| ||
Despite Napster's well-publicized shutdown—and a recent federal court ruling that Verizon must identify any Internet subscriber suspected of illegally exchanging copyrighted music files—the practice of swapping music across peer-to-peer networks appears to be alive and well.
"How many people share music files?" moderator Lee Black, a senior analyst at Jupiter Communications, asked the audience at Cyberposium 2003. After three-quarters raised their hands, he posed this question: "How many think it's wrong?" Nervous laughter spread across the room as far fewer hands went up.
The first time he used Napster, Harvard Law School professor Jonathan Zittrain recalled thinking, "My God! This is so illegal!" before joking, "Of course, I was only using it for research purposes."
"The culture has shifted," said Russell Simmons, chairman and CEO of Rush Communications and cofounder and chairman of Def Jam Records. "It's not about buying music anymore. If the industry doesn't respond to that change quickly, it's going to be in big trouble. We can't shut these people down."
Kevin Bermeister, president and CEO of Altnet, hopes to be part of the solution to "monetize" a new music experience. With the belief that peer-to-peer networking is driven more by convenience than price, he launched Altnet in February, 2002. The company charges customers a small fee for downloading secure, reliable content of a higher quality than is usually found on P2P networks.
| If the industry doesn't respond to that change quickly, it's going to be in big trouble. |
|
— Russell Simmons, Def Jam Records |
"We came to the conclusion that if you ask people to pay, they'll pay for a better product," he said. "It's a relatively small percentage, but it's been a great start. We think we've proven the model at a relatively early stage, and that our base will continue to grow as we acquire more content."
The music industry has traditionally relied on a centralized distribution model, said Black. Is the industry not considering P2P at all as part of the value chain?
"I think I personally know all five people willing to pay for music," replied Tsvi Gal, CIO of Warner Music Group. "A lot of this issue has to do with education and habits," he said, noting that most people will think twice before reproducing paper documents printed with a "Do Not Copy" warning. The same people who are unwilling to pay for music files, he added, go online and willingly pay a dollar or two to download ring tones for their cell phones that are versions of copyrighted songs.
"In order to sell something on the Internet, you need to have a product that is not available free or easily."
A company like Altnet can be successful, he continued, but it's not the solution for the music industry. "It will work with a few of you," he said to the audience, "but not all of you." The answer, he said, is a combined approach that incorporates convenience, low prices, and legal action against violators. Otherwise, the music industry is in danger of disappearing. "That may not seem like a big deal," he said, "but it makes it very difficult to introduce and foster new talent in the marketplace."
From a legal standpoint, the music industry has a strong hand at the poker table, Zittrain said, citing various instances in which the entertainment industry at large has used The Digital Millennium Copyright Act of 1998 to sue or otherwise discourage copyright violators from breaking the law.
| We came to the conclusion that if you ask people to pay, they'll pay for a better product. |
|
— Kevin Bermeister, Altnet |
"Legal action should not be the only tool in the game," commented Warner Music's Gal. "There are always loopholes, and legal actions take a long time to work their way through the courts." Besides, he added, consumers want to be served, not sued.
"You have to move with the culture; you can't fight it," agreed Simmons. Involving lawyers and executives unfamiliar with the industry's heart and soul isn't the right approach. "This is an opportunity that demands an immediate, creative dialogue with real vision; we need to find a solution that moves consumers along gently, that convinces them this is a part of a process that will provide a better service."
"Let's use technology to allow users greater connectivity and give them the opportunity to interact with the artist," agreed Burmeister. For their part, he added, artists need to come to terms with the reality of digital rights and be prepared to "give more of themselves" to online customers.
What about innovations such as digital watermarking, asked one audience member. Doesn't technology have a role to play in protecting copyright? Warner Music will continue to use such barriers, said Gal, "but that is more to show that we are sincere in putting the lock on the door—not that we believe the lock is unbreakable."
The panel discussion was held during the Cyberposium 2003 conference on January 18.