Slide 1-2
Napster vs. RIAA
Digital Copies, Music and Distribution
Frank Field
ESD.10, Block 2
Technology & Policy Program
Massachusetts Institute of Technology
Cambridge, Massachusetts
Materials Systems Laboratory
The Maze Of Copyrights
First Distinction
A "Song"
A "Sound Recording"
Second Distinction
Reproduction Right
Making Copies
Public Performance Right
Owned By the "Song" Owner
Not Owned By the "Recording" Owner
Changed in 1995 to add "digital audio transmission"
Compulsory License (Section 115)
If a recording has been distributed in the US,
The owner of a song must license the use of the song at a legislated rate
(No rate has been yet set for digital phonorecordings)
Massachusetts Institute of Technology
Cambridge, Massachusetts
Slide 1-2
Materials Systems Laboratory
Frank Field
ESD.10 Block 2
Slide 3-4
US Code: Title 17, Section 106 (as of 1/23/2000)
Sec. 106. Exclusive rights in copyrighted works
Subject to sections 107 through 121, the owner of copyright under this title
has the exclusive rights to do and to authorize any of the following:
1. to reproduce the copyrighted work in copies or phonorecords;
2. to prepare derivative works based upon the copyrighted work;
3. to distribute copies or phonorecords of the copyrighted work to the public
by sale or other transfer of ownership, or by rental, lease, or lending;
4. in the case of literary, musical, dramatic, and choreographic works,
pantomimes, and motion pictures and other audiovisual works, to
perform the copyrighted work publicly;
5. in the case of literary, musical, dramatic, and choreographic works,
pantomimes, and pictorial, graphic, or sculptural works, including the
individual images of a motion picture or other audiovisual work, to display
the copyrighted work publicly; and
6. in the case of sound recordings, to perform the copyrighted work
publicly by means of a digital audio transmission. (added Digital
Performance Rights in Sound Recordings Act of 1995)
Massachusetts Institute of Technology
Cambridge, Massachusetts
Materials Systems Laboratory
The Actors
Record Companies
Contracts With Recording Artists
Financing, Promotion and Distribution of Recordings
Royalty Payment To Artists
Music Publisher
Contracts With Songwriters
Commercial Exploitation of Songs
Licensing for
Recordings
Sheet Music Printing
Public Performances, Live and Recorded
ASCAP/BMI
"Performance Rights Societies"
Representation of Publishers and Songwriters wrt Performance Licensing
"Songs" not "Song Recordings"
Massachusetts Institute of Technology
Cambridge, Massachusetts
Slide 3-4
Materials Systems Laboratory
Frank Field
ESD.10 Block 2
Slide 5-6
The Actors (continued)
Harry Fox Agency
Licensing Agency
Specifically To Record Companies for Music Publishers
For Reproduction of "Songs" as Phonorecordings
Compulsory Licensing Arrangements
Recording Industry Association of America
Trade Association
Promotion of Record Company Interests
Current Head: Hillary Rosen
Aggressive Anti-Piracy and Intellectual Property Protection Efforts
Massachusetts Institute of Technology
Cambridge, Massachusetts
Materials Systems Laboratory
A Complex Structure of Relationships
Creators of Intellectual Property
Composers
Performers
Arrangers
Distributors of Intellectual Property
Music Publishers
Phonorecording Manufacturers
Performers
Broadcasters, etc.
Consumers of Intellectual Property
Massachusetts Institute of Technology
Cambridge, Massachusetts
Slide 5-6
Materials Systems Laboratory
Frank Field
ESD.10 Block 2
Slide 7-8
Enter - Napster and its Peers
Shawn Fanning Northeastern U. Undergraduate
1st prerelease - mid-1999
Concept
MP3 Search Engine
File Sharing Protocol
IRC/Communication Tool Within A
Community
Peer-to-Peer Technology Rather Than
Central File Store
Central Indexing/Locating
Mechanisms
Every logged on client sends
updated list of files to be shared
Client
Client
Client
Central Index Server
(Napster, Inc.)
Client
Client
Explosive Growth
Feb 2000; 1.1 million
Aug 2000; 6.7 million
Feb 2001; 13.6 million US
1. Song title query sent to server
2. Receive client list w/ title hit
3. Select and contact client
4. Transfer file
Massachusetts Institute of Technology
Cambridge, Massachusetts
Materials Systems Laboratory
Pew Study - Upward Trend
Percent of Internet Users Who Download Music (+/- 3%)
Adults - Gender & Race
Men
Women
Whites
Blacks
Hispanics
Household Income
7-8/2000
2/2001
24%
20%
20%
29%
35%
36%
23%
26%
30%
46%
Educational Attainment
< High Sch
Grad HS
Some Coll
Grad coll+
Slide 7-8
2/2001
28%
24%
20%
15%
36%
31%
29%
24%
7-8/2000
2/2001
18-29
37%
51%
30-49
19%
23%
9%
15%
Under $30k
$30k-$50k
$50k-$75k
$75k+
Age Cohorts
7-8/2000
2/2001
48%
25%
25%
15%
55%
31%
32%
21%
Massachusetts Institute of Technology
Cambridge, Massachusetts
7-8/2000
50+
Materials Systems Laboratory
Frank Field
ESD.10 Block 2
Slide 9-10
2001 RIAA Midyear Statistics
Jan-Jun 2000
% Change
Revenue
Unit
Revenue
Units
Revenue
Unit
Revenue
Units
Revenue
420 $5,681.2
38.6
$303.2
1
$12.4
19.4
$77.4
$13.53
$7.85
$12.40
$3.99
397.9
22
1
11.7
$5,528
$176
$12.9
$55.6
$13.89
$8.00
$12.90
$4.75
-5.3%
-42.9%
7.4%
-39.5%
-2.7%
-41.9%
3.3%
-28.2%
$3.50
$5.43
$13.45
$25.14
-0.8
3.1
4.8
3
($2.9)
$17.3
$65.5
$70.1
$3.63 -181%
$5.58 30.9%
$13.65
-5.9%
$23.37 115.9%
-182.8%
38.8%
-4.0%
99.2%
Units
CD
Cassette
Vinyl LP/EP
CD Single
Cassette
Single
Vinyl Single
Music Video
DVD
Jan-Jun 2001
1
2.3
5.1
1.4
$3.5
$12.5
$68.6
$35.2
Massachusetts Institute of Technology
Cambridge, Massachusetts
Materials Systems Laboratory
RIAA Annual Sales - 2000 Report
Millions of units sold
1000
900
800
700
600
500
400
300
CD
CD single
Cassette
Cassette Single
Music Video
DVD
200
100
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Massachusetts Institute of Technology
Cambridge, Massachusetts
Slide 9-10
Materials Systems Laboratory
Frank Field
ESD.10 Block 2
Slide 11-12
RIAA Annual Sales - 2000 Report
Billions of dollars in revenue
$15
CD
CD single
Cassette
Cassette Single
Music Video
DVD
$10
$5
$0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Massachusetts Institute of Technology
Cambridge, Massachusetts
Materials Systems Laboratory
RIAA Annual Sales - 2000 Report
Billions of dollars in revenue
$15
DVD
Music Video
Cassette Single
Cassette
CD single
CD
$10
$5
$0
1991
1993
1992
1995
1994
Massachusetts Institute of Technology
Cambridge, Massachusetts
Slide 11-12
1997
1996
1999
1998
2000
Materials Systems Laboratory
Frank Field
ESD.10 Block 2
Slide 13-14
Unit Revenue (MSRP) - From RIAA Statistics
Unit Revenue
$15
$10
CD
CD single
Cassette
Cassette Single
$5
$0
1991
1993
1992
1995
1994
1997
1996
1999
1998
2000
Massachusetts Institute of Technology
Cambridge, Massachusetts
Materials Systems Laboratory
Immediate Controversy
Typical Positions
"Napster Is Theft of Intellectual Property; Abuse of Artists"
"Napster Allows Me To Sample Before Buying"
"Napster Allows Me To Find Music Unavailable Otherwise"
"Napster Allows Me To Acquire Only That Which I Like On A CD"
"Napster Allows Me To Stick It To The Record Companies"
Subsidiary Issues
"MP3s Allow Me To 'Space Shift' Just Like Analog Cassettes"
"MP3s Are Infringing Copies"
"MP3s Are/Can Be Degraded Copies, Not Pure Digital Copies"
Massachusetts Institute of Technology
Cambridge, Massachusetts
Slide 13-14
Materials Systems Laboratory
Frank Field
ESD.10 Block 2
Slide 15-16
RIAA Sues Napster For Copyright Infringement
Making Copies
No Right To Distribute
Playing Phonorecords
No Licensing
Economic Harm To Artists, Industry
Napster Counterpositions
Fair Use
Noncommercial Use - Home Recording Act
Digital Millenium Copyright Act 512 - Safe Harbor Provision for
Transitory digital network connections
Information location tools
Lawful Sharing (uncopyrighted works or copyrights not enforced by owners)
Rejected at Trial
Appeals Process Seemed To Go Napster's Way
Ultimately Failed - "100% requirement"
Converting to Paid Subscription Model
Massachusetts Institute of Technology
Cambridge, Massachusetts
Materials Systems Laboratory
Effect Of The Decisions On Napster
February, 2001 - Peaked
Billions of downloads
3.0
Trailed Off Rapidly Thereafter
2.5
Ultimately, Complete Shutdown
Still Weak Operation, Waiting To
Convert To Subscription Servce
2.0
Purchased By Bertelsmann
1.5
0.5
NA
1.0
0.0
Sep-00 Nov-00 Jan-01 Mar-01 May-01
Oct-00 Dec-00 Feb-01 Apr-01
Massachusetts Institute of Technology
Cambridge, Massachusetts
Slide 15-16
Materials Systems Laboratory
Frank Field
ESD.10 Block 2
Slide 17-18
Alternatives Immediately Emerge
According to WebNoize, 3.05 billion audio files were shared in August, 2001
FastTack 970 million
AudioGalaxy 910 million
IMesh 640 million
Gnutella tools 530 million
Compared with 2.79 billion in Feb 2001, Napster's peak
Alternative Technologies
CNet Download Statistics
Music Sharing Tools
Audiogalaxy
Morpheus
KaZaa
iMesh
LimeWire
9/10 week
991,021
1,769,024
947,773
400,650
256,737
To date
24,828,106
18,853,936
12,220,794
16,631,222
5,525,967
(LimeWire recently converted to Open Source license)
Massachusetts Institute of Technology
Cambridge, Massachusetts
Materials Systems Laboratory
Artists Split on the Subject
Disdain for Record Companies
Outstanding FTC Consent Degree On Price Collusion in CD Market
High Profile Artist Controversies
Prince
Courtney Love
Others Working With RIAA
Metallica, Dr. Dre
Independents On The Outside, In Many Respects
Massachusetts Institute of Technology
Cambridge, Massachusetts
Slide 17-18
Materials Systems Laboratory
Frank Field
ESD.10 Block 2
Slide 19-20
Complicating Factor - Distribution As A Player
Injuries To Artists - Generally Decried
Injuries To Users - Generally Decried
Injuries To Record Companies - Generally Applauded
Massachusetts Institute of Technology
Cambridge, Massachusetts
Materials Systems Laboratory
Dichotomy? (from Equity lecture)
Social Conservatism
(Distributive) Justice
Fair Process
Liberty
Freedom to act
Property
Individual creation
Need Motivates
"To justify income redistribution, it is
necessary to show that individuals
somehow do not have a just title to the
income they earned"
Massachusetts Institute of Technology
Cambridge, Massachusetts
Slide 19-20
Social Liberalism
(Distributive) Justice
Fair shares of social resources
Liberty
Freedom from constraints
Property
Social creation
Need Inhibits
"All social values -- liberty and
opportunity, income and wealth and the
bases of self respect -- are to be
distributed equally unless an unequal
distribution of any, or all, of these values
is to everyone's advantage"
Materials Systems Laboratory
Frank Field
ESD.10 Block 2
Slide 21-22
"Enrich the Public Domain" vs. "Incentivize Creativity"
(A possible mapping)
"Enrich the Public Domain"
(Technolibertarianism?)
"Incentivize Creativity"
Distributive Justice
A fair process ensures justice
Distributive Justice
Justice needs enforcement at
end use
Property - Property is a social
construct
Copyright
Internet Distribution
Property - Property is an individual
product
Individual creativity
Freedom
Freedom from constraint
Freedom
Freedom to act as one chooses
Motives
Need Inhibits
Motives
Need motivates
Massachusetts Institute of Technology
Cambridge, Massachusetts
Materials Systems Laboratory
Technologies
Copy Protection
SDMI
CPRM
Encryption
CSS for DVDs
Digital Rights Management
Passport/Hailstorm
Trusted Servers
Streaming Content
RealNetworks
Windows Media
Legal Instruments
Fees for Potentially Infringing
Hardware
Anti-Circumvention
Monitoring
Songbird
Webcrawlers
Massachusetts Institute of Technology
Cambridge, Massachusetts
Slide 21-22
True Peer-to-Peer
No Central Index Server
Encryption
AIMster
FreeNet
Decryption
Copy Protection Circumvention
Techniques
Materials Systems Laboratory
Frank Field
ESD.10 Block 2
Slide 23-24
Defense of Distribution?
Is Copyright The Real Issue?
IITF White Paper Declared Every Digital "Image" Is A Copy
An Interesting Perspective Since Challenged In DMCA Evaluation
"Ephemeral Copies" Returning To The Discussion
Recall The Discussion Of Where Copyright Laws Come From
Developed By Distribution Stakeholders
Negotiated Positions To Maintain Business Economics
Congress As Manager Of Negotiations
With The Development Of The Internet, Distribution Is No Longer A Big
Business Proposition
Barriers To Entry Have Fallen
Does The Current Distribution Business Model Work?
Is The Internet Regulable?
Massachusetts Institute of Technology
Cambridge, Massachusetts
Slide 23-24
Materials Systems Laboratory
Frank Field
ESD.10 Block 2