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Grok this
Artists deserve to be paid — but the entertainment industry’s bid to outlaw innovation is wrong-headed and doomed to fail

THE QUESTIONS that Supreme Court justices ask during oral arguments are notoriously unreliable as guides to how they will eventually rule. Nevertheless, the justices appear to have focused on the right issues this past Tuesday in the matter of MGM Studios v. Grokster, which has been described as potentially the most significant copyright case in a generation.

The justices made it clear that they have no sympathy for those who use Grokster and other peer-to-peer file-sharing programs to download music and movies illegally, thus depriving artists, actors, and other creative types of the rewards that are justly theirs. But the court also seemed unwilling to solve the problem by stifling technological innovation. As Justice Stephen Breyer observed, the entertainment industry’s arguments in favor of banning P2P software could just as easily be used to outlaw photocopiers, VCRs, and portable MP3 players such as the iPod, given that all those products can be used to violate copyright law. Said Breyer: "You see the problem here. It could be that in each of these instances there are vast numbers of infringing uses."

There is a major difference: Grokster and Morpheus, similar file-sharing software owned by co-defendant StreamCast Networks, do not appear to have any legitimate business applications, which makes them quite different from the examples Breyer cited. And the justices were right to be troubled by the notion that they should offer legal protection to businesses that profit from theft. But the court needs to craft a solution that somehow manages to punish illegal activity without stifling innovation.

Illegal file-sharing is a real problem, and the entertainment industry’s attempts to shut down companies that facilitate it are understandable. But though suing may make sense in the short term, in the long term the industry must overcome its reluctance to come to terms with new technology — a reluctance that is not only hurting its own bottom line, but that of the creative community as well. Remember, it wasn’t that many years ago that the industry did try to ban the VCR, because it feared people would tape movies and shows off their television sets and sell them surreptitiously. Fortunately, in 1984, the Supreme Court ruled that that the Sony Betamax could be sold legally because it could be used for legitimate purposes, such as time-shifting. The main difference between the Grokster case and the earlier one is that, by most accounts, at least 90 percent of P2P activities are illegal. Yet in the early days of the VCR, industry leaders did not foresee the rise of prerecorded videotapes and video rentals, developments that helped revitalize and enrich Hollywood. The same could happen with P2P. We are in the midst of a very fluid situation, and it’s impossible to know how technology will develop over the next few years.

Rather than standing in the way of innovation, the music and film businesses need to embrace it, and to understand that today’s threat can become tomorrow’s profit center. Consider the case of Apple. In 2001 the company began selling Macintosh computers with built-in CD read-write drives and software that made it easy to download music and transfer it onto compact discs. Apple’s advertising slogan — "Rip, Mix, Burn" — was a virtual invitation to steal. Two years later, though, Apple entered into a partnership with the major recording labels, which had finally become desperate and scared enough to try something new. And Apple has since sold well over 100 million songs — legally — through its iTunes Music Store. The partnership provided a huge boost to Apple’s iPod music players, and helped to revive the record industry as well, even if it did have to be dragged kicking and screaming into the 21st century.

The entertainment business can also combat the illegal file-sharers by offering innovation that promises greater value for consumers. One of the dirty little secrets of online music is that it often doesn’t sound all that great. The reason: compressing it for rapid transfer over the Internet removes so much data that a true audiophile can discern a significant difference. Yet CDs aren’t perfect, either. In the past several years, the record labels have gingerly embraced new formats such as Super Audio CD, which offers much richer sound when the disc is played on the proper equipment. The industry benefits because the file sizes produced by formats such as SACD are so huge that transferring them over the Internet simply isn’t practical. Likewise, an increasing number of albums are now being released with the music CD on one side of the disc, and videos, concert footage, and other extras in DVD format on the other. The idea is that fans won’t want to miss out on the DVD goodies by downloading the music for free.

Dire predictions to the contrary, illegal file-sharing has not killed the music business, nor is it likely to destroy the film industry, either. Recorded-music sales were up two percent last year, the first increase in some time. That doesn’t mean the business is healthy — CD sales are still far lower than they were just four years ago, largely because of illegal downloading. But it does mean that there is still time for the industry to get its act together. Moreover, artists themselves do not agree on the hazards of file-sharing. Sheryl Crow and the Dixie Chicks have sided with the record industry in the Grokster case. Others, such as Chuck D and Brian Eno, have taken the opposite position, arguing that P2P makes it easier for them to distribute their music and limits the power of the international media conglomerates that control their work. It’s hard to see how Chuck D and Eno’s utopianism is ever going to put money in any artist’s pocket. But they are among the most thoughtful observers of the music scene, and their views need to be taken seriously.

None of this is to countenance theft. Stealing music, films, and other content is wrong, whether said theft takes place via Grokster or by slipping a copy of a CD under one’s jacket and walking out of a store. The old online saw that "information wants to be free" has never made any sense. After all, musicians, actors, writers, and other artists — as well as the companies that make their work possible — deserve to be properly compensated for what they produce.

Ultimately, though, dealing with the challenge of technological innovation by trying to outlaw it is as futile as commanding the tide to stop coming in. The Grokster case is fundamentally different from the Napster ruling of several years ago: Napster actually provided a central directory to facilitate theft, and it made some sense to shut that directory down. This time, the industry is trying to ban an idea. Even if Grokster and Morpheus are shut down, P2P software will continue to proliferate — if not here, then overseas, which the Internet makes just as accessible as the record store next door.

So, whether we like it or not, illegal file-sharing is here to stay. The industry’s goal should not be to eliminate it, which is impossible, but rather to reduce it to a manageable level through a combination of legal action against particularly egregious violators and better value for consumers who play by the rules. That’s what will best serve everyone’s interests, including those of the artists themselves. Those are the principles the Supreme Court justices should keep in mind as they prepare to decide this case three months from now. That doesn’t mean Grokster and Morpheus shouldn’t be put out of business; perhaps they should, given their officials’ utter contempt for the rights of artists. Developers and marketers of such software should have some economic responsibility to those who are being financially damaged. The onus should not be placed only on the copyright holders who are being ripped off. Nevertheless, the entertainment business needs to invest at least as much effort in embracing new technology that would benefit everyone.

What do you think? Send an e-mail to letters[a]phx.com

Issue Date: April 1 - 7, 2005
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