"mp3 sharing is typically allowed as well, until the stock market scheme runs its cycle and the industry run government needs to shore up its coffers. Back in '98 the national debt was going to be paid off by '05. Now the Federal Gov't is again looking at a multi-trillion dollar outstanding loan to the Federal Reserve."
That's an astute observation; too bad I've already commented in this thread. The vast majority of unauthorized copying of music is under-the-radar stuff that nobody's bothered with (although it's "typically allowed" more in the sense of the "copying the Friends tape" sense than the "teacher copying article for students" examples that the parent poster gave). This is why the rightsholders are being careful to go after the "whales" -- those who are trading thousands and thousands of MP3 files and thus more likely to be contributing to lost sales.
Generally speaking, most laws go unenforced, and economics play a vital role in the tipping point. On the local level, the enthusiasm with which your local traffic wardens give out speeding tickets might be driven primarily by the department's budget shortfall, rather than an actual attempt to make the streets safer.
I'm not going to wag my credentials at you, but it's safe to say that I know a few things about IP law.;-)
You're correct that "fair use" is not an ironclad set of allowable activities, but a set of guidelines for determining if an otherwise infringing act is allowed. Often, the fine line between fair use and infringement goes to the court on a case-by-case basis. You can see these guidelines here. Notice that the first guideline references "nonprofit educational purposes." You said that this isn't a use defined by the courts -- did you mean that literally? Can you give me an example of a court finding against a teacher who photocopied an article for his or her students?
When I stated that photocopying by teachers is "the classic example," I meant just that -- when explaining fair use doctrine, experts typically use the "photocopying by teachers" example quite a bit. This can be shown empirically by talking to any lawyers you know and asking them for some examples of fair use.
I hope this has helped. You're correct that there's a lot of misunderstanding of fair use doctrine here on Slashdot, although most Slashdotters think that it has more teeth than it does.
"Oh, I call BS on you. Within "the general population" there isn't even understanding of intellectual property, much less "widespread support". Ask your friends: How many of them realize they're criminals for taping the last episode of Friends and lending it to a friend?"
Not a criminal act.
"How many even know that you have to pay royalties for singing "Happy Birthday" in public, and how many of them think that's a good thing?"
I am aware that this is a rhetorical question, but my guess is that most of my friends don't lose any sleep over this one. Own a restaurant and don't want to pay the ASCAP/BMI license to perform copyrighted music in your establishment? Then don't. My friends don't have an "us vs. them" attitude toward songwriters -- songwriting is just a way to make a living, and asking that somebody respect your rights to the song you've written is not oppression in any meaningful context.
"How many understand that when their high school teacher photocopied articles for them to read, it was illegal?"
that's actually the classic example of the application of fair use doctrine. It's typically allowed.
"But on this issue, the public is woefully under-, mis-, and ill-informed."
Lawyers for the original Napster also tried that "fair use" argument, and the Ninth Circuit Court handed them some free clues. Ivan Hoffman does an excellent job of explaining the background.
Nonetheless, this hasn't stopped lots of folks for making arguments similar to the ones you've given; the "I was educating myself by downloading that file" one is quite common. This is understandable, because many folks aren't familiar with a surprisingly simple concept well known to lawyers: "the laugh test." If you wouldn't buy some lame "educational fair use" rational for music piracy, you can't expect anybody else to.
"that would make it easy for musicians new and old to put their music on the internet for both free and for pay."
This already exists. Kazaa is used by many indie musicians to distribute their own work. Of course, 99% of Kazaa traffic is the unauthorized distribution of copyrighted work, but I have heard stories that some musicians use it. There's also the old standby of putting MP3s of your work on your own web site.
Indie and unsigned musicians who wish to make money on their work can use Apple's iTunes Music Store. You typically have to go through a third party that will transcode your music and work with Apple to get it on the store, but the cost of doing so is typically less than pressing a few hundred of your own CDs and trying to sell them one by one on your own.
Trouble is, the "The Internet will cause the death of the RIAA Real Soon Now" sentiment has been echoed on/. for years. The Internet's a great thing, but it's not immune to a few immutable rules of economics.
"So whose side are you on? If a black guy gets thrown into prison for daring to sit on a seat reserved for whites, will you shrug your shoulders and say "Too bad, he engaged in civil disobedience and that has consequences. Don't like this policy? Then don't drive in their bus!""
World of difference here. Blacks have the same inalienable human rights as others do to the pursuit of happiness, and the Jim Crow laws were stripping them of these rights.
Consumers do not have an inalienable right to download the latest Linkin Park CD via P2P if they can't afford to buy it or if they'd just rather not pay for it. The inconvenience of paying the lousy fifteen bucks, or doing without, is orders of magnitude left than being denied a seat due to the color of your skin.
"Well it can be argued that (to some extent) Grokster does slightly benefit from piracy"
Huh? Benefiting from piracy is their business model. Either you use the free version, and they make ad revenue, or you pony up $30 for the ad-free version. It's pirated content that makes up the vast majority of the traffic. If, magically, all the unauthorized content were no longer available on the network tomorrow, the users would go away, their ad revenue would dry up, and they'd be out of business. That miniscule percentage of people who really are using Grokster to trade shareware and Linux distros will not support their business. The money's in the millions of teenagers who want the latest Britney or Linkin Park for free, and not the Slashdotters who think that getting KDE via P2P is a good idea.
By the way, edonkey and the rest also rely on piracy to stay in business. The people behind the file sharing platforms are not philanthropists or freedom fighters. They are businesspeople with business plans, forecasts, and revenue goals. It's a good business to be in, if you can keep the government off your ass.
I acknowledge you're not a lawyer, so you may not have understood that the "it should be replaced by a more flexible rule..." business does not mean "throw out the decision and thus make VCRs illegal." She was suggesting that the decision no longer be applied as a rule within the concept of evaluating current cases. No worries... a lot of Slashdotters, including the one who did the write-up, also misunderstood this.
"Kazaa gets more advertising revenue from having more users. Duh. Her same argument would make Microsoft liable for people who send copyrighted attachments with Hotmail, except that unlike Kazaa, Microsoft has finally figured out that large companies can buy their way out of federal prosecution with enough political contributions."
This is a straw man (mischaracterizing somebody else's position so that it's easier to tear down). The argument is that Kazaa's business model relies on copyright infringement. This is largely via advertising revenue, and more Kazaa users means more ads, but this does not mean that anybody whose business model relies on ads also relies on copyright infringement, and that's not what she's implying. She's pointing out that Kazaa has a profit motive here, and not that relying on ad revenue is a litmus test for legality.
The parent may not have been clear in his explanation of why he thinks that BitTorrent may not fall victim to this law while Kazaa would. One test (and I'm paraphrasing from the act here) is whether the system relies on piracy for commercial viability. You can do a thought experiment here and imagine what would happen to both services if, with the wave of a wand, all unauthorized copyrighted material were gone from both services tomorrow. Kazaa's traffic would go to less than 1% of what it is now, and their revenue stream would disappear almost as quickly. As the parent poster pointed out, there's a higher ratio of legimate traffic on BitTorrent. While you are 100% correct that both systems work in fundamentally the same manner, it's actually the difference in their business models which may, according to the parent poster, exclude BitTorrent. It's that same reason that your example of Microsoft's Hotmail would be exempt from the law -- and likewise, if starting tomorrow nobody could use Hotmail to infringe on somebody's copyright, it would probably keep chugging along.
"If this is their best idea for how to grow the business, I'm worried. iTunes Music Store had a 'small profit' last quarter - but it really exists to sell iPods - what equivalent business model does eBay intend to use, or for that matter , what better model do they intend to use?"
Steve Jobs' statements bout iTMS profitability has confused a lot of people, particularly those who haven't been directly involved in starting a business.
It's extremely common for startup businesses to operate at little or no profit at launch. This applies in the low-tech world, as well. A friend recently opened a coffee shop. It was lean going for a few months; she hadn't built a customer base and she was spending more in advertising than she was making back in sales. This is similar to the iTMS ramp-up. She's now doing fine.
That iTMS is profitable after just a year or so is actually pretty good news.
Actually, that's precisely why the letter started that sentence with "Ironically." Read it again and I think you'll see what I mean.
For a while now the mantra has been that technology is good, and file sharing is good because it uses modern technology to allow more people access to free music. The file sharing companies have argued that the record companies won't play with them because they're afraid of technology.
The record companies counter that they are not against technology per se (look at the success of Apple's collaboration with the record companies as an example), but that they're against people helping themsleves to their copyrighted work without paying for it. They've found companies who are doing cutting-edge stuff with technology to prevent unauthorized sharing of copyrighted stuff, and they've invited the file-sharing companies to come and see the demos. The file sharing companies have refused, because -- and this is the point the letter makes -- it would hurt their business model. After all, Kazaa's ad revenue would be cut to a miniscule fraction if, overnight, all the unauthorized content disappeared from their network. Like your average record company, Kazaa has employees to pay, and Kazaa's CEO wants that newer and bigger BMW just as much as the next CEO.
In short, the record companies and the P2P operators like Kazaa have two things in commmon:
They both accuse the other of being afraid of technology.
They both have a business model to protect.
They both embrace new technology only when it suits them.
"The RIAA companies sells CD's at prices far above the cost of manufacture + royalities."
You may be confusing gross margin with net margin. There's a lot -- a lot -- more to the cost of a CD than manufacturing and royalties. Most CD releases lose money, and overall, the recording industry runs at a lower net margin than many other industries, including the computer hardware and software industries.
Your point wasn't lost on me -- that the margin they make is an inducement to steal -- but if it is for CDs, it is for a lot of other things, too.
The same thing they do with the money from CDs they sell, or the money that any company makes from selling goods... paying for the expense of running a business. Most of this goes to paying employees.
Believe it or not, your average record company runs on lower overall net margins than Apple Computer. If one's opinion of a company is gauged by how much money they put in the bank vs. paying employees, Apple's the evil one here.
"The trade-off is that you pay a fee to the RIAA on every audio cd and piece of digital audio recording equipment."
The majority of the tarrif on blank audio CD-Rs in the US goes to artists, composers and performers. A small slice of the pie goes to record companies, as they tend to hold or co-hold copyrights on recordings. None goes to the RIAA.
"Of course, they don't tell you this - they just let you pay the fee on audio CDs and leave digital audio recording equipment essentially unavailable, so they get their tax and can still sue you for copying music CDs."
Who's "they" ? The RIAA? They see none of this money. If you would like to learn more about the tarrif, this spells it out.
"Speaking of CDRs, as a Canadian I pay levies (which are forwarded to the record companies) on all blank media that I purchase"
Some goes to record companies, but most goes to artists, composers and performers.
One one level, it makes little difference, as you've already forked out the cash. But, if you (like so many Slashdotters) happen to kneel at the shrine of "record companies bad, artists good" it's an important distinction.
"Okay, if this is true, why isn't there wholesale firings going on in the industry?"
The recording industry is hemmoraging money -- and people. Universal cut almost 1,000 people last year, almost 5% of their workforce by my reckoning. The industry is consolidating and smaller, weaker record companies hurt by the industry downturn have been swallowed up by larger ones, resulting in more layoffs. The record chains are hurting as well. Tower Records recently filed for bankrupcty and closed many of their stores.
"After all, the vast majority of artists they sign fail (lose money)."
The recording industry has always been a speculative business, with the Britneys of the world allowing the financing of the other acts that don't recoup their investment.
"I find it hard to believe lack of talent is an issue considering some of the bands/artists that have been successful but still, evaluating talent is their business, so that is no excuse. Sounds like a failure of advertising and promotion to me."
Agreed. If you are in any business, if external forces cause a change for the worse, it's up to you, and nobody else, to fix it.
"I don't know, perhaps the fact that the label isn't actually spending their own money, but rather putting that charge on a list of recoupable expenses to be charged back to the artist?"
That's part of the contract. The record label promotes and distributes your music in exchange for the right to distribute it. Regardless of whether the artist gets paid first or last, if the record company is doing its job, it's promoting your music.
"What evidence do they have that that kind of expenditure would result in a boost in royalties that would more than offset the expense?"
I gather from the article that it's a new thing, so they probably don't know. Sometimes, when trying a new advertising method, you just gotta spend the money and see what happens. There's an old saying in the advertising business -- 50% of your advertising is wasted, but you don't know which.
"The record execs don't care, since it's not their money, and maybe they can even get the musicians to give them a bonus based on their performance, which would go straight into their nose candy fund."
Record companies are in it for a profit. If you work in advertising and promotion for a record company and your efforts are a waste of money, you lose your job. The same rules of business that apply elsewhere also apply to the record company... you've got to hit your goals, make a profit, and keep your stockholders happy.
I haven't met many record industry folks, but those that I've met have been hard working, passionate people who work impossibly long hours for shitty pay, and do it because they love the music. Not one of them has been a cocaine user. Has your experience been different?
"Likewise, limited copying and sharing with friends isn't copyright infringment! Gasp! It's when the copying becomes large scale (7 million anonymous friends on the internet...) or commercial that it becomes infringment."
A popular (and self-serving) belief among Slashdotters, but not correct. Usually, Slashdotters claim that giving copies of CDs to your friends is "fair use," when it is not.
The EFF has an excellent introduction to fair use rights for music. There are some good examples (typically involving the duplication of music for academic purposes) but burning a CD for your friend is typically not allowed.
The Matrix Reloaded DVD: $13.99 The Matrix Reloaded soundtrack CD: $16.99 Enter The Matrix video game: $19.99
The video game on a plastic disc, which probably cost less than a million bucks to produce, costs 40% more than a DVD of the film, which costs tens of millions! Those goddamn greedy software programmers! Let's punish them for their greed by pirating the hell out of the game and calling it a social protest!
Whoops, sorry, I forgot how many Slashdotters make their money.
But anyway, yeah. I wholeheartedly support the notion of selling CDs for below $10. Selling at below cost is always good for business. And, I'm sure that Slashdotters have a much better understanding of the supply/demand curve in the record industry than, say, the accountants and economists who actually work for that industry.
I'm looking forward to the first person to +5 insightfully point out that CDs cost only $0.25 to press, thus there's bags of margin to be made at sub-$10, so I can school them on the important differences between manufacturing cost and cost of sale, and between gross and net margin. It's a pity I'll have to, with all the financial geniuses around here.
"If The Who was able to make Tommy 30 years ago and Pink Floyd The Wall 25 years ago, why hasn't the music industry progressed? The music industry has not moved forward, it has moved backwards."
Rock operas aren't much in fashion any more. The teens who bought Pink Floyd and The Who back in the 70's are buying hip hop now. Some sub-genres have managed to last decades, but the era of the rock opera was short-lived. Popular taste moved on. That's progress for you.
Those who state that the music of this generation is not as good as music of some previous generation should understand that middle-aged people in the 1920s were pining for a return to the music of the 1890's -- now that was music. And twenty years from now, your children will be waxing romantically on the era of Outkast and Kanye West, who (to the disagreement Who/Pink Floyd fans) are damn good musicians. Outkast and Kanye West have as much visceral, emotional appeal to today's generation as Pink Floyd and the Who did to children of your generation. As Alex Ross put it, all music becomes classical in the end.
Each and every one of us will get off of that pop culture bus at one point or another. Some of us will insist that good music stopped with The Who or Pink Floyd or The Beatles or Duran Duran or Glenn Miller or Elvis or the Smashing Pumpkins or what have you, and equate our dislike of current music with the lack of "progress" in the music industry. And so it goes.
"The early masters like Mozart and Beethoven were supported/sponsored by patrons thus freeing them to indulge their creativity and create truly legendary music that has outlasted their mortal lives and should last long after the members of commercial music industry sponsored music acts meet a similar fate...."
Mozart and Beethoven became very rich men as a result of their work. They were the musical superstars of their generation. Today, if you sign with the right record company and they help make your first CD a success so that you don't need to work as a waiter any more, that's an equally fine way of allowing you to indulge your creativity.
Many Slashdotters believe that so-called "greed" among artists is this new concept that is poisoning creativity, when the reality is that many of the authors, musicians, playwrights, painters and other artists of the past millennium who are still well-known to us today made considerable fortunes from their work. They were commercial in every sense of the word. Human nature does not change.
"That's one of the really sad/frustrating/infuriating parts about this whole thing. The artists themselves actually don't have the rights to distribute their songs, either. About the only rights they're "allowed" to retain is the right to perform their works."
Another important right that the artist usually retains is publishing rights. There's a lot of money to be had there.
"But they can't legally distribute their own CDs, nor post their own music for download."
Yes, that is the tradeoff when you sign a contract that results in a record company spending hundreds of thousands of dollars or more of their own money to record, engineer, produce, distribute and market your music. The exclusive distribution rights to the recordings are the way in which they recoup their massive investment -- record companies, very much like the company that you probably work for, are for-profit businesses. If you were to approach a typical record company with the proposal that they front all the money recording, producing, marketing, etc. but allow you to give away unlimited copies for free, they would likely ask you if you were out of your fucking gourd.
There are a number of smaller record companies that share distribution rights. Magnatune is one of them. You may have your music distributed by them, and at the same time, you may put it in your Kazaa share directory if that's what you want to do. The trade-off is that Magnatunes will not front you the money to produce your music -- you're on your own. And, even they have restrictions, because (just like big record companies or the company that you work for) they are a for-profit business and must protect their investment.
"Anyways, as for downloading not being illegal, yes and no. If you own the physical CD, it is legal to format shift it onto your computer... Whether that means you stick the CD in your drive and rip it, or download the tracks from Kazaa, both are legal methods of format shifting."
The original Napster tried this argument, as well. It didn't work in their case. Here's an excellent summary.
"Excuse me, you're now equating people who don't buy CDs because they don't work to people who make illegal copies of music."
Actually, more to the point, if the CD has DRM, don't buy it is exactly what I'm advocating. That is within one's rights as a consumer. And, that's exactly what I do... I vote with my wallet. If enough people do, CD DRM will die the death it deserves.
Many Slashdotters make the leap from this to the notion that it's okay to pirate music because of the existence of CD DRMs. If you're just not sure what I mean, that's understandable -- it's been lost of many other Slashdotters as well.
Please read the thread again. I think it's universally agreed that CD DRM sucks. What I reject, however, is the notion that the existence of DRM CDs forces one to become a pirate. I think free will comes into play here a bit more than some others appear to think.
Slashdot Mirror
"mp3 sharing is typically allowed as well, until the stock market scheme runs its cycle and the industry run government needs to shore up its coffers. Back in '98 the national debt was going to be paid off by '05. Now the Federal Gov't is again looking at a multi-trillion dollar outstanding loan to the Federal Reserve."
That's an astute observation; too bad I've already commented in this thread. The vast majority of unauthorized copying of music is under-the-radar stuff that nobody's bothered with (although it's "typically allowed" more in the sense of the "copying the Friends tape" sense than the "teacher copying article for students" examples that the parent poster gave). This is why the rightsholders are being careful to go after the "whales" -- those who are trading thousands and thousands of MP3 files and thus more likely to be contributing to lost sales.
Generally speaking, most laws go unenforced, and economics play a vital role in the tipping point. On the local level, the enthusiasm with which your local traffic wardens give out speeding tickets might be driven primarily by the department's budget shortfall, rather than an actual attempt to make the streets safer.
I'm not going to wag my credentials at you, but it's safe to say that I know a few things about IP law. ;-)
You're correct that "fair use" is not an ironclad set of allowable activities, but a set of guidelines for determining if an otherwise infringing act is allowed. Often, the fine line between fair use and infringement goes to the court on a case-by-case basis. You can see these guidelines here. Notice that the first guideline references "nonprofit educational purposes." You said that this isn't a use defined by the courts -- did you mean that literally? Can you give me an example of a court finding against a teacher who photocopied an article for his or her students?
When I stated that photocopying by teachers is "the classic example," I meant just that -- when explaining fair use doctrine, experts typically use the "photocopying by teachers" example quite a bit. This can be shown empirically by talking to any lawyers you know and asking them for some examples of fair use.
I hope this has helped. You're correct that there's a lot of misunderstanding of fair use doctrine here on Slashdot, although most Slashdotters think that it has more teeth than it does.
"Oh, I call BS on you. Within "the general population" there isn't even understanding of intellectual property, much less "widespread support". Ask your friends: How many of them realize they're criminals for taping the last episode of Friends and lending it to a friend?"
Not a criminal act.
"How many even know that you have to pay royalties for singing "Happy Birthday" in public, and how many of them think that's a good thing?"
I am aware that this is a rhetorical question, but my guess is that most of my friends don't lose any sleep over this one. Own a restaurant and don't want to pay the ASCAP/BMI license to perform copyrighted music in your establishment? Then don't. My friends don't have an "us vs. them" attitude toward songwriters -- songwriting is just a way to make a living, and asking that somebody respect your rights to the song you've written is not oppression in any meaningful context.
"How many understand that when their high school teacher photocopied articles for them to read, it was illegal?"
that's actually the classic example of the application of fair use doctrine. It's typically allowed.
"But on this issue, the public is woefully under-, mis-, and ill-informed."
You are correct on that point!
Lawyers for the original Napster also tried that "fair use" argument, and the Ninth Circuit Court handed them some free clues. Ivan Hoffman does an excellent job of explaining the background.
Nonetheless, this hasn't stopped lots of folks for making arguments similar to the ones you've given; the "I was educating myself by downloading that file" one is quite common. This is understandable, because many folks aren't familiar with a surprisingly simple concept well known to lawyers: "the laugh test." If you wouldn't buy some lame "educational fair use" rational for music piracy, you can't expect anybody else to.
"that would make it easy for musicians new and old to put their music on the internet for both free and for pay."
This already exists. Kazaa is used by many indie musicians to distribute their own work. Of course, 99% of Kazaa traffic is the unauthorized distribution of copyrighted work, but I have heard stories that some musicians use it. There's also the old standby of putting MP3s of your work on your own web site.
Indie and unsigned musicians who wish to make money on their work can use Apple's iTunes Music Store. You typically have to go through a third party that will transcode your music and work with Apple to get it on the store, but the cost of doing so is typically less than pressing a few hundred of your own CDs and trying to sell them one by one on your own.
Trouble is, the "The Internet will cause the death of the RIAA Real Soon Now" sentiment has been echoed on /. for years. The Internet's a great thing, but it's not immune to a few immutable rules of economics.
"So whose side are you on? If a black guy gets thrown into prison for daring to sit on a seat reserved for whites, will you shrug your shoulders and say "Too bad, he engaged in civil disobedience and that has consequences. Don't like this policy? Then don't drive in their bus!""
World of difference here. Blacks have the same inalienable human rights as others do to the pursuit of happiness, and the Jim Crow laws were stripping them of these rights.
Consumers do not have an inalienable right to download the latest Linkin Park CD via P2P if they can't afford to buy it or if they'd just rather not pay for it. The inconvenience of paying the lousy fifteen bucks, or doing without, is orders of magnitude left than being denied a seat due to the color of your skin.
"Well it can be argued that (to some extent) Grokster does slightly benefit from piracy"
Huh? Benefiting from piracy is their business model. Either you use the free version, and they make ad revenue, or you pony up $30 for the ad-free version. It's pirated content that makes up the vast majority of the traffic. If, magically, all the unauthorized content were no longer available on the network tomorrow, the users would go away, their ad revenue would dry up, and they'd be out of business. That miniscule percentage of people who really are using Grokster to trade shareware and Linux distros will not support their business. The money's in the millions of teenagers who want the latest Britney or Linkin Park for free, and not the Slashdotters who think that getting KDE via P2P is a good idea.
By the way, edonkey and the rest also rely on piracy to stay in business. The people behind the file sharing platforms are not philanthropists or freedom fighters. They are businesspeople with business plans, forecasts, and revenue goals. It's a good business to be in, if you can keep the government off your ass.
I acknowledge you're not a lawyer, so you may not have understood that the "it should be replaced by a more flexible rule..." business does not mean "throw out the decision and thus make VCRs illegal." She was suggesting that the decision no longer be applied as a rule within the concept of evaluating current cases. No worries... a lot of Slashdotters, including the one who did the write-up, also misunderstood this.
"Kazaa gets more advertising revenue from having more users. Duh. Her same argument would make Microsoft liable for people who send copyrighted attachments with Hotmail, except that unlike Kazaa, Microsoft has finally figured out that large companies can buy their way out of federal prosecution with enough political contributions."
This is a straw man (mischaracterizing somebody else's position so that it's easier to tear down). The argument is that Kazaa's business model relies on copyright infringement. This is largely via advertising revenue, and more Kazaa users means more ads, but this does not mean that anybody whose business model relies on ads also relies on copyright infringement, and that's not what she's implying. She's pointing out that Kazaa has a profit motive here, and not that relying on ad revenue is a litmus test for legality.
The parent may not have been clear in his explanation of why he thinks that BitTorrent may not fall victim to this law while Kazaa would. One test (and I'm paraphrasing from the act here) is whether the system relies on piracy for commercial viability. You can do a thought experiment here and imagine what would happen to both services if, with the wave of a wand, all unauthorized copyrighted material were gone from both services tomorrow. Kazaa's traffic would go to less than 1% of what it is now, and their revenue stream would disappear almost as quickly. As the parent poster pointed out, there's a higher ratio of legimate traffic on BitTorrent. While you are 100% correct that both systems work in fundamentally the same manner, it's actually the difference in their business models which may, according to the parent poster, exclude BitTorrent. It's that same reason that your example of Microsoft's Hotmail would be exempt from the law -- and likewise, if starting tomorrow nobody could use Hotmail to infringe on somebody's copyright, it would probably keep chugging along.
"If this is their best idea for how to grow the business, I'm worried. iTunes Music Store had a 'small profit' last quarter - but it really exists to sell iPods - what equivalent business model does eBay intend to use, or for that matter , what better model do they intend to use?"
Steve Jobs' statements bout iTMS profitability has confused a lot of people, particularly those who haven't been directly involved in starting a business.
It's extremely common for startup businesses to operate at little or no profit at launch. This applies in the low-tech world, as well. A friend recently opened a coffee shop. It was lean going for a few months; she hadn't built a customer base and she was spending more in advertising than she was making back in sales. This is similar to the iTMS ramp-up. She's now doing fine.
That iTMS is profitable after just a year or so is actually pretty good news.
"Wait... I think they got that backwards..."
Actually, that's precisely why the letter started that sentence with "Ironically." Read it again and I think you'll see what I mean.
For a while now the mantra has been that technology is good, and file sharing is good because it uses modern technology to allow more people access to free music. The file sharing companies have argued that the record companies won't play with them because they're afraid of technology.
The record companies counter that they are not against technology per se (look at the success of Apple's collaboration with the record companies as an example), but that they're against people helping themsleves to their copyrighted work without paying for it. They've found companies who are doing cutting-edge stuff with technology to prevent unauthorized sharing of copyrighted stuff, and they've invited the file-sharing companies to come and see the demos. The file sharing companies have refused, because -- and this is the point the letter makes -- it would hurt their business model. After all, Kazaa's ad revenue would be cut to a miniscule fraction if, overnight, all the unauthorized content disappeared from their network. Like your average record company, Kazaa has employees to pay, and Kazaa's CEO wants that newer and bigger BMW just as much as the next CEO.
In short, the record companies and the P2P operators like Kazaa have two things in commmon:
"The RIAA companies sells CD's at prices far above the cost of manufacture + royalities."
You may be confusing gross margin with net margin. There's a lot -- a lot -- more to the cost of a CD than manufacturing and royalties. Most CD releases lose money, and overall, the recording industry runs at a lower net margin than many other industries, including the computer hardware and software industries.
Your point wasn't lost on me -- that the margin they make is an inducement to steal -- but if it is for CDs, it is for a lot of other things, too.
The same thing they do with the money from CDs they sell, or the money that any company makes from selling goods... paying for the expense of running a business. Most of this goes to paying employees. Believe it or not, your average record company runs on lower overall net margins than Apple Computer. If one's opinion of a company is gauged by how much money they put in the bank vs. paying employees, Apple's the evil one here.
"The trade-off is that you pay a fee to the RIAA on every audio cd and piece of digital audio recording equipment."
The majority of the tarrif on blank audio CD-Rs in the US goes to artists, composers and performers. A small slice of the pie goes to record companies, as they tend to hold or co-hold copyrights on recordings. None goes to the RIAA.
"Of course, they don't tell you this - they just let you pay the fee on audio CDs and leave digital audio recording equipment essentially unavailable, so they get their tax and can still sue you for copying music CDs."
Who's "they" ? The RIAA? They see none of this money. If you would like to learn more about the tarrif, this spells it out.
"Speaking of CDRs, as a Canadian I pay levies (which are forwarded to the record companies) on all blank media that I purchase"
Some goes to record companies, but most goes to artists, composers and performers.
One one level, it makes little difference, as you've already forked out the cash. But, if you (like so many Slashdotters) happen to kneel at the shrine of "record companies bad, artists good" it's an important distinction.
"Okay, if this is true, why isn't there wholesale firings going on in the industry?"
The recording industry is hemmoraging money -- and people. Universal cut almost 1,000 people last year, almost 5% of their workforce by my reckoning. The industry is consolidating and smaller, weaker record companies hurt by the industry downturn have been swallowed up by larger ones, resulting in more layoffs. The record chains are hurting as well. Tower Records recently filed for bankrupcty and closed many of their stores.
"After all, the vast majority of artists they sign fail (lose money)."
The recording industry has always been a speculative business, with the Britneys of the world allowing the financing of the other acts that don't recoup their investment.
"I find it hard to believe lack of talent is an issue considering some of the bands/artists that have been successful but still, evaluating talent is their business, so that is no excuse. Sounds like a failure of advertising and promotion to me."
Agreed. If you are in any business, if external forces cause a change for the worse, it's up to you, and nobody else, to fix it.
That's part of the contract. The record label promotes and distributes your music in exchange for the right to distribute it. Regardless of whether the artist gets paid first or last, if the record company is doing its job, it's promoting your music.
"What evidence do they have that that kind of expenditure would result in a boost in royalties that would more than offset the expense?"
I gather from the article that it's a new thing, so they probably don't know. Sometimes, when trying a new advertising method, you just gotta spend the money and see what happens. There's an old saying in the advertising business -- 50% of your advertising is wasted, but you don't know which.
"The record execs don't care, since it's not their money, and maybe they can even get the musicians to give them a bonus based on their performance, which would go straight into their nose candy fund."
Record companies are in it for a profit. If you work in advertising and promotion for a record company and your efforts are a waste of money, you lose your job. The same rules of business that apply elsewhere also apply to the record company... you've got to hit your goals, make a profit, and keep your stockholders happy.
I haven't met many record industry folks, but those that I've met have been hard working, passionate people who work impossibly long hours for shitty pay, and do it because they love the music. Not one of them has been a cocaine user. Has your experience been different?
"Likewise, limited copying and sharing with friends isn't copyright infringment! Gasp! It's when the copying becomes large scale (7 million anonymous friends on the internet...) or commercial that it becomes infringment."
A popular (and self-serving) belief among Slashdotters, but not correct. Usually, Slashdotters claim that giving copies of CDs to your friends is "fair use," when it is not.
The EFF has an excellent introduction to fair use rights for music. There are some good examples (typically involving the duplication of music for academic purposes) but burning a CD for your friend is typically not allowed.
It gets worse! From Amazon:
The Matrix Reloaded DVD: $13.99
The Matrix Reloaded soundtrack CD: $16.99
Enter The Matrix video game: $19.99
The video game on a plastic disc, which probably cost less than a million bucks to produce, costs 40% more than a DVD of the film, which costs tens of millions! Those goddamn greedy software programmers! Let's punish them for their greed by pirating the hell out of the game and calling it a social protest!
Whoops, sorry, I forgot how many Slashdotters make their money.
But anyway, yeah. I wholeheartedly support the notion of selling CDs for below $10. Selling at below cost is always good for business. And, I'm sure that Slashdotters have a much better understanding of the supply/demand curve in the record industry than, say, the accountants and economists who actually work for that industry.
I'm looking forward to the first person to +5 insightfully point out that CDs cost only $0.25 to press, thus there's bags of margin to be made at sub-$10, so I can school them on the important differences between manufacturing cost and cost of sale, and between gross and net margin. It's a pity I'll have to, with all the financial geniuses around here.
"Uh, most of the piracy is started by INSIDERS!!!"
The key word here is most. As you are complete and thorough in the jobs that you do, you can presume that others are, as well.
Most accidents aren't caused by drunk drivers, yet there's still a lot of money spent on stopping it.
"If The Who was able to make Tommy 30 years ago and Pink Floyd The Wall 25 years ago, why hasn't the music industry progressed? The music industry has not moved forward, it has moved backwards."
Rock operas aren't much in fashion any more. The teens who bought Pink Floyd and The Who back in the 70's are buying hip hop now. Some sub-genres have managed to last decades, but the era of the rock opera was short-lived. Popular taste moved on. That's progress for you.
Those who state that the music of this generation is not as good as music of some previous generation should understand that middle-aged people in the 1920s were pining for a return to the music of the 1890's -- now that was music. And twenty years from now, your children will be waxing romantically on the era of Outkast and Kanye West, who (to the disagreement Who/Pink Floyd fans) are damn good musicians. Outkast and Kanye West have as much visceral, emotional appeal to today's generation as Pink Floyd and the Who did to children of your generation. As Alex Ross put it, all music becomes classical in the end.
Each and every one of us will get off of that pop culture bus at one point or another. Some of us will insist that good music stopped with The Who or Pink Floyd or The Beatles or Duran Duran or Glenn Miller or Elvis or the Smashing Pumpkins or what have you, and equate our dislike of current music with the lack of "progress" in the music industry. And so it goes.
"The early masters like Mozart and Beethoven were supported/sponsored by patrons thus freeing them to indulge their creativity and create truly legendary music that has outlasted their mortal lives and should last long after the members of commercial music industry sponsored music acts meet a similar fate...."
Mozart and Beethoven became very rich men as a result of their work. They were the musical superstars of their generation. Today, if you sign with the right record company and they help make your first CD a success so that you don't need to work as a waiter any more, that's an equally fine way of allowing you to indulge your creativity.
Many Slashdotters believe that so-called "greed" among artists is this new concept that is poisoning creativity, when the reality is that many of the authors, musicians, playwrights, painters and other artists of the past millennium who are still well-known to us today made considerable fortunes from their work. They were commercial in every sense of the word. Human nature does not change.
"That's one of the really sad/frustrating/infuriating parts about this whole thing. The artists themselves actually don't have the rights to distribute their songs, either. About the only rights they're "allowed" to retain is the right to perform their works."
Another important right that the artist usually retains is publishing rights. There's a lot of money to be had there.
"But they can't legally distribute their own CDs, nor post their own music for download."
Yes, that is the tradeoff when you sign a contract that results in a record company spending hundreds of thousands of dollars or more of their own money to record, engineer, produce, distribute and market your music. The exclusive distribution rights to the recordings are the way in which they recoup their massive investment -- record companies, very much like the company that you probably work for, are for-profit businesses. If you were to approach a typical record company with the proposal that they front all the money recording, producing, marketing, etc. but allow you to give away unlimited copies for free, they would likely ask you if you were out of your fucking gourd.
There are a number of smaller record companies that share distribution rights. Magnatune is one of them. You may have your music distributed by them, and at the same time, you may put it in your Kazaa share directory if that's what you want to do. The trade-off is that Magnatunes will not front you the money to produce your music -- you're on your own. And, even they have restrictions, because (just like big record companies or the company that you work for) they are a for-profit business and must protect their investment.
"Anyways, as for downloading not being illegal, yes and no. If you own the physical CD, it is legal to format shift it onto your computer... Whether that means you stick the CD in your drive and rip it, or download the tracks from Kazaa, both are legal methods of format shifting."
The original Napster tried this argument, as well. It didn't work in their case. Here's an excellent summary.
"Excuse me, you're now equating people who don't buy CDs because they don't work to people who make illegal copies of music."
Actually, more to the point, if the CD has DRM, don't buy it is exactly what I'm advocating. That is within one's rights as a consumer. And, that's exactly what I do... I vote with my wallet. If enough people do, CD DRM will die the death it deserves.
Many Slashdotters make the leap from this to the notion that it's okay to pirate music because of the existence of CD DRMs. If you're just not sure what I mean, that's understandable -- it's been lost of many other Slashdotters as well.
Please read the thread again. I think it's universally agreed that CD DRM sucks. What I reject, however, is the notion that the existence of DRM CDs forces one to become a pirate. I think free will comes into play here a bit more than some others appear to think.