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Intellectual Property State of the Union
January 19, 2006
Thomas Mennecke
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The IFPI (International Federation of the Phonographic Industry) released its 2006 Digital Music Report, which can only be described as one of the most painful reads since the NPD Group's "Illegal Peer-To-Peer Music File Declines After Supreme Court Grokster Decision."

The report does have several merits, but masks the real issues while ignoring the millions of music fans that participate on P2P and file-sharing networks. Much like RIAA president Cary Sherman's dismissal of the P2P community during his interview with college reporters, the IFPI choose to pretend it's winning the war against piracy.

The report does have several interesting details pertaining to the growth authorized music services forecasted for 2006, but presents little new information. For example, the report details that over 400 million music tracks were sold in 2005 - 20 times more than 2003. In addition, the music industry is hopeful the integration of mobile phones and the MP3 player will yield continued success in 2006. According to the IFPI, mobile music downloads account for 40% of all digital revenue.

While the IFPI's report succeeds in its account of the 2005 digital music market, it completely fails on its account of P2P and file-sharing. The problem with the IFPI's report is that it relies heavily on its own research - not to mention findings by the largely discredited NPD Group’s reports on file-sharing.

Of course the problem with publishing a report based on the IFPI’s research is the question of accuracy. Not that the IFPI is publishing false information, but those who are being questioned may not feel comfortable revealing downloading habits to an organization who supports the prosecution of nearly 20,000 P2P users.

In addition, the IFPI’s report demeans its potential consumer base by referring to them as “obstacles.” These “obstacles” are also spending significantly less on CDs, according to IFPI (which backs up its claim with research from organizations like Forrester and Jupiter.) Yet these reports ignore the reasons why “obstacles” are spending less money on CDs. P2P and file-sharing users represent the frontier of the digital age, where relying on physical CDs is less important than having a digital file. It’s impossible to expect an advanced culture of individuals to lug around circa 1978 technology when MP3 players offer cutting edge portability. These reports also fail to examine the possibility that iTunes users spend less on music by purchasing single tracks rather than full albums.

The IFPI report also places a tremendous amount of credence into several court rulings against P2P networks. Most notably, the United States Supreme Court in June of 2005 ruled unanimously that Grokster, LTD could be sued for encouraging copyright infringement. In addition, several other global decisions – such as the South Korean ruling against Soribada and the Australian ruling on Sharman Networks – have been heavily used as propaganda by the music industry. While these ruling do indeed affect commercial P2P operations, they have only served to encourage open source development.

The most interesting, and perhaps most inaccurate, portion of the IFPI’s report is on page 21. Here the IFPI makes a dizzying attempt convince the reader that file-sharing has been “contained.”

“There is a consensus, however, that illegal file-sharing of music files has been held in check within the last two years in the context of a sharp increase in broadband penetration globally.”

Where they received this “consensus” information is unclear, although the NPD Group’s research tends to agree with them. The IFPI does indicate however, their calculations on the fight against P2P networking is based on “IFPI estimates.”

For example, the IFPI states “the simultaneous availability of copyrighted music tracks for illegal download or distribution – at 885 million, of which 775 million are available on P2P networks and the remainder on websites. This is slightly up on the piracy level of January 2005 (870 million) but down compared to the level in June 2005 (900 million).”

“35% of illegal file-sharers have cut back or stopped the activity, while only 14% have increased it. Half of illegal file-sharers who cut back on illegal file-sharing did so because of concern over the legal consequences. 35% did so out of concerns about viruses. 15% could not find the song they wanted on the P2P network.”

Again, these numbers are based on the IFPI’s undoubtedly highly trained crack research group who calculated file-sharing has been kept in check for the last two years. But how seriously can these numbers be taken without third party verification? Its largely apparent that most people who engage in file-sharing will tell an industry backed survey just about anything out of fear of reprisal.

The reality of the situation dictates a much different story for the IFPI. Empirical evidence, in addition to extensive research by third party P2P tracking firms Cache Logic and Big Champagne contradict virtually all of the IFPI’s findings. Over the last two years, the P2P population has jumped from an approximate 5.6 million simultaneous users in December 2003 to 9.6 million users in December 2005. If this represents containment, what represents proliferation?

It’s apparent the IFPI’s report is largely based on its own research and little else. Propaganda? Sure - and that’s fine. It’s more than entitled to push its agenda and business model. But the great failure of the IFPI and indeed the RIAA’s Cary Sherman is its intolerance of the P2P community. Rather than open a dialog with its consumer base, it refers to them as “obstacles” and “thieves”, which represents the great core of their problems. The IFPI and RIAA are in a struggle to win the hearts and minds of the P2P population, as the IFPI readily admits its is failing to achieve. The answer to this problem boils down to respect. If the IFPI can’t respect the needs and wishes of the P2P community, it can’t possibly expect the P2P community to respect theirs.

This story is filed in these Slyck News categories
Entertainment Industry :: IFPI

You can read the IFPI's report here.

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