A proposed solution to end the P2P wars

In the last two and half years, I’ve written almost 300 of these columns on file sharing. This will be the last to appear on the Network World Fusion site. If you have any suggestions as to where these columns should appear next, let me know.

Based on the mail I receive, many of these columns are widely shared and distributed by forwarded links. Terrific, please continue to distribute my work. Let me know where it appears.  In between my other deadlines, I will post new columns from time to time on my personal Web site, http://www.ontherecord.org

In the meantime, I’d like to make some final observations on file sharing. Since the Recording Industry Association of America (RIAA) began its flurry of subpoenas and lawsuits against alleged copyright violators, the dispute over file sharing has made it on to the front pages of newspapers around the world. The RIAA says it is reaching settlements on dozens of its 261 lawsuits and has received 863 affidavits from file traders under its bogus amnesty program.

But in the past few weeks, the RIAA is finally being challenged on these tactics by P2P providers, lawmakers, and the very music fans whose business the record industry depends on.

The American Civil Liberties Union has filed a motion accusing the RIAA of illegally using these subpoenas to learn the identity of alleged file traders. The right to online anonymity is the larger civil liberties issue raised by the P2P wars. The ACLU is correct in its charge that the subpoenas, filed under the Digital Millennium Copyright Act (DMCA) violated due process and the constitutional rights shielding the anonymity of Internet users. It is asking a federal judge in Boston to reject attempts by music labels to reveal the identity of an alleged file trader at Boston College.

The American Library Association has also criticized the RIAA’s attempt to shut down P2P networks. In what could be a powerful blow to the record industry’s attempt to equate file trading with porn distribution, five major U.S. library associations have filed a legal brief supporting Streamcast Networks and Grokster which are being sued by the five major record labels and large movie studios.

The brief asks the Ninth Circuit Court of Appeals to uphold an earlier decision to dismiss the industry’s suit against the P2P companies. Both the ACLU and the library groups point out that P2P networks have many non-infringing uses and the technology should not be destroyed because some people use it to trade copyrighted material. This is essentially the argument used in the 1985 Betamax case where the movie industry tried to outlaw VCRs.

Sharman Networks, creator of the Kazza software, is also hitting back, filing new anti-trust charges against record labels and movie studios in response to the copyright infringement claims lodged against it. The lawsuit asserts that these entertainment companies have conspired to drive Sharman out of business in an effort to monopolize the distribution of content. A similar lawsuit filed last January was dismissed, but this new one points to the real damage suffered by Sharman at the hand of the entertainment industry. The record labels have continued the legal rampage by suing iMesh, one of the oldest file-trading networks.

Cary Sherman, president of the RIAA, has said that he expects more lawsuits to be filed. Only this, he says, will make file traders aware of copyright laws and create an environment where legitimate online music business can flourish.

But six P2P companies have formed a trade group called P2P United which is urging Congress to approve a voluntary compulsory license for music files which would force music labels to license their works for a flat fee. Of all the business models proposed for preserving the rights of file traders and getting artists paid, voluntary compulsory licensing seems like the best solution to the P2P dispute.

One of its main proponents is Fred von Lohmann, senior staff attorney with the Electronic Frontier Foundation (EFF). He points out that systems that extract micropayments in return for online music have high transaction costs, which defeat the efficiencies of distributed networks. Another problem with existing online music sites like Apple’s iTunes is that they dictate which hardware or software is needed, and don’t offer the music in the unrestricted and ubiquitous MP3 format.

Users of other widespread technologies, such as Internet access and cell phone services clearly want to pay for those services with one blanket payment and downloading music should follow the same model. Major copyright owners should get together and offer a blanket license for music downloads which von Lohmann says should cost about $5 a month. These could be sold by ISPs via a copyright access card or whatever the market develops as the best payment solution. “The key to getting consumers’ acceptance is getting a price point that consumers find reasonable,” von Lohmann says.

According to von Lohmann, one could imagine a world in which the existing 60 million U.S. file traders expand to a market of 100 or 200 million legal, paying customers. He says this scenario could potentially generate $300 billion a year in pure profit for the music industry.

This type of blanket license was used after copyright owners gave up trying to sue radio out of existence. Performing rights organizations (PRO) were formed to which songwriters and music publishers were invited to join. Blanket licenses were given to all radio stations that wanted them. Once they received a license, radio stations can play anything and the fees are divided among the PRO members.

The three major PROs in the U.S. are American Society of Composers, Authors and Publishers (ASCAP), BMI and Society of European Stage Authors and Composers (SESAC).  They are not perfect models, but they can be improved on for the purposes of P2P licensing. Von Lohmann notes that under the ASCAP, for instance, artists get a much larger percentage of the proceeds than they do with record company deals. This solution does not require any changes to the copyright law and permits copyright owners to set prices. But copyright owners have to be willing to give up their lawsuits and join a PRO, and the big entertainment companies have not yet shown an interest in pursuing this option. 

When copyright holders refuse to grant licenses at any price, such as record labels refusing to license their music to P2P sites, Congress has promptly stepped in to move things forward. The EFF points out that this situation arose with many new technologies including cable TV, satellite TV, digital recording media, and Internet radio. The EFF notes that the first American compulsory license was adopted when the music industry fought the Napster of 1909 – the player piano.

“The problem, of course is that the recording industry is going from a distribution to a licensing model and this is exactly the lesson that they taught the music publishers 100 years ago,” von Lohmann  says. “The ancestors of the recording industry were the ones who brought out the first player pianos and refused to pay a share to song writers.”

During this copyright crisis, von Lohmann said songwriters sued, and lost, went to Congress and lost, and Congress finally cut a deal.  “Every new technology that has come along will make more money for the copyright industry,” von Lohmann says. “That has happened for the last hundred years and there is no reason to believe that the Internet will be an exception to that rule.”

P2P technology is a highly efficient strategy for to sharing bandwidth, supporting online archives, and distributing digital culture. It will not be abandoned by the hundreds of millions of people around the world who use it. I welcome you to join me as we watch to see if Congress will lead the way with a compulsory licensing plan for P2P networks, and how this model can be crafted to reimburse artists and support the rights of Internet users everywhere.