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You're Gonna Pay for That

The record industry's still scapegoating downloaders--while angling for more of their cash.

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Every six months or so the Recording Industry Association of America releases its latest figures about the state of the music business, and every time the numbers are misleading in exactly the same way. The RIAA's October 3 press release declares that music shipments of "all physical formats" are down 5.8 percent for the first half of 2005--evidently compared to the first half of 2004, although that's not clear. (CDs have dipped 6.5 percent; it's a reasonable guess that DVDs are up.) Why the drop? "Illegal online downloading" and "rampant unauthorized CD burning," the RIAA claims--the usual suspects.

But take a close look at what those numbers represent. They're for shipments--the number of discs that labels send to stores--not sales. There's a big difference, though the RIAA avoids making a distinction. Unsold CDs are returnable, and if shipment numbers are down that doesn't necessarily mean there's a downturn in sales. It might just mean that distribution is getting more efficient, or that fewer stores are selling CDs. The Almighty Institute of Music Retail, a market-research firm, claims that more than a thousand American music stores have closed since 2003, supplanted only in part by the likes of Wal-Mart, Best Buy, and Target.

First-half sales of CDs are in fact down about seven percent in 2005 according to Nielsen SoundScan, which keeps track of how many discs people actually buy, but last year's first-half sales figure was up about seven percent from 2003 levels. For a hit-driven business that's a reasonable fluctuation; in 1981, for instance, sales fell 11.4 percent. And though "physical format" music shipments for the first half of this year were 190.1 million units, sales were 282.6 million units. Where'd all those extra units come from? Holdovers from last year, most likely. Music distributors tend to offer discounts to retailers near the end of the year, but the discrepancy still means shipment figures matter less than the RIAA claims they do.

The same RIAA press release explains one of its figures with a sentence that begins: "When shipments of all physical products are combined with sales of digital downloads . . ." That's combining apples and oranges--or, rather, apples on the store shelf, including the wormy ones, and oranges sold. Digital sales are turning into a big fruit basket for the music business: Americans bought about $198 million worth of music downloads in the first half of the year, up from $73 million the first half of last year. Labels reportedly get about two-thirds of retail price from outlets like iTunes, and they're saving money in the process--the manufacturing and storage costs attached to CDs don't apply to digital files.

Still, the big labels wouldn't mind getting their mitts on the other third. Bertelsmann AG--the German company that owns half of the major label Sony BMG and poured money into Napster a few years back--is about to launch another "peer-to-peer" service, modeled not on Napster but on BitTorrent. Sort of.

The new service, called Gnab ("bang" backwards--just imagine a giant sucking sound), will launch in Germany late this year. The idea is that users will pay to simultaneously download fragments of song files from other users without, as the Associated Press put it, "overburdening the centralized servers." In other words, without costing the financial beneficiary more than a little bit of money for storage and bandwidth. Naturally, Gnab doesn't permit file sharing as such; its files will apparently have digital rights management out the wazoo, so you can't forward something you like to a friend who hasn't also paid for the service.

Forwarding stuff to friends, the RIAA doesn't want anyone to forget, is naughty. It's gotten easy to yawn every time Big Music sues another batch of civilians, but for the record, the National Law Journal noted in early October that the RIAA has filed around 14,800 lawsuits against alleged file-sharers to date and settled about 3,400 of them. On October 26 the RIAA announced they were suing another 745 people. More than a few John and Jane Does are fighting back; lawyer Ray Beckerman, who represents some of them, keeps track of peer-to-peer-related litigation on his blog, Recording Industry vs the People (recordingindustryvspeople.blogspot.com).

The music business is trying to make sure that the barn door gets locked--and never mind where the horses are. According to the "National Journal's Insider Update," a telecommunications newsletter, the RIAA is allegedly pushing for language in a Senate bill that would give the Federal Communications Commission antipiracy power over digital audio broadcasts. According to the proposed language, which could potentially be attached to a digital-television bill, broadcasters would have to encrypt their signals, and it would be illegal for listeners to do the computer equivalent of taping songs off the radio. (FCC chairman Kevin Martin has indicated that he approves.) Of course, audio capture software is simple and already ubiquitous--if you can hear something, you can record it--but utter stupidity doesn't seem to be an impediment to record-industry schemes.

In light of that, the most appropriate response might be to just give in to it. Take Australian musicians Dr. Sonique and Jon Drummond, who bill themselves as the world's most prolific composers. A few years ago they announced on their Web site, magnus-opus.com, that they'd generated a huge number of short melodies that just happen to be identical to the touch-tone sounds generated by every possible telephone number. So if you drunk-dial your ex or connect to your dial-up ISP, you're technically infringing on their copyright. You can apply for a license for single-performance or ongoing rights. But even if you don't, Sonique and Drummond probably won't try to sue you.

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