Saturday, April 15, 2006

An Unrealistic View of the Power of Law

There are a few reasons for stealing intellectual property and probably just as many justifications for it but the bottom line is that because technology enables it, it will continue to happen. There is no doubt the music industry suffers revenue loss due to file sharing networks. What is in doubt is the actual dollar value of those "losses." It's one of those numbers that can't be measured because it's a number based on woulda-coulda-shoulda. It's like saying that 60% of sexual assualts are never reported. If they aren't reported then how can you say 60% of them are never reported? It's a number based on extrapolation from existing data and assumptions.

One of the key assumptions of the RIAA is that the rate of illegal downloads is equal to the rate of actual purchases if P2P networks did not exist. They assume there is a 1:1 corelation between illegal downloads and purchases. This couldn't be further from the truth. In the past, I have downloaded megs of music but hardly if ever listen to it because most of the music isn't appealing to me. But hard drive space is dirt cheap so I don't delete it. But just because I have it on my drive doesn't mean that I would've gone out and bought CDs if P2P networks didn't exist. As it stands now, I don't need to steal music because Yahoo Music Engine enables me to sample new stuff, buy it if I want or download it on to my computer. I can be legit and broaden my musical horizons at the same time for the price of a CD a month.

What the RIAA doesn't get is that people use P2P to discover new music. I think most people who share music actually buy CDs of their favorite bands. I always buy the latest DMB disc or U2 or an emerging artist I like a lot and want to support. P2P is a zero-cost way of trying music to find what a person likes. However, there are times when people find music, dig it a lot and still don't buy it. That is an actual loss of revenue and it is a loss RIAA can legitimately complain about.

The problem is that it's a number that is impossible to measure accurately. It can be measured probabilistically but even then that propbability calculation will itself be based on various assumptions about normal distributions of consumer behavior in a P2P network versus behavior at Best Buy where actual dollars are traded for a CD.

All this to say that Diane Feinstein, D - Kahleeforneeah, wants to pass legislation that will either regulate or outlaw P2P networks. It is odd for a Democrat to come to the defense of commercial intellectual property rights, being that today's Dems are typically indiscernible from socialists, who believe that no one should be rich and poor people should be able to live in gated communities. It is also odd because laws will not stop P2P.

The RIAA is vigorously pursuing people who share music on P2P networks. They are also alienating its customer base. Nevertheless, the only reason why prosecutions for P2P piracy have been effective is because the RIAA has been enforcing its rights. Yet, the efficacy of RIAA's efforts are questionable.

Here's why. As the RIAA flushes casual P2P users out of the networks, there will still be motivated people who participate in music sharing. The only effect laws against P2P will have is drive the networks underground. They are high-trust networks at the top that eventually filter down to low-trust, low-risk networks at the bottom. RIAA's Gestapo tactics will also drive technological innovation that makes it increasingly difficult to identify uploaders and downloaders.

Making something illegal always creates demand for it and with the demand comes subversive, covert networks to produce and distribute the illegal item. Think drugs, think alcohol during prohibition, think abortions before 1973.

One of the more ingenious techniques I've heard of are LAN parties. A bunch of people get together, jack into a switch and share files with everyone at the party. This is a form of distribution that the RIAA will never be able to touch. While not as rapidly effective as internet-based P2P, it still generates viral results. This kind of distribution is impossible to squelch because the high-trust, localized networks can't be monitored.

Wired magazine had an article a while ago that described the dynamics of piracy across underground servers. Top-level servers are where a lot of pirated media originates. It is a distribution network that is secretive and requires high-trust for access. It is also an unstoppable network. Congress can pass 10,000 laws on P2P-type distribution networks but they will be ineffective. Casual peer sharers will drop off but there simply are not enough music cops to suppress the sharing impulse, particularly when measured against weighier issues like felonious crimes, terror and making sure the paparrazi don't get illegal photos of Cameron Diaz shtupping Ben Affleck and Angelina Jolie.

What Congress and RIA/MPAA do not understand is that a fundamental, powerful shift has occurred in the way that people understand, distribute and consume media. The RIAA and MPAA are playing a losing game rather than adapt to the new rules. Media rights are in flux and while the open source movement has trouble functioning without schizophrenia in commercial markets, it is nonetheless having significant influence in the way intellectual property is conceived. The next five years will be deeply interesting.