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A Burning Issue: Music Piracy And Downloads – Feature

Popular music has been upended by every technological advance from electricity and the phonograph to cassette tapes and recordable CDs. The switch from analog to digital accelerated the pace of illicit duplication and distribution, sounding the loudest alarm yet. As Napster struggles to survive, other sites from Gnutella to KaZaa are filling the void. Last week, labels and music publishers sued Audiogalaxy, a booming file-swapping network that lured 3.5 million users in March.

The complaint: The Recording Industry Association of America, on behalf of labels, is vigorously seeking to stamp out proliferating Web sites that permit free downloads of music. Users argue that peer-to-peer file-sharing, even more prevalent now than in Napster’s heyday, is a legitimate means of sampling and trading music and that the industry’s substitute sites are clunky, incomplete and too rigidly priced.

Anti-copying devices – such as the implanted software on the European version of Celine Dion’s A New Day Has Come that can freeze or crash computers when users attempt to make copies – prevent a CD buyer from transferring music to a mix tape or spare copy.

The industry helped orchestrate the download crisis by failing to deliver effective alternatives.

“Their only answer is, ‘Don’t do this because it’s illegal,’ and the only other option is spending $18 for a CD,” Light says.

Downloading may not be taking a significant bite out of record profits, says SoundScan CEO Mike Shalett, noting, “CD sales were actually up last year. We had a tremendous loss in cassette sales, partly because we don’t make as many.”

In 2001, consumers bought 1.2 billion blank CDs. Album sales were down a relatively meager 22 million units from the year before (to 762.8 million), suggesting that most blank CDs are used for personal copies. Only top 10 albums suffered a drop; sales of all other titles stayed flat, indicating that only the most hotly demanded albums trigger a CD-burning frenzy.

The defense: The livelihood of musicians and labels is imperiled by piracy worldwide. Free downloads threaten the very infrastructure that pays royalties, publishing fees, recording and marketing/promotion costs. The effect is not minuscule, as avid users suggest.

“The fact that technology allows consumers to burn a rather decent copy of music, whether by borrowing a friend’s CD or grabbing it off a file-sharing service, does seem to have a dampening effect on some types of music,” says Geoff Mayfield, Billboard’s director of charts.

Last year, sales of certain rock albums fell off dramatically after the first day of sales, “and those records ended up limping home with smaller opening-week numbers than were projected,” Mayfield says. “That threat hasn’t gone away. It’s a serious challenge because it’s more insidious than the home-taping practice that the entertainment industry worried about 16 years ago. You can copy music faster and get a better copy.”

The outlook: Illegal downloading “definitely has the opportunity to become a bigger problem as more households have CD burners,” Shalett says.

The beleaguered industry “can’t do a whole lot to combat downloading until legislation lets them close down sites like Napster,” says music consultant Tom Vickers. “The genie is out of the bottle. Just as U.S. corporations go offshore to avoid taxes, these file-sharing sites are in locations like Holland or the West Indies, where U.S. law doesn’t apply. As a result, it’s not going to change.”

The industry is counterattacking in court, a slow process, and with anti-copying devices, which consumers resent and tech heads will no doubt override. Labels have yet to tackle pirates head-on with superior Web sites, attractive subscription deals and enough free downloads to stimulate purchases. Enhancements, such as the bonus DVD attached to the first 2 million copies of Eminem’s widely bootlegged new album, are one tack that may lure the cyber set back to stores.

“Labels are adding extras, whether it’s a visual component like the 3-D Spider-Man cover art or DVD add-ons with interviews or performances,” Vickers says. “As more labels recognize that downloading isn’t going away, they’ll combat it with enhancements you can’t get anywhere else.”

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