7.19 Music and Video Piracy

The popular practice of downloading music and video files raises several technological, business and legal issues.

Music

Music downloading and swapping is very popular on the Internet. An estimated five billion songs, amounting to 38,000 years of music, were swapped on peer-to-peer websites in 2006 (i.e. largely illegally), while 509 million were purchased online. {1}. In the UK, the number of illegal music downloads was estimated to be 1.2 billion in 2010. {2} Although a 2006 study by A. Zentner concluded that file sharing contributed to only a 7.8% drop in sales, {3} music retailers have naturally tried to suppress the activity. The seamless integration of Apple's iPod and iTunes store (hardware with easy-to-use and pay-for content) greatly contributed to the popularity of both product lines, and Apple first introduced Digital Rights Management (DRM) to control the subsequent distribution of its music. Songs could be copied no more than five times, could not be played on non-Apple machines, and could not be burned in CDs more than seven times.

Nonetheless, programs to break DRM security software appeared widely on the Internet, and Apple abandoned this approach in the face of customer opposition and the appearance in 2007 of the Amazon online music store, which offered music without these restrictions (and indeed with the blessing of the big recording companies). The impecunious, particularly students, had long objected to DRM, but the contest on an industry level was between copyright owners and companies supplying the devices, software and services to carry the music, i.e. companies like Dell, Microsoft and Time Warner Cable, where the big players ultimately won.

Music is not only sold as discrete audio files to be saved on computer hard disks or mobile phone flash memories, but as streaming media. Web video, music and other large media files are broken into chunks by streaming software, sent as chunks over the Internet, and played as a continuous sequence of chunks at the client computer. Popular streaming software includes Microsoft's Media Player and Apple's QuickTime. Streamed files must be viewed 'live': they cannot be saved and copied or sold on.

Videos

Though the transmission of MP3 music files does tie up Internet resources, much more demanding are videos, where a single, high-quality film may take a whole day to download, even over broadband connections. Some 160 million Americans in August 2009, for example, watched over 25 billion videos on the Internet. YouTube accounted for 40% of this viewing, but the remainder was services from sports, news and entertainment companies. {8} The resources used were phenomenal, and called on several technologies.

Two were the file download and streaming mentioned above, but a third was what is called Peer to Peer (P2P) technology. P2P transmission operates by segmenting the file and sending the segments over a large network of computers, employing the hard disks, processing power and bandwidth allowances of hundreds and sometimes thousands of participating machines. Even otherwise idle computers are pressed into service. The most commonly used P2P net employed today is that designed by BitTorrent, which indeed carries 30-50% of all US Internet traffic. Much of that traffic consists of media files used in breach of copyright, but BitTorrent Inc itself and other companies provide legal P2P facilities, as this technology provides an efficient and scalable means of handling large files. Akamai, for instance, a major P2P network distribution supplier, maintains a network of 84,000 servers in 72 countries.

Breakdown by Company

In 2010 the largest media companies were: {10}

Company	Market Capitalization ($billions)	2010 Revenue ($millions)	2010 Net Income ($millions)	Employees (thousands)
The Walt Disney Company	82.7	38.1	4.3	149
News Corporation	46.2	32.8	2.6	51
Time Warner	40.7	26.9	2.6	31
Liberty Media Corp (Ca)	6.1	0.7	0.8	19
Liberty Media Corp (St)	4.0	1.3	0.2	19
Madison Square Garden	2.1	1.0	0.3	1.3
Warner Music Group Corp.	0.9	3.0	-0.1	3.7
Bona Film Group Ltd.	0.4	0.04	0.005	0.4
CKX, Inc.	0.3	0.3	0.03	0.4
KIT Digital, Inc.	0.3	0.5	-0.02	0.3

Questions

1. Explain the piracy problems faced by the music industry.
2. Why was Apple iPod so successful?
3. What is digital rights management. Discuss the pros and cons of its use.
4. What technologies are employed in video transmission?

Sources and Further Reading

1. Music download. Wikipedia. Useful statistics, but only to 2006.
2. BPI: 1.2 billion illegal music downloads in 2010 a record by Jacqui Cheng. Arstechnica. January 2011.
3. Measuring the effect of music downloads on music purchases by A Zentner. Google Scholar (Journal of Law and Economics, 2006).
4. Music Download Review. Top Ten Reviews. Straightforward, detailed comparison of ten services. 2011.
5. Compare the Size of Music Services across the Web. New Rock Star Philosophy. Simple visual presentation. February 2011.
6. Mobile Music: Top 4 Streaming Services Compared by Blake Robinson. November 2010. Mashable.
7. List of online music databases. Wikipedia. Comparison of free on-demand music sources using streaming media.
8. E-Commerce 2010 by Kenneth C. Laudon and Carol Guercio Traver. Pearson 2010. Chapter 3.
9. BitTorrent Sites Statistics. Isohunt. Some 543 sites listed.
10. Ten Biggest Players within the Diversified Entertainment Industry. Seeking Alpha. May 2011.
11. Videohelp. Technicalities of playing and converting between DVD, Blu-ray, AVI, MKV, MP4 etc. formats.