Why Musicians and Labels Should Embrace Filesharing

Lots of people (mostly labels, but some artists) believe that "piracy" is the same as "theft." They believe that downloading music for free hurts artists, especially independent artists. They're wrong. In this essay, I'll tell you why.

"Piracy" is not theft

What many are calling "piracy" is technically copyright infringement, not theft. It is a very important distinction.

  • Theft means that you have taken property away from someone else, such that it permanently deprives the owner of that property. It applies almost exclusively to tangible goods or money (aka "scarce resources"). It is a criminal offense, meaning you can serve jail time.
  • Copyright infringement means that you have made an unauthorized copy of someone else's material, such that both parties have a copy. It applies almost exclusively to intangible goods (such as words, images, or sounds) - in economic terms, public goods. It is (until recently) a civil offense, meaning you can get sued, but you will not serve jail time.

What makes theft immoral is not that the thief gets something for nothing, it's that the thief does harm to the victim by taking something away from them. Let's say you throw out a chair, and I take it from the trash without asking you. Even though I got that chair for free without asking, it's not theft because I do no harm by taking it.

Copyright infringement does not deprive anybody of anything. On the contrary, copyright is theft from the public: you're depriving copyrighted material from everyone else, when it would cost you nothing to let them have it.

Copyrights are in the same legal category as patents, and arise from the same Article in the Constitution. They are often lumped together with trademarks under the umbrella term "Intellectual Property," though trademarks are a different animal altogether. For the differences between them, read this article on lawmart.com. The term "Intellectual Property" is also misleading, since materials covered by copyrights and patents are not "property" in the usual sense of the word.

This is why the doctrine of fair use exists. "Fair use" is the legal allowance of certain uses of copyrighted material. Those uses include reporting, teaching and scholarship, criticism and review, and satire. It also includes copying materials you own, if it's for private use (like taping a TV show to watch later). In general, if it does not supercede the original for profit, or is sufficiently transformative, it is considered fair use. Its definition is constantly in flux, because it does not arise from one law, but from a history of case law.

Besides filesharing, there is another class of "intellectual property theft" I should mention: Counterfeiting. This is when an organization creates an imitation product, often inferior in quality, and attempts to sell it as the genuine article. It is done for profit, sometimes by criminal organizations. In the case of goods (not money), it is punishable under trademark and patent laws - as well as laws against fraud.

But even in this case, it is not considered "theft," and the goods produced are not considered "stolen property." This was decided by the Supreme Court in the case of Dowling v. United States:

Since the statutorily defined property rights of a copyright holder have a character distinct from the possessory interest of the owner of simple "goods, wares, [or] merchandise," interference with copyright does not easily equate with theft, conversion, or fraud. The infringer of a copyright does not assume physical control over the copyright nor wholly deprive its owner of its use. Infringement implicates a more complex set of property interests than does run-of-the-mill theft, conversion, or fraud.

Plagiarism is also confused with copyright infringement by a lot of people, but is a separate issue altogether. Plagiarism means you have taken another's ideas or expressions, and passed them off as your own. It can usually be avoided merely by citing your sources. Unless it is also copyright infringement or fraud, it is not illegal in either a civil or criminal sense - but of course you can lose your job, your funding, or your academic standing. At the very least you will lose whatever credibility you had.

Both counterfeiting and plagiarism are obviously problems. But this is not what most people mean by "piracy;" they mean non-commercial peer-to-peer filesharing. They're not even close to the same thing; for example, there's even some anecdotal evidence that filesharing hurts counterfeiting. It seems stupid to even bring this up - except those fighting "piracy" often make no distinction between them.

Moral arguments against music "piracy"

But legal distinctions aside, there are also moral arguments against sharing music. Basically, they amount to two related arguments:

  1. If you benefit from someone else's work without paying for it, you're stealing.
  2. If you get art for free, you're taking money out of the mouths of artists.

The first comes from that confusion between "sharing" and "stealing." We've all had friends that borrow money and never pay it back, or lived with roommates that have taken our food without asking, or had boyfriends or girlfriends that move in and don't pay the bills. We call them "freeloaders," and we are right in doing so.

But these are all examples of scarce resources; the moral objection is not that freeloaders are getting something for nothing, it's that they're getting our something, so we get nothing. Filesharing, by nature, does not deal in scarce resources, so this argument is moot (we still have our something). But to artists, there is one scarce resource that the "pirates" get for free: the artists' time and effort.

This is called the "sweat of the brow" argument. Legally speaking, it has been soundly rejected by Congress and the Supreme Court. Their reasoning is simple: it's the role of the government to protect the public, not to protect your paycheck.

Legality aside, "sweat of the brow" is not much of a moral argument either. And nowhere is this more true than in the arts. You can go to school for years and work your ass off, and still sling burgers for a living. Or you can have little talent and no schooling, yet be an overnight sensation. And there's nothing unfair about it either way. This is because it's not the artist who sets the value of their work, it's the consumer.

Artists have known this for a long time. If their tastes are not mainstream, they can either make less money, or make lesser art. This is especially true in music, where making money is often seen as "selling out." The notion that "it's all about the music" is so universally accepted that it's become a cliche.

I'm not one of those people. I find absolutely nothing wrong with making money from selling music. But it's not a right. You don't have a right to get paid; only to convince people to pay you. In economics, there is no such thing as an A for effort.

But that point might be moot anyway. People have been able to listen to music for free for a very long time, through a now-obsolete device called a "radio." It didn't keep anyone from making money hand over foot. Quite the opposite. In that case, artists and labels realized (eventually) that letting people listen to music for free was a tremendous promotional tool. In fact, for decades, labels (or their proxies) would pay to get music on the radio; they would pay to get people to listen for free.

One critique of the "free radio" model is that the music was paid for; it was funded through advertising. But in no case was the listener required to pay - you could turn off the radio when ads were on, and you wouldn't be "stealing" anything. This is a case where companies figured out a way to monetize what the end user got for free. And as long as radio was the primary way that people heard new music, this model worked, and worked well.

Which brings us to the second argument: that getting art for free means that artists won't get paid. It's obviously not true for radio, so it it true for filesharing?

Let's put this in the context of album blogs: a blogger makes a release available on the web, and a downloader downloads it. In order for the "theft" idea to be true, at least one of the following has to be true:

  • The blogger is not creating interest in the album.
  • The downloader would have paid for the album otherwise.
  • The downloader will not pay for the album later.

Here's the problem: there is not a shred of evidence for any one of these claims. Filesharing is promotion for what's being shared. If people can't get music for free, most will just do without it. And those that won't do without it will often pay for it, whether they can get it for free or not.

This is backed up by just about every independent study done in the last decade:

A study released this week by Jupiter Research reports that about 34 percent of veteran file swappers say they are spending more on music than they did before they started downloading files.

- Study: File sharing boosts music sales

Digital music research firm The Leading Question found that they spent four and a half times more on paid-for music downloads than average fans.

- Downloading 'myths' challenged

A newly study commissioned by Industry Canada, which includes some of the most extensive surveying to date of the Canadian population on music purchasing habits, finds what many have long suspected (though CRIA has denied) - there is a positive correlation between peer-to-peer downloading and CD purchasing.

- Gov't Commissioned Study Finds P2P Downloaders Buy More Music

Researchers monitored the music download habits of 1,900 web users age 15 and above. Over time, the study found that users who downloaded music illegally from P2P file-sharing sites like BitTorrent ultimately made ten times as many legit music purchases than the law abiding users.

- Study finds file-sharers buy ten times more music

A vast majority of Internet users isn't paying for online content, according to a new study commissioned by the European Union, and most of them aren't willing to change this behavior even if sources for free content disappear.

- EU study: Online content needs to be free, outlawing P2P isn't working

The short-term net welfare effects of file sharing are strongly positive given that it is practised by consumers whose demand is driven by a lack of purchasing power.

- Economic and cultural effects of file sharing on music, film and games (PDF)

Of course there are many other studies that supposedly show a loss to "piracy" that numbers in the billions. But most of those are paid for by the very people who want to present filesharing as "theft:" major label representatives and Hollywood studios. Nearly all of them use two premises: that every download is a lost sale; and that if profits are falling, filesharing is to blame.

They do not take into account other factors, such as the percieved quality of the content, the convenience of getting the content immediately, the desire to get that content without undue restrictions attached (such as DRM), or the moral choice not to support organizations that the users do not approve of. They ignore the 1990's boom that the recording industry experienced with the introduction of CD's, which is now busting as CD's become obsolete. None of them even consider the promotional value of filesharing.

These studies are usually repeated uncritically by the mainstream media, parasitic "Internet Piracy Protection" companies, and Washington lobbyists. But every independent study I've seen concludes this simply isn't true.

This often seems counter-intuitive. The usual question is, "why would anyone pay for something they can get for free?"

If a release was nothing more than a collection of MP3's, they probably wouldn't. But here's the thing. An album is more than its audio. It's also the artwork, the packaging; the physical object. If that weren't true, then labels everywhere would only sell those retarded "Sharpie attack" CD-R's. And if a label even tried to do it, everyone would call bullshit on that.

But more importantly, an album is about communication. Not just between the artist and listener, but between artists, between listeners, and so forth. In other words, it's about creating a community. In musicians' language, a community is called a "scene." In business language, a community is called a "market." And any business worth a shit knows that creating a market is just as important as creating a product.

It may seem cynical to put a price tag on a subculture. But from a business standpoint, that's the main reason people spend money on music at all. Or, really, anything that's not food or shelter. And if you don't want to look at things from a business standpoint, then you have no right to care whether downloaders are hurting sales or not.

So who still believes that filesharing is stealing?

Traditional Artists

Quite a few in the anti-filesharing crowd are actually musicians. Nowadays they are in the minority, but those that are actively against filesharing do have their reasons, wrong-headed as I think they are.

Let's not forget that copyright holders are the only ones legally allowed to charge for copies. In most cases, the label owns the copyright, not the artists. And record labels have a long and sordid history of freeloading on the backs of artists. I think that traditional musicians are so used to dealing with labels, they simply can't wrap their heads around the notion that people getting their music without payment could be anything other than people screwing them over.

Many professional musicians have made money by the old model for so long, they can't think of doing business any other way. For example, there are some musicians who claim that unless major labels make a ton of money, they won't be able to fund "new" (meaning, currently indie) artists. The reasoning is that if labels lose profits, it will be "emerging artists" that will be dropped, and they will only promote the established money-makers.

To anyone familiar with the music industry, the notion that major labels are friendly to new artists is pretty laughable. Unless you're a manufactured pop sensation, you would have to already be successful as an indie artist (or on an indie label) to even be considered for a major label contract. The costs for recording and promotion (which are controlled by the label) are taken out of the artists' royalties, not the label's profits. The artists usually sign over their copyrights, permanently. So, if the label decides to let an album go out of print (or to not release it in the first place), neither the artist nor anyone else can release it, making it totally unavailable to the public. (Of course, the artists still have to pay back expenses from the "royalties" they cannot collect.)

Because of this, the vast majority of artists cannot make any money whatsoever from the sales of recorded music. Most will remain in debt to the labels for their entire lives.

Let's not forget that the only reason major labels were able to "break" anyone in the first place is because that small cabal held a monopoly on the airwaves. That isn't true anymore. And the loss of their monopoly has been a boon to artists. The proof is in the numbers:

  • More albums are being recorded right now than at any time in history. In 2000, 35,516 albums were released. Seven years later, 79,695 albums (including 25,159 digital albums) were published (Nielsen SoundScan, 2008). And that doesn't include albums that fall beneath Nielsen's radar.
  • Taken as a whole, the music industry is growing. That growth has been strongest in areas where artists get the most profit (e.g. live shows, merchandise, sponsorship deals). The only decline has been in sales of CD's.

By any honest measurement, filesharing is far, far better for both emerging and established artists than record labels ever were.

This is not even taking into account the new methods that artists have for promoting their work: Twitter, email lists, BBS posts, or what have you. When used wisely, deliberate filesharing can be another arm of an artist's promotional campaign. And these promotional channels are available to all artists equally. The only real "problem" with filesharing is that it helps level the playing field.

The last group of artists are the very small minority who still buy into the "rock star" myth. These are the people looking for the golden ticket to the chocolate factory, who are now crying because candy is free. These suckers bought the hype, and think the music industry is a pathway to mansions, swimming pools, hookers, and blow. They want to write just one "timeless" song, then rest on their laurels as the royalties pour in. "Artists" like these want to be nothing more than parasites, and should be treated as such.

Fortunately, most of these guys either OD'ed or moved to the suburbs in the 90's. But sadly, there are still a few around.

Traditional Labels

The reason most labels are against filesharing is because their only business model has been one of enforced scarcity. In the case of the majors, this is because they held a monopoly on communication. Any access to music by anyone at all had to be done on their terms. If you weren't on a label, you couldn't get on the radio, couldn't get on TV, and couldn't perform at the larger live venues. And over the past twenty years, all of these channels were being merged into a very small cabal of major media players.

This monopoly is the only way that major labels survived at all, at any point in their history. So now that those channels are becoming less and less relevant, they've attacked any new technology that they don't control. It's not about preventing "theft," it's about preventing competition.

But major labels aren't the only ones that make money through manufactured scarcity. Indie labels have often produced deliberately-scarce items at exhorbitant prices. Say they have an album that could realistically sell 500 copies at $10. Instead, they make 200 copies, and sell them for $25 apiece. They make the same amount of money, and their production costs have been cut by more than half.

Now, a lot of really underground labels (e.g. noise labels) are one-man operations, who can't afford to produce more than 200 copies. So, many times this is not a matter of choice. I'm not going to shit on people like this, and you shouldn't either. But if you can't afford to meet demand, you can't complain if your limited release is the first one on the torrent sites. Fortunately, most of these labels don't care about filesharing, since their copies are going to sell out in any case.

If artificial scarcity is actually a choice, it's an indefensible one. The only thing you're doing is preventing people from hearing the album, and that helps nobody.

So, if this is the case, why do copyrights even exist? Whose side does the law come down on?

The legal basis of copyrights

Copyright disputes have been around a long time, but copyrights in most Western countries grew out of English copyright law. For about 150 years, English law dictated a publishing monopoly through the Stationers' Company. This company was given free reign by the Crown to censor any works which it didn't approve of - primarily, Protestant material. In 1709, the Statute of Anne was enacted, partially to prevent this kind of monopoly censorship.

In the United States, copyright law was first established in our Constitution. Here is its full text:

[The Congress shall have Power] To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries;

- Article 1, Section 8, Clause 8

Because this right is not a "natural" right (like free speech), it is the only one in the Constitution to have an expiration date. This clause does not actually grant those rights; it says Congress has the power to grant them - at its discression. If Congress didn't grant them at all, that would not be unconstitutional. It is also the only clause in the whole Constitution that has a stated purpose. That purpose is explicit: It is to promote progress, not to protect creators' rights. This is important. Let me say it again, in bold:

Copyright law is not there to protect artists' rights.

Don't believe me? Ask Congress:

The enactment of copyright legislation by Congress under the terms of the Constitution is not based on any natural right that the author has in his writings... but on the grounds that the welfare of the public will be served and progress of science and useful arts will be promoted.... Not primarily for the benefit of the author, but primarily for the benefit of the public such rights are given.

...Or the Supreme court:

It may seem unfair that much of the fruit of the compiler's labor may be used by others without compensation. As Justice Brennan has correctly observed, however, this is not "some unforeseen byproduct of a statutory scheme."... It is, rather, "the essence of copyright," ... and a constitutional requirement. The primary objective of copyright is not to reward the labor of authors, but "to promote the Progress of Science and useful Arts."

...Or Thomas Jefferson, the founding father (and patent worker) who wrote that law:

Inventions then cannot, in nature, be a subject of property. Society may give an exclusive right to the profits arising from them, as an encouragement to men to pursue ideas which may produce utility, but this may or may not be done, according to the will and convenience of the society, without claim or complaint from anybody.

The entire reason it exists is to give people an incentive to create new works, so that the works can (after a short time) become public domain. Got a best-seller that's decades old, but haven't written anything since then? Tough shit. It belongs to everyone now. Publish or perish, baby.

The Fascist Creep

With that in mind, the original Copyright Act of 1790 granted copyrights for a term of 14 years, plus a 14 year renewal if the author was still alive. After that, it would enter the public domain. This still seems fair to me... but copyright lengths kept creeping up and up:

  • The Copyright Act of 1831 extended the term to 28 years with 14-year renewal
  • The Copyright Act of 1909 extended the term to 28 years with 28-year renewal
  • The Copyright Act of 1976 extended the term to either 75 years or life of author plus 50 years
  • The Sonny Bono Copyright Term Extension Act of 1998 extended the term to 95 years (120 years if you're a publisher), or life plus 70 years

...and the penalties got worse and worse:

  • The No Electronic Theft ("NET") Act of 1997 made non-commercial infringement a criminal offense, and raised the statutory damages by 50%
  • The Digital Millennium Copyright Act of 1998 (DMCA) criminalized circumventing DRM (e.g. DVD region encoding)
  • The "ART Act" (part of the Family Entertainment and Copyright Act) of 2005 criminalized filming movies in a movie theater, and early release of movies and software

How reasonable are these term lengths? In contrast, the current patent term length is 20 years (utility patents) or 14 years (design patents), with no option to renew. This makes copyright terms about six times longer than patent terms.

Patent infringement is still civil law - there is no such thing as criminal patent infringement. And until the "NET Act," there were no criminal laws against non-commercial copyright infringement either. (As an aside: Dave LaMacchia, the "criminal" who they passed this law to stop, is an acquaintance of mine. He's still a free man, so hide your children.)

But it's the 2005 law that allowed the FBI to arrest some dude who uploaded a leaked copy of Wolverine to the Web, even though he isn't the source of the leak. How much did it harm the film? Despite mostly negative reviews, it grossed about $373 million worldwide, which means the studios made over $200 million in profit. I guess we can all sleep soundly, knowing that guy's off the streets.

It's probably no accident that the laws became more draconian as the major labels gained power, and even more draconian now that they've screwed up their businesses. Since the advent of rock and roll, the global music industry has been conglomerated into fewer and fewer hands; as it stands, four major companies control over 70% of all music sold worldwide.

Those labels have always seen any new technology as a threat. With casettes, it was Home Taping is Killing Music. The threat of "theft" led to the Audio Home Recording Act, which effectively killed DAT tapes. In the movie biz, Jack Valenti famously compared the VHS tape with the Boston Strangler. And because Microsoft kowtowed to the labels and Hollywood studios, Windows Vista and Windows 7 are both saddled with ridicuous, driver-level DRM called Output Content Protection.

And with every downturn in profits comes a new claim of "stealing." In a bizarre story torn from the pages of the Onion, the RIAA claimed that listening to the radio was "piracy." That claim led to Congress authoring the Performance Rights Act, a legally-mandated, additional  royalty fee for radio stations that will likely destroy indie music on the radio.

This shows just how much the government is in the RIAA's pocket. In fact, under the Obama administration, the Justice Department is becoming more and more infiltrated by former RIAA and MPAA lawyers. Not that it doesn't go both ways: RIAA CEO Mitch Bainwol is the former chief of staff to cat-killer Bill Frist and Mary "Wife of Sony" Bono, both Republicans.

It was a largely bipartisan vote that created the PRO-IP Act of 2007, signed into law by George Bush in 2008. In addition to raising the (already severe) fines for infringement, it also allowed the government to seize computers, and created the office of the "Intellectual Property Enforcement Coordinator" (aka "Copyright Czar"). This is a totally new White House cabinet position, currently headed by Victoria Espinel.

But by far the worst big-media politician is our current Vice President, Joe Biden, who has a long and sordid history of bad technology law. His anti-privacy stance is so extreme that his legislation spurred the creation of PGP.

No surprise, then, that Biden recently held a round-table discussion of IP rights that included the big media players, but no representatives from ISP's or the tech industry, and not a single consumer advocacy or public interest group. I guess he didn't mean them when he said "all stakeholders are present." I guess he also didn't mean the press, who were kicked out after the opening remarks.

Within a couple of weeks, Congress earmarked $30 million to fight "piracy." In a congratulatory letter, the MPAA cited "Operation Holiday Hoax," an anti-counterfeiting operation, as an example of "piracy." But the money is actually earmarked for "piracy on the internet or using high technology." In the old bait-and-switch, they say the money is for counterfeiting, but use the money to arrest non-commercial peer-to-peer filesharing.

Two months after that, Attorney General Eric Holder created an IP Task Force, where he said copyright infringement "threatens not only our public safety but also our economic well being." This is nearly identical to the language used by former Attorney General Michael Mukasey, who claimed in 2008 that copyright infringement fosters terrorism.

And now, there's a coalition of nations (led by the U.S., the E.C., Switzerland, and Japan) that are discussing something called the Anti-Counterfeiting Trade Agreement (ACTA). The definition of "counterfeiting" is pretty loose, and includes "piracy over the Internet." It's a fairly horrific agreement that makes the Patriot Act look like the Magna Carta. It could possibly include "intermediate" (ISP's, YouTube) liability; global adoption of the DMCA (sans "safe harbors"); a "three strikes" rule to kick accused infringers off the Internet; the right to seize "infringing" content during border searches; and the requirement that ISP's wiretap their users, and hand over information about suspected infringers without a warrant. (Note: see update below for the working text of the treaty.)

Why doesn't anyone know for sure what is in it? The meetings are confidential, in foreign countries, attendees are asked to sign NDA's, and Twittering gets you kicked out. And that's at the public meetings. The only reason any part of the act came to light is that a working copy was leaked to Wikileaks (which is sadly offline at the moment). The laws can also be inferred from the leaked EU response to the treaty.

Of course, none of this secrecy applies if you're a lobbyist from the technology, pharmaceutical, or big media industries. In that case, you're invited to help draft the legislation. It's just public interest groups, the press, and average citizens that are unwelcome.

Given all this, the claim that filesharing is "stealing" rings rather hollow. It would be more accurate to say that if you are against filesharing, you are supporting totalitarianism.

What artists and labels should do

The solution seems rather simple. If you don't want people getting unauthorized music for free, give them authorized music - for free.

Do not give away inferior copies, such as low-bitrate MP3's or files with DRM. This will only drive people to unauthorized copies. Make the music available with the understanding that it will be shared. Just about every music format (MP3's, Ogg, FLAC, etc) has a robust tagging system; use it. Include links back to your website in the tags, so people will know where to go when they get those files.

There's a new service starting up called MusicDNA, which is supposedly a competitor to iTunes LP. These are great ideas, but they're limited by being proprietary and costing the end-user money. A better idea would be a FOSS (or at the very least, gratis) solution. Songbird looks promising. Releasing free music in a similar format would be perfect.

If you have a problem with downloads, then make your music available for high-quality streaming, free of charge. (This is the way "Web 2.0" is moving anyway.) Allow off-site embedding, a la YouTube.

Find out what most people are using to get music (torrents, Soulseek, Last.fm, whatever), and make your content available there, without restrictions. Encourage people to link to it. Try to spread it around as much as possible.

Think of free music as a promotional tool, like the radio. Perhaps they can get access to your catalogue if they sign up for your mailing list; perhaps it could be used to promote tangible goods (albums with special packaging, merch, or whatever); perhaps it's promoting your live events.

But whatever you do, stop thinking of yourself as selling music, and think of yourself as selling a service. At the very least, that "service" is your community. That's why people listen to music in the first place.

None of this, of course, is a guaranteed recipe for success. Likewise, I'm sure there are plenty of ideas that I haven't thought of. But nowadays, you will lose if you're not competing with free.

It's not about preventing people from getting your music for free. It's about what you're going to do since they can.

ACTA Update:

The Internet chapter of ACTA (Article 217) has been leaked. Stripped of legalese, it does this:

  • Requires that all countries have civil and criminal laws against filesharing ("an act of, trademark, copyright or related rights infringement which takes place by means of the Internet").
  • Requires that all countries have civil and criminal laws against circumventing DRM, whether it actually results in copyright infringement or not. (The exceptions to circumvention that occur in U.S. law are nowhere to be found.)
  • Requires that all countries have some form of liability for third parties ("Online Service Providers"). It requires that liability be limited (but not eliminated) if OSP's adopt a "reasonable" policy against repeat filesharing. In a footnote, a "three strikes" law is mentioned as an example of a "reasonable" policy. In addition, it requires that OSP's in all countries adopt a "Notice-And-Takedown" system. All of this directly conflicts with the DMCA's "Safe Harbors" rules.
  • One bit of good news: OSP liability cannot be conditioned on monitoring its users. In other words, it does not require warrantless wiretapping.

ACTA talks are still ongoing. Posting updates here would require me to edit this page every day, so if you want to follow this, here are some good links:

God help us all.