How the record industry killed legal P2P, created a generation of pirates, and laughed all the way to the graveyard
TorrentFreak's Enigmax does a great job of summarizing Copyright and Innovation: The Untold Story, a remarkable scholarly paper written by Rutgers law's Michael A. Carrier, forthcoming in Wisconsin Law Review. Carrier interviewed the 31 subjects for the paper: "CEOs, company founders, and vice-presidents from technology companies, the recording industry, and venture capital firms," and asked them to tell the story of the P2P wars and the music industry. The result is a very good, zippy, 61 pages that'll angry up your blood, with phrases like "Lawyers at the labels historically drove the digital agenda. There was no one there with a truly entrepreneurial spirit. Zero, zilch, zingo, nada. No one there whose entire initiative was not to hang on to the past." and "Even more dramatically, each of the companies 'had a VP level person called the ‘digital person’' who was 'the person who had a decent office and no operational responsibility whatsoever.'"
Here's some of Enigmax's highlights:
It started with a drain on cash. Interviewees reported that venture capital funding for digital music “became a wasteland”, a “scorched earth kind of place” housing a “graveyard of music companies.” With the big labels choosing where and when to sue, funding was hard to come by.
Nevertheless, some innovators didn’t give up, although when the labels were through with them many probably wished they had. The report details instances where innovators tried to get label approval but found themselves in extremely difficult situations.
One recalled that the labels “don’t license you if you don’t have traffic” but once enough footfall is achieved then “they want to get paid for ‘infringement’ and the longer it takes to license you, the larger the ‘infringement’ number they can justify charging you.”
Another described a litigation “Ponzi scheme” whereby settlements and other fees extracted from startups were used to fund the labels’ ongoing litigation strategy. However, like all Ponzi schemes there was a problem – maintaining momentum. “Once you stop suing new people there are no new settlements to pay for the ongoing litigation,” one interviewee reported.
On Twitter, former Warner Music CTO Ethan Kaplan greets the "surprising" news that file sharing of pre-release albums drives demand with acerbic and admirable sarcasm: "Let me simplify this answer: YES IT LEADS TO MORE SALES. DEMAND = DEMAND W/ $$$$$$ IF PRODUCT GOOD."
Simplified further: MUSIC BUSINESS (RECORDED): your product isn't diamonds mined from a secret mythical land.
And beyond broadband/napster/whatever, what hurt you the most is PEOPLE FIGURED THAT OUT. Cynicism caught up with you.
Ethan's one of the good'uns.