By Jane Black In December, Ted Cohen, vice-president for new media at record label EMI, attended his cousin's wedding. At the reception, he and more than 100 other guests were given a keepsake: a CD of the couple's 18 "favorite love songs," including nine songs copyrighted by EMI. When Cohen half-jokingly informed his cousin that he was guilty of copyright infringement, the groom looked surprised: "No it's not," he told Cohen. "It's fair use."
Everyone has a similar story. Kids make CD compilations for their law-abiding parents at Christmas. Friends burn songs or entire albums for friends. Some don't know that it's stealing. Most simply don't care. After all, until now, no one worried about negative consequence.
All that changed on Jan. 21, when a U.S. District Court ruled that Internet service provider Verizon (VZ), if requested, must unmask the identity of subscribers suspected of trading unauthorized music files on peer-to-peer file-sharing services. In a 35-page ruling, Judge John Bates dismissed Verizon's claims that revealing the name of a subscriber who had offered to share 600 copyrighted songs would be an invasion of privacy. Specifically, downloading and sharing hundreds of copyrighted songs is neither fair use nor a form of protected speech, the judge ruled.
DOWNLOADERS IN HANDCUFFS? Bates's ruling marks an important new phase in the music industry's three-year war on Internet piracy. As the labels now aim their guns at their own customers, they must be careful not to push too hard. The RIAA's war on piracy already has angered many die-hard music fans. Branding too many customers criminals could incur the wrath of the larger music community, which still buys CDs. Most consumers would be outraged if dozens of music fans were escorted away from their PCs in handcuffs, like the disgraced ImClone CEO Sam Waksal, or WorldCom's CFO Scott Sullivan. "The goal is not to alienate but to educate," says EMI's Cohen. Achieving that goal may require more carrots, along with the industry's legal sticks.
Until now, the main strategy of the Recording Industry Association of America (RIAA) has been a legal assault on high-profile distributors of copyrighted material, including Napster, Aimster, Morpheus, and KaZaA. And in the courtroom, the RIAA has won every time. Yet the industry doesn't appear to be winning where it really wants to -- in the marketplace. CD sales continue to fall. In the first half of 2002, U.S. music shipments dropped 7%, to $5.53 billion from $5.93 billion in the first half of 2001.
The industry sees itself at the do-or-die stage. "File traders have taken comfort in anonymity," says RIAA President Cary Sherman. "They feel they can do whatever they want with no risk of consequences. This is an area where being nice doesn't do the trick."
WELCOME DEPARTURE. On the one hand, Sherman is right: Enforcement may be the only way to make customers understand that downloading copyrighted music is the same thing as walking out of a record store with a few CDs in their bag. But turning your customers into prosecutable crooks could intensify the outrage many music fans already feel about the music industry's bumpy transition to the Digital Age.
RIAA CEO Hillary Rosen's resignation is a good first step. Rosen, who led the RIAA since 1998, was at the forefront of the industry's bare-knuckled legal battles and a lighting rod of criticism for the its slow embrace of digital music. She has long talked of stepping down for family reasons. And a new industry front person could help soothe long-simmering tensions between the labels and music fans by focusing more on education and negotiation rather than threats and legal action.
"I think Hillary has been misunderstood," says one industry insider. "But there's no doubt that everyone sees this move as a chance for a new start."
GET 'EM YOUNG. A good starting point is education. The RIAA claims that it "works with" universities and corporations to educate them about the evils of piracy. In reality, the campaign has amounted to little more than a series of threatening letters. On Nov. 21, the U.S. Naval Academy acted on the industry's request to crack down on illegal music trading when it seized almost 100 computers from students suspected of downloading unauthorized songs from the Internet. If the midshipmen are found guilty, they face possible loss of leave, court martial, or even expulsion. The incident provoked a wave of protest -- and disgust -- in the technology and university communities (see BW Online, 11/27/02, "Music Pirates at the Naval Academy?").
A better way would be to spend time and money educating younger children on the concept and importance of copyright. One program already under way is a fifth-grade curriculum, developed in conjunction with Scholastic Inc. (SCHL), that has been introduced at 10,000 schools across the country, a part of the whole generation of teens whose first stop for music is the Internet, not the local music store.
It's the RIAA's responsibility to get to young consumers early and teach them that downloading illegal music could means less music gets produced, as declining revenue translates into labels being forced to reduce spending on development, distribution -- and jobs.
KILLER APP. Most important, it's time to improve the legitimate Internet music services, such as MusicNet and PressPlay (see BW Online, 12/21/02, "Pay to Play Music: Lots of Missed Notes"). In recent months, the labels have taken small steps to improve them. For example, PressPlay now allows subscribers to burn a limited number of tracks each month. Sony and Universal are also offering 99-cent downloads through major online retailers.
These services still have a long way to go. Internal wrangling over contracts, as well as technical challenges and pervasive fear of even greater piracy have stalled the birth of truly innovative offerings. Supposedly, the thinking is that if you can't compete with free, why try? But the illegal download services have established the abilities to personalize, mix, rip, and burn music as a "killer app." Now the labels have no choice but to quench music fans' thirst -- or risk the long-term consequences. Black covers technology for BusinessWeek Online in New York