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An exploration of mp3 file sharing and online music piracy, and its ethical implications regarding consumers, musicians, and record companies

Background

"In traditional ethical studies, the classic problem is the starving man - can a starving man ethically steal a loaf of bread if he has no money. The modern version is evidently, can the person who wants to listen to music steal it if he thinks the price is too high?"

The topical escalation of media coverage besieging the demise of Napster has instigated widespread debate over the implications file sharing and the Internet will have for the record industry. The Napster software allowed its millions of users to share and download music mp3 files, which are of near CD quality, from each other's hard drives. This infringed copyright laws and provided a very real threat to both musicians and record companies alike. In response Napster was sued by the American heavy metal band Metallica, and then taken to court by The Recording Industry Association of America; where they were subsequently ordered to cease operating. Despite this verdict, many similar companies such as Grokster and Kazaa continue to offer file-sharing facilities and provide free access to copyrighted music.

There are numerous arguments originating from all sides of the debate. Many of these are mutually exclusive and, therefore, cannot all be substantiated. McDougall (2000) published an article online, in which he summates the main arguments listed below:

  • Copying is fair use
  • Copying is theft
  • Music wants to be free
  • Napster users buy more CDs
  • Music companies make too much money
  • Music companies will make more money with Internet distribution
  • Musicians can't make money with Internet distribution
Musicians will make more money with Internet distribution

Within the context of a report, the following discussion will evaluate these key points from the perspective of the consumers, musicians, and record companies.

The Consumers' Perspective

There are two fundamental arguments that endeavour to justify online music piracy from the consumers' perspective. The first is that copying is fair use. Many believe that subsequent to buying a recording; consumers should be entitled to do with it as they please. This is a very difficult matter to police, as the Internet is a global entity, and all nations have their own laws and regulations. The bulk of the legal disputes, however, have taken place in the United States, where Napster and the RIAA were based. The following is an extract from the U.S. constitution regarding American copyright laws:

"The Congress shall have power... to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries."

The fair use clause, as argued by the consumer side, is in section 107 and allows use for activities such as: criticism, comment, news reporting, teaching, scholarship, or research. Copies may be made for teaching but it does not allow any copying for entertainment or recreational purposes. This law is now being enforced with regards to online piracy due partly to the efforts of the Recording Industry Association of America. Such is the antagonism felt by consumers over this pronouncement that an organization has been set up to promote a boycott of the RIAA. Their website opens with the following text:

"Boycott-RIAA was founded because we love music. More and more the RIAA and the major labels have attempted to lock up our culture and heritage through extensive lobbying, outrageous campaign donations, misleading our political leaders and lying to the public, while misrepresenting the facts."

This suggests that consumers have the right to download music for free, as the practices of the major labels and industry bodies such as the RIAA are questionable. This is irrelevant as stealing intellectual property is still stealing, despite the substantiation of a physical product. "Piracy is theft. It is the reproduction of someone's copyright without their approval and generally on a commercial scale." The International Federation of the Phonographic Industry is the industry body that publishes statistics and information regarding recorded music. In 2002 they published their music piracy report that highlighted the far-reaching effects of music piracy, which effects governments and whole economies rather than just overpaid record company executives.

"The economic losses due to piracy are enormous and are felt throughout the music value chain. The victims include the artists whose creativity gets no reward; governments who lose hundreds of millions of tax revenues; economies that are deprived of new investment; consumers who get less diversity and less choice; and record producers who are forced to reduce their artist rosters because it is impossible to compete against theft."

Having established the far-reaching consequences of music piracy; it becomes harder to justify this behaviour, regardless of the music industry procedures. This is another issue entirely and consumers do still have a choice. Because we live in a free market economy, consumers may choose to buy music from one of the thousands of independent labels. Consumers may also choose not to buy recorded music; it is not an essential commodity as in the case of the starving man and the loaf of bread. They could still hear the music on the radio or television. If a whole generation of people become used to not paying for music, the industry may never recover and aspiring musicians will have no motivation to create new music. The ethics become even more questionable when it is pointed out that a lot of people make a lot of money from online music piracy. The IFPI claim the global pirate market is worth US.3 billion (this includes pirate CDs as well as online piracy).

There is another contention in the defence of file sharing. It has been argued from various sources that overall record sales enjoyed a period of growth during the time that Napster was in operation. This gives rise to the hypothesis that allowing consumers to listen to music for free via the Internet makes them more likely to spend money on cassettes, records, and CDs. "Yankelovich partners unveiled a study finding that two-thirds of those surveyed were prompted to buy music after listening to a song online." This is perfectly consistent with current consumer behaviour theory. Having heard, and liked a song the element of risk is removed from the purchase: it's a case of try before you buy.

These findings, however, are contradicted by the most recent industry sales figures produced by the International Federation of the Phonographic Industry. In their 2001 world sales report they affirmed that global sales fell by 5 0n value since 2000. This is attributed to new technologies assisting an increase in illegal downloading and CD copying. "Piracy has grown alarmingly in the top 10 markets in the past two years facilitated by new technologies - the Internet and CD-R." This debate cannot easily be resolved as there are too many external factors such as economic and social aspects affecting sales. The current state of the music industry, however, does suggest that the initial assumptions made by the RIAA and their supporters are correct. The industry is struggling to make profits, and sales of all recording formats, including compact disks for the first time, fell according to the IFPI 2001 world sales figures.

The Musicians' Perspective

Musicians are another group who are currently contesting the practices of the major record labels; this does not necessarily mean that they agree with the consumer side arguments. The industry is essentially an oligopoly, as five global entertainment conglomerates dominate sales and distribution all over the world. These companies have a notoriously unethical reputation and a turbulent relationship with the artists they promote. The American rock star Courtney Love is currently in the midst of a legal battle with her record label (Universal) claiming she has been cheated out of substantial royalties. She claims that the music industry is based on piracy because the major labels cheat musicians and make all the money simply because the control the distribution system. In a speech to the Digital Hollywood online entertainment conference, she made the following statement:

"Recording artists have essentially been giving their music away for free under the old system, so the new technology that exposes our music to a larger audience can only be a good thing."

This is an interesting viewpoint as the majority of the arguments against online piracy depict musicians as the victims. It may often be the case, however, that they are no worse off as a result. In her speech, Courtney Love also highlights that female singer Toni Braxton sold 88 million worth of CDs, but had to declare bankruptcy in 1998. The record contract she signed allowed her only 35 American cents per album she sold. This leads to the view that online music piracy is stealing from large conglomerates; which some believe to be okay. This is not true, as discussed earlier; there are many other victims including governments, economies, and even consumers, as less money can be invested in new acts. It would also be deplorable to say that stealing from musicians is okay, as the industry does it anyway. This merely serves to highlight another contemporary ethical issue stemming from the music industry.

There also musicians who support Napster et al on the belief that it can help new artists break into the mainstream. American punk rock band The Offspring actively encouraged fans to download their music, by entering those who did so into a prize draw. The winners received one million dollars, funded by the band themselves. Lead singer with The Offspring, Dexter Holland made the following statement talking to Inside.com:

"We're not afraid of the Internet. We think it's a cool way to reach our fans. If a band sells 12 million albums, what are we supposed to say? Oh, maybe we could have sold 13 million if we had just been Internet Nazis. Frankly, at a certain point, you have to say. Hey, let the people have the music."

This is an interesting point but not all artists sell millions of records, it is possible that some may struggle to earn a living as a result of file sharing. On the other hand it may be a useful marketing tool for these acts to build upon their fan base. Many other musicians from diverse backgrounds share this view. Speaking to the New York Times, rapper Chuck D made a comparable statement.

"We should think of (Napster) as a new kind of radio - a promotional tool that can help artists who don't have the opportunity to get their music played on mainstream radio or on MTV."

It is perfectly feasible that file sharing could be a promotional tool akin to commercial radio. It is also feasible that it could help break struggling acts into the mainstream. However, whether this promotional tool is utilised or not should be the artist's prerogative and not the consumer's. Artists and record companies can choose which songs to play on the radio in order to endorse an album, which is a greater body of work that the consumer may then buy. File sharers can download the entire album of there own free will. This is why it is unethical, an element of control is lacking, and without consent it is theft of intellectual property.

Finally, there are the musicians who are sincerely opposed to online music piracy. One such band is Metallica, who were mentioned earlier. Metallica sued Napster after an unfinished new track surfaced without their consent. This led them to find that all their previous works were also being downloaded. Speaking to the U.S. State Senate, drummer and band spokesperson Lars Ulrich made the following statement:

"I don't have a problem with any artist voluntarily distributing his or her songs through any means the artist elects-- at no cost to the consumer, if that's what the artist wants. But just like a carpenter who crafts a table gets to decide whether to keep it, sell it or give it away, shouldn't we have the same options? My band authored the music, which is Napster's lifeblood. We should decide what happens to it, not Napster -- a company with no rights in our recordings, which never invested a penny in Metallica's music or had anything to do with its creation. The choice has been taken away from us."

A phrase often used by Napster supporters is "music wants to be free". Lars counters this by pointing out that; musicians don't want to work for free. People in other professions (those who run Napster for example) are not expected to do so, and it is unfair to assume that all musicians are wealthy, as the majority struggle to make a living. The key contradiction to the freedom of information argument is the fact that the Napster software, logos, and trademarks were all copyrighted. This is hypocritical and removes credibility to the Napster supporters' claim that information should be free.

Another point raised by Lars Ulrich is that; theft of intellectual property is viewed as a lesser crime that physical theft (as divulged above). To argue this point, he uses an analogy; professing that downloading free music is like "winning one of those contests where you get turned loose in a store for five minutes and get to keep everything you can load into your shopping cart." The only differences are; there is no time limit, all the consumers win, and there is no store to cover the cost of the goods. If it was actual CDs being stolen (a tangible product) peoples perceptions may be dissimilar to the way they are now. This is conceivably because consumers are uneducated about this type of theft.

Metallica have been the most vocal musicians in their opposition to online piracy, but there are many more who share their opinion. There are groups such as Artists Against Piracy, a coalition of musicians including; Garth Brooks, Blink-182, Aimee Mann, Bon Jovi, Faith Hill, Hanson, DMX, Alanis Morissette, and Bryan Adams. The purpose of the AAP is to give artists an influence over the way their music is distributed online and to educate consumers about online piracy. They have undertaken a major advertising campaign to inform consumers about the issues, as discussed by InternetNews.com (11/07/00).

"Artists Against Piracy kick's off its educational campaign Tuesday with full-page ads in The New York Times, Los Angeles Times, USA Today, The Wall Street Journal and The Washington Post. Under the headline `If a Song Means a Lot to You, Imagine What it Means to us,' the ad has been endorsed by, and includes the names of, approximately 70 recording artists representing a wide spectrum of genres."

This widespread opposition serves to highlight the distress caused to musicians over the illegal use of their work. Some musicians choose to support Napster et al either because they believe it to be a good promotional tool, or because they have grievances regarding their recording contract. Without attempting to define what is ethical, it seems only fair that the artist in question should have the entitlement to decide how his or her own work is presented, distributed, or sold rather than leaving it up to the consumer.

The Record Companies

There are two types of record company: the major labels, and the independent labels. There are five major labels, each part of global entertainment conglomerates: EMI (Thorn), Warner (Time Warner), BMG (Bertelsmann), Polygram (Seagram), and finally Sony. These five labels have a combined global market share of 71.1%. Conversely, there are literally thousands of independent labels worldwide, which compete for the remaining 28.9%. Burnett (1996) found there to be hundreds of independent companies in the majority of countries he studied.

Many independent labels are embracing the Internet and file sharing as a way to promote their artists. This may be because they exert less influence over the media, and may not be able to get radio or television airplay. According to the New Musical Express, many leading independent music acts will see their songs legitimately return to Napster once its paid membership service gets going - through their independent labels.

It is the major labels that are most opposed to this digital phenomenon. "The transnationals are not prone to, as one executive wryly noted, `giving away our products for free'." This is extremely similar to the precedent debate about VCRs, and whether they would kill off the film industry: which they did not. Some also believed that recordable audiotapes would kill off the music industry when they were first introduced. All situations are different, nonetheless, and concerns this time around may be justified.

Many assume that major record companies charge too much money for CDs (around 15 in Britain) in comparison to the cost of producing them (less than 1 each), thus justifying digital theft. The fact is, making a sound recording involves a lot of fixed costs and tends to cost hundreds of thousands of pounds. Once produced, however: the variable, unit costs, are low. As believed by Mason (1986):

"Any individual item of information can be extremely costly to produce in the first instance. Yet, once it is produced, that information has the illusive quality of being easy to reproduce and to share with others."

For a major label, the break-even-point for CD sales is approximately 250,000 copies. This is why many industry executives are threatened by the conception of online piracy and falling music sales. The steps taken to control online music distribution are diverse and varied. In there 2002 Annual report, EMI asserted: "EMI is also very aware of the challenges presented by piracy, both physical and digital. We are continuing to co-operate with governments around the world to enact and enforce anti-piracy legislation."

A recent step taken by BMG is the introduction of CDs with anti-copying measures. One of the reasons they gave for this was to stop recordings becoming available online before their release date. This often happens when advance copies are sent to critics and industry insiders for review. According to on article on the BBC website , however, this has caused problems with some consumers. European versions of Celine Dion's latest album have apparently caused computers to crash, and would not work on older stereo systems. BMG plan to remedy these initial problems and continue with this anti-piracy strategy.

Sony and Universal, conversely, plan to make legal downloading of their music easier and less expensive for computer users. "Consumers now will be able to purchase digital singles under the Universal label for less than one dollar and albums for about US0 through several online retailers, including Amazon.com (Nasdaq: AMZN) and Best Buy (NYSE: BBY) For its part, Sony (NYSE: SNE) plans to lower its prices to .49 per song and will offer music through RioPort, the company's online distributor." This is an early sign of the industry embracing the new technology, and capitalising on its benefits: as happened with videocassette recorders, and audio tape recorders.

"Companies will have to decide sooner rather than later whether to go the whole way and permit full download of music (`clicks and mortar') or just to allow the consumer to preview the music online before buying it via mail order or through the `bricks and mortar' traditional retail store."

Conclusions

Whereas definite conclusions regarding what is ethical are extremely difficult to derive, the main points covered must be summated. Firstly, in the eyes of the law, copying is not fair use. Whereas this does not automatically make it unethical, it must be respected that it is theft. In an attempt to justify this, many say it is a victimless crime, or that the major record labels are corrupt, unscrupulous, and make too much money anyway. As the prior text demonstrates, however, piracy damages an industry upon which many people rely including: musicians, technicians, producers, managers, and even whole economies. It is also true that people make money from piracy duplicating work in which many people have invested a lot of time and money. This elects piracy as an act that is difficult to justify by anyone's definition of ethics.

There are further arguments that claim file sharing can aid the music industry, much in the same way that commercial television and radio do. This is claim is supported by many musicians as well as consumers. The effectiveness of this strategy, unfortunately, is difficult to gauge and contradicted by recent industry sales figures. It is also more perilous as consumers can download entire albums as opposed to hearing elected singles; which are used to promote sales of an album. Due to the level of risk attached to downloadable mp3 files, adopting this strategy should be the choice of the person who stands to loose the most: the artists and their record companies. In reality it is a decision made by the consumer, who stands to loose nothing and gain everything.

Many consumers do not even deliberate the ethical concerns connected to piracy, as they are not stealing a tangible product. Groups such as Artists Against Piracy strive to remedy this by educating the consumer about this brand of theft. Ethical consumption is becoming more and more commonplace in all markets and sectors for this very reason. The consumer is becoming more educated concerning ethical issues. A similar inclination may emerge in the music industry, as the fact remains that ethics affect everyone's consumption behaviour to some extent on a daily basis. This is best encapsulated by the words of an actual ethical consumer, as cited by Shaw (2000):

"We are making ethical choices all the time, not just about consuming products. Life is full of decisions which have an ethical dimension to them, and whether people acknowledge it or not that is always the case."