MATHEW INGRAM, Globe and Mail Update

The recording industry, both in Canada and elsewhere, would like you to believe that the music world is in dire straits, and that its parlous state is solely the result of illegal file-sharing by Internet scofflaws. The lawsuits that have been launched against individual file-swappers by Canadian and U.S. industry groups might look like overkill, they say, but are really a desperate attempt to stop the widespread pilfering of money from artists' pockets.

This might make a nice bedtime story for the kids, but does it reflect what is actually going on in the music world? It's true that downloading of digital music files has mushroomed since 19-year-old college student Shawn Fanning created the Napster network in a dorm room in 1998 as a way of sharing MP3 files. And it's also true that the music business has lost revenue over that period. But did the former necessarily cause the latter? And even if it did, does that mean the industry is dying?

The party line from the Recording Industry Association of America (RIAA) and the Canadian Recording Industry Association (CRIA) — which lost a key battle on Wednesday when the Federal Court ruled that music downloading and sharing is effectively legal — is that the industry's losses are solely a result of file-trading. More people downloading means fewer people buying CDs, the argument goes, and that means lower sales. It's as simple as that.

Of course, economic harm is just one part of the industry's two-pronged case against file-swapping. The other is that sharing of music files over the Internet is blatant copyright infringement, an abuse which harms the holder of the copyright — which in most cases (although not all) is the record company. The record companies like to conflate these two concepts, the economic and the legal, and refer to downloading or sharing of files as theft, just the same as taking a CD without paying is theft.

No one gets charged under the Criminal Code for downloading, however — they get charged under the Copyright Act in Canada (and the Digital Millennium Copyright Act in the U.S.). And Judge von Finckenstein of the Federal Court certainly doesn't seem to equate downloading or sharing with theft. In fact, his ruling held that under Canadian copyright law both downloading and sharing are legal. This is primarily because of the copyright levy that Canadians pay on blank CDs and MP3-playing devices, funds which are then distributed to artists (theoretically).

The industry's case that file-sharing is equivalent to theft relies to a large extent on the idea that the business is being harmed by downloading and uploading. Even some members of the industry itself, however, admit that there's a possibility consumers aren't buying CDs for other reasons as well, such as a decline in the quality of the musical acts being promoted, for example, or the effects of the economic downturn in both the U.S. and Europe over the past few years.

There are even surveys that dispute the industry's argument that downloads automatically mean lower sales of CDs. In a study released this week, for example, a Harvard Business School professor's research tracked downloads over a four-month period, and then correlated that with CD sales. He expected to see a decline in sales as the amount of downloading increased. Instead, the study found no such relationship. According to the authors, the effect of downloading on CD sales is "indistinguishable from zero."

The industry could argue, of course, that there's no way of knowing whether those CDs would have sold even more copies if downloading hadn't been occurring, but that's a far slipperier slope. Is it safe to assume that every download of a song represents someone who might have bought a CD but didn't? That's a leap of logic that some may not want to take.

In fact, there is an argument to be made that some people who download would never have bought any CDs, and that downloading might make them more likely to do so rather than less. A group of music retailers made a submission to the Copyright Board of Canada last year effectively arguing just that — that some consumers use downloading as a way of surveying music and trying it out before they buy it. The group argued this should be allowed under copyright law's "fair dealing" provisions.

In other words, perhaps not all downloading should be thought of as simple theft. The music industry also has a track record of perceiving virtually any new technology as theft: even the production of printed music was seen as an instrument of the devil in the 1920s. The industry tried to stop it and failed, just as it argued vehemently about radio being the death of the music business — only to realize that radio increased the audience for music rather than decreasing it. Tape recorders were also seen as the bane of the industry because they allowed copying, but music continued to sell.

After years of false starts and ham-handed attempts, the industry has at least made some inroads into dealing with the digitization of music, thanks to services such as iTunes and Canada's Puretracks.com. But there is still far too little available, too many restrictions on how you can use it, and too much of a sense that the industry is trying to maintain the fat profits that arguably helped drive the downloading phenomenon in the first place.

There has also been too much emphasis on lawsuits, and not enough on giving consumers what they appear to want — something that would benefit artists and other rights-holders as well. Canada's copyright levy is one way artists can be compensated, and a compulsory license, such as the one that allowed radio and the music industry to co-exist, is another.

Downloading doesn't have to be the death of the music business. It may mean a change in the way it works, but that isn't always a bad thing.

E-mail Mathew Ingram at mingram@globeandmail.ca

FULL STORY HERE

"The industry's case that file-sharing is equivalent to theft relies to a large extent on the idea that the business is being harmed by downloading and uploading. Even some members of the industry itself, however, admit that there's a possibility consumers aren't buying CDs for other reasons as well,"

Really? NO KIDDING?? Even people within the industry KNOW that file sharing ISN'T the only reason sales are down.

What is really sad is all the major labels have had the power to save their "Sales Figures" since Napster started. Does anyone really think the original Napster was stupid, and didn't make some kind of financial offer to the RIAA labels? Today, about 60 Million people download music today off Kazaa alone. If each were required to pay $5 a month to do so, I doubt the number of downloaders would drop significantly. That's $300 Million in sales that the RIAA labels have FLATLY REFUSED! So who's really to blame for their sales decline, and their layoffs, and our declining economy as a result? NOT FILESHARING!!!

In each instance, Napster, Aimster, Audiogalaxy, Scour... and whatever other file sharing applications the RIAA has shut down, they have turned away millions of dollars, and preferred to lay off their own employees to compensate. Why would ANY corporation do THAT? It's obvious that the labels want control... monopolistic control, which is supposed to be illegal in this country.

It's disgusting that our media and lawmakers are too blind to see this. It's even more disgusting that our Justice Department, that is supposed to PROTECT consumer's from this kind of activity, is also ignorant. Makes me wanna puke.

Napster offered a nickle per song to the RIAA. At the time, it figured out to be a half million $$ a day in royalties.

Times four years.

They pissed away billions in the name of greed.

Excellent point gdZ!

Back in 2000, just about all the file traders were using Napster. I doubt that folks would have objected to a nickel a song, especially since Napster could use their server machines to help weed out poor quality MP3 files.

The RIAA affiliates could have made tons of money if they had cut a deal with Napster.

in the united states, do we not have a tax on blank cd's and recorders for the purpose of compensating groups like the RIAA? what is the matter with this country!?

oh and great article by the way

death123, you are correct, we actually do have such a "tax" and I am not against it in principal ...but that money should be given directly to the songwriters and artists and creators of audio works and NOT given to the RIAA and the major labels. Record labels should not own copyrights. Labels should make money from the sale of records. (Not from "licencing" to the listener a right to listen to the songs on the recording.) This distinction is so blurred and we must make it clear in order to win.

Shmoo

On the tax on CD-Rs, is this imposed on all CD-Rs (Data & Music)?

Capt-n-Jack. Yes.

haha i was about to say yes too

i am a reborn anti-tax netizen.

I have investigated every way that the RIAA can share the windfall of opportunity the internet provides the artist of music. I have looked into the methods that the government have used to spread the beauty and random creation of art.

They have fought it, and persecuted it, and slaughtered every chance that has ever been presented to them.

Introducing any kind of new taxation or fee on any part of the internet does not buy freedom, it reduces the internet to a pay-as-you-go franchise.

Do NOT let them charge you for EMAIL, in the name of stopping spam!!! SHHHHHHHHHEEEEPPPP!!!! Who is the wolf, and who is your grandma?

"Even people within the industry KNOW that file sharing ISN'T the only reason sales are down."

Although, I have never seen it mentioned, has anyone thought of the effects being caused by satellite radio ?

XM was introduced in Nov 2001. Last week they announced more than 1,680,000 subscribers. Sirius is right behind.

Do you think these folks are still buying CD's ?

Where do all the license fees go ?

BTW, XM stock (XMSR) soared from $5 to $30 within a year.