?" I replied?

"No, but that's not the point," came the logically impaired answer.

Of course, it was the point. The victim of that Coke robbery probably wasn't Corporate Coke; it was probably the poor schmoe who stocked the machine and had to make up the difference out of his pocket.

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Louisville, KY: Have you heard of the major records labels wanting to increase prices of popular iTunes downloads? Can you think of a better way to encourage more people to go straight back to other P2P services or BitTorrent? Do you think the major media companies will ever realize that people will be willing to pay for DRM-free downloads and the ability to use their paid-for content in any way they wish?

washingtonpost.com: Apple CEO Against ITunes Price Hike (September 20, 2005)

Frank Ahrens: I haven't heard that but it wouldn't surprise me.

When iTunes sells a song for 99 cents, 70 cents is paid to the artist's record company. The artist typically gets 10 to 15 cents; the songwriter, about 8 cents.

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Washington, DC: The article dealt with the issue of movies and song being shared, however, i was wondering what the standing is for TV shows that are airing. Am I allowed to D/L a TV show that just aired, by which I mean an all-new episode, since that would be equivalent to using a TiVo or recording to a VHS?

Frank Ahrens: See, this is a good point about how technology can make the law murky.

This is interesting: No court would say you are not allowed to tape or TiVo a show...that is fair use.

And obviously networks and producers would be unhappy if you got hold of the next episode of, say, "Lost" before it hit the airwaves.

If I were the Supreme Court (and what a notion THAT is), I would say that your download of an already-broadcast copy of a television show that was available over the air for free, especially, or on basic cable (my fellow judges are telling me to hold back on premium cable services, such as HBO), and you use it only for your personal use, then you don't have to go to jail.

Solomon-like, no?

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Los Alamitos, CA: Why do you think the ruling will cause Illegal filesharing to fade away or go legit. Don't you think new and more secretive and powerful methods for illegally downloading files will arise?

Frank Ahrens: The market is like water--it finds all cracks.

Here's a dirty little secret: The movie and music industries don't mind P2P networks as long as their are not easily searchable. If you can sit down and type in "The Matrix" and within seconds you have dozens of high-quality digital files of the movie, they hate that.

If there is a P2P service that makes you hunt and burrow for content, that is believed to discourage the casual user, which is where the big damage is done.

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Sao Paulo, Brazil: Record makers could strongly encrypt their music. That they do not suggests to me that there is more profit in selling stealable music than in selling non-stealable music. Isn't strong encryption the way for them to go, anyway?

Frank Ahrens: Well, it's a fine line.

Music companies know that if they lock down their music, it will have negative consumer backlash. They'll look even more like The Man and they think that will drive consumers more to the P2P option.

So they are trying some "managed copyright" CDs that add some more content and let consumers share the songs to a point, such as, you can e-mail the songs on your CD to a friend's computer where they live for a while then die.

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Vancouver, Canada: Do you think the music/movie business will go after Microsoft and other company that allow file transfers via chat programs like MSN?

Frank Ahrens: I think Microsoft is too big and powerful of an ally for that.

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Annapolis, MD: Who exactly is liable for what happens to downloaded content? I thought that the modern peer to peer networks consisted of only programs and direct links, is it now punishable to write software that allows two people to share data?

Frank Ahrens: The Supreme Court's June ruling said that P2P services such as Kazaa and Grokster are liable for the potential criminal activities of their users. Justice Breyer called free song-swapping "garden-variety theft."

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Sao Paulo, Brazil: Frank --

Skype is a P2P program that can be used to send files. I would imagine that Skype, if accused, could make use of the Betamax defense. Don't you think?

Frank Ahrens: Another good legal question.

I would like to see the numbers of customers who use Skype for telephone service as opposed to swapping copies of White Stripes albums.

I imagine that, if legal action were brought against Skype, it would argue that it is primarily a phone service whose dominant activity is not the sharing of copyrighted material.

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washingtonpost.com: At a Glance: MGM v. Grokster

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Louisville, KY: Digital music is a tricky field for all parties involved. However, recent moves by record labels -- DRMed music, DualDisc "CD's," aggressive litigation -- have made me feel less like a consumer and more like a criminal. If the product I'm being sold has a myriad of "don't steal this" logos on it, I'm less likely to buy it. Especially in light of the move from Grokster et al to BitTorrent.

I would imagine that instead of record companies figuring out how to best lock out content from consumers, they might make a way for it to be more accessible. A lower price point for CDs might be a step in the right direction...

Frank Ahrens: Good point.

CD prices are such an explosive topic.

When Andy Lack was hired head of Sony Music a few years back, I asked him if he thought CD prices were too high. He said they probably were and he caught hell from the rest of his industry for months.

Universal tried lowering CD prices a year or so later by sticking a certain price (I think it was $9.99) on the label. Well, they had to stop that because retailers hollered, saying Universal was taking away their right to set prices. (Don't mess with Wal-Mart/Best Buy.)

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Vancouver, Canada: My friends and I recently started using a free product called Pixpo by a company How2Share. I works well, i want to know what you think about file sharing and streaming between friends not big groups. Are we breaking the law?

Alex

Frank Ahrens: I guess the question is, "what are you sharing?" and "How big is your group?"

See, music companies eventually came to a peace (it took them a long time) with casette tapes because they have a built-in lifespan. A tape of a tape sounds bad enough; a tape of a tape of a tape sounds like quasar emissions.

But a digital file does not depreciate with each copy.

Another tricky question: Does the music or movie industry bring an action against your group of five it it grows to 50? Or 500? Does Pixpo have a maximum number of users in each group?

At the same time, companies such as How2Share must not be penalized for innovation and creating products that people want to use, in fair-use capacity.

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Lidsville: I'd like to hear your thoughts on BitTorrent as well as file sharing via newsgroups.

Frank Ahrens: Lidsville! Charles Nelson Reilly!

From the acid-rattled minds of Sid and Marty Kroft!

I just went to Bittorrent and typed in R.E.M., as I do, and up popped "Fables of the Reconstruction" mp3 files. If I were the music industry, this I would not like.

I think the music and movie industries don't really care where you share content, if the artist does not get paid for it, they don't like it.

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Prince William County, VA: Why do you think of PeerFlix or DVD trading? Is it legal since you are not really buying the product?

Frank Ahrens: DVD trading seems fine. You or someone else has paid for the DVD and everyone involved has gotten their cut of the royalties (unless you bought it on the sidewalk in Times or Tiananmen squares) and you're swapping ones you don't want anymore to people who don't want theirs anymore, who also have paid for theirs.

The High Court of Ahrens rules: "Okey-dokey."

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NoLo, DC: The record producer who wrote in earlier really needs to ask himself if it isn't music industry that's broken when an album can sell 430,000 copies and the artist not recoup anything. That's simply absurd.

Frank Ahrens: I'll post this one...

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Los Alamitos, CA: STEALING IS WRONG!!! File sharing is not sharing ... it is stealing and then distributing stolen property among other thieves. It doesn't matter whether it is among a small group of thieves or with millions of thieves. Does somebody not really get it? Stealing is wrong no matter what. There is no legit justification for stealing.

Frank Ahrens: ...and then this one...

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Frank Ahrens: ...and then I'll go eat lunch. The court is in recess.

Thanks for all of the good questions and comments. The next few months will be very interesting in this landscape.

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