Recording Industry to ISPs: A Little R-E-S-P-E-C-T for Copyright, Please

Communications services providers, which realize “huge revenues” from music, are becoming music retailers, IFPI said. So they must work with the music and movie industries to ensure copyright is respected on their networks, the group said. Talks are under way in France, Italy, Spain and the U.K. on “enhanced cooperation” -- but IFPI “wants these discussions to go further” by convincing service providers to “make concrete commitments” to controlling infringements.

“I've talked to the telcos in Brussels and they all think it’s a good idea for the ISPs to get involved,” IFPI CEO John Kennedy said in London: “But it’s easier to get people to agree than to get them to do something.” Kennedy accused ISPs of “zero response” to his requests for more collaboration in the face of what he called their “social responsibility and commercial imperative” to fight piracy.

IFPI wants ISPs first to “warn offenders that their conduct is no longer acceptable under the terms of the agreement they signed.” The IFPI “will tell them who the big offenders are,” so ISPs can issue warnings, Kennedy said. Then ISPs should “show teeth and terminate connections. That would be less messy and unpleasant than litigation.”

IFPI’s report acknowledged limited cooperation between the music industry and ISPs, said a spokesman for the Internet Services Providers Assn. U.K. (ISPA). As to IFPI’s call for more, he said, “ISPs aren’t law enforcers.”

ISPs don’t condone use of networks for illegal activities, the ISPA spokesman said. But he said he hopes IFPI isn’t asking providers to break the law by, for instance, providing data shielded by the Data Protection Act. Any action against subscribers must conform with the law, not a trade group demand, the spokesman said.

ISPs are working at disseminating legitimate content online and “cooperation is developing,” said a spokesman for the European Telecom Network Operators’ Assn. “However, Internet providers can’t be seen as responsible for policing infringement of copyrights on their networks,” though they continue to work closely with content providers, he said.

Last year, Information Society & Media Comr. Viviane Reding launched a program aimed at enacting a European charter on online content and intellectual property rights by May 2006. But Kennedy told us he thinks the effort will fizzle into another “talking shop” because Reding hasn’t taken control of it.

Other Challenges Persist

Digital music faces other challenges, old and new. Interoperable digital rights management (DRM) technologies remain elusive, due mainly to leading technology providers’ decision to build incompatible systems, IFPI said. Apple’s iTunes, for instance, works only with the iPod. Most other licensed online music services offer songs in the Windows Media Audio format, which won’t work with the market-leading iPod. More consumers want to shift tracks among devices, but until systems are interoperable, online services should be allowed to use available systems, IFPI said. “DRM is much maligned in the media, “ Kennedy said: “We would rather people focussed on the advantages rather than the perceived disadvantages.” He noted the technology has been used for years in CDs, DVDs and games.

Internet piracy continues to plague the music industry, but legal online buying is catching up with unauthorized file-swapping, IFPI said. More infringing music files are available at any one time than a year ago, but the figure is down 20% from the April 2003 peak of 1.1 billion.

Thousands of infringement cases filed around the world are paying off as 35% have illegal file-sharers have stopped or cut back -- and courts issue high-profile rulings against P2P networks. A consumer survey for IFPI found authorized purchases as popular as P2P file-swapping in the U.K. and Germany, IFPI said.

“We're winning the war but haven’t won,” Kennedy said. There’s no time for complacency, he said. “We were sitting here waiting for the Grokster and Kazaa decisions. If they had gone against us, it would have been a colossal problem. China is the next big challenge.”

A rising concern, in the U.S. anyway: Digital stream-ripping, which allows automatic identification, recording and storage for later listening of separate individual tracks from digital broadcasts such as radio shows, IFPI said: “In effect, a broadcast can be turned into a library of free downloads.” If digital services are licensed as radio services rather than on-demand services, they need technical controls to ensure they don’t undermine on-demand sales services, IFPI said.

Milestones Reached

Milestones were met in 2005 in the Internet’s legitimate music market, IFPI said. Online and mobile music distribution emerged as the fastest growing delivery channels. Single-track downloads more than doubled, to 420 million, while the number of subscription service users rose from 1.5 million to 2.8 million. Online song catalogs doubled; more than 2 million tracks are available. Apple iTunes now reaches 21 countries. Portable video launched, mobile phones became portable video devices, and iMesh, the world’s first authorized peer-to-peer (P2P) network, went into beta testing.

Digital distribution formats became more diverse in 2005 as new business models were tried, IFPI said. Digital channels range from master ring tones to satellite radio, though the preferred means remains a la carte downloading. The new online and mobile channels have forced a shake-up in recording industry marketing strategies, with consumers being offered concert downloads, preorder exclusives, and artist websites. Digital-only labels -- such as Warner Music’s Cordless Recordings -- promote new acts. Digital aggregators collected rights to supply online music stores, and other new intermediaries emerged to sell and market through online and mobile channels.

Despite the euphoria, Kennedy admitted “less than 5% of Internet users are buying music online.” But, he added, “there is a new wave of digital commerce.”