New Contenders in World of Digital Downloads

Volume CIII, No. 6June, 2003

Mikael Elsila

In recent months, Allegro has reported on the proliferation of Internet music pirating – something both Local 802 and the AFM take very seriously. When consumers “share” copyrighted music files with each other through software like Kazaa, record companies lose sales. This affects both royalty artists and side musicians alike, in addition to the industry as a whole.

The record labels’ lawsuit against Kazaa is still in progress. However, the labels recently lost their case against Grokster and Morpheus, two similar file-sharing programs.

In file sharing (also called peer-to-peer or P2P), there is no central repository of files. Instead, users put their own record collection up for grabs by telling others that it’s OK to download files from certain folders on their computer. When those files contain copyrighted music, that’s when musicians have a problem.

In the case of Grokster and Morpheus, a Los Angeles federal judge ruled on April 25 that the file sharing software was no different than a VCR. A VCR allows people to share videotapes with each other. If those videotapes contain copyrighted movies, it’s not the fault of the manufacturer of VCR’s, according to the judge’s ruling.

With regard to illegal file sharing – pirating – the situation is pretty cut and dried for musicians. But what about legal downloads of music?

The labels say that software like Napster, Kazaa, Morpheus and Grokster hurt their sales. And indeed, sales of CD’s have been declining. But how can labels compete with free, pirated music? Legally selling music through the Internet has been the nut that the record labels haven’t been able to crack – until perhaps now.

Selling music over the Internet would change the music industry forever. Some believe that pirating is impossible to control and that the days of making money from selling music are over. Others believe that the industry itself will change from selling CD’s in music stores to selling downloads over the Internet. Related to this might be the death of the album. Instead of producing one album with many songs – some hits, some filler – tied together by a concept, the Internet allows labels to sell one track at a time. The artistic and financial implications of this are a big question mark.

Until now, labels haven’t been able to get their act together to sell downloads over the Internet. Even some artists have resisted. Universal and Sony created Pressplay. AOL Time Warner, BMG and EMI launched MusicNet. But the two competed with each other, then fizzled.

But Apple just launched a new site that might be the first to successfully sell legal music downloads. Called the iTunes Music Store, it allows users pay a small fee for each download; there is no monthly subscription fee. And, unlike its competitors, Apple allows users to own the music they download, instead of just listening to it in real time. A whole bunch of complicated mechanisms prevent mass duplication. You can burn music to a CD or download it onto a portable digital player.

Why would consumers pay even a small fee for digital downloads when they can pirate music for free? For one thing, networks like Kazaa are teeming with viruses and spam. And sometimes the quality of pirated music is dodgy. Apple is counting on the fact that consumers will pay a small fee for an official, legal network where the quality is controlled and assured.

This is new territory for the AFM, and issues arising out of digital distribution remain to be resolved. A side letter to the Sound Recording Labor Agreement gives the AFM the right to negotiate with recording companies over music downloads.

The agreement also allows for Joint Cooperative Committee meetings between the AFM and record labels. The AFM plans to set up these meetings soon.

For the first time, musicians are facing the world of legal Internet music downloads. It is beyond doubt that we will be affected.

The question is how musicians – or the Special Payments Fund – will be paid. Once again, we have to wait and see.