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Music Exec: ISPs Must Pay Up for Music-Swapping

A top music executive said on Saturday that telecommunications companies and Internet service providers (ISPs) will be asked to pay up for giving their customers access to free song-swapping sites.

The music industry is in a tailspin with global sales of CDs expected to fall six percent in 2003, its fourth consecutive annual decline. A major culprit, industry watchers say, is online piracy.

Now, the industry wants to hit the problem at its source – Internet service providers.

“We will hold ISPs more accountable,” said Hillary Rosen, chairman and CEO the Recording Industry Association of America (RIAA), in her keynote speech at the Midem music conference on the French Riviera.

“Let’s face it. They know there’s a lot of demand for broadband simply because of the availability (of file-sharing),” Rosen said.

As broadband access in homes has increased across the Western world, so has the activity on file-sharing services.


The RIAA is a powerful trade body that has taken a number of file-swapping services, including the now defunct Napster, to court in an effort to shut them down.

Rosen suggested one possible scenario for recouping lost sales from online piracy would be to impose a type of fee on ISPs that could be passed on to their customers who frequent these file-swapping services.

Mario Mariani, senior vice president of media and access at Tiscali, Europe’s third largest ISP, dismissed the notion, calling it impossible to enforce.

“The peer-to-peer sites are impossible to fight. In any given network, peer-to-peer traffic is between 30 and 60 percent of total traffic. We technically cannot control such traffic,” he said.

Rosen’s other suggestions for fighting online piracy were more conciliatory.

She urged the major music labels, which include Sony Music, Warner Music, EMI, Universal Music and Bertelsmann’s BMG, to ease licensing restrictions, develop digital copyright protections for music, and invest more in promoting subscription download services.

Pressplay and MusicNet, the online services backed by the majors, plus independent legitimate services such as Britain’s Wippit.com, sounded somewhat optimistic about their longterm chances to derail free services such as Kazaa and Morpheus.

But they also acknowledged they cannot compete with the “free” players until the labels clear up the licensing morass that keeps new songs from being distributed online for a fee.


Officials from Pressplay and MusicNet, which are in their second year in operation, declined to disclose how many customers they have.

“We haven’t really started yet,” said Alan McGlade, CEO of MusicNet, when asked about his subscriber base.

Michael Bebel, CEO of Pressplay, said his customers tally is in the tens of thousands. He added that the firm, backed by Universal and Sony, could expand into Canada in the first half of the year, its second market after the U.S. He didn’t have a timeframe for Europe.

Meanwhile, Kazaa and Morpheus claim tens of millions of registered users who download a wide variety of tracks for free.

Rosen hailed a recent U.S. court decision which ruled that Kazaa, operated by Australian-based technology firm Sharman Networks, could be tried in America, as an important legal step to halting the activities of file-sharing services.

“It’s clear to me these companies are profiting to the tune of millions and millions of dollars. They must be held accountable,” Rosen said.

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