Music internet piracy is causing serious problems within the global society, especially the music industry. Music internet piracy itself has resulted in big music companies such as Sony, in losing millions of dollars every year and is progressively growing. There have been many institutions and strategies that have been adopted by the music industry to combat music piracy which have addressed music piracy but have not had the ability to stop it.
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In this essay, I will be investigating “The effect of Peer-to-Peer internet piracy on the music industry.” I will be doing so by breaking up my essay into different sections. These include an introductory section on music publishing and copyright infringements: this will give some background information as to the whole concept of music rights. Then I would be investigating The Global Music Industry and to follow this, a section on why music piracy has been so successful. Straight after this I will look at the industry’s response to combat music piracy and finally a section on the future of the music industry
This topic is worthy of study because it outlines the impact of music piracy on the music industry. This should make you think twice before downloading a song or album because you will witness the effect it is having on the artists, producers, singers, and companies if you consistently download music. If music piracy continues, it will have an effect on people entering the music industry because they are being denied of the money they deserve.
Music Publishment and Copyright Infringement
Music piracy is defined as “the illegal duplication and distribution of sound recordings.”  Each time an album or single is purchased a faction of that sale goes to the artist or band that made the song. This money is called a royalty payment. This is where musicians earn most of their income. If people continually download music or tracks from the Internet without paying for them, the musicians receive no royalties.  This is a serious problem because if singers are not payed, this will threaten the future of music copyright as they might leave the industry due to the decreased return.
Music copyright is “the legal right to publish and sell copies of an artist’s, singer’s, or writer’s work.”  In the music industry, the copyright to a song is usually shared by the singer and their recording company under the condition that the recording company pays the singer for a share in their copyright, which gives the company the right to prevent any other organisation from selling the songs. The consequence of another company being found selling copies of the song is that the singer or their recording company has the right to sue and press charges against that company for breaking copyright laws.  The artists have this right to make sure that only their companies can sell their songs, which would result in only that company receiving the money. But when the music is downloaded from the Internet, the companies do not get money out of it as it is a free transition to the downloader.
The Global Music Industry
The global music industry was quite successful during the 1990’s. According to the International Federation of the Phonographic industry (IFPI), ” album sales grew from US$24.1 billion to US$38.6 billion during the decade.”  Those days are well over now and the industry is struggling and sales have been falling quite rapidly. The Institute for Policy Innovation said “music piracy is costing the U.S. economy $12.5 billion every year. 71,060 U.S. jobs lost, a loss of $2.7 billion in worker’s earnings, and a loss of $422 million in tax revenues, $291 million in personal income tax and $131 million in lost corporate income and production taxes.”  So not only is music piracy threatening the future of music copyright, it is also threatening the global society in terms of jobs, taxes and salaries.
This problem has arisen from the online music file sharing programs that are now available to use through the internet. The most commonly used file sharing is ‘Peer to Peer’ (P2P) networking, which was used by Napster. Napster was created in June 1999 and made the work of many artists available for free. Napster’s popularity was immediate and according to Mediametrix, a company that provides internet rankings and measurement, “Napster was the fastest software adoption in history”  and “2.8 billion music files were downloaded each month.”  Napster is a different way to distribute MP3 files. Instead of storing the songs on a central computer, the songs live on users machines. When you want to download a song using Napster, you are downloading it from another person’s machine, and that person could be your next-door neighbour or someone halfway around the world.  Napster also used a “centralized directory that facilitated efficient searches for songs, albums and artists,”  which made it very ‘user-friendly’ that helped it become more popular and widely used around the world.
Given the impact on the music industry, the Recording Music of America (RIAA) soon filed a case against Napster in the U.S. District Court of San Francisco for ââ‚¬Å“engaging in or enabling, facilitating or assisting others in the copying, downloading, uploading, transmission, or distribution of copyrighted musical work or sound recordings protected by copyright or state law without the express permission of the rights owners.ââ‚¬  Napster was then shut down February 2001. This did not see the end of file sharing on the internet though; many other peer-to-peer alternatives to exchange music over the internet remained available such as “Freenet, Gnutella, Gnarly, Wired Planet”  and KaZaA. For instance, KaZaA, is currently holding the new record of most downloaded software with “more than 230 million users worldwide.”  In all the countries listed by the Yahoo Buzz Index, which is an index that measures internet search sing the Yahoo search engine, KaZaA was the number one and most popular search term on the internet in many weeks during 2003. 
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The graph above demonstrates the increasing sales of music from 1991 to 1998, but due to the introduction of Napster in 1999, music sales have decreased rapidly from 2000 onwards and are still decreasing. The graph also indicates that it is projected that in 2012, there would be an increase in the amount of digital format spending on music and less CD sales compared to the sales in 2006.
File sharing has been growing ever since it started. In June 2001, IFPI estimated there were 3 million simultaneous global users and 500 million files available for copying at any stage in time. In 2002, the IFPI estimate went up to 5 million simultaneous users and 900 million files.  Clearly we can see now that file sharing is increasing rapidly every year and is getting more popular with more users and files being put up to download. In 2002, NetPD, a company that provides protection services to copyright owners whose material is being pirated through the internet, reported that 3.6 billion files were downloaded monthly, of which around 60% and 70% were music files.  The most popular albums are suffering the most. The most popular albums are available for downloading almost immediately after release and in some cases before release. “Popular artist Eminem’s album was available for download even before it was released.”  So it is fair to say that copyright protection technology has been ineffective in preventing music from being downloaded and threatens the future of music copyright.
Not only are the producers and artists losing money, the top five recording distributors are also feeling the effect of music piracy. “The five recording distributors or record labels combine to distribute over 80% of all sales in the United States in both 2002 and 2003.”  These “Big Five” companies are , Universal Music Group (IMG), Warner/Elektra/Atlantic (WEA), Sony, Bertelsmann Music Group (BMG), and Electric and Musical Industries (EMI). These companies have tremendous market power in the signing of artists, the release of new albums and the distribution of the albums. If music piracy continues, it will threaten the rights of these big companies sales and music copyright  and impact on their commitment to sign and develop new artists.
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“Table above presents aggregate market share data for total album sales in 2002 and 2003, the two years in the data sample.” 
Reasons That Contribute to Music Piracy’s Succession
File sharing and music piracy over the internet has been successful due to many aspects that are changing within the society. Back in the 90’s there was no technology around to assist in file sharing. That is why the music sales were so successful in those days. But now society has super fast broadband speeds and new computer technology that assist to make file sharing and music piracy possible and simple to do. In this section of the essay I will be underlining all the aspects that have been introduced in the society that have made it easier for music pirates (pirates being a person who downloads music or uploads music on the Internet), to make file sharing and music piracy so successful.
The first reason for music piracy’s success is the development of broadband and cable internet which has facilitated music swapping. A soundtrack that takes more than 12 minutes to download with a dial-up connection can be downloaded to your computer in as fast as 20 seconds with a high speed connection.  Napster enjoyed the super fast speed of the internet in Universities and used it effectively until they were banned because file swapping was consuming much of the bandwidth available. “In the University of Illinois at Urbana-Champaign, file sharing had amounted to 75% of the total bandwidth.”  Now that the internet speeds are faster and more efficient, downloading music is much easier and makes life much easier for the pirate. If this continues and technology keeps on improving, then this will surely threaten the future of music copyright because as mentioned before it is quicker to download and easier.
Another change in technology that has the ability to threaten the future of music copyright is that it is getting easier to use such digital formats. The development of digital compression formats has had a major influence on the illegal distribution of music. “Online delivery is possible in “Motion Picture Expert Group-1 Audio layer 3″ format (MP3).”  “MP3 is a digital compression method that reduces a piece of recorded music to one-tenth of its original size.”  This is the format used in the online sharing of pirate copies. MP3 is the most popular and productive format of data compression. MP3 compresses the data without significantly compromising sound quality which is what the pirates want. Also, “the ease of trading songs using MP3 format will discourage consumers from buying legal copies of albums or songs,”  which potentially does have the ability to threaten music copyright as it has become very easy to download and store music with minimal hassle, due to the MP3 format.
MP3 files are more productive to use than CD’s. A 5 minute soundtrack that would take more than 50 megabytes in CD compression format would only take a file of 5 megabytes to store without noticeably affecting the sound quality. This 5 megabyte compressed file takes 12 minutes to download with a dial-up internet connection (56Kbps modem downstream), 1 minute and 20 seconds with a regular DSL or cable connection (512Kbps downstream) and 20 seconds with a fast DSL connection (2000Kbps downstream).  So now that faster internet assists with faster downloads, many people buy fast speed broadband to download compressed MP3 files efficiently and effectively.
The development a myriad of portable MP3 players ranging from top of the range IPods to inexpensive pocket sized MP3 players has also had an impact and will further threaten the future of music copyright. People can upload (rip) CD’s to their PC’s hard drives and listen to music on their computer. The computer then has the ability to compress the files to a suitable MP3 format to reduce the storage memory on the hard drive and to facilitate the sharing of the files over the internet, and convert the files back to a CD format and “burn” CD’s that can be played by any MP3 player. So the portability of the music is now more convenient, as now the music can be carried in a MP3 player device. MP3 players and IPods are the most popular sources of listening to music, so now if everybody’s downloading music files off the internet, they will find it more convenient to listen to music from a little device such as an MP3 player. So if there is a growing number of MP3 users, there would also be a growing number of music downloader’s, which has the impact to threaten the future of licensed and copyrighted music.
The Industry’s Response in Combating Music Piracy
The music industry has adopted many strategies, punishments and policies to combat and prevent music piracy from continuing. In this section of the essay I will analyse the responses that the industry have implemented to combat music piracy.
The first response that the music industry implemented was that the RIAA (Recording Industry Association of America) individually sued participants in file sharing network. On June, 25, 2003, the RIAA announced publicly that it would be monitoring file sharing networks and taking legal action against users of these networks. This announcement had the effect of reducing file sharing activity across the board because many consumers became concerned about the risk of being sued for thousands of dollars. “The RIAA focused their attention on the “major offenders” who were averaging more than 1, 000 copyrighted music files each.”  Doing this reveals that as a result of the lawsuit strategy, album sales increased by 2.9% over the 23 weeks in the data sample after the strategy was announced. During this period, actual record sales in the U.S. were an average of 11,470,652 albums per week, based on national level data reported by Billboard magazine (2003) each week, and thus would have been 11,147,378 per week in the absence of the reduction in file sharing caused by the lawsuit strategy.  As you can see this lawsuit strategy was effective in combating music piracy. It increased the music sales and helped overcome the issue of music piracy. RIAA continued with this for 23 weeks and stopped it. Because RIAA had focused only on the “major offenders”, this gave the chance for many casual users who initially abandoned file sharing for fear of being sued to return to the music piracy networks.
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Another successful strategy that was implemented by the music industry that has eased music piracy was that it put up legal digital music online. Many companies and organisation are now allowing music to be downloaded with a cost attached to it. The most popular and prominent organisation is ITunes. ” ITunes charges their customers $0.99 per track downloaded. As of April 7, 2009, and onwards, ITunes is charging $1.29 per track to the most popular songs and $0.69 per track to the least popular songs.” 
The ITunes store has sold 8 billion tracks since its launch in mid-2003. It has been confirmed that recent months have seen music sales climb very high to four billion projected track sales each year.  “Between January 6, 2009 and July 21, 2009 the service sold 2 billion songs.”  This compared to the sales between April 28 2003 and January 10, 2007 to sell the first two billion songs. ITunes has also been running extensive programmes of live events in London, hosting great and packed crowds and some of the world’s popular and successful artists.  So we can tell by this information that ITunes is a successful implementation by the industry and is continuing to grow rapidly. It is getting so popular that ITunes is now extending its stores to new European markets during this year.
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This graph shows a rapid increase of music sales of ITunes from 2002 to 2009.
Another strategy that the industry has been implemented is that the major labels such as, Pressplay, owned by Sony and Universal; AOL MusicNet, owned by the other 3 big labels (EMI, AOL Time Warner and BMG) and by RealNetworks, “are set to begin offering consumers digital-music subscription packages.”  Most services offer unlimited downloads, for a fixed charge from US$10 to US$20 per month and the possibility to do permanent burnable downloads for around US$1.  These digital- music subscription packs contain their own library of music and customers are admitted to download the licensed music that is on display and available for downloading. This proved to be a successful strategy as well. It gave consumers maximum downloads for a fixed price, the consumers were happy to use it because they were secured when downloading songs as they were legal to download.
The music industry decided to seize CDs from CD companies in Italy, Greece and Spain due to the fact that these companies are producing more CDs to store downloaded music and distribute them illegally. “Total seizures of CD-R discs in 2001 were three times higher than in 2000, at 9.6 million.”  Seizures of blank discs destined for illegal CD-R labs totalled 19 million, compared to less than one million a year earlier indicating massive levels of anticipated production. There were also major actions against the mass-producing CD plants. Around 42 CD manufacturing lines, up from 20 the previous year, were put out of action by IFPI assisted police initiatives, mainly in Indonesia, Malaysia and Philippines. These manufacturers have a potential annual production capacity of some 200 million CDs, roughly equivalent to the legitimate market in the UK. A further 22 manufacturers were taken out of action in the first four months of 2002. 
In some places, like the United Kingdom, the “Three strikes policy” has been introduced to try and combat music piracy and illegal file swapping across the internet. The three strikes policy disconnect the Internet for users who have offended the copyright violation which have been promoted by the RIAA. 
Hull, in the UK, has put the three strikes policy into practice to deal with the internet users caught downloading copyrighted material. Karoo, the city’s only internet service provider (ISP), serving approximately 90,000 internet users has been cutting connections immediately if a user is caught downloading copyright material without warning the offender. This harsh practice of cutting the internet connection without notifying the customer, has brought controversy from customers and several digital rights group. Under the new law, Karoo will send three written warnings notices to the customer before cancelling their (ISP) connection, after the (ISP) accepted it was exceeding the expectations of copyright owners. The (ISP)’s policy remains contentious as well as substantially harsher than that of other UK (ISP)’s, which have apparently been unenthusiastic to deal with illegal file sharing across their networks, and only lately agreed to send warnings notices to persistent offenders. 
The Future of the Music Industry
The future of the music industry looks grim for the years ahead. In this section of the essay I will be investigating the future of the music industry and music copyright.
File sharing has made a dramatic change in the distribution process since it started causing changes in the music industry. “In 1999, 51% of albums were sold in retail stores and 34% in “other stores”.”  In 2002 and 2003 the share of sales in music stores had a dramatic drop to approximately 35%, whereas the ‘other stores’ had increased to 50% of music sales. Also, by 2003, 5% of all music acquisition occurred through the internet and music piracy, and it is continually growing. The reason is that the industry is shifting from retail stores to sales through large electronics chains such as Best Buy and Circuit City, as well as mass merchants such as Wal-Mart.  Therefore, music piracy is effecting not only music sales music copyright, it is also effecting the business industry. Now that most of the music is electronic and can be downloaded at home using the internet, music retailers such as Sanity have suffered due to internet file sharing and music piracy, which does have an effect on the future of the music retail industry as more music is being downloaded than sold ‘traditionally’ in retail stores.
Also, “‘buying a record’ may be replaced with ‘downloading a record’,”  which can affect the future of music industry as ‘downloading a record’ eliminates the “need for labels to manufacture, warehouse, and ship tangible products.”  If consumers continually downloading music and ignore buying them, the industry will affect “what music the public listens to and how they listen to it.”  Because of this, many ‘digital labels’ would be introduced. In the new web-based music industry, artists could make their own labels and record companies individually on the internet, using their own computer. This can affect the current major record labels as many indie  labels could easily produce their own record labels at home, which will increase the popularity of them, resulting in some of them being as successful as past indies such as Yahoo and Microsoft, which will give way to a more dynamic free market. 
In this essay I investigated “The effect of Peer-to-Peer internet piracy on the music industry.” I believe I have demonstrated that music piracy does have the ability to threaten the future of music copyright. I have also analysed the implementations the music industry have implied to combat this problem within the society and evaluate how successful they were to prevent music piracy from continuing.
In conclusion, music piracy is infringing copyright laws and costing the music industry millions of dollars each year. With the introduction of Napster in 1999, music sales decreased extraordinarily. In 2001, Napster was put out of business but this did not see the end of music piracy. KaZaA, a Napster successor than came in business and is now holding the record for most downloaded files. As you can see, music piracy is very hard to stop because if you shut down one distributor, many other distributors and organisations come into the illegal world of music piracy.
Music piracy is getting easier due to the technologies available for the pirate to work with. Now there is super fast broadband internet speed, data compression, MP3 and portable players for the pirate to use to successfully download music efficiently and effectively. Digital music is now one of the most popular formats of music.
The music industry has been working hard to combat music piracy and file swapping online. Although they did not completely stop music piracy altogether, they had certainly eased it and decreased the number of music downloads online. The most successful strategy that was introduced by the industry was to put legal music online. The music was digital, but it had a price fixed to each track. Many companies, namely ITunes, put their songs online legally and this decreased the level of music piracy over the Internet. ITunes is continually growing and is selling more and more tracks each year.
A new focus that could be emerged from my study in this essay is “What should the global society and music industry do in order to stop music piracy at once and for all?”
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