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Legal downloads can't stop piracy

I’m about to save the music industry from shelling out hundreds of thousands of dollars for consultants and research reports, by revealing the marketing secret behind the five-year-long surge in illegal online swapping of songs:

People like to get things for free that would otherwise cost them money. And they won’t stop taking them for free just because there’s a convenient legal alternative, if that alternative requires opening their wallets.

Stunned by my unique powers of insight? You shouldn’t be, yet this obvious lesson seems lost in the squabbling among record labels, quasi-legal peer-to-peer file-sharing networks and start-up companies hoping to offer compromise solutions.

One of those start-ups is Snocap, officially unveiled a week ago. The new service, formed by Napster founder Shawn Fanning, intends to provide copy protection for legal sharing of songs through peer-to-peer networks. In theory, this could help convert thieves to paying customers.

In reality, San Francisco-based Snocap has failed to recruit a supporter among the biggest peer-to-peer services operating today, such as Kazaa, eDonkey, Morpheus and BitTorrent. That’s no surprise; these services make money by pushing ads at their users. Free music pulls in more eyeballs, and more eyeballs means more money.

Legal music downloads, by themselves, simply aren’t enough to stop piracy.

Like any good consultant, I’ve got statistics to back up my argument.

Ongoing project

The NPD Group, a research firm in Port Washington, N.Y., released survey results Thursday from an ongoing project where the company monitors activity on 10,000 home computers. NPD uses software that tracks what consumers actually do, not what consumers say they do – an important distinction in examining touchy subjects such as illegal music downloads.

NPD found a paltry 8 percent of peer-to-peer users, who are busy sucking up unauthorized copies of CD tracks from services such as Kazaa, Morpheus and BitTorrent, have tried legal download services such as Apple’s iTunes Music Store or RealNetworks’ Rhapsody.

Of that 8 percent, two-thirds continue to use illegal peer-to-peer services, NPD says. The small remaining number have presumably exited the dark side, and are now legal downloaders. But that’s a trickle.

Back in summer 2001, when the original Napster service was about to be shut down by court order, I wrote columns saying Napster should be unplugged because artists and record labels deserve to be paid for their work.

I got a huge volume of e-mail in response, much of it filled with morally questionable arguments. My favorite: Record labels charge too much for CDs, so it’s OK for me to take them through Napster. That’s like saying it’s OK to rob convenience stores when the price of milk gets too high.

The more serious arguments for Napster went like this: I’d be willing to buy songs online if there were a legal way to do so, especially if I could buy single tracks instead of being forced to purchase an entire CD.

Well, that’s exactly what you now get with iTunes. The service today offers about 1 million tracks, almost all of them available for 99 cents each. And it’s hard to imagine a service that would be much easier to use. Once you’ve set up an account, you find the song you want and just click the “buy” button.

But statistics from NPD and others show illegal peer-to-peer downloads are still trending upward. The legal services at best have blunted the rate of growth.

The Recording Industry Association of America, or RIAA, got a huge amount of flack in September 2003 when it began suing people who had thousands of illegal songs on their computers. But the industry had no other choice. The courts ruled, properly I think, that peer-to-peer services weren’t responsible for policing what was transferred through their networks. So the only way to stop illegal swapping is to go after the individuals who are breaking the rules.

The fear factor

You wouldn’t expect convenience stores to fight shoplifting with nothing more than signs saying, “It’s not nice to steal.” Most of us don’t shoplift because we know it’s wrong, but a significant minority don’t shoplift only because they’re afraid of getting caught.

The music industry won’t survive in anything near its current form unless it wields both a carrot and a stick. New and more creative forms of licensing are needed to make legal services increasingly attractive. Why not sell older and more obscure tracks at 49 cents, for example, or allow users to listen to a downloaded song once for free before buying?

At the same time, the industry needs to keep prosecuting pirates and taking other unpleasant but necessary steps. No form of paid service can survive online when there’s a free alternative that users aren’t afraid to tap.

Contact Mike Langberg at [email protected] or (408) 920-5084. Past columns may be read at www.langberg.com.

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