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january 18, 2007:
music industry threatens isp’s over piracy – the madness continues

The UK Independent reports: “The International Federation of the Phonographic Industry, or IFPI, said it would take action against Internet companies that carry vast amounts of illegally shared files over their networks. It stressed that it would prefer not to pursue such a strategy and is keen to work in partnership with Internet providers.”
John Kennedy, the chairman of the IFPI, said he had been frustrated by Internet companies that have not acted against customers involved in illegal activity. He warned that litigation against ISPs would be instigated “in weeks rather than months.” Barney Wragg, the head of EMI’s digital music division, said the industry had been left “with no other option” but to pursue ISPs in the courts.

The IFPI wants ISPs to disconnect users who refuse to stop exchanging music files illegally. Mr. Kennedy said such activity is in breach of a customer’s contract with the ISP and disconnecting offenders the IFPI had identified would significantly reduce illegal file sharing. Let me see if I get this straight: The record labels still have not gotten around to working out a realistic model that can actually monetize the tremendous and surging interest in music. They still prefer control and denial over access to new revenues. They still bang their heads against the wall, and try to offer only crippled and DRM’ed files via iTunes, Napster, and Rhapsody. Well, if you haven’t noticed, next to no one is buying. Just look at the increasing number of Windows DRM-based services that are slowly shutting down, such as AOL Music, My-CokeMusic, and Virgin Digital. While not a bad concept, the various new ad-supported services will also fail miserably as long as they are forced to sell crippled files. All of this bizarrely illustrates that the major labels still don’t get that they are killing the market by not offering something that people will actually want to buy.

DRM LOCK

They still market music like it’s 1982 (i.e., push-push-push); they still want digital radio – and TV – to be crippled or go away. Just look at the debate on the new so-called Perform Bill in the U.S. (imagine DRM’ed radio!) and the Broadcast Flag discussions, as well as the certifiably ridiculous lawsuits against XM Radio, the U.S. satellite radio service. So now they want the ISPs to patrol their users and the entire web, and see if someone downloads something in a manner they have not sanctioned. In other words, they want to enforce their failed and antiquated business models via a web police squad that they won’t even pay for. Now, if that’s not Orwellian, I don’t know what is! The absurdity is unfathomable.

Here is my message to John Kennedy: It’s time you understood that the world has moved on since total control of music was feasible, back when a bunch of guys determined what the artists, the distributors, the retailers, the radio stations, and ultimately the consumers could or could not do. It’s now the user formerly known as the consumer who has the power, and they aren’t buying that crippled and locked stuff you want to sell them. Period. Not because they are evil and not willing to pay, or because they are all looking to steal as much as possible, but because the value proposition isn’t working. Because you are trying to sell them less value, fewer options, and fewer usage rights – for more money! Those ISPs you want to sue into oblivion or make into your content police need to get a new kind of blanket license so that anyone can use the music, under a flat-fee and revenue-sharing agreement such as Playlouder in the UK is suggesting. And the record labels would make a lot more money, too!

To me, it is utterly disturbing that the industry and supposed leaders like John Kennedy are still pushing this disconnected, ill-informed, and bizarre agenda, while at the same time it is perfectly clear that digital music is not selling as it’s currently offered, that sales are slowing down, that the consumers are rejecting the current offerings, and that $2 billion in sales in 2006 could have been $20 billion if the industry finally gave the users what they really want: open and fully compatible formats, flexible pricing and bundles, easy and instant access, and fully interactive and sharing-enabled online and mobile platforms. What has to happen before you guys get it? EMI sold to private investors? MySpace signing major artists for direct deals? Google offering direct distribution to millions of bands? 50% of the staff fired at major labels around the world?