The Effectiveness of RIAA Lawsuits

Is suing your customer base an effective remedy against file swapping?

In the face of evidence suggesting that the lawsuits have been ineffective at curbing P2P music-swapping, the RIAA responded that "lawsuits are an important part of the larger strategy to educate file-sharers about the law." Well, the "education by lawsuit" of American music fans is also off to a rocky start. Awareness of copyright law is certainly up. For example, an April 2004 survey revealed that 88 percent of children between 8 and 18 years of age understood that P2P music-downloading is illegal. Unfortunately, the survey also discovered that 56 percent of the children surveyed continue to download music anyway. So while many music fans are aware of the "stick" of lawsuits, they seem relatively unintimidated by it.

So what about the "carrot" of authorized music services like Apple's iTunes Music Store? In the words of the RIAA, the lawsuits are also intended to "encourage music fans to turn to these legitimate services." Well, the news there is not terribly encouraging, either. While the authorized music services are attracting a modest number of customers, it is also clear that they together account for a trivial percentage of the total number of digital music files being downloaded today. In fact, it is fair to say that all of the authorized music services together do not yet amount to a drop in the digital music-downloading bucket. Apple, the most successful of all the authorized music services, sold a total of 100 million downloads in its first 15 months of operation. This sounds impressive until it is held up against the 5 billion files that move across the Kazaa network every month.

P2P file swapping is an interesting topic. It raises a lot of issues on both the supply and demand side of distribution. For example, I teach in a school where the students are by and large overwhelmingly honest and maintain strong religious beliefs. When you walk by the cafeteria there are literally hundreds of book bags left unattended; in the student snack bar it is not unusual to see laptop computers sitting on a table with nobody around. One student told me that your computer is always safe, but leave a pack of cigarettes lying around and they're gone in a second. When asked if they have ever illegally downloaded files off the Internet, roughly 80% of my students admit to having done so. How do you explain this cognitive dissonance?

I have always questioned the RIAA’s motives and tactics. You have the opportunity to distribute your product at nearly zero marginal cost and rather than spend your resources discovering a means to do so, you sue your (probably best) customers. This is both a poor business strategy and indicative of the sizable market power enjoyed by the recording industry. Instead of suing their customers right off the bat, they might have started with a non-threatening information campaign explaining the costs and ethics of illegal file swapping. Members of the recording industry are not likely to be viewed sympathetically, however, which in my opinion makes the following proposal likely ineffective.

But there is a better way, one that keeps the government out of it. Known as "voluntary collective licensing," the concept is simple: the music industry forms one or more collecting society, which in turn offer file-sharing music fans the opportunity to "get legit" in exchange for a reasonable regular payment, say $5 per month. So long as they pay, the fans are free to keep doing what they are going to do anyway -- share the music they love using whatever software they like on whatever computer platform they prefer -- without fear of lawsuits. The money collected gets divided among rights-holders based on the popularity of their music.

In exchange, file-sharing music fans who pay (or have their ISP or other intermediary pay on their behalf) will be free to download whatever they like, using whatever software works best for them. The more people share, the more money goes to rights-holders. The more competition in file-sharing software, the more rapid the innovation and improvement. The more freedom to fans to share their favorite music, the deeper the global catalog of available music.