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Music File Sharing

HTM 304

Management Information Systems

CRN 42335

Fall 2007

Prepared for:

Fang Fang

December 11, 2007

By:

Caitlin Smith

Stewart Rutledge

Jess Culpeper

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Music File Sharing

Technology over the past several years has brought a

lot of benefits to society and especially to business. E-

commerce is almost essential for a company to be very

successful in today’s marketplace. However, technology has

also brought a lot of drawbacks to society and business as

well. People and business constantly have to adapt to the

ever changing world and way of life. With the increase of

interest in cell phones, personal media players, and

laptops, there has come a new interest for new products.

Such products are digital music. Although the interest in

digital music has opened many more doors to opportunity, it

has also opened many other doors to problems. The music

industry has to deal with music piracy and come up with

actions on how to stop it. As well as society has to learn

the legality of music file sharing and learn about what the

issue of music file downloading is and in what ways is it

legal and illegal to better protect ourselves as well as

behave ethically as possible when purchasing digital music.

Introduction

To first understand why music file sharing is illegal,

one has to understand the legalities that protect the

music. When an artist or a group makes a song, they

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usually get it copyrighted. A copyright is “the exclusive

right to make copies, license, and otherwise exploit a

literary, musical, or artistic work, whether printed,

audio, video, etc.” When someone makes a copy for shares a

copy of a song, it is breaking the copyright law. When

breaking this law it is called piracy, “the unauthorized

reproduction or use of a copyrighted book, recording,

television program, patented invention, trademarked

product, etc.” So how did piracy become such a problem?

Shawn Fanning, a Northeastern University student,

created Napster which was a file sharing service that made

the way for peer-to-peer file sharing for music. In July of

1999, Napster was made available to the public. People

from around the world joined the site and at a rapid rate

started downloading music, but never paid a dime. Less

than six months later, the music industry wanted to take

legal action for violating copyright laws. Metallica, Dr.

Dre, and Madonna all filed lawsuits against Napster. The

claims were 1. That its users were directly infringing the

plaintiff’s copyright. 2. That Napster was liable for

contributory infringement of the plaintiff’s copyright. 3.

That Napster was liable for vicarious infringement of the

plaintiff’s copyright.

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Napster reached its peek with 26.4 million users in

February of 2001. However, in July of 2001, Napster was

found against for all three claims and was forced to shut

down. A year later, Napster declared bankruptcy and sold

all its assets. Napster now is a pay service music sharing

service similar to something like iTunes.

Over the years, music file sharing has become a hot

topic. Napster is not the only file sharing service that

has been an issue for the music industry. Several other

sites, such as Kazza, limewire, WinMX, and others, have

come about to make file sharing more difficult to crack

down on, but they have been trying.

Who is the RIAA

An organization called the Recording Industry

Association of America (RIAA) has become the strongest

fighter in the war against piracy, especially illegal music

file sharing. The RIAA is an “organization committed to

helping the music business thrive.” Their “goal is to

foster a business and legal climate that protects the

ability of our members.” The members of the RIAA are the

members of the recording industry; musicians, producers,

record labels, etc.

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The RIAA is out there to fight piracy. The RIAA

considers downloading music without paying or without the

bands or artists consent as equally as bad as shoplifting

from a convenience store or stealing a woman’s purse right

off her shoulder. They are completely correct. Just

because the crime does not exactly have an immediate

penalty or the likelihood of someone being caught is less,

does not make is a lesser crime. It is extremely illegal

and someone can be penalized for it greatly, which will be

discussed later. The industry is being greatly affected by

piracy.

So how much is the music industry actually loosing.

Well according to the RIAA page, it is broken down into two

categories. Losses from street piracy which is the

manufacture and sale of counterfeit CDs and also losses

from illegal online music file sharing. The RIAA estimates

that approximately that the United States music industry

loses more than $300 million per year to the street piracy.

Calculating the loses from online piracy is extremely

difficult, the RIAA does know that the online pirated

marketplace largely out numbers the legal marketplace. The

RIAA states “that means investment in new music is

compromised,” and “piracy is a very real threat to the

livelihoods of not only artists and record label employees

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but also thousands of less celebrated people in the music

industry.” Basically, the people in the positions such as

the receptionist at the front desk of a record label

company or the record store clerks. “Piracy undermines the

future of music by depriving the industry of the resources

it needs to find and develop new talent and drains millions

of dollars in tax revenue from local communities and their

residents.”

Financial Impact

No matter what side you may be on in regards to this

issue, whether you are the consumer, musician, the record

label, or any other facet of this interesting issue, the

main thing most people are worried about is, how is

downloading and illegal downloading going to impact my

wallet. Well, it is obviously going to be very different

from party to party. The consumer is worried that the

record company is going to get fed up with the somewhat out

of control downloading and lack of CD sales issue, and

either jack up the prices of legal downloads or come out

guns blazing on illegal downloaders and levee either heavy

lawsuits and/or even jail time. The Musician or Artist is

scared that they are not going to make any money due to all

their music being downloaded for free and they won’t be

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able to live out their dreams in that Bentley and huge

mansion. The record label is in the business of maximizing

profit for their musicians and themselves. If you are

taking their music for free, they are not exactly

maximizing profit. The record label would like to charge

whatever they want for their products, but without absolute

power over their product, they are going to have to meet

the consumer somewhere in the middle. All these players in

this issue need to look at the financial impact of file

sharing on them, now and in the future. The fact of the

matter is that physical CD sales are down, and digital

downloaded music up. Nielsen SoundScan reported that as of

July 2007 CD album sales were down 15 percent during the

first half of 2007 compared to the first half of last years

record sales. They also reported that the sale of digital

tracks had increased 49 percent as compared to last year’s

sales. You can see a definite trend there.

People are choosing to get their music digitally more

and more. This is really illustrated in the sales figures

from the first quarter of 2007. NPD Group reported that

Wal-Mart was number one in music sales with 15.8 percent of

the market share, Best Buy came in second with 13.8 percent

of the market share, and iTunes came in third with 9.8

percent of the market share. Although the numbers show

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that a lot of people are still getting their music the old

fashion way at Wal-Mart or Best buy, digitally delivered

music, in particular iTunes, is fast on their heels. The

financial figures are clearly not in the old CD’s favor.

Nielsen SoundScan reported that digital music sales were up

67 percent in 2006 and as we stated earlier are already up

49 percent through the first half 2007 and Strategic

Analytics believes we will see digital sales grow to

upwards of 62 percent by the end of 2007 and account for

about 2.7 Billion dollars in the music industry. By

looking at the numbers from even just the last few years,

you can clearly deduce from them that every year digital

sales are increasing and the next year is generally

bettering each previous year’s sales.

The financial impact of online music file sharing in

the future varies, but most analysts say basically the same

thing, digital online music is an industry that is going to

keep growing. Jupiter Research predicts that by 2012

digital online music sales will account for a third of the

music sales market share. They also predict that digital

music spending will rise to 3.4 Billion dollars over the

next 5 years and that CD sales will continue to decrease.

In-Stat predicts that digital music will account for 26

percent of music sold by 2011.

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Experts and novices alike, can see financially the

viability of the digital online music trend. Digitally

downloaded music will definitely financially impact the

music industry negatively and positively no matter what

side you stand on, but it’s how you react and how one uses

the advantages of online music downloading that will really

prove one’s exact financial impact.

Impact to the Artists & Record Label

There is no one set impact to musicians throughout the

music world, due to the fact that there are all kinds of

different musicians at different levels. There are going

to be different feelings about file sharing at each level.

There exists a wide spectrum of musicians in the music

world, speaking from a financial and exposure point of

view. This being the case it is probably easier to analyze

the levels at the opposite ends of the music world

spectrum. On one side of the spectrum you have an artist

or band just starting out, looking for any exposure it can

get to further it’s popularity. On the other side of the

spectrum you have the mega band or artist(i.e. Metallica,

Aerosmith, Prince, etc.) who needs no exposure, because

people already know full well who they are. These artists

clearly have different needs. For the small time artist,

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getting exposure through file sharing is a great way to

drum up a “buzz” and to reach people with their music.

Although they may possibly lose money in the beginning of

their career, they know that getting their music out will

eventually equal success in the long run in a lot of

instances. In one lawsuit in 1998, which is one of the

many lawsuits the Recording Industry Association of America

(RIAA) has filed in response to digital music file sharing,

one of the fans listed in the lawsuit felt he was unjustly

being sued. Fred Cohen responded to this lawsuit by

saying, "I never understood why they want to enforce those

copyrights when it doesn't hurt them. It was great

advertising for them," he said. "My site was mostly songs

[that the record labels] weren't marketing themselves.

Plus, I had links to record stores so people could buy the

albums. I was never trying to take away sales or screw the

record companies," he added, noting that according to a

poll on his site, more than half the people who listened to

songs on his site followed the links to stores and bought

CDs.

Since 1998, record companies generally understand this

point, and realize that this is a good thing for smaller

acts. Fans of smaller artists can really help with

promotion by file sharing and promoting their favorite

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bands. These types of activities can lead to more

concerts, merchandise sales, ultimatley more revenue for

the artist and the record label, thus generally file

sharing for the smaller band or artist can have a very

positive effect.

This however is generally not the case for the large

more well known prominent artist. While they may need to

promote their latest album, they certainly don’t want to

give it away. They will still see some of the benefits of

file sharing such as further sustained popularity leading

to higher concert and merchandise sales, but ultimately

they will be losing album sales. The bigger and more

successful the artist with larger possible album sales, the

bigger the threat of file sharing, because they will lose

album and revenue sales on a wider scale. The end result

is ultimately a potential larger loss of revenue and a

potentially financially devasting impact to the larger

group or artist.

Impact to the Consumer

Consumer beware! The RIAA has launched a full scale

war on illegal file sharing in the form of lawsuits. The

latest and most publicized lawsuit the RIAA has levied is

against Jammie Thomas. Depending on who you ask, there are

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many different opinions on this case. Some feel that this

was a cheap attack on the consumer. Anticopyright

copyright organizations and activists believe this was a

viscious attack by the tyrannical RIAA and greedy music

labels. While Jammie Thomas has technically illegally

digitally shared songs, she is far from the worst offender.

She only had 24 songs available on Kazaa, which is one of

the more popular peer to peer file sharing sites. Compared

to a lot or file sharers, the amount of songs she had was

very low. From the RIAA’s standpoint though, it doesn’t

matter how many songs. If you have one illegally shared

song, you are breaking the law.

Cary Sherman, President of the RIAA, feels that their

lawsuits and efforts against illegal file sharing are

really paying off. He feels that since the RIAA has

launched their antifile sharing program in June of 2003,

that they have yielded some very positive results. He

cites several different items to substantiate this.

Sherman goes on to say that digital music revenues have

have doubled from 2005 to 2006. In 2005 digital revenue

was about 8 percent of the market, where as it was about 16

percent of the market in 2006. Sherman feels that they are

also stemming the tide of the illegal consumer with the

threat of the lawsuit. In 2003 there were an estimated 7

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million households illegally downloading music. Today they

estimate that there is about 7.8 million households

illegally downloading. He considers this a success due to

the fact that internet and broadband users have increased

from 38 million of home users in 2003 to an estimated 80

million today. So, the number of households have stayed

relatively the same, while the use of internet and

broadband users have more than doubled. Sherman also feels

that the lawsuits are getting the message out there loud

and clear. He said that only an estimated 37 percent of

users new what downloading music illegally was in 2003,

whereas an estimated 73 percent of users understand now,

and he believes this is in large part due to the lawsuits.

For the legal filesharer, this has made things a lot more

cut and dry. New user friendly advents like iTunes and

iPods have given structure to the file sharing issue.

Consumers now know where they can go to download music

legally and by the growth of the financial numbers and the

music market share, they are doing it a lot more often.

Ultimately, the impact to the consumer is this, if you

want to acquire music digitally or otherwise, you’re going

to pay for it. If consumer wants to illegally file share,

they may get music for free, but they run the risk of legal

penalties.

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Methods of Downloading

Trying to figure out exactly how one would obtain

downloaded music files, there is a simple question that

person must ask themselves; do I want to download those

music files legally, or illegally? There are many

different options out there for someone to choose from, but

it basically comes down to what type of cost that person is

willing to endure, that should ultimately influence their

decision. Whether it be paying for a monthly service to

access songs, buying songs by album or individual song, or

downloading song for free from a peer to peer program, one

way or another the consumer will have to pay.

The first method that consumers have to choose from

when downloading music, often involves running a peer to

peer program. This method of file sharing has been found

to be illegal, and poses many threats to the people who use

this method. This allows people to share music from one to

another via their personal computers. Many programs have

exist that allow people to share their music, some no

longer exist, but many still are very prevalent today, and

are being used by millions. After the fall of Napster,

people began to use a wide variety of programs to share

music. Those programs include Kazaa, Kazaa lite, Limewire,

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WinMx, Shareaza, Morpheus, Bearshare, Gnutella, eMule, and

Kademlia just to name a few. Through these programs, users

have the ability to share their music files with other

users. As well as browse other people libraries to

downloading songs they might want. This is all done for

free, or so the program users may think. There are many

different cost associated with peer to peer file sharing,

even though they aren’t immediate, they can be quite pricey

in the long run.

One potential risk that can occur when sharing music

illegally is that of malware. Malware is software designed

to infiltrate or damage a computer system without the

owner's informed consent. Some file-sharing software comes

bundled with malware such as spyware, viruses, adware, or

otherwise privacy-invasive software. Sometimes this

unwanted software remains installed on the system even if

the original file-sharing software is removed, and can be

very difficult to eliminate. In many cases such malware can

interfere with the correct operation of web browsers, anti-

virus software, anti-spyware and software firewalls; can

cause degraded performance on affected systems; and in some

cases may secretly compromise a user's privacy or security.

In most cases it is possible to remove adware and spyware

by running spyware removal programs. Such programs can

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often remove malware without influencing the functionality

of the file-sharing software. By downloading songs

illegally over a peer to peer program, users run the risk

of potentially downloading some form of malware. Often

times when searching for a song, numerous results will come

up. Unfortunately there is no true way in knowing who you

are downloading from, and what their intent might be. The

best-known types of malware, viruses and worms, are known

for the manner in which they spread, rather than any other

particular behavior. The term computer virus is used for a

program which has infected some executable software and

which causes that software, when run, to spread the virus

to other executable software. Viruses may also contain a

payload which performs other actions, often malicious. A

worm, on the other hand, is a program which actively

transmits itself over a network to infect other computers.

It too may carry a payload. Persons who decide to file

share over peer to peer networks must seriously analyze

these risks, and ask themselves if they are ready to accept

potential hazards. Is the draw of free music really worth

the risk of possibly having some sort of malware ruin their

system? Forcing them to spend vast amounts of money to try

and fix their systems, or just buy a new one all together.

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The second threat that can be associated with illegal

file sharing is that of possible lawsuits filed against

downloaders by the Recording Industry Association of

America (RIAA). Since the beginning of file sharing, the

RIAA has been hard at work to prosecute those who would

share music illegally. There are many different view

points on how the RIAA has proceeded with their lawsuits,

and whether or not they should even be prosecuting

individuals. Some feel the RIAA has taken measures too

far, that they are excessive and unfair with their

litigation. Others still like the fact that their work is

being looked after. Whether you feel the RIAA is doing the

right thing or not can be a mute point. There are,

however, many legal cases to try and back your claim.

One such case occurred September of this year. With

assistance from the RIAA, Interscope Records sued Yolanda

Rodriguez over illegally sharing music files. The RIAA

accused the defendant, Yolanda Rodriguez, of downloading

and distributing copyrighted works, but did not offer any

specific evidence or proof of its claims. The case took

place in Southern California and was presided over by Judge

Brewster. During the case, defendant Rodriguez failed to

appear in court. As such, the RIAA was to be awarded a

default monetary judgment. However, Judge Brewster felt

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differently. He deemed that the plaintiff’s must present

at least some facts to show the plausibility of their

allegations of copyright infringement against the

defendant. Judge Brewster shocked the RIAA by not only

denying a default monetary judgment, but also completing

dismissing the case for failure to state a claim. Many of

those who are against the RIAA felt this would be a record

setting case, that the RIAA had lost some of it’s validity

by constantly filing charges with no evidence. Those

opposed to the RIAA felt this case could be used as

precedent to deny the RIAA any future claims against those

who file share music illegally. Little did they know how

wrong they were.

The RIAA had an opportunity to redeem themselves a

month later in yet another lawsuit of file sharing. The

RIAA tried another suit this past October when they filed

charges against Jammie Thomas in Duluth Minnesota. This

case was a little different then the previous one that took

place in California. Instead of being ruled over by a

single judge, a panel of twelve jurors was asked to bring

down a ruling. In the case, the RIAA claimed that Jammie

Thomas had illegally shared 24 music files over a Kazaa

file sharing network. Ultimately the jury found Thomas

guilty of file sharing and ordered her to pay $9,250 per

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song she illegally downloaded and shared. The total amount

she has been ordered to pay the RIAA is $222,000. This is

no small amount and should be seriously taken into account

when someone might want to file share. The RIAA feels this

case finally justifies the claims that they have been

making throughout the years. They are expected to use this

case and their precedent for future filings. Although some

feel the amount ordered to be paid was a bit excessive, it

doesn’t change the fact that the RIAA now has their

launching point to continue litigation against those who

choose to file share.

Malware and excessive penalties awarded through

lawsuits should be more then enough deterrent to prevent

people from file sharing. Fortunately there are

alternatives in place that allow for music to be downloaded

legally. These alternatives are by no means free, but they

do offer the ability to acquire ones favorite songs over

the internet and free of vicious malware. Such programs in

existence are the very popular iTunes, the new and improved

Napster, Yahoo music unlimited, and MTV.com. Each provides

the users with access to various artists and songs, but all

come at a price. The most prevalent and used downloading

program would have to be Apple’s iTunes. The program is

free to download, and allows users to input their CD's into

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the iTunes library for organizational purposes. Also, by

accessing the iTunes store, a user can purchase songs to

add to their library. The user has the option to buy

individual songs for .99 cents each, or buy entire albums

for various prices, usually around $9.99 each. One

drawback to iTunes is that purchased songs from their music

store, can only be accessed on four computers. Some might

find this a displeasure if they wanted to play their iTunes

library from their iPod on different computers. Other

programs that can be used to download music are the new

Napster and Yahoo music. Each program requires a monthly

bill, ranging from 9.95 a month for Napster, and 5.99

roughly for Yahoo music. Both programs offer unlimited

downloads, with a small catch. To run and play the songs

downloaded, you must download specific music players for

each company. Furthermore, an active account must be

present in order to play downloaded music. This could be a

problem for some who might download music for a few month

or year, be happy with their collection and stop their

service. They would lose all access to their favorite

songs unless they continued paying the monthly fee, which

over time could add up to a pretty hefty bill. Yet another

option out there would be MTV.com/downloads. This site

offers free music downloads for anyone willing to resister

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with the site. The problem here is that music selections

are very limited, and most of the artist are unknowns or up

and comers.

There are many choices out there when it comes to

downloading. It all comes down to whether or not the

consumer is willing to do it legally or illegally. Whether

someone runs the risk to obtain music for free via peer to

peer file sharing, or if they decided to use a pay site is

completely up to them. The bottom line is though, one way

or another it’ll cost you.

Conclusion

As complex as music file sharing can be, it can be

done right and be beneficial to everyone that is involved.

Piracy only takes money from the industry and creates

problems for the consumers. Treat the music file trading

issues just as you would treat going into a store and

purchasing a CD off the rack. If done correct and legal,

then there won’t be any problems for either the consumer or

the music industry. Technology will always bring more

issues to the table with business and consumers, but

hopefully we can all behave as ethically and legal as

possible when it comes to using the internet as our

marketplace.

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Reference Page

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5129687.html?tag=item

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• http://www.news.com/Recording-industry-shows-how-to-lose-by-winning/2010-

1030_3-6213830.html?tag=item

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pricing/2100-1025_3-6212107.html?tag=item

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