Filesharing and the birth of the digital music industry

Liisa Benmergui

DAP02S

October 28, 2004

Seminar Goals

Discuss peer-to-peer networksHistory: Past events in digital music

distributionPresent state of online music industryVisions of the future

P2P : An overview

Definitions

What is P2P?“Generally, a peer-to-peer (or P2P) computer

network is any network that does not rely on dedicated servers for communication but instead mostly uses direct connections between clients (peers). A pure peer-to-peer network does not have the notion of clients or servers, but only equal peer nodes that simultaneously function as both "clients" and "servers" to the other nodes on the network.”

- From Wikipedia, the free encyclopedia

Important p2p terms

ClientServerServent

Centralised networks

Decentralised networks

Decentralised networks

Hybrid networks

P2P categories

First Generation: Napster

Centralized, infringed copyright laws Second Generation:

Gnutella/FastTrack Decentralized “true peer-to-peer networks” harder to pursue legally

Third Generation: Freenet

Built upon generation 1 and 2 technology Anonymous networks

History and events in p2p network activity

Where did it all begin?

1999 Napster is launched by college drop-out Sean Fanning

Felt there was a need to create a common, “easy-to-use” forum dedicated to sharing music files, namely .mp3 format

In December, RIAA filed a class action suit against Napster. This gave Napster a great deal of publicity, and millions of users

flocked to the service. 2000

In March, Nullsoft unofficially releases Gnutella first client was developed by Justin Frankel and Tom Pepper of

Nullsoft, a division of AOL Shortly after release AOL decides to stop project Gnutella project continued via reverse-engineering

Historical milestones continued

2001 Limewire, main developer of Gnutella-based technology

is released as open source In February, Napster use peaked with 13.6 million users

(source: comScore Media Metrix) Napster ordered to pay 26 million USD in copyright

infringement case

2002 Saw the rise of p2p networks and software development

2003 – 2004 Lawsuits filed against networks, as well as, individuals

Who is against p2p and why?

RIAA: Recording Industry Association of America The “BIG 4”

EMI Sony-BMG Universal Music Warner

MPAA: Motion Picture Association of America

Reasons

Copyright infringement by p2p networksCopyright infringement by individual clientsLack of royalty payments

Reactions

Lawsuits against centralized networksSeptember 2003 RIAA files lawsuits

against individual clientsLobbying for right to outlaw p2p networksLobbying for rights to break into personal

computers, if there is a suspicion of illegal activity

Is filesharing illegal?

No, sharing files is not illegal, if a person has received permission from the files’ creator(s)

Filesharing in theory is based on the fundamental idea of sharing, but it has received a lot of bad publicity due to filesharing network “misuse” by individuals

The birth of online music stores

One person’s misery is another person’s success After Napster, “downloading” became a

household term The profile of the downloader has evolved into

distinct categories Apple was one of the first larger companies to

back this idea and revolutionize the music industry as we know it By cutting deals with the artists themselves, Steve Jobs

revamped the digital music scene

Legal online alternatives: an even shorter history2003

May: iTunes Music store launched in USA Consists of iTunes software Compatible with PC and MAC

October: Roxio’s Napster 2.0 launched in USA

Familiar name, different functionality

The beat goes on

2004 June

iTunes Music store launched in UK

September MSN Music Store

• No software download Virgin online music store

• Beta version of software available

Why buy music if you can get it for free?

Factors

Security issues Consumers are not interested in spyware, pop

ads, or viruses Trusted brands have evolved in this domain

guaranteeing consumers protectionEase-of-use

The publicity showered on p2p networks arguably raised awareness as to how easy it can be to search and download songs off the Internet

Portable MP3, WMA, AAC players have evolved Smaller, lighter, easier to use than ever before

Average consumer will choose price over quality of the music

What is the impact of filesharing on the music industry?

RIAA claims that album sales have gone down

Recent research has shown that filesharing is not a true threat to album sales Clients that are sharing music online are not the

target group of album marketing

Contradicting research: who is right?

Visions of the future

Factors that will affect media distribution Broadband connections will facilitate downloads Rethinking of the strategies to combat illegal

copying Demand for better quality downloads

Conclusion

Filesharing has existed among smaller groups years before Napster came along

Are lawsuits the true answer to this new problem? The fact remains: Peer-to-peer networks do not

seem to be disappearing, on the contrary, clients are on the rise

Businesses must adapt, not deny