SPV AAA.
B) Para el sector privado.
2.3 Consideraciones Jurídicas para el Desarrollo de las APP´s.
When we talk about the music industry we generally refer to the interests represented by the five majors (Universal, Warner, Sony, BMG and EMI) who together control about 75% of the global recorded music sales. Although there are many independents, the five majors have enough collective clout to set the agenda regarding the interests of the music industry as a whole. The most vociferous campaigner for the ‘rights’ of the music industry is the Recording Industry Association of America (RIAA) which first came to public prominence during their lawsuit against the Napster file-sharing network.
In February 2001 the US 9th Circuit Court of Appeals issued a ruling against Napster that it
had engaged in “knowingly encouraging and assisting” copyright infringement by allowing internet users to search for, and download, copyrighted music files. The court ruled that Napster would have to put in place a filtering system to prevent copyrighted recordings being exchanged. By July of that year, Napster had effectively ceased to operate. During its two-year lifespan millions of people had swapped billions of music files on-line (Birch & Davidson 2002). A survey by the Pew Internet & American Life Project found that at the height of Napster’s popularity users of file- sharing networks did not consider swapping music on-line to be an illegal activity.4 In fact, since
the demise of Napster, a plethora of new file-sharing networks has sprung up.5 A survey by
Nielsen/NetRatings placed Kazaa, currently the most popular file-sharing application, as the 6th
most popular Internet application in the US, being used by 10.6% of the active on-line population.6
The same survey found that Kazaa was one of the ‘stickiest’ applications with the average user spending 2.36 hours per month using it on-line. The music industry, in the guise of the RIAA, has decided that pursuing the new breed of fully decentralised file-sharing networks is fruitless and has responded by suing individuals.7
4 Downloading Free Music: Internet Music Lovers Don’t Think It’s Stealing. Pew Internet & American Life
Project’s On-line Music Report, available at
http://www.pewinternet.org/reports/pdfs/PIP_Online_Music_Report2.pdf, p. 6 (September 28, 2000).
5 Napster use slumps 65%. BBC on-line report. http://news.bbc.co.uk/2/hi/business/1449127.stm 6 More than 72 Percent of the U.S. Online Population Uses Internet Applications. Nielsen/NetRatings
(November 2002), available at http://www.nielsen-netratings.com/pr/pr_021218.pdf
7Students sued in piracy battle. BBC News On-line report, 4 April, 2003.
The argument put forward by the music industry is that file-sharing is an infringement of copyright which effectively prevents record labels from making money upon their core asset – content. They illustrate their point by demonstrating trends that show a fall-off in CD sales which they maintain is due to the growth of on-line piracy.8 Appealing to the better nature of file-sharing
advocates, they claim that file-sharing ultimately hurts artists.9 A recent economic analysis
concludes that on-line piracy is having an effect on sales but that the RIAA’s claims for industry meltdown at the hands of the file-sharing networks is unconvincing (Liebowitz 2003). For instance, while CD unit sales were down by 10% in 2001, the figure cited by the RIAA, total revenue was down by 2%.10 Furthermore sales of recorded music are declining from an all-time high, and have
experienced significant drop-offs in four periods prior to the widespread use of the Internet for exchanging digital music. The current slump began in 1999 when file-sharing networks had very little market penetration. Liebowitz discusses many factors which could contribute to a drop in sales for consumer entertainment goods such as the CD and concludes that, based on the figures, it is far from conclusive that the music industry is in terminal decline.
Recent studies by Forrester Research would suggest that usage of file-sharing networks affects different segments of the CD buying public in different ways. Heavy CD buyers tend to buy even more CDs, using the file-sharing Networks to try out new music before buying. Light CD buyers may be buying less, tending to burn their own compilations to use in portable walkmans or at work.11
The key issue is that CD sales are declining and the music industry believes that it is due to the growth of on-line piracy. At the same time consumers are downloading and swapping music as much as ever, and do not feel that they are breaking the law. The type of litigation being pursued by the music industry in the US is to criminalise and alienate those people (16–30 year olds) who typically buy a lot of CDs. There appears to be a breakdown of the expectations between music providers and music consumers. The question is whether creators, producers, distributors and consumers can come to an agreement where each receives the value they expect.
The central issue in this debate is copyright, which, particularly as applied the music industry, is complex and difficult to understand (Fisher 2003). As we shall see, the music industry uses recording copyright as the single means of leveraging control over the physical production and
8
Recording Industry Announces 2001 Year-End Shipments. February 25, 2002 http://www.riaa.com/news/newsletter/022502.asp
9 RIAA on piracy http://www.riaa.com/issues/piracy/default.asp 10 http://www.riaa.com/news/newsletter/022502.asp
11Forrester Research Report. Bernoff, J. (2002) Downloads Save The Music Business
http://www.forrester.com/ER/Research/Report/Summary/0,1338,14854,00.html 'Proof' - downloading music hurts Europe's CD sales
distribution of music. For them it is crucial that they leverage the same degree of control over the digital distribution channel.
Ironically, the original appeal of digital music to the industry was that – now that there was no physical product to be manufactured and distributed – they could ‘dis-intermediate’ distributors and retailers and market directly to the consumer, thus preserving the currently centralised distribution model minus a few value links. However, the lack of agreement on standards for digital authentication, digital distribution methods and payment models meant that the recording industry was caught unprepared by the advent of file-sharing networks. We suggest that the file-sharing networks not only represent a consumer desire for greater access to music but also a change in the way music should be marketed and distributed. We suggest that the success of the file-sharing networks is partly due to the alternative manner in which music was distributed – not from a centralised server, but from a community who in a self-organising manner have assembled the biggest repository of music yet available.
We suggest that the music labels, rather than attempting to establish direct marketing links with their customers, should adopt the role of an enabler or facilitator allowing users to share music with each other, thus facilitating a social network rather than simply a business relationship. It is clear that the record industry must be remunerated for digital services, but we suggest that the current pay-per-download model will only be attractive to certain segments of the market. We propose Smart Radio as an alternative model that offers a compromise service which caters for needs of the music industry and its consumers.
The remainder of this section will discuss the issues of digital distribution. We will first look at the competition the music industry faces in the form of file-sharing networks. We will then look at the physical distribution model, and the new digital distribution model. A sub-text running through this chapter is that the file-sharing issue has simply brought the long-standing problems within the music industry to crisis point. These include:
• Innate distrust by consumers of the music industry.
• The music industry’s high profit margin on each CD, which is used to ‘subsidise’ non- profitable artists. This argument is hard to make in a digital environment.
• The concept of copyright ‘ownership’ on a medium (music) which is simply not understood by consumers.
• The domination of the music market by five media conglomerates (the 5 ‘majors’).
2.1.1 What is a File-sharing Network/P2P Network?
The network architecture we are most familiar with today is the client-server architecture in which a centralised server hosts resources which can be requested by any number of clients (see Figure 2.1). The resources might be web page hosted by a HTTP server, or any type of file hosted by an FTP server. The server provides a single point of access and, in the context we are examining, if it hosts illegal material, it can be shutdown.
Figure 2.1: The client-server architecture
A Peer-to-Peer (P2P) network is a decentralised network in which each node can equally act as a server or a client (see Figure 2.2). In ‘pure’ P2P networks all peers communicate symmetrically and have equal roles. However, most P2P networks are not completely decentralised. Most have some degree of centralised functioning such as when a new host is bootstrapped. The Napster network was an example of a hybrid P2P system. While file-sharing was decentralised, the directory of files was centralised, with the Napster servers replying to search queries and brokering client connections (Oram 2001). It was the centralised nature of the Napster network architecture which allowed the US federal appeal court to rule that Napster was knowingly assisting the breach of copyright. Since the demise of Napster, many alternative P2P networks have sprung up which decentralise the search and brokering requirements of the network. The key point in file-sharing networks is that there is no single point of access. In theory, clients can download files from each other without going through an intermediary server. This type of service is very difficult to police.
Figure 2.2: The figure illustrates the decentralised architecture of a P2P network
Decentralised systems are not new; the Internet routing architecture itself is largely decentralised, with the Border Gateway Protocol used to coordinate the peering links between various autonomous systems.
2.1.2 The MP3
The process of converting a sound into a digital format for transmission or storage purposes produces very large file sizes. For instance 1 second of what we term ‘CD quality’ sound requires a file size of 176.4 KB and the three and half minute pop single requires a file size of 37 MB. The mp3 was developed as part of an ISO initiative to develop standards for the encoding of audio and video files. The Moving Picture Experts Group (MPEG) was constituted for this task and met for
the first time in May of 1988. The main application the group had foreseen for the first audio-visual standard, MPEG-1, was CD-i, an interactive compact disc developed by Philips and Sony to put games and educational programmes on television sets. As part of the development of the standard, the expert group sought proposals for an audio codec (coder-decoder), a means of shrinking audio file sizes without losing its identifying qualities. The codec that was chosen had been developed in the 1980s by researchers from the Fraunhofer Institute and the University of Erlangen, Germany in order to allow high-quality music to be transmitted over ordinary telephone lines. The codec could shrink music files by a factor of twelve or more with little loss of quality. The MPEG-1 standard was completed in 1992; it described three separate but related ‘layers’, schemes for converting sound into a digital format. Layer 1 and Layer 2 were intended for high-performance applications; Layer 3, a version of the codec developed by the German team, was intended for devices that handle data relatively slowly, such as personal computers. MPEG-1, Layer 3 is what is now called mp3.
The mp3 codec is lossy – its compression algorithm removes a certain amount of data that cannot be recovered when the file is decompressed. The algorithm takes advantage of a feature of human auditory perception, called auditory masking, whereby the ear cannot discern certain frequencies in particular situations. For instance, this occurs when the presence of a strong audio signal makes weaker audio signals in the proximity imperceptible. The mp3 compression algorithm removes the tones people do not perceive, decreasing the size of music files without greatly affecting the sound.
The source code for the mp3 compression algorithm was stored on an insecure computer at the University of Erlangen where it was downloaded by a hacker, soloH, who produced software that could convert CD music tracks into compressed digital files, a process known as ripping. The software was further improved by a community of on-line developers. Within 2 years mp3 sites began to spring up throughout the Internet, all containing copyrighted songs that had previously been imprisoned within compact discs (Mann 2000).
2.1.3 Techniques of Music Delivery
There are two major methods of delivering audio and video content over the Web. The first method uses a standard Web server to deliver the audio and video data to a media player. The second method uses a separate streaming media server specialised to the audio/video streaming task. Until recently, audio and video on the Web was primarily a download-and-play technology. The entire media file had to be downloaded from a server before it could be played. However, this technique causes significant delays before playback because media files are usually large and take a long time to download.
The alternative to waiting for a full download is to stream the media files so that playback can begin while the data is being sent, without having to wait for the whole file to download. Playback begins after the client has pre-fetched a few seconds of the media into a buffer, after
which time it begins to drain the buffer and playback begins. As we can see from Figure 2.3, if the rate at which the client drains the buffer is faster than the fill rate from the network, then playback will have to pause while the buffer is refilled. However, increased broadband access has meant that streaming audio is an increasingly viable option for home users.
Figure 2.3: Client-side buffer for a streaming application