E-Mail This Article to a Friend Deaf to reason The recording industry keeps playing bad cop instead of embracing change BY DAVID S. BERNSTEIN

IT’S BEEN A YEAR since the Recording Industry Association of America (RIAA) brought lawsuits against 261 people, many here in Massachusetts, for sharing music files over the Internet without permission from the copyright holder. (See "Sue You, Sue Me Blues," News and Features, September 26, 2003.) Since then, the buzz about the recording industry’s war against music-swapping services, such as the phenomenally popular Kazaa, has died. Online distributors — and Wall Street — are much more interested in the new, legally approved services debuting almost weekly: iTunes, VirginDigital, Rhapsody. Do customers prefer a streamed "jukebox" or straight downloading? Would they rather pay per song, or through a monthly subscription?

The only ones still interested in the legal battle, it seems, are the recording companies themselves, who are letting these new online opportunities slip through their fingers as they remain obsessed with file-sharing miscreants and their enablers. In fact, those companies, through the RIAA, have actually stepped up their assault. "It is absolutely hotter than ever in the legal world," says Mark Fischer, an intellectual-property attorney with the Boston office of law firm Fish & Richardson. Last Thursday, the trade group filed 762 additional lawsuits against members of the general populace, bringing the total of such actions to about 5400.

But they really want the big fish: the companies that make and distribute the peer-to-peer (P2P) software. So, earlier this year they sued the maker of Grokster, a program that enables P2P users to download music files from any other computer that uses the same software. Joe in Milwaukee can copy the latest Jill Scott single from Jane in Phoenix, with no copyright police checking permission slips. The RIAA argued in the Grokster case that the software’s manufacturer should be held accountable for the lawlessness it fosters. On August 19, the Ninth Circuit Court of Appeals said no.

The infuriated association is now trying to overturn the ruling through legislation, which it’s desperately trying to move through Congress before it recesses at the end of this week. The RIAA is also backing several other pieces of legislation, including one that would curtail the advertisements that provide the P2P networks’ revenue. "Their approach has been to attack the customers, the companies, and the revenue streams," says Sam Yagan, CEO of MetaMachine, which operates the eDonkey P2P service. "If they had spent all that money and effort [on] making a deal with [P2P networks], I think they could have co-opted the whole system by now."

Instead, however, the recording companies seem hell-bent on squashing the cheaters and oblivious to the emergence of potentially profitable distribution models. Apple’s year-old iTunes, which sells two million individual song downloads a week — with copyright permission — for 99 cents a pop, has demonstrated that many, many people will pay for a convenient, well-organized, legal, pay-per-download service. Wal-Mart, Microsoft, RealNetworks, Sony, America Online, eBay, and Buy.com have followed Apple’s lead. Others, including Virgin and telecommunications provider RCN, are testing monthly subscription services. Indeed, the RIAA estimates that the total number of legal, paid music downloads rose from 19 million in the second half of 2003 to 54 million in the first half of 2004. Add to that "streaming" services that offer radio-like listening access without permanent downloading.

In other words, there are lots of ways to try to squeeze pennies out of music lovers, and lots of serious companies are already trying to do so. (Even more want in on the action: Yahoo, Viacom, and others are expected to enter the market soon.) "This all validates how much music means to people," Fischer says. The recording industry, which owns the product everybody is so eager to get, seems to be the group with the least idea of how to take advantage of it.

INSTEAD, THE industry has stepped up efforts to attack music-lovers in court. Actually, it is now suing "John Does" who own IP addresses with large stashes of shared music files, since the courts ruled last December that Internet-service providers don’t have to cough up the names behind those IP numbers. The effect is the same; the RIAA eventually unearths users’ identities, and forces them to settle — usually for around $5000 each — to avoid potentially huge penalties. "You’ve got an industry where you view every customer like they are coming into your store planning to rob you," Fischer says.

However, since the odds of any individual being hit by one of those lawsuits remain negligible, this litigation orgy has done little to deter inveterate file-sharers. (On the other hand, RIAA spokesperson Jonathan Lamy is probably correct in suggesting that without the lawsuits, illegal file-swapping would be even more rampant.) Illegal downloads still dwarf legal ones, a status quo that threatens to prevent the growth of the paying market, since none of the legal music-distribution services is reliably profitable yet.

You’d think the recording industry would be working to make them profitable. Think back to the fledgling music-video days of the early 1980s: record labels not only made the videos, they offered up their stars for interviews and promotions, and set up deals for exclusive rights or early access to hot videos. The industry is just beginning to do the same for digital distribution companies, instead of treating them like part of an assault on its precious, fading compact-disc sales. Sites such as iTunes now tout exclusive tracks and pre-release access to singles, along with all manner of artist promotion, such as Tom Petty’s playlist suggestions.