Music piracy on peer-to-peer networks

Introduction

The use of Peer-to-Peer (P2P) networks[1] is extremely popular between young people especially when it comes to finding music. Nowadays, that a great number of households both in the developed and in the developing countries have internet access, sharing files on P2P networks is an easy task without cost. Due to the fact that this type of file sharing is free of charge and at the same time easier and quicker than visiting a music store, P2P networks are largely used especially by teenagers who are mainly low-income members of the Internet community and very keen on new technologies.

However, file-sharing related to music, despite its advantages, has sparked many controversies between the music industry and the users of such networks. The music industry claims it loses millions of revenue due to "illegal" downloading. In this essay, we will try to investigate the actual impact of P2P networks and whether teenagers who are sharing their songs are responsible for a worldwide declining trend on the sales of music CDs. Moreover, we will narrow down the research in Greece and we will examine whether the global conditions apply in this country as well. Finally, we will propose some solutions that aim combating music piracy and we will examine their effectiveness.

The IT Background of the Issue

Before P2P networks were created, people used to share music by copying CDs. However, from the time that the first P2P network appeared, things changed. The definition for a P2P network is "a network of two or more computers connected as equal partners able to share processing, control and access to data and peripherals". [2] P2P networks became the most innovative idea for sharing data, especially music. A P2P network consists of peers that share their data and which are both suppliers and consumers. [3] This means that the songs, instead of being stored in a central computer (server), they are stored in each peer's hard disc.[4] So, when someone connected on the network is searching for a song, he actually has access to the hard discs of all other peers. This also implies, that P2P networks do not have the notion of clients or servers but only equal peer nodes that simultaneously function as "clients" and "servers" to the other nodes on the network.[5] Since we do not have a client-server model but we have only peers sharing files, we can characterize a P2P network as decentralized and difficult to shut down.

A P2P network is easy to use, that's why this technology became so popular. Users of such networks can search for content by sending arbitrary queries into the system. The node that wishes to begin the search sends a message to all nodes connected directly to it. Each of these nodes will in turn replicate and send the message to its own neighbors. This process continues until finally the file is found in someone's hard disc. [6]

The first P2P music network, Napster, was designed in the late 1990's, due to the increased popularity of the mp3 music format. In the meantime, many similar networks appeared, such as Gnutella, Kazaa, BitTorrent etc. Despite many attempts to shut down such networks, every year thousands of new users participate in this file sharing process and its popularity increases every day. [7]

The Music Industry's view

Throughout the 1990's, the music industry was quite successful. However, during the last years, according to recent sales statistics, there has been a decrease in the number of units sold and a decline of profits. [8] For instance, between 1994 and 2004 the number of the top 100 album sold dropped from 194.9 million units to 153.3 million. [9] In France, the number of new albums released fell by 8% in the first half of 2008. [10] Moreover, according to the IFPI (International Federation of Phonographic Industry) sales dropped by 7.1% in 2002, 8.8% in 2001 and another 5.0% in 2000. [11] As far as Greece is concerned, in the last 10 years, the music industry has lost more than 260m and according to the IFPI Greece belongs to the list with the countries where music piracy is more than 50%.[12] So, what is the reason for the decline of music sales globally?

Some months before sales began to drop and the profit of the music industry to shrink, Napster, a P2P application was launched. In June 1999, Napster was released and made the work of many artists available on the Internet for free. [13] Napster gained popularity rapidly while at the same time the drop of the music CD sales started at a fast pace. The relation for the music industry was clear. P2P networks such as Napster were responsible to a certain extent for the decrease in their revenue.

A single file shared can result in millions of illegal downloads and corresponding losses in revenues. [14] According to the IFPI's estimations, over 40 billion files were illegally "file-shared" in 2008, giving a piracy rate of around 95%. Moreover, a Jupiter Research estimates that music piracy cost the music industry £180m in revenues during 2008 in the UK alone. [15] The Institute of Policy Innovation concludes that music piracy causes $12.5 billion of economic losses every year and that 373,375 jobs were lost due to piracy only in the US. [16] In Greece, the employment in the music industry fell by 67% in the last decade, compared to the 1990s. [17]

As statistics show, the fact that music sales decrease globally and that P2P networks are operating is not a coincidence. If we narrow the research, we can observe that most P2P network users are college students. The Pittsburgh Tribune mentions in an article that every student on campus thinks that downloading online is an entitlement.[18] This attitude shows that most of the college students are frequent users of P2P networks. As a student of a Barg College said: "Obviously I knew it was illegal, but no one got in trouble for it". [19] Clearly music Websites and P2P networks play an increasingly important role for the entertainment of the young generation who already uses the Internet as a source. [20] A study in 2004 found that 58% of students in two Universities engaged in file sharing, and that 40% of their music was pirated.

Moreover college students are more likely to engage in piracy than the general population (25% versus 16%)[21] since their income is limited and they have more free time.

Each student owns 2508 songs on his computer, on average and they pirate roughly 150 songs per month. [22]Furthermore , according to the same survey, when students pirate 10% more music through P2P web sites, they buy 0.7% fewer iTunes songs and 0.4% fewer CDs. All these are evidence that music piracy in P2P networks performed by college students hurts up to an extent the music industry and the artists. However, as Whitney Broussard, a lawyer of the music-law firm of Selveren, Mandelbaum & Mintz, said, "The sharing may be technically illegal but there's no way to stop it". [23]

Hence the music industry relates the decline of CD sales with the operation of P2P networks. However, what is the point of view of the students about this phenomenon?

Students' View

So far we have examined the music industry's view on the issue of music piracy via P2P networks. However, there exists a completely contradictory view from students who are users of these networks. The new generation and especially those with broadband connections spend more time on the Internet for entertainment activities like listening to music. They have realized that the Internet is offering many new possibilities for entertainment. [24] So, what do all these students think about music piracy?

The general idea is that file sharing "not only doesn't hurt legitimate CD sales, it may even boost sales of some types of music". [25] According to the report of the IFPI, the digital music industry grew internationally in 2008 by around 25% and consumer demand for music is higher than ever. Total music consumption rose by one third in the US between 2003 and 2007. [26]

P2P networks users have various arguments which support then above view. The most important one is that downloading stimulates the interest for new music. Since users have access to large volumes of music and of different genres, it is easy to share music from unknown artists and genres since it does not involve an additional cost. In fact, 44% of the users download unknown music by known artists and 30% unknown music from unknown artists. [27] Many artists have already realized that this illegal downloading may actually help. As Radiohead said on the BBC, "this file-sharing activity is evidence of a lot of interest in music" and that "illicit downloading does encourage people to become music fans". [28]

Oberholzer and Strumph, two Harvard Business School Professors, characterize those who share unknown music as "samplers", which means that they download a song or two and if they like the music they are likely to buy the CD or visit an artist's concert. [29] It is clear that the interest for music is promoted and that new artists and songs are discovered in P2P networks. According to the survey performed by IPSOS Raid in 2002, one third of the responders changed their favorite genre.

Another argument is that the budget of students is not sufficient to buy all the CDs that they want to, and at the same time CD prices are too high, which means that the real value of the CDs is overestimated by the music industry. [30] "Buying a whole CD at the price of 20 for only one or two songs that are worth, is something that most of us can't afford", replied characteristically someone to the survey conducted in the scope of this essay. And this is the general view of most students.

Many artists as well seem to agree with this perspective. They do not have a problem if people share or download their music for free because in fact they earn little from copyright. [31] However, the overestimated prices of CDs are not the only reason teenagers put the blame on the music industry. Teenagers blame the RIAA (Recording Industry Association of America) for the creation of distrust among students and Universities administrations. Not in a few cases, RIAA accused the Universities which provide broadband connections to their students, of the illegal file-sharing of songs in P2P networks and gathered information about the students through the University.[32]

There are many surveys that support students' arguments. One survey is the one performed by Indicare in 2005 which states that "two of three that have found a new artist on the net have later bought a CD by this artist and 16% have bought more digital music". [33] Another research by the RIAA among those who use P2P networks showed that actually music sales went up by 3%. Moreover, as Nielsen SoundScan - an information system that tracks music sales - reported digital album sales totaled 66 million in 2008, an increase of 32%. [34]

Local Survey

We have already seen the two contradictory views on the issue of file sharing in P2P networks. Through a local survey that conducted in the scope of this essay we are going to trace the trend in Greece. The survey was conducted using questionnaires (see Appendix 1 for the complete questionnaire) that were handed out to 85 students of ages 16 to 20. It was targeted to our school and to other schools in Greece as well. (For full answers represented with charts see Appendix 2.)

From the first question it is clear that most users have ADSL access. ADSL is a broadband connection, which provides increased bandwidth, so the data are transmitted faster than with other connections. [35] Hence, users with broadband need less time to download data than those who have other types of connection.

In the question whether they use P2P networks to share music, the majority of students (80%) answered positively. This agrees with statistics from research conducted in other countries as well. In Spain for example, 73% of the population has P2P networks as a main source for digital music. [36]Thus indeed P2P networks are very popular when it comes to finding music.

In the next question 41% answered that they visit their P2P network almost every day, something that can be justified. The questionnaire was handed out to students between 16 and 20 years old, who usually are usually of low income and at the same time they enjoy surfing on the Internet and they have plenty of time to do so. [37]

Answering to whether they know if it is legal to use P2P networks, 70% responded that they were informed which shows that most people know that it is illegal sharing music. However, they are still not prevented from engaging in file-sharing. As it is reported in the Pittsburgh Tribune-Review newspaper, after a survey that was conducted among students, "about 80% of the 486 respondents knew it was illegal to download music without paying for it",[38] something that agrees with the survey's findings. The surprising fact however, is that 30% of those who answered the questionnaire have never been informed whether sharing music is legal so these students actually have the excuse as well that they do not know that they are doing something wrong.

Another question concerns the number of songs downloaded each month. Only 17.0% download more than 30 songs per month, which means more than one song per day. Almost half of the students download less than 10 songs per month while 38% download between 10 and 30 songs per month. The conclusion is that despite that most of the students use their P2P network quite frequently; they are not all heavy downloaders, since only few of them download more than 30 songs per month. Hence, they cannot be the only reason for the decline in the worldwide music sales.

As far as the source of the music files is concerned, 70% responded that their music files usually come from file sharing. This confirms the claim of the music industry - that P2P networks hurt the revenue from the units sold since most of the songs are not paid. And at the same time, 65.4% spend only 0-20 on buying CDs per month, which confirms that CD sales are hurt since the major customers of the music industry (teenagers) spend less than 20 per month on buying CDs.

However, 68% of the students answered that they had discovered new artists or genres of music while using P2P networks something that supports the argument of students that "Downloading stimulates the interest for new music" [39]

Then, almost half of the people (56%) responded that they are not likely to purchase the CD of the artist after they discover a song which they like on the network. Since this percentage is near the middle, it shows that those asked are distributed among the two sides. However, again we should bear in mind that the research is limited to less than 100 people. But in the next question 57% of students said that they had visited a concert or a place where the artists that they found on the Net perform live, which is actually a gain for the music industry, however again this is near the middle. Hence, these results confirm that this subject is very debatable since they are in the middle and are not in favour of any side.

Finally as far as some solutions to the problem of file-sharing, almost 65% of those who answered the questionnaire believe that sites such as iTunes, that charge you a small fee - are a solution.

Solutions

We have already examined both points of view and we have examined as well whether statistics confirm the arguments of each side. Still, the true impact of music piracy over P2P networks is a very debatable subject and both sides have strong arguments to support their point of view. So, are there any solutions that would help both sides to reconcile and have equal gains and losses?

The first solution that currently seems to be most accepted by both sides is the creation of legal sites such as iTunes where you can listen to or download a specific amount of music with a small charge. The Chief Executive of Apple Computers, Steve Jobs, said that "DRM's haven't worked, and may never work, to halt music piracy"[40], criticizing the music industry's attitude about digital rights management (DRM). For that reason he created iTunes, an open online music marketplace, which became the world top-selling music store. Evaluating this solution we can suggest that such sites may provide an effective solution to the problem since they do not only have a wide variety of products but also enable customers to buy only the songs that they want and not the whole CD for a small price (i.e. 1$/song). This seems to work for the music industry as well as music consumers.

Another solution targets high school students and college students through educational programs.[41] When the music industry realizes that attitudes have changed, then instead of suing its own customers it can invest in some educational programs that will inform students about what is legal - 30% of those who answered the questionnaire have never heard whether file sharing in P2P networks is legal - and what is not. Moreover these educational programs should inform the students on issues of copyright and intellectual property. They should also present all the alternative ways of acquiring music instead of relying on music piracy.

Moreover, as Russell Simons, chairman and CEO of Rush Communications states, "The culture has shifted" and the proposed solution is a "creative dialogue" which is in agreement with the educational programs for schools and colleges. It should also involve consumers of greater ages who should be informed on issues of file sharing and copyrights. [42] Such a measure, is likely to help in the problem of music piracy since people will be more informed about the great problems for music industry associated with piracy, and at the same time they will have the chance to express their personal point of view that if taken into consideration by the music industry may lead to solutions that benefit both sides.

On October 23rd 2009, the BBC published the article "Europe backs down on piracy plans" according to which new legislation is going to be imposed on many countries across Europe and the main targets are going to be P2P networks. This solution is much crueler than the previous ones since it involves Internet Service Providers (ISP's) shutting down the internet access on heavy downloaders and users of P2P networks. [43] This is likely to bring the opposite results and soon new technologies will be developed that will make file sharing feasible again. At the same time, as Ed O'Brien, the Radiohead guitarist, said on the BBC, "It's going to start a war which they'll never win", when he was referring to the music industry.[44] Moreover many artists are afraid that such a cruel measure may turn fans away from music.

Conclusion

Thus, we have examined the two perspectives of the issue of music piracy in P2P networks. The one perspective is that of the music industry which sees its revenues shrinking and the other perspective is that of teenagers, who are frequent users of P2Pnetworks, and who find these networks the optimum solution to the problem of having to go to a music store to buy music and pay for it and at the same time they have discovered other advantages of such networks as well. Both sides have their arguments that they support with the results of the various researches that are taking place in many countries around the world. However, my personal research does not seem to give results that are in favour of only one side, and while some results agree with what the music industry says, others contradict them and support the opposite point of view, that of students. This shows that the attitudes for this subject are constantly changing and is not one that is right and one that is wrong since both sides have right arguments.

The problem of piracy however still remains unsolved and for this reason there are some solutions proposed. One would have been the creation of legal websites such as iTunes that offer the same opportunities as P2P networks but do not harm the music industry to the same extent. Another solution could have been the creation of educational programs, targeting at students that will inform about the impact of music piracy. The results of such a measure however, will be obvious only in the long-run. Finally the less effective solution so far is the use of legislation in order to ban the existence of P2P networks. Thus, we can realize that there is a number of measures that could be taken to solve the problem of music piracy.

Hence, the overall conclusion is that the impact of file sharing in P2P networks, still remains a debatable subject that changes every day and we should wait until new solutions are found that please both sides, and the music industry, and the teenagers that use P2P networks.

Bibliography

Web Sites

Articles

Papers

Books

Appendix 1

Below I provide the complete questionnaire that I handed out as part of the primary research.

Music Piracy Questionnaire

What type of Internet connection do you have at home?

Do you use Peer-to-Peer Networks (like Limewire, KaZaA etc.) to share music?

If yes, how frequently?

State which program you use:

Have you been informed whether it is legal or not to use P2P file sharing to download music?

How many songs do you download from P2P networks on average each month?

Your music files come more often from original music CDs or from sharing?

Why do you prefer P2P to find music? :

How much do you spent on buying CDs?

Had you ever discovered a new artist or genre of music while using your P2P network?

Have you ever purchased CDs of new artists you first heard on the Net?

After discovering new artists on the Net which are of your taste, have you gone to any of their concerts or places where they perform live?

If you find a song in the network and you like it will you then buy the artist's CD?

The music files you have downloaded are only saved as playlists in your PC or you save them in your mp3 or iPhone as well?

How much time do you spent on listening to music that comes from the Net compared to other sources? (Answer with percentage i.e. 30%) ?

Do you believe that sites such as iTunes are a solution to legalizing file sharing?

Other comments

Appendix 2

In this Appendix the results of all the questions answered are provided below in chart form:

  1. What type of Internet connection do you have at home?
  2. Do you use Peer-to-Peer Networks (like Limewire, KaZaA etc.) to share music?
  3. If yes, how frequently?
  4. Have you been informed whether it is legal or not to use P2P file sharing to download music?
  5. How many songs do you download from P2P networks on average each month?
  6. Your music files come more often from original music CDs or from sharing?
  7. How much do you spent on buying CDs?
  8. Had you ever discovered a new artist or genre of music while using your P2P network?
  9. Have you ever purchased CDs of new artists you first heard on the Net?
  10. After discovering new artists on the Net which are of your taste, have you gone to any of their concerts or places where they perform live?
  11. If you find a song in the network and you like it will you then buy the artist's CD?
  12. The music files you have downloaded are only saved as playlists in your PC or you save them in your mp3 or iPhone as well?
  13. Do you believe that sites such as iTunes are a solution to legalizing file sharing?
  1. Peer-to-peer networks will be referred as P2P in this essay
  2. Wiktionary, http://en.wiktionary.org/wiki/peer-to-peer
  3. Wikipedia
  4. How the Old Napster Worked by Jeff Tyson - How stuff works
  5. Wikipedia
  6. Decentralized Peer-to-Peer network architecture: Gnutella and Freenet - Jem E. Berkes - University of Manitoba
  7. Wikipedia
  8. Trends in downloading and file-sharing music - Olle Findahl - August 2006
  9. Students aim to stop music piracy by peers - Pittsburgh Tribune-Review - Bill Zlatos (21 Nov. 2005)
  10. IFPI DIGITAL MUSIC REPORT 2009: SUMMARY
  11. Measuring the Effect of Online Music Piracy on Music Sales -Alejandro Zentner - University of Chicago
  12. ? pe??ate?a ??pte? s?a?? t? d?s????af??? a???? (Music piracy hurts heavily the music market) - www.hotstation.gr - 17 September 2007 - Accessed 30/5/2009
  13. Measuring the Effect of Online Music Piracy on Music Sales -Alejandro Zentner - University of Chicago
  14. Intellectual property crime report 2007 - IP crime group
  15. IFPI DIGITAL MUSIC REPORT 2009: SUMMARY
  16. From the Boardroom to the Classroom: Piracy Impacts and Solutions Commissioner Deborah Taylor Tate - Penn Intellectual Property Group - University of Pennsylvania - December 2, 2008
  17. ? pe??ate?a ??pte? s?a?? t? d?s????af??? a???? (Music piracy hurts heavily the music market) - www.hotstation.gr - 17 September 2007 - Accessed 30/5/2009
  18. Students aim to stop music piracy by peers - Pittsburgh Tribune-Review (21 Nov. 2005)
  19. "Music piracy crackdown nets college kids" - Anna Jo Bratton - Yahoo news - 14/05/2007
  20. Trends in downloading and file-sharing music - August 2006
  21. From the Boardroom to the Classroom: Piracy Impacts and Solutions Commissioner Deborah Taylor Tate - Penn Intellectual Property Group - University of Pennsylvania - December 2, 2008
  22. "Should the Music Industry Sue Its Own Customers? Impacts of Music Piracy and Policy Suggestions" - Tin Cheuk (Tommy) Leung - University of Minnesota - Job Market Paper - November 8, 2008
  23. The Atlantic Online - September 2000 - by Charles C. Mann
  24. Trends in downloading and file-sharing music - August 2006
  25. by Sean Silverthorne, Editor, HBS Working Knowledge - HBS professor Feliz Oberholzer-Gee interview
  26. IFPI DIGITAL MUSIC REPORT 2009: SUMMARY
  27. Trends in downloading and file-sharing music - August 2006
  28. "Musicians hit out at piracy plans" - BBC News - Ian Youngs - 10 September 2009
  29. Feliz Oberholzer-Gee interview by Sean Silverthorne, Editor, HBS Working Knowledge - HBS professor
  30. Trends in downloading and file-sharing music - August 2006
  31. The Atlantic Online - September 2000 - by Charles C. Mann
  32. "Piracy needs key despite music piracy on campuses" thursday, october 25, 2007 By Donald N. David New York Law Journal
  33. Trends in downloading and file-sharing music - August 2006
  34. IFPI DIGITAL MUSIC REPORT 2009: SUMMARY
  35. Tomorrow's Technology and You - George Beekman, Michael J. Quinn, 8th Edition - Pearson International Edition
  36. Trends in downloading and file-sharing music - Olle Findahl - August 2006
  37. "Should the Music Industry Sue Its Own Customers? Impacts of Music Piracy and Policy Suggestions" - Tin Cheuk (Tommy) Leung_ - University of Minnesota - Job Market Paper - November 8, 2008
  38. Students aim to stop music piracy by peers - Pittsburgh Tribune-Review (21 Nov. 2005)
  39. Trends in downloading and file-sharing music - August 2006
  40. "Apple's bid to end music piracy protection may signal end to copyright system." PHYSorg.com. 8 Feb 2007. www.physorg.com/news90177994.html
  41. "Music piracy crackdown nets college kids" - Anna Jo Bratton - Yahoo news - 14/05/2007
  42. Peer-to-Peer: Has the Music Stopped? - HBSWK Pub. Date: Feb 3, 2003 by Julia Hanna
  43. Europe backs down on Piracy plans - BBC News - http://news.bbc.co.uk/2/hi/technology/8322308.stm - 23 October 2009
  44. Musicians hit out at piracy plans - BBC News -http://news.bbc.co.uk/2/hi/entertainment/8247376.stm - September 10th 2009

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