Music File Sharers: 1, RIAA: 0

In the continuing battle to shut down illegal peer-to-peer music sharing Websites, the Recording Industry Association of America (RIAA), which represents the U.S. recording industry, has been dealt a blow. The District Court of Arizona has ruled in the case of Atlantic vs. Howell that simply keeping music in a "shared" folder on one's PC doesn't constitute illegal file sharing. In addition, the court called the act of downloading content from someone's PC "secondary copyright infringement" rather than "primary", since that person would be taking a copy of a copy, and not a copy of the original. Do you follow? The Court adds that the definition of "distribute" within the Copyright Act is not made clear enough to determine if simply making music available to others in itself can be considered "distributing" it.

At the end of its decision, the Court stated that it "is not unsympathetic to the difficulty that Internet file-sharing systems pose to owners of registered copyrights. Even so, it is not the position of this court to respond to new technological innovations by expanding the protections received by copyright holders beyond those found in the Copyright Act."

This makes sense. If someone steals something from me, how is it my fault? The owner of a stack of CDs in his car isn't considered at fault if a thief breaks in and steals them, even if he accidentally left the door unlocked. So why should someone be considered at fault if he fails to protect his PC hard drive, and others steal content from it?

It's true that, in some cases, people will purposely leave music in a "shared" folder in order to ramp up P2P site offerings. But in other cases, it could be an honest mistake. I'll bet that my parents make all their music available through a shared folder and don't even know it!

In this particular case, the Howells had over 4,000 music tracks available through the online P2P site KaZaA, many of which were digitally ripped copies of original recordings. However, although they admit to purposely sharing other content via KaZaA, they claim not to have intended to share the original recordings.

This could be a groundbreaking case in the issue of music distribution online and P2P sharing, which has plagued the music industry for years. Many artists have been taking the "if you can't beat 'em, join 'em" stance as of late, doing things like offering music tracks for free online in hopes of gaining consumer support. What's your stance on this issue?

Online Music and Video Sales Continue to Grow

From the desk of Lee Distad's Professional Opinion:

I was going to title this, “The Challenge of Online Music Sales” but then I realized that by excluding video, I was being hopelessly 2001.

Paid downloads are here. They’re bigger than ever, and some retailers and content owners (we used to call them Record Labels when I was a kid) have embraced the new business model, while others have reluctantly ducked their toes in the water. More and more, consumers are using these services, and online music and video sales continue to grow, at the same time that hardcopy sales in traditional retail stores continues its slow, stately decline.

But none of that is news, I’m just pointing out the obvious. What’s worth talking about is why some companies are doing fantastically well, and others have been struggling.

On the winning side, you’ve got 800-pound Gorillas like iTunes and Wal-mart who sell huge amounts of downloadable entertainment. In fact, I’d say that iTunes is practically synonymous, Kleenex-like, with the whole business. Along for the ride are smaller content providers, whether resellers like MusicGiants, or labels like Naxos, the specialty classical label, which have found the online sales world to be very much to their liking. In fact, Naxos founder Klaus Heymann was recently quoted as saying “We could live comfortable [sic] if from tomorrow we never sold another CD.”

Then you’ve got the losers, like Sony’s Connect service, and Virgin Digital, each of which has announced that it’s rolling up its operations.

So what’s the difference? Why are some online download services floundering, while others flourish?

My bet is that it is how the audio and video is delivered to the customer. The winning sellers offer content in common formats, such as mp3 or WMA. Due to Digital Rights Management, the content is not 100% wide open once it’s on your computer, but once it’s on your hard drive, it’s yours, more or less. Compare that to Sony Connect, which made use of their ATRAC format, which locked you in to using a Sony portable player, or Virgin Digital, who charged a monthly licensing fee to maintain access to your music. Former Virgin Digital customers will no longer be able to access their music files once their current licences run out.

It appears that customers are voting with their wallets, and are resistant to business models that exert too much control over how they enjoy their entertainment. DRM remains a contentious issue, but my impression is that the groundswell against it is gaining momentum: more and more content is being offered DRM free. In the face of that, will locking content with DRM remain viable in the marketplace?

http://businessopinions.blogspot.com/ (For more of Lee Distad's Professional Opinion)

iPod Sales STILL Growing

It's insane to think that, even after so many years of market domination, the Apple iPod is still growing like wildfire: Apple recently reported an 88% earnings growth, fueled by 36% growth in Macs and 24% growth in iPods when compared to the same quarter last year. In fact, the company reported that it was the most profitable March quarter in its history!

I'm probably one of the few people left on the planet that doesn't own an iPod, and it's not because I don't think its a sleek, sophisticated device. I often stroll through a local retailer and stop to admire the beautiful form factor of the nanos, all lined up in varying colours. If there's even been a sexy gadget, that one's it. I think part of me just doesn't want to follow the pack: it's like an iPod cult, and I want no part of it. After all, is the iPod really the best interface out there? Or is it just conditioning that has made people believe this? I'm not sure. I have used an iPod, and it is blazingly simply, and very, very cool. But I've also used a Toshiba Gigabeat, and a SanDisk Sansa player, and so are they.

As for getting music, the last thing I want to do is fork over my credit card and rack up a ton of $2 purchases for songs. I've heard horror stories of people racking up thousands of bucks over the period of a few months on just downloading music! I'll pass on the unnecessary debt, thank you very much. I'll just rip them from my CDs, or find, er, other means of getting tunes. So really, the whole "seamless integration" thing doesn't matter to me. In terms of video, podcasts on iTunes are free, and up here in Canadia-land, I can't get the TV shows anyway.

I'm not saying the iPod doesn't deserve the market-share leading position it has achieved. But for me, I'll continue to admire the gorgeous nano from afar, and stick to my guns in supporting the underdog.