Now You See It, Now You Don't
The digital tug-of-war yields no winners, but the genie is out of the bottle.

The past week has been eventful for the brave new world of digital downloads, yet despite some interesting prospects for change, things remain the same.

At the end of April, a Federal judge denied the recording and motion picture industries' plea to shut down Grokster and Morpheus, two of the most popular sites. The decision was considered a loss in the battle against online piracy. Another judge, however, ruled last week that Verizon must hand over the names of two of its subscribers suspected of music piracy. Score one then for the industry.

Meanwhile, a fresh offering from a major technology player has shone a spotlight on the prospects for change. Apple just launched its iTunes service, which charges users $1 per downloaded song from its library of more than 200,000 tunes from all the major labels. This focus on the actual practice of music users is a dramatic departure from the industry's current practices.

While the industry tries legal strategies aimed at shutting down the online services and targets individual subscribers for legal action, it is clearly not averse to a "If you can't beat 'em, join 'em" strategy. Warner Music Group started the ball rolling by uploading audio files purported to be Madonna songs onto peer-to-peer file-sharing services, having inserted an assortment of threatening audio clips into the tracks, including one of the diva herself screaming at song-swappers, "What the f***k do you think you're doing?" Similarly, the RIAA resorted to sending IM's ("instant messages') to Grokster and Kazaa users warning that they could be "easily" identified and that they face "legal penalties."

It is doubtful that such tactics will amount to much in the short run. In the case of Madonna, the backlash was immediate and furious. Hackers soon defaced Madonna's official website, posting profanities along with several downloadable files of the then-unreleased songs. To date, attempts to shut down P2P's by focusing on individual swappers, pressuring the technology industry to produce products that enable secure distribution, uploading bogus tracks on networks or sending threatening IMs have thus far barely made a dent in the explosion of file sharing and trading occurring in a highly-networked world.

"It is plain that litigation against the technology companies has not slowed the spread of P2P file sharing. In fact, most estimates put the number of file-sharers at 2 to 3 times the number that were using Napster at its height," says Electronic Frontier Foundation's Fred von Lohman. "The entertainment industry's goal in its lawsuits is to erode the principle announced in 1984 in the Sony Betamax case - that so long as a technology has substantial, non-infringing uses, the technology maker cannot be held liable when the technology is misused. This legal principle is one that all technologists rely on - everyone from Intel to Microsoft to Cisco to Dell. If the entertainment industry can chip away at it in the courts, they will be one step closer to being able to veto new technologies that they don't like."

The lingering, underlying economic question continues to hang unanswered while the politics of the issue take center stage - how will content owners not only curb piracy but also convert millions of non-paying swappers into customers? There has been evidence that consumers are willing to pay for content online if there are no restrictions on what devices it can be played back on, when it can be played back, etc. According to a new report from Jupiter Research, Consumer Attitudes Toward Digital Rights & Content Ownership, 47% of those surveyed said they would pay for content if they could own the content and could have it played back at any time, and that there would be no restrictions on the way files can be remixed or transferred. (These restrictions proved to be the downfall of many of the subscription-based Internet music services.) However, there is still a serious incentive issue at stake that is unresolved. Even if a service like Apple's - widely heralded as being the best one to date - is essentially the dollar store for online music, that's still one dollar more than the file-swapping services charge. How can the industry compete with a service that doesn't charge? Right now, the entertainment industry's main claim for the advantages of paid digital content is that unlike the files that can be downloaded for free off of popular P2P networks, "legit" services offer virus-free, quality content that is held to the same standards as traditional music formats, such as CDs.

Indeed, on the feature-length film side, that argument is already being made, and an emerging business model has taken shape. "Court rulings aside, what is key to the success of Movielink is providing a great customer experience," says Movielink CEO Jim Ramo. "We have to demonstrate added value, which in our case is ensuring ease of use, a quality viewing experience, reliability, and properly labeled and virus free films."

However, some critics argue that this is not a strong enough incentive to win over the vast population of users who are accustomed to obtaining their content for free. Also, the entertainment industry's concept of secure digital distribution and digital rights management is widely viewed as unrealistic. According to Jon Healy, who covers digital technology for The Los Angeles Times, the biggest technological issue is the misconception of digital-rights management. As of now, the tools just aren't available to enable files to move easily but securely from a computer to other devices. Without that, the online content business the entertainment industry is waiting for won't happen.

"Even if the tools were available, there needs to be a single, industry-wide standard to make life easier for device manufacturers and content providers," Healy says. "There may be some excessive expectations in some quarters about security. Hollywood seems determined to force devices and software to be designed to prevent attacks and respond immediately in the event of a breach. Some critics in the tech world say the studios are demanding too much, and that it ought to stop waiting for hardware-based security and just get in the game."

One approach to profiting from the P2P problem, proposed by University of Texas law professor Neil Netanel, is known as Noncommercial Use Levy. This would be a system of compulsory licensing, where users would pay a tax on ISP subscriptions or purchases of devices that download or play content from file-trading services. The proceeds of the tax would compensate copyright owners for revenues lost because of file trading. Although in many respects a highly idealistic outcome to the Internet piracy battle, this "can't beat 'em so join 'em" approach would allow the industry to benefit from a P2P situation that seems almost impossible - and too costly - to effectively eliminate.

"We at EFF believe these kinds of proposals have the benefit of actually talking about the real issue: how do we get artists compensated while making P2P file sharing legal," says Fred von Lohman. "It is premature to endorse any particular solution yet, but I think each of these proposals is better than one in which 60 million American Kazaa users are hunted, ISPs like Verizon are forced to rat out their subscribers, colleges install electronic surveillance equipment to monitor their networks, and litigation against Napster's investors chills the climate for investment in innovative new technologies."

For many of these innovative technologies, including long anticipated VOD (video on demand) services, digital music is the canary in the coalmine. Content rights holders in other media, such as movies and television, are battling their own piracy wars, and are waiting to see what happens in the digital music industry before they risk allowing their content to be distributed in less-secure formats. The day may come when we can pay for VOD downloads, but probably not until the digital music industry, and the courts, resolve these conflicts and find mutually beneficial arrangements. What is true is that the conflicts may be beside the point - the genie is indeed out of the bottle. Omar Khayyam's beautiful verse in the Rubaiyat makes the point as nothing else can:

"The Moving Finger writes; and, having writ,
Moves on: nor all your Piety nor Wit
Shall lure it back to cancel half a Line,
Nor all your Tears wash out a Word of it."

by Wendy Hall, Larta Staff Writer, and Rohit Shukla, Larta VOX Publisher

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