The Past and Future of Filesharing

It’s been almost one year since the U.S. Supreme Court handed down its ruling in the MGM v Grokster case, determining that Grokster and Streamcast can be held legally liable for what it calls “inducing” copyright infringement by users if they market their filesharing programs “with the object of promoting its use to infringe copyright.”

Although Grokster caved and accepted the judgment, paying a substantial amount to MGM, Streamcast hasn’t given up. The case is now being heard in US District Court in L.A. (Source: Hollywood

The new “inducement test” is being hotly debated by entertainment and technology lawyers in and out of court. Even if StreamCast loses, attorney Charles Baker will seek to block damages by asserting the affirmative defense of copyright misuse. “The motion picture companies, record labels and publishers have for years colluded to limit the distribution of digital content”, pointing out the unfavorable licensing contracts that indie labels and others not associated with the majors are forced to accept.

Baker says, “The fight is far from over”, as the Supreme Court, in its ruling, invited anyone to take the case to the 9th Circuit Court of Appeals.

Has anything changed in the real world of p2p? Yes, quite a lot.

The Hollywood Reporter, ESQ., invited RIAA general counsel Steven Marks, Universal Music Group eLabs president Larry Kenswil, and EFF’s Fred Von Lohmann to take part in a “spirited” roundtable discussion on the court ruling, filesharing, and digital distribution.

Kenswil believes that rather than shaking up the music industry, the Supreme Court’s ruling brought stability to the industry, setting rules about what people can do with copyrighted material. Von Lohmann disagrees. Except for the “inducement test”, the court failed to clarify the basic rules, pointing out that it’s still unclear whether a technology that has substantial non-infringing uses can be held responsible if people misuse the technology.

Both Marks and Kenswil believe that the inducement test has “nudged” technology companies to approach the labels and studios, looking for ways to work together, in effect taking the position that any technology not approved and sanctioned by the cartels is illegal. This, they claim, doesn’t stifle technological innovation, but encourages it (as long as the cartels can control it). Von Lohmann rightly puts them in their place and tells them they’re putting “the cart before the horse” when it comes to encouraging innovation.

The cartels claim the Betamax precedent doesn’t exist, as concerns the Supremes’ decision , or that if it does exist, it can be ignored because they want to work with “legitimate services”, which has already “enhanced” the market, citing the growth (haha!) of the legitimate digital market year to year.

Did we miss something here? As all parties acknowledge, free p2p has increased monthly since the original Napster case. They also acknowledge that the cartels will always have to compete with free p2p, although Universal’s Kenswil claims Napster had nothing to do with the “billions of dollars now being spent on digital music” and the technology behind it. He calls that idea “preposterous”. I guess he should know because it was the RIAA which shut Napster down, coerced it into joining the “legitimate” marketplace, which then turned Napster the useless piece of p2p crap it is today. He wouldn’t want to admit that billions were wasted in that arena.

On the other hand, while the rate of shared music files has slowed down – but still moving in an upward direction – in comparison to just a few years ago, film and TV filesharing has risen dramatically, constituting the bulk of files being shared around the world.

On the lawsuits in general, this roundtable had some obvious observations and a few surprises for the reader:

Marks: “I don’t think we’ve ever targeted technology or technology services.”

What’s that?

Didn’t the cartels sue Grokster, Streamcast, and Kazaa? Aren’t they trying to make a case against XM’s Inno? Didn’t they try to influence (read blackmail) the Swedish and U.S. governments into closing down Pirate Bay, ultimately failing – an endeavor which in turn gave birth to more filesharers and the creation of numerous political “Pirate Parties” in several countries, including Sweden and the U.S.?

Marks: “We’ve targeted companies who were, in our view, facilitating copyright infringement.”

Ah, so that’s how they blackmailed Bram Cohn. Okay, I get it now. As long as they can control the technology, everything’s kosher. If they can’t control it, in their view it’s illegal. Gotcha. First, threaten to sue the pants off the inventor of the most popular filesharing software. When he capitulates to your demands, pay him off with a house, a car, lifetime education for his kids, health insurance for the family, a seven-figure salary, and an exclusive contract (compulsory gag order/non-disclosure codicil included) .

Don’t forget to go after the users of the software, either.

Marks: “We very reluctantly began filing cases against individual users. But we think that both of those efforts have borne through. [The problem of piracy is now one] that is exemplified more by a hard-core group of users than it is by a continuing growth of users.”

LOL! That’s very funny because every statistical survey of file sharing has continually shown that more and more people are sharing files every day.

As Eric Garland, CEO of Big Champagne – the main analyst of p2p facts and figures – tells in a separate Hollywood Reporter interview, at any one time there are 10 million people sharing files on free p2p networks.

That’s roughly ten times as many as when Napster was in its heyday. And the numbers are going up, not down.

The lesson, according to the view of the cartels and their interpretation of the Grokster ruling is, if you have – or want to create – a filesharing program, go to the cartels first and ask for permission to innovate. Then you’ll get a sweet deal like Bram did. If you don’t you’ll be viewed as a thief and sued.

Marks: “Eradicating every last act of piracy is something we understand is futile, and has never been an objective of the industry.”

Really? So what’s with the 19,000 + lawsuits then? The ones you have no proof of copyright infringement? The ones, which will cost the industry billions of dollars and millions of customers? The ones you’ll ultimately lose because public awareness of and disgust for these frivolous cases and their waste of tax payer money will do more to turn people away from “legal” product than any p2p program ever could? What about these lawsuits? Are they just symbolic token lawsuits to grab headlines before they’re lost or thrown out of court? Hmmm?

I think it’s so cute they still consider free filesharing as “piracy” when nothing has been stolen, no money or services have been exchanged , ergo, no profit , no theft – and there’s no proof that a shared file equals a lost sale.

On the other hand, entertainment cartel practice of colluding to fix prices, bribe radio stations, arrest customers and plant spyware into computers everywhere is considered business as usual.

The cartels have never been able to prove that a file shared is equal to a lost sale or rental. In fact, several court cases have either been dropped by the cartels or thrown out exactly because they can’t prove it. And at the same time, the music and film industries are reporting record profits.

Big Champagne, the most-noteworthy and respected compiler of free p2p statistics, the place where even the MPAA and RIAA go to for reliable information, has continually shown that free p2p has increased, despite the thousands of unlawful lawsuits filed against innocent people. But no-one can show that money is lost due to free p2p.

The entertainment industry is stuck in, and unwilling to leave, the past. The future is here. The future is now. The future is free p2p.

Free p2p doesn’t have to be seen as something negative or evil. It can also be a useful tool for the cartels.

For decades the Nielsen TV ratings system has decided the rates advertisers must pay.

The Nielsen ratings system is based only on overnight results in certain markets, whereas free p2p is immediate and virtually open-ended time-wise, and isn’t tied to age or gender demographics. Instead of calculating viewers per capita or by region, they can see exactly how many times a file was downloaded and use this info to help in setting advertising rates. There’s no reason why the Nielsen system can’t work with the Big Champagne system. There will always be people who either first watch a program on TV with ads and then download it, or vice verse. The two sets of statistics, taking this knowledge into account, can be used to create a better and more accurate picture.

True, when files are shared ads are edited out. But looking at the total worldwide viewership, instead of just measly overnight ratings, including the statistics from p2p networks will give a much better idea of how many people are interested in a program, which can be used to calculate ad rates.

Too many times a good program is cancelled because of either low ratings (Star Trek: Enterprise) or because of pressure from political or religious groups (The Book of Daniel). Both of these shows were extremely popular on p2p networks, but were canceled due to outdated ratings systems and the extreme-right activist groups. Ad revenue was lost, but not because of free p2p.

Even though more people might be downloading a program, that doesn’t mean they won’t watch it on TV as well, just as downloading a film doesn’t mean a DVD or cinema ticket won’t be purchased. But a new way of calculating ad revenue can be created using all the tools available.

I don’t know how this can be done, but I believe it can be done to satisfy networks and advertisers, without losing viewers. Keeping these shows on the air will increase the numbers of broadcast viewers, whether they have access to a computer or not. And p2p will be the cause of this increase.

Has anything changed in p2p since MGM v. Grokster? Yes, most definitely.

There are more and more files and file sharers and file sharing networks than ever before. This, despite , or as a result of , the backward-thinking cartels and their ridiculous claims of losing money, as well as the thousands of lawsuits being illegally and immorally brought against innocent people.

And as mentioned cinema tickets, and CD and DVD sales and rentals have increased.

Will the cartels change with the times? Probably not. As long as they can continue influencing political parties and the lamescream media; as long as they can control the distribution of “product” and the technology behind the distribution; and as long as there are lawyers willing to make a buck off the backs of innocent people, the entertainment industry will lag behind real innovation.

But free p2p is here to stay.



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