By Kate Bulkley
Monday July 14, 2003
The record companies have been so badly crippled by internet piracy that they can barely afford to invest money to combat the problem. Kate Bulkley looks at their dwindling options
So what will the musical summer of 2003 be remembered for? There's Beyoncé Knowles' sexy look, yet another Glastonbury, Craig David's smooth rhymes and the latest Robbie and Madonna hits. All this is true, but spinning around in the background all the time and getting louder is the issue of internet music piracy. What the worldwide music industry sees as the dark shadow of illegal music downloading is becoming an increasingly hot topic here in the UK.
We've all heard about Napster and that today there are a billion songs available on the web, many on peer-to-peer (P2P) networks like KaZaA and Grokster. We've also heard how the record labels suddenly feel vulnerable after having the business to themselves for half a century. But only now is the issue reaching the people who just might have the most influence in the matter: the government.
They may sound like dry topics, but copyright protection and the enforcement tools that go with it are the building blocks that politicians and lawyers need to police the explosion of illegal music. Even some artists are playing their part. Earlier this year, Madonna flooded the net with fake free MP3 files of her latest album American Life that when opened only gave the downloader a recording of Madonna saying: "What the fuck are you doing?"
As internet music piracy has doubled worldwide, the Recording Industry Association of America or RIAA (the equivalent of the BPI) has also begun toughening up on downloaders. Instead of the touchy-feely approach of trying to educate against music file-sharing, last month the RIAA said it will begin suing for copyright infringement those people who offer "substantial" amounts of music online to others over P2P networks. The chatrooms have been full ever since with people wondering what constitutes a "substantial" amount of downloading.
Of course, many of the fashions that begin in America eventually come to Britain, and this one is no exception. At the launch of the Recording Industry Commercial Piracy Report 2003 last week, industry figures described an 80% rise in physical music piracy (basically, the CD bootlegging industry) in the UK over the past year, but most of the questions from the attendees were about internet piracy because, like it or not, it is the future.
The music bigwigs in the UK say that when music downloading began with MP3 files, there was no way to collect money for the artist or the record label. The technology just did not exist, so the downloads of current music catalogues were fair game and no one got paid. "The cat was out of the bag when the digital CD arrived," says Tim Bowen, chairman of BMG UK and Ireland.
BMG and all its rival record companies are busily digitising their back catalogues since Napster launched in 1999 and they all, to varying degrees, have begun licensing their music for digital distribution to services such as MusicNet, PressPlay, iTunes and Peter Gabriel's OD2. "We are in a hiatus period at the moment because 100% of our music is available for free download," says Bowen. "But the digital download also gives us huge opportunities. There is no unwillingness to license our material to Apple or anyone else that has a business plan that makes sense. But to date, the offerings have not been there as marketable opportunities."
There are currently only 12 legal download sites in the UK, says Bowen, but they are all small and relatively fragile businesses and hold limited attraction for punters compared to free services.
At the piracy press conference last week, the record companies also took aim at parliament, accusing it of dragging its feet on passing legislation to combat piracy. The EU has passed two important directives in the past two years: one to protect music copyrights, and a second to harmonise enforcement laws against both bootlegging and internet piracy. Both are still awaiting UK legislation.
So while the RIAA is suing everyone it can, particularly university students - who are among the most adept downloaders - the BPI has yet to go down that route, partially because the laws are not in place. Peter Jamieson, executive chairman of the BPI, says the laws need to be strengthened, but for the time being, "We think [combating illegal downloading] is about education and legitimate business models. But if an individual starts uploading files without returning money to the investors behind the music, I would consider him a legitimate target."
The BPI has been sending out leaflets to universities and businesses to try to counter the problem, but it doesn't seem to be having much effect. The BPI will issue its first full-blown piracy report at the end of this year, but indications from the international body, IFPI, are that the amount of net pirate music will have doubled over the past 12 months, both worldwide and in the UK.
Jamieson wants his campaign to act as a carrot rather than a stick, to socially stigmatise illegal music downloading. "I'm a great believer in the moral majority, and if the alternative to illegal downloading is easy and usable, it will be attractive. It's just like the Americans and the war in Iraq - they overdid shock and awe and underdid hearts and minds. We want to overdo hearts and minds."
But while all this is going on, the music industry is suffering from a huge downturn in normal record sales. In May, EMI announced grim figures - a 12% slump in sales of recorded music and the termination of 400 artists' contracts. Last week, the BPI revealed that in the UK, levels of unauthorised consumption of music are one-third those of authorised consumption.
Other figures show that about five million people worldwide had used pirate sites in the past 12 months, up from three million in June 2002. The number of music files on these sites doubled to 1.1bn over the same period.
The dilemma for the UK music makers is that while business is down, there is little spare money to spend on educating consumers in the evils of illegal downloading. The BPI is now talking to ad agencies about creating a small-scale media campaign to reach the general consumer.
The commercial answer is obvious: better legitimate sites. I-Tunes, launched in America in May by the Apple organisation, is a case in point. I-Tunes sold a million songs online in its first week and features more than 200,000 songs in its catalogue, but is still a US-only and Mac-only service.
Meanwhile in the UK, Freeserve's year-old £4.99-a-month music club has proved popular (although no figures have been released), while AOL's version - which has no separate charge above the normal monthly AOL subscription fee - began three weeks ago with little fanfare, but much hope.
The most significant engine for legalised music downloading has been Peter Gabriel's OD2 company, which works alongside HMV, Microsoft's web portal MSN, BT and Tiscali among others. OD2 spearheaded Digital Download Day Europe in March to show consumers how easy it is download legitimately.
You would think that the record companies would all be scrambling to help out the legal download sites. But you would be wrong. Only EMI has clearly stated that it will make over 90% of its back catalogue available online. So without more support, companies like OD2 are left looking like the music shop on the corner trying to compete with the illegal P2P sites' Virgin Megastore.