TCS Daily


Blame Canada II

By Jay Currie - October 8, 2003 12:00 AM

A little over a month ago I wrote a piece here on the private copying right in Canada. Blame Canada struck a nerve in the run up to the RIAA lawsuits. It was put up at Reason Magazine's Hit and Run Blog, featured on Tech TV's Music Wars special and Slashdotted. Over at Slashdot Blame Canada has attracted nearly 1200 comments.

 

Never make a math error in a piece which might be Slashdotted. In Blame Canada I suggested that a levy be imposed on blank media, including hard drives, at the rate of a penny a megabyte. A hundred emails later, what I meant to say was 1/10 of a penny and, as many people pointed out, even that is far too much with the size of today's drives. Adding a $100.00 levy to an $89.00 100 Gig hard drive would not fly. A reasonable compromise might be to cap the levy at 10 or 20 Gigabytes. But other than the math, there was general support for some form of blank media levy in exchange for a private right to copy.

 

A number of people, including several lawyers and some very tenacious law students suggested I was completely wrong when I said file sharing was legal in Canada. While most conceded that downloading files was legal under S. 80 of the Canadian Copyright Act, many read that section restrictively and concluded uploading was not a private use and therefore no longer protected by the private copying exception. The best place to read the legal discussion is here.

 

Uploading is more problematic in Canada. The legislation is ambiguous. My own view is that the exemption in S. 80 is designed to cover the majority of non-commercial uses. While the matter has not been litigated in Canada, the fact the levy itself is applied across the board on tapes and CDRs even if they are not going to be used to record music suggests that the exemption for private use should be interpreted equally broadly.

 

Looking at the origin of the private copy right, private use likely includes incidental, casual or inadvertent sharing in any non-commercial setting. Moreover, even if a Canadian Court were to interpret the section narrowly, the evidentiary problems presented by the section's murky language, which include issues of intent, would make a successful criminal or civil action extremely difficult.

 

The take away: downloading is almost certainly legal in Canada, uploading in a non-commercial setting can be argued to be private use and legal under a broad interpretation of the S. 80 private copy right. If a Court ruled uploading was not legal the whole question of why the levy is imposed on all tapes and CDRs without exception for data or dictation would have to be re-opened.

 

The fact is the Canadian recording business wanted to get its hands on revenue from blank media used for recording music and blank media which might be used for recording music. It wanted the broadest possible definition of blank media and got it, so it only makes sense to argue for the broadest possible definition of private use.

 

While this argument was raging on the net, the RIAA launched its law suits. As many had predicted, mass litigation had some major PR blowback from the go. Suing a 12-year-old honours student living in public housing or Texas's Grandpa Pickle, suggested the RIAA really was firing its legal shotgun randomly.

 

While these were PR disasters, legal pratfalls are beginning to emerge. The Boston Globe reports that the RIAA has withdraw a suit against a 66-year-old woman who has no children living with her and runs a P2P challenged Mac. The withdrawn lawsuit alleged Mrs. Ward was sharing 2000 songs including a hip hop ditty from Trick Daddy entitled, "I'm a Thug".

 

As I write the RIAA has settled at least 52 of its 261 lawsuits. After all of the sabre rattling it appears the RIAA is cutting deals as fast as it can with those pesky pirates. According to the San Jose Mercury News:

 

"Daniel N. Ballard, a lawyer whose firm is representing at least four defendants, said the settlement offers he was familiar with -- between $3,000 and $4,000 -- appeared aimed at discouraging Internet users from hiring defense lawyers.

"'It's a small enough number that it doesn't make economic sense to hire an attorney to litigate these,' Ballard said."


Meanwhile, the RIAA's new chairman, Mitch Bainwol, cheerfully declared in the New York Times that exterminating 'pirates' was the last thing on the RIAA's mind,

 

"It's a two-step process," he said. "I don't think anyone has an expectation that file-sharing becomes extinct. What we're trying to drive for is an environment in which legitimate online music can flourish."

 

A good thing, too, because the Times reports, even with the lawsuits, only 36% of the people in a recent survey agreed that it was "never all right" to share files. The RIAA takes heart from figures released September 29, 2003 by Nielsen//Netratings suggesting the traffic to Kazaa has dropped 41% since June. However, clicking on Kazaa I find 4,058,000 users online and 731,140,076 files being shared. Extinction seems a rather distant goal.

 

The mass litigation in terrorem (and thank you Jacob Eden for pointing out my in terrorum was illiterate in Latin) tactic is also drawing legislative attention. Again from the Times, "Several legislators, including Senator Coleman, have called for a re-examination of the notion of "personal copying." Some critics have suggested that Congress could force the record companies to license their material and find a way to tax Internet users to pay them, essentially legalizing file sharing."

 

"The record industry needs to win back the hearts and minds of record buyers, because they can't win a technology war," said Eric Garland, Big Champagne's chief executive. (By the way, stopping in at Big Champagne's website is well worth the time.)

 

In the reaction to the Blame Canada piece and the news since it ran, a major theme seems to be that while people are not about to stop downloading, they  realize there is something very basically wrong with the copyright system itself, particularly as embodied in the Digital Millennium Copyright Act. And they have nothing but scorn for the RIAA and its forlorn attempts to litigate rather than innovate its way out of the P2P grinder. The "Canada hole" is just one more reason the litigation is a startling waste of time and public relations disaster of unprecedented dimensions.

 

Market reality briefly appeared when Universal Music announced it was dropping the wholesale prices of its CD's by up to 30%. (A mixed blessing as the company is also dropping all discounts and co-op advertising payments to the retailers. And the price cut may also drop artists' royalties by up to 30% as they tend to be a percentage of the wholesale price.) Legal download services, beginning with Steve Jobs' I-Tunes are selling songs, one at a time, for 99 cents. And I-Tunes claims to have sold 10 million songs in a couple of months.

 

However, winning hearts and minds, not to mention making money, will take a lot more than grudgingly letting people download legally.  Kazaa averages 3-4 million people online which implies, if each is downloading one song, that in the next couple of hours Kazaa users will download more songs than I-Tunes has sold in two months. Free is very stiff competition.

 

To get back in the game, RIAA members need to look at P2P as a marketing solution rather than piracy running out of control. And they should do it fast before they start losing in Court. Because if they begin to lose their lawsuits, P2P sharing will become the permanent default music choice of millions.

 

The first move the RIAA can make is to join with the new P2P alliance and press for a private copying right modeled on the Canadian solution. Saying "yes please" to a levy on tapes, CDs, I-Pods and hard drives has to be more lucrative than suing 12 year olds.

 

The next move is to embrace P2P. How?

 

One way would be to give away non-performing assets. Most record companies have vast backlists. Lists going back to the 1920's in some cases. Now, while these are often the basis for retrospective boxed sets which command big money from die hard fans, the fact is that those backlists are often decades beyond their best before date. There is nothing more disposable than pop music. Record companies could make all of the titles in their back catalogues available for free in 128 bit MP3 versions on advertising driven "club" sites. To join the club a downloader would have to provide their real name, an email and a real street address.

The record companies could be very up front about the fact they would be monitoring members downloads and building a picture of each members tastes. "Once we know you we are going to try to sell you stuff."

What stuff to sell? Those box sets for starters. After all, if a record company knows the names and addresses of all the people who download Clash or Jefferson Airplane or Herman's Hermits songs, it knows who to offer the definitive collections to.

 

Second, unreleased material. Record companies have vaults full of songs by once popular musicians which, for one reason or another, have never been released. Knowing who those fans are let's you sell that material.

 

Third, really good recordings of the material someone has downloaded in 128 bit. Again, if you know that a particular group of 1000 -- 10,000 people are listening to T-Rex in 128 bit, imagine how happy they would be to be offered hi-fidelity versions of the songs they are downloading.

 

Fourth -- merch -- all the paraphernalia of your favorite bands, as well as books, special access websites and other fan related material.

 

Fifth, concert tickets, pay per view and net casts. When a band is going on the road the people who downloaded their songs could be offered first crack at the tickets. But special webcasts of concerts could be offered as well.

Of course, this list goes on. Knowing what a person likes means you have a good chance of knowing what else he or she would like. Both from backlist and with new releases. Better still, you would have an email address to send samples to.

Add to this the revenue from advertising -- Golden Oldies are a huge market for radio, why not for the music itself -- and you begin to build a revenue rich, targeted marketplace.

 

The record companies could use the P2P networks to publicize their clubs. They could flood Kazaa with current tunes, branded with their label, with a five to ten second promo at the beginning and end of the file. If you want to download Trick Daddy you can get a clean copy with the Trickster himself shilling for his record company's club.

 

Adapting to the new digital, P2P reality may be painful. But in this case it is adapt or die. There will, no doubt, be deaths. I would not want to be in the retail record store business at the moment. But the creative destruction unleashed by new technology is already creating new alternatives for artists to reach their audiences.

 

As Terry O'Reilly pointed out in his 2002 article on P2P "Obscurity is a far greater threat to authors and creative artists than piracy." And, as 32 time Grammy Award nominee John Snyder suggests in his Salon article, P2P file sharing represents the greatest marketing tool the music industry has ever come upon.

 

Most of the email and the comments on the various sites which reposted the article -- and my copyright lawyer has your names -- expressed a willingness to buy music and frustration with a copyright law and an industry which has lost touch with technological reality. The Canadian solution, while a long way from perfect, suggested to many the beginning of a system they could live with. It may be a way forward for the RIAA.

 

Jay Currie is a Vancouver writer whose writing and blog is at www.jaycurrie.com.

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