Music Industry Risks Backlash After Suits

By | September 10, 2003 at 12:00 AM

The legal assault on music file-swappers is an unparalleled move by recording companies desperately trying to survive after failing to fully embrace digital distribution methods and driving up the cost of CDs.

But record companies now risk a backlash that could damage far more than their financial results, while still not making a significant dent in music piracy, some observers say.

A day after firing off 261 copyright lawsuits against individuals it accuses of each sharing hundreds of music files online, recording industry officials fielded a few calls from defendants eager to avoid paying thousands in damages.

The Recording Industry Association of America said it settled the first of the suits for $2,000. The defendant was Sylvia Torres, the mother of 12-year-old Brianna Lahara of New York, who was accused of downloading more than 1,000 songs from Kazaa.

The effort by some to make it all go away may bode well for the industry, but some observers and lawmakers began to question the tactic. Accounts emerged that some of those caught in the industry’s piracy net were young children and seniors – hardly the perfect poster image of a hard-core music pirateer. That led some to question whether the industry might be making its problem even worse.

During a Senate Judiciary Hearing Tuesday, Sen. Dick Durbin, D-Ill., alluded to whether the industry wasn’t going too far while questioning Cary Sherman, president of the Recording Industry Association of America.

“Are you headed to junior high schools to round up the usual suspects?” Durbin asked Sherman.

Sherman told Durbin the industry is merely trying to get the message across that sharing music is illegal and that people may be caught.

“Yes, there are going to be some kids caught in this, but you’d be surprised at how many adults are engaged in this activity,” Sherman said.

The accounts of those sued bolstered the view that music fans of every ilk have taken to downloading music directly to their computers, not to mention being able to do so for free, as a preferred method of getting their music.

“The real hope here is that people will return to the record store,” said Eric Garland, CEO of BigCampagne LLC, which tracks peer-to-peer Internet trends. “The biggest question is whether singling out a handful of copyright infringers will invigorate business or drive file-sharing further underground, further out of reach.”

There are signs some people have stopped file-sharing since June, when the RIAA announced its lawsuit campaign, and also have moved to other file-swapping networks perceived to be safer than the market leader, Kazaa.

Traffic on the FastTrack network, the conduit for Kazaa and Grokster users, declined over the summer and climbed again last month, as has the number of people using less popular file-sharing software like eDonkey, Garland said.

“The overall trend is that Kazaa is down, although in the most recent month, it’s actually rebounding and a number of the other services are gaining usage,” he said. “As people do flee Kazaa… they’re going to migrate into communities you can’t quantify.”

Just because a person stops file-sharing does not mean they will start buying CDs and generating revenue for the industry, said Josh Bernoff, an analyst with Forrester Research, Inc.

“Many of these individuals have gotten out of the habit of buying CDs,” Bernoff said. “They think CDs are too expensive, they only want a couple of tracks on the CD.”

The recording industry has been battling a three-year slump in CD sales that it blames squarely on the explosion of music file-sharing that first started when Napster surfaced in the late 1990s. Record companies were successful in suing Napster out of business in 2001, but have not had similar victories against more elusive and prolific successors, including Kazaa, Morpheus and Grokster.

While the industry has begun to warm up to paid music download services, such as Apple Computer Inc.’s iTunes Music Store and Buy.com’s BuyMusic.com., no service has emerged as a clear alternative to the file-sharing services’ selection.

Bernoff said consumers already think so little of the music companies, that the lawsuits likely won’t make much of a difference.

“The industry has been backed into a corner, and their image is so bad, the lawsuits are not going to be much of a problem,” he said.

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