Rough Trade

You have to be pretty desperate to attack your industry’s most enthusiastic potential customers, especially in the middle of an economic downturn. But that’s exactly what National Academy of Recording Arts & Sciences president Michael Greene did with his already infamous speech at last month’s Grammy Awards, transcribed at the official Grammys Web site as “The Insidious Virus of Illegal Music Downloading.” Everyone in the music business is panicking over the peer-to-peer file-trading software that’s been springing up. Napster was containable, but its successors aren’t.

The last few weeks have seen even more shake-ups. The baby Naps KaZaA and Morpheus are at each other’s throats, the Napster case’s judge called the major labels’ ownership of music copyrights into question, and musicians have been complaining that the big labels’ official alternatives to peer-to-peer systems are unfair. Greene took the industry’s frustrations out on fans, raging against “musical dreams haplessly snared in this World Wide Web of theft and indifference.” Metallica and Dr. Dre’s lawyer Peter Paterno put it less floridly in The New York Times: “If I were in charge, I would put viruses everywhere on these services. That would stop Little Johnny from stealing this stuff.”

Jeff Harris is one of those “Little Johnnys.” A 20-year-old sophomore at Columbia, he currently has 1300 MP3s on his week-old computer, and he’s been downloading them since 1996 (at one point, he had around 3000). He buys CDs less than once a month these days, he says, although he’s purchased a bunch based on files he downloaded—the Strokes, Blur, Heart, Bauhaus—and many of his MP3s are copied from CDs he owns, which makes them legitimate. Jeff has heard of people downloading entire albums and burning them onto CD-Rs, but he’s never done it himself.

“I try not to think of the moral implications,” he says. “But I’m not sure if the RIAA [Recording Industry Association of America] understands what the music industry should really be about. I think the free downloading of music will take the focus off the recorded format, and put it back on live music.” A friend of his down the hall runs an FTP server with hundreds of Dave Matthews Band concerts (the group allows fans to record and trade its live shows for free). Harris is especially annoyed by the new wave of copy-protected CDs that don’t play in computers: “I like to own the actual physical object, and also to be able to take [the music] with me or play it on any system.”

The official music-downloading services that two major-label coalitions have launched, pressplay and MusicNet, don’t give Harris what he’s looking for. They offer streaming and downloadable files for a monthly fee, though not in the standard MP3 format; pressplay also offers very limited CD-burning capabilities for an extra fee. “Oh, Lord,” Harris says with a laugh. “Well, it’s nice to know that they’re not doing it correctly, and therefore it’ll fail.”

MP3 trading is a pretty simple concept. Music files take up a lot of room on CDs, but they can be converted, or “ripped,” into the much smaller MP3 format. If you want to share your MP3s with friends or strangers, you put them into a “shared folder” on your hard drive. Peer-to-peer programs let you see what other Internet users have in those folders; if you find something you want, you can download it directly from your fellow user’s drive.

A year ago, “peer-to-peer” was more or less a synonym for Napster: Shawn Fanning’s small, brutally efficient program spawned a gigantic legal brouhaha over the widespread copyright infringement it fostered. The music-business lawsuit that shut down Napster’s original service last year left a void that dozens of other companies rushed to fill—including the five major record labels themselves.

Obviously, a huge demand for downloading applications existed, and a centralized index of unlicensed files like Napster’s wouldn’t fly legally. But as California’s appeals-court ruling on A&M Records v. Napster last February noted, “To enjoin simply because a computer network allows for infringing use would . . . potentially restrict activity unrelated to infringing use.” In other words, the network itself was legal. On the same principle, VCRs are kosher even though they can record and duplicate copyrighted TV programming.

While the legal issues are sorted out, all the players are watching their language carefully. If you’re pro-trading, upstart companies like KaZaA and WinMX provide “programs,” which are innocent; if you’re anti-trading, they’re “services,” which are malign. Most of the current generation of file-trading systems are built on “distributed networks,” in which each computer looks for others running the same program and compares shared files, without relying on a central index. Theoretically, these networks can’t be shut down, since there’s no way to turn them off—and, often, no central site to sue. Some of them don’t seem to be quite as distributed as they let on, though: When the Fast Track network upgraded its operating software a few weeks ago, it shut out the popular Morpheus system, whose owners hadn’t paid their licensing bills. (Morpheus has subsequently switched over to Gnutella, an “open source” network whose software’s code is free for all to use.)

The peer-to-peer companies tend to be disingenuous about what they’re offering. Their disclaimers bring to mind the “novelty tobacco pipe” labels on bongs: Users have to agree not to infringe copyrights, so if something illegal happens, it’s not the company’s problem. Still, it’s pretty indisputable that the essence of their business—typing in a song title, finding it on somebody else’s computer, and downloading it without paying—is here to stay. Labels can complain about it; they can sue the companies that profit from peer-to-peer programs or services; they can demand that hardware be larded with copy-protection schemes, as in the Security Systems Standards and Certification Act that Senator Fritz Hollings has been drafting. But they can’t stop it. If you can hear a song, you can copy it. Connect a cable from your stereo to your computer, run a sound-capture program, and you’ve got a perfectly good MP3. The technology is out in the world, and it’s not going away.

Record labels can frame this situation in a couple of ways. One interpretation is to consider unauthorized file trading as straight-up theft; the other is to treat it as a cheap and easy promotional tool—and the gateway to a new market.

Smaller labels are generally gravitating toward the latter interpretation, and figuring out ways to capitalize on it. Ben Lebovitz of the small New York label Ace Fu—which promotes its bands, including Pinback and Ex Models, through Napster—is bitter about the major labels’ attitude toward file trading. “They think pressplay and MusicNet are going to compete with KaZaA and WinMX? It’s insane to think they’re going to make any money off of it,” he says. “The majors had one chance, and they could’ve made money off Napster if they hadn’t killed it, but they didn’t have the foresight to see that. The RIAA took away a very effective means of promoting my label—it does us way more good than harm to get our music out there to people who wouldn’t have heard it.”

New York’s sovereign independent label Matador, meanwhile, offers songs from its catalog through a handful of licensed download services, including pressplay and emusic, a site that offers unlimited MP3 downloads from 900 indie labels for a flat monthly fee. Matador general manager Patrick Amory says, “Once it became apparent that [our titles were] going to be available free anyway, the philosophy was (1) Why not get some money out of it and (2) Get some promotion out of it.”

Larger labels, though, are freaking out: They’re faced with a significant new technology that’s all but completely out of their control, and feeling an economic crunch from all directions. Overall record sales declined last year for the first time in two decades. (Of course, everyone had a bad year in 2001, and a close look at the figures reveals something curious: 2001’s sales dropped by 22.3 million discs, or about 3 percent, but 2001’s top 10 albums sold, in aggregate, 20.3 million fewer copies than 2000’s top 10. Hybrid Theory was no No Strings Attached, Shaggy was no Eminem, and there’s your difference right there.) The neo-payola “independent promotion” scam—in which labels pay radio stations’ exclusive agents every time a song is added to their playlists—has gotten so exhausting and expensive that the RIAA has asked the FCC to investigate the business and make stricter rules. And high-profile artists’ lawsuits (Dixie Chicks, Courtney Love), flameouts (Mariah Carey), and public gripes about the industry’s standard contracts (led by the Recording Artists Coalition, whose several hundred members include Bruce Springsteen, Fred Durst, and Beck) have put the majors on the defensive.

It doesn’t help that their own online services are arriving far too late, and causing problems of their own. MusicNet and pressplay are legitimate in the sense that the record companies get paid for their use—though the artists barely do. A recent article in The New York Times suggested that artists on pressplay get a fraction of a cent per download; according to the Los Angeles Times, managers of bands including Korn and No Doubt claim they haven’t given their consent to appear on the system at all. The two major-label services also, as the Napster case’s Judge Marilyn Patel put it, raised “the specter of possible antitrust violations”—they imply a monopoly on digital distribution, since the majors haven’t been willing to license their catalogs to other companies.

Matt Goyer created Fairtunes.com, a site where file sharers can send money to their favorite musicians directly; he keeps tabs on the latest developments in file trading on his weblog, Blog.mattgoyer.com. Goyer calls the record business’s copyright-protection lawsuits “a whack-a-mole game”—as soon as they get rid of one company, another one springs up. “The industry is trying to buy time to find a solution,” he says. “But if you go to pressplay or MusicNet, you can’t transfer what they’re selling onto your iPod. Consumers don’t want that! Consumers want MP3s! Give us what we want, and we will pay for it.” Matador’s Amory agrees: “You’ve got to use MP3s—you’ve got to use what people are going to play.”

Napster, meanwhile, is developing a new version of its old peer-to-peer service, which will eventually incorporate both MP3s and a proprietary format of its own. They’re also working on a system that will analyze sound files’ waveforms to make sure they’re legit before they can be downloaded. At the moment, the new Napster is in a semi-public “beta version,” available only to a group of former Napster users, and not to the press. (Goyer claims it’s nowhere near as sleek and efficient as the original version.) The current scuttlebutt is that this Napster won’t launch for real until it can license the major labels’ catalogs, which won’t happen for at least nine months; two weeks ago, Napster laid off members of its indie-licensing department.

Peer-to-peer music trading may never be as big an issue as its opponents fear. If you’re downloading illicit MP3s on a significant scale, you probably have (1) a very fast Net connection, (2) not enough money to buy CDs, and (3) lots of time to wrestle with recalcitrant software, hardware, and networks. Which means you’re probably a college student. At a certain intersection of disposable income and spare time, it makes much less sense to go through the hassle of downloading an album’s worth of songs, burning a CD, and printing artwork than it does to buy the damn thing.

The labels’ current PR offensive recalls their “home taping is killing music” campaign from their last slump, 20 years ago. The movie industry went through the same sort of anxiety attack when VCRs were introduced; likewise, in 1942, the head of the American Federation of Musicians declared that musicians who made phonograph records were “playing for their own funerals.” Each time, the entertainment business changed, but it didn’t collapse.

Even some major industry players are equivocal about file trading now. Artemis Records’ Danny Goldberg, formerly the CEO of Warner Bros. Records, says, “I think a lot of it is good for the business. If people are literally trading songs, it’s positive: They’re turning people on to music. As long as copyright infractions stay illegal and it’s a guerrilla thing, it’s less of a problem than if you can get an IPO and advertise on the Super Bowl, which is where it was going.”

So what will actually emerge from the chaos? One extreme scenario is the anarchist-utopian ideal, in which “the recording industry, as we know it, is history” (per the Times Magazine): Copyright is wiped out altogether, the music industry’s middlemen are eliminated, musicians disseminate their work for free, and the grateful fans pay them directly. That’s not likely to happen. The other extreme is the consumer’s nightmare: The majors install copy protection in every functional piece of hardware and software, shut out their smaller competitors, and collect royalties from every playback of every piece of music forever. That’s not likely to happen either, if only because the technology industry is much bigger than the entertainment industry, and has more lobbying power. Philips, the electronics company that co-invented CD technology, already plans to pull the “compact disc” logo from copy-protected discs, and wants to make labels that manufacture them add warning stickers.

The best bet is that the whole kerfuffle will blow over, the same way the home-taping issue did years ago. The major labels will offer their own downloads in a form that the market demands and basically ignore the peer-to-peer underground. Young people will keep exchanging sound files with each other, then graduate and get jobs and crave physical artifacts and pay for most or all of their music.

Some experienced file traders, in fact, are convinced that peer-to-peer’s best days are behind it. Kunal Gupta, for example, was once another “Little Johnny.” A 19-year-old Columbia first-year with just under 3400 MP3s on his hard drive, he’s barely downloaded anything in the last three years. In the days before Napster, he says, MP3 traders relied on a client-server program called Hotline, whose users would keep special and rare recordings on their servers to represent the music they cared about most; you’d get to know and trust their taste over time. Shared folders in the post-Napster world, though, are “basically a mandatory consequence of the granted right to leech any media you desire at will,” Gupta says; high-powered search engines turn file sharing into anonymous immediate gratification. “MP3s really had a golden age,” he says, “and I honestly have nostalgic memories of those long-gone years.”

SYSTEMS ANALYSIS

Carly Hennessy photo: Steve Shaw

We compared some baby Naps and the new major-label download services, and tried looking for the same songs on each of them: Kylie Minogue’s ubiquitous “Can’t Get You Out of My Head,” Cybotron’s 1983 proto-electro jam “Clear,” and the recent bubblegum flop “I’m Gonna Blow Your Mind” by Carly Hennessy (whose album, Ultimate High, sold fewer than 400 copies after MCA spent $2.2 million promoting her).

Audiogalaxy (www.audiogalaxy.com)

Easily the champion among current file-trading services, it’s got a small stand-alone application called Satellite that does the actual downloading work while you search for files using your Web browser. Copyright holders can ask for their songs to be blocked, for all the good that does: A search on “kylie can’t” yielded 861 variations on the title, and although “Can’t Get You Out of My Head” by Kylie Minogue was unavailable, “Kylie Minoque” [sic] by Can’t Get You Out of My Head did just fine. (Cybotron got 66 hits, Carly 11.) Still, after The New York Times reported that users were trading zipped files containing an entire album and its scanned artwork, searches for “zip” started turning up zilch. A Mac version of Satellite is available; it’s not officially authorized, but Audiogalaxy founder Michael Merhej says, “We don’t discourage its use.”

WinMX (www.winmx.com)

The wonk’s peer-to-peer service of choice. Its interface is ugly but informative, with exact file sizes and bitrates, and it makes a point of being open to all sorts of media, not just music. (Read: porn and Simpsons episodes.) Tracks from forthcoming hip-hop albums reportedly tend to show up on WinMX first, for some reason. It mostly searches on its own network, although it also looks for files through OpenNap (an open-source variation on Napster). Kylie yielded 478 hits, Cybotron 4, and Carly 2.

KaZaA (www.kazaa.com)

Formerly part of a trio of portals to the Dutch Napster equivalent FastTrack—the other two were Grokster and MusicCity’s very popular Morpheus. But Grokster is notoriously loaded with “spyware” that tracks what you do online, and Morpheus is now off FastTrack and flailing. KaZaA is specifically targeting former Morpheus users these days; it’s a fairly nondescript stand-alone search engine, and although it offers filters for “adult or offensive files,” copyright-related issues are on the honor system.

LimeWire (www.limewire.com)

An attractive program for using the Gnutella network. Advantage: It’s open source and fully distributed, so it can’t be shut down. Disadvantage: It’s painfully slow—and the more people use it, the slower it gets. (Morpheus switching over to a Gnutella-based system probably won’t help, either.) What’s available through LimeWire fluctuates wildly; when we checked, it found 85 copies of “Can’t Get You Out of My Head” and none of “Clear” or “I’m Gonna Blow Your Mind,” but those results might’ve been completely different five minutes later. There’s also an even pokier Mac version.

MusicNet (www.musicnet.com)

Not actually a peer-to-peer service at all, this is the official download site launched by AOL Time Warner, EMI, Bertelsmann, and Zomba late last year. Its program, RealOne Player/RealOne Music, is pretty to look at, but stupendously bloated. For 10 bucks a month, you get to stream 125 songs once, and download another 125—in their proprietary format. Which means they stop working after a month, and if you want to hear them on your iPod, you’re out of luck. Their music library is seriously limited, too (none of our test cases were available), although they’ve got all the Britney you’d ever want.

pressplay (www.pressplay.com)

The other official major-label service: a collaboration between Sony and Universal, also featuring licensed tracks from EMI and a handful of indies. Users can have access to each other’s playlists. Ten dollars a month gets you 300 streams and 30 downloads (in Windows Media files, so you can’t transfer them); for more money, you can also burn a few files to CDs. No Kylie, although the search engine suggested both her former boyfriend’s band INXS and Paula Abdul as alternatives; no Cybotron, but a bizarre suggestion of Herbie Hancock; and it drew a blank on poor Carly Hennessy. —D.W.