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New Arguments Against P2P: The Phony Moral Debate

Posted By Barry Ritholtz On April 5, 2005 @ 12:01 am In Film,Finance,Music,Politics | Comments Disabled

“Its Illegal.”

That’s the phrase the Recording Industry have been chanting nonstop for the past 5 years. It has been the mantra of the big labels and studios ever since Napster winked into existence.

But a subtle shift is already underway. As we await the Supreme Court’s decision in the Grokster case, the industry — or in this case, its apologists — is positioning itself for a defeat on the merits. They want and need a fall back position, in the event the Supreme Court decides not to overturn the well settled law — "substantial non infringing use" — of Sony BetaMax case.

If the Betamax decision is not overturned, than on the law, the case is over: Articles such as this one — File-sharing case worries Indie artists [1] — incontrovertibly demonstrate the inescapable conclusion that not only are there substantial non infringing uses for P2P, but they are from direct business competitors to the Big Labels. If P2P is quashed, it would have the effect of limiting competition to the majors from the small, underfunded, scrappy independents.

And that’s even before we get to the issue of stifling technological innovation.

Indeed, knowledgeable observers have long since figured out that P2P is not about copyright at all. Instead, its about disintermediation — getting the Labels out of the middle, removing them from between the artist and the listener.

Of course the labels are horrified about P2P — it makes them irrelevant. Who the hell wants to be replaced by a collaborative filter?

But even if the industry wins the Grokster case, the result will be a pyrrhic victory, largely unenforceable against the free roaming decentralized software the Recording Industry inadvertently birthed when they litigated the centralized Napster to death. In fact, just this past week, the WSJ Op-Ed [2] page acknowledged that stopping swapping is all but impossible:

Allofmp3 [3], which resides in . . . Russia, and was described to me by one knowledgeable user as "more or less legal." Even if the anti-Grokster forces can next afford to spend 10 years to win (and enforce) MGM v. Putin et al. in the Hague, there will always be another wave of digitized aliens hacking through the copyright walls. There has to be a better way.”

So a new approach has been hatched: Apologists for the industry are replacing the catchphrase “Its illegal” with a new mantra.

Are you ready to hear what it is? (Hold onto your seat):

“Its morally wrong.”

Allow that to sink in a moment. One of the most corrupt, decadent, morally bankrupt industries the planet has ever seen is now making the argument that people should not use P2P — due to the ethical considerations:

“It may seem quaintly old school to suggest that people should stop downloading culture without paying simply because it’s the right thing to do. But that may be the best option available.”  -Daniel Henninger [4], WSJ

I find that approach utterly fascinating, more than a little infuriating, and outright hilarious — all at once. The Recording Industry must be hellbent on getting into the Guinness Book of World Records for the most hypocritical, disingenuous, cynical, and intellectually dishonest arguments in the history of mankind.

You want to play that way? OK, I’m game. Let’s go along. If the industry wants to have a discussion on morality, lets have a closer look at this black kettle, the house of glass they want to throw stones from. Let’s examine how the industry arrived at where it is today — but according to their wishes, from an ethical standpoint.

Remember, we are not arguing about what is legal, but rather what is RIGHT or WRONG:


Price Fixing: Wrong (and Illegal):

Lets start our discussion with the Free Markets. Our capitalist
system relies on competition to set prices on goods and services. But
what happens when the distributors of these very same goods get
together and illegally fix prices?

That conspiracy does substantial
damage to both consumers of these useful and creative arts, as well as
their creators. When a group of plutocrats thwarts the
capitalist system, everyone but them loses. Consumers have less access
to these works, as the Labels illegally maintained prices higher than
the market place would have borne. These oligopolists extract monopoly profits, while the bands sell that many less units. And the creators of these works, who
derive the lion’s share of their income from publishing their music and playing to audiences, gets
that much less exposure, recognition and money.

Its just wrong.

Amazingly, even after they got caught, the recording industry cheated on their price fixing
settlement. Part of the
resolution included donations of CDs to libraries. In direct
contradiction to the spirit of the agreement, the labels used the
opportunity to dump tons of junk CDs — old, unpopular, and many
repeats of the same CDs — onto libraries. 

It was only after a group
of Librarians contacted the State Attorney Generals involved in the
case — along with some uncomfortable press coverage — that the
industry was embarrassed into doing the right thing.


UPDATE  April 21, 2005  10:55pm

Lest you think I am leaving out the MPAA — Here’s a charming example of THEIR respect for the law:



Two NYPD veterans are being investigated by Internal Affairs for allegedly accepting payoffs from the motion-picture industry to arrest vendors of pirated DVDs, law-enforcement sources told The Post.

One officer, a sergeant on the force since 1992, has been transferred from the Staten Island Task Force to the 122nd Precinct pending the internal investigation. The other, a cop for five years, still works on the task force.

As members of the unit, the officers, ages 36 and 32, would arrest the sellers of illegal DVDs and confiscate their stock. Often they would act on tips from investigators with the Motion Picture Association of America, many of whom are former cops, sources said.

There is nothing improper about that practice. But on at least four occasions in Brooklyn, Manhattan and Staten Island, the task force officers arrested the vendors, confiscated the illegal movies and then allegedly received gratuities of several hundred dollars from the MPAA itself or its investigators, the source said. The MPAA strongly denied that the payoffs came from the trade organization.

Note that the MPAA does not deny a payment was made — just that they didn’t make (an agent on their behalf, perhaps?)


Jamie Schram
NY Post, April 21, 2005


Copyright Extension: Wrong (but Legal):

The framers of the constitution wanted to strike a balance between
encouraging artists and inventors to create works, yet allowing the
populace to benefit from these works. The balance is a monopoly “for
limited Times to Authors and Inventors”

The Recording Industries have trampled the concept of limited, via a
corrupt land grab. They bought a series of copyright extensions, after
greasing Congress with millions of dollars. Intellectual property which
should have fallen into the public domain for the use and enjoyment of
U.S. citizens instead remains property not of their creators, but of
large corporations who had little if any hand in their creation.

The term of copyright now extends 75 years beyond the date of the author’s death. This created a huge windfall for the companies who purchased these
assets from their creators. Of course, this buy in was done when
copyright was much shorter.

The Sonny Bono Copyright Term Extension Act of 1998  (a/k/a "The Mickey Mouse Protection Act")
resulted in a huge taking of public assets by private entities and a
purchase under false pretenses from the songwriters. Its enabled by
bribery, and in direct opposition [6] to the explicit wording of the US Constitution [7].

And, its all perfectly legal.

But that doesn’t matter, since today’s discussion is not about the
legalities, but rather, about what’s right and wrong. The massive
copyright extension amounts to true piracy, theft on the high seas from
the public and the very works creators at issue here.

Wrong, but legal..


Radio Consolidation: Wrong (but Legal and Dumb):

The Nation’s airwaves are a limited and precious commodity, one that
is supposed to be administered by the FCC and Congress on behalf of the

Instead, thanks to some well greased Congressmen, yet another act of
Piracy took place: The 1996 Telecommunications Reform Act. It radically
changed the ownership limitations of the public airwaves, allowing
another massive land grab. Companies such as Clear Channel
Communications — who helped pay for the legislation — consolidated
the radio industry.

Pre 1996 Act, local stations served their communities with local
DJs, Program Managers, and Music Directors. Afterwards came McRadio.
Instead of a vibrant competitive broadcast industry, with 1000s of
different stations running all manners of programming, we now get music
pumped across the country from some sterile fluorescent lit bunker
somewhere in Texas.

Playlists shrunk dramatically, focus groups ruled the air, and the
amount of content on the radio — the actual number of different songs
– fell off a cliff.

That’s just wrong. The quality of what’s available for free over the
public airwaves has dropped precipitously. Another wrong foisted on
music fans.

The irony is that this land grab ended up doing major damage to both
the Music Industry as well as Broadcast Radio itself. Listeners
abandoned Radio in droves, flocking instead to iPods, Satellite Radio
and the Internet. Singers and Songwriters were also hurt by this. You
can’t buy what you never hear, and most people used to hear new music
on the radio. No longer. Worse, Bands cannot sell tickets to a tour if
no one has ever heard of them, SongWriters do not get publishing
royalties if no one else is covering or performing their songs.

So who’s really hurting the Artists? Why its the Radio industry, and
by virtue of their mute compliance, the Recording Industry.

From Payola to NoPlay-ola, in a few short years.  That’s also wrong.

Refusing Digital Distribution: Wrong (but Legal and Very Dumb):

Winstoin Churchill once said "If you destroy a free market, you create a black market."
In the 1990s, the marketplace was clamoring for a way to obtain content
digitally. A well managed industry would have responded to this market
demand by offering its consumers a fast, secure, legal — and
profitable — way to do this. Digital distribution should have been a
profit center, a new market for musicians to use to disperse their
work, build relationships with their fans, and help sell concert

Instead, the industry acceded to the demands of their brick and
mortar retailers. They ignored the marketplace, and crated an enormous
void. Nature may hate a vacuum, but not nearly as much as the
marketplace does. Napster wasn’t inevitable, but rather sprung into the
void created by the Recording Industry. More irony: Tower Records
recently filed for bankruptcy.
The industry has misrun their
business for decades, and now they are suffering the consequences of
their poor judgement and bad behavior. Blaming P2P for their woes
ignores the reality that this is a merely hell of their own devisement.
And that’s before we get to other bad behavior of the recording
industry:  Cheating their artists, foisting oppressive contracts onto
young musicians, using Enron like accounting to avoid paying them. But
you get the idea.

The Blackmarket for music — brought to you by the recording
industry. I expect a few years from now, B-School students will be
reading studies of this enormous and unprecedented management screw

Unclean Hands

Apologists for the recording industry cannot in good faith argue
that everyone but themselves needs to “do the right thing.” They have
shown a propensity for doing the wrong thing — both legal and illegal
– time and again.

I’m all for moral behavior. However, I have no patience for an
ethics lectures from a corrupt and incompetent ring of real pirates.

Can Justice Scalia Solve the Riddles Of the Internet? [2]
Daniel Henninger (henninger@wsj.com)
WSJ Op/ED, April 1, 2005; Page A10

File-sharing case worries Indie artists [8]
Alex Veiga
Associated Press, 3/25/2005 8:44 AM
http://www.usatoday.com/tech/news/techpolicy/2005-03-25-indie-file sharing_x.htm?csp=36

A Brief History of the Patent Law of the United States

A History of the United States Patent Office [10]
Jason O. Watson, creator of Historical-Markers.org
April 17, 2001

Copyright extension law at issue in suit [6]
Courtney Macavinta
CNET News.com, January 12, 1999, 2:10 PM PST

A  History of Copyright in the United States [11]

What is Copyright?  [12]

File-sharing case worries Indie artists [1]

File-sharing case worries Indie artists [13]

File-sharing case worries Indie artists [14]

Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2005/04/new-arguments-against-p2p-the-phony-moral-debate/

URLs in this post:

[1] File-sharing case worries Indie artists: http://abcnews.go.com/Technology/wireStory?id=611968

[2] WSJ Op-Ed: http://online.wsj.com/article/0,,SB111232125427395146,00.html

[3] Allofmp3: http://www.allofmp3.com/

[4] Daniel Henninger: mailto:henninger@wsj.com

[5] POLICE PAYOFF PROBE: http://www.nypost.com/news/regionalnews/23341.htm

[6] direct opposition: http://news.com.com/2100-1023-220049.html?legacy=cnet

[7] US Constitution: http://www.house.gov/Constitution/Constitution.html

[8] File-sharing case worries Indie artists: http://www.usatoday.com/tech/news/techpolicy/2005-03-25-indie-file%20sharing_x.htm?csp=36

A Brief History of the Patent Law of the United States: http://www.ladas.com/Patents/USPatentHistory.html

[10] A History of the United States Patent Office: http://www.m-cam.com/%7Ewatsonj/usptohistory.html

[11] A  History of Copyright in the United States: http://arl.cni.org/info/frn/copy/timeline.html

[12] What is Copyright?  : http://www.copyright.com/ccc/do/viewPage?pageCode=cr10-n

[13] File-sharing case worries Indie artists: http://news.yahoo.com/news?tmpl=story&u=/ap/20050325/ap_on_hi_te/file_sharing_artists

[14] File-sharing case worries Indie artists: http://www.sfexaminer.com/articles/2005/03/29/business/20050329_bu01_recording.txt

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