From the point of view of a recording artist or a record label, it appears as though little is being done to address the problem of illegal downloading on the internet. Copyright laws protect the interests of authors and performers, who have the right to choose whether and how their music is sold. The basic case is simple--if an artist chooses to sell their music, then it is an infringement on their copyright and moral rights to take their music without paying for it. Since it is taken without their consent, some people call this "theft".
Who benefits from music sales?
Some artists choose to sell their copyright to labels in exchange for the money necessary to make a recording (an "advance") and an ongoing share of the sales of that recording after the label earns enough in profits to cover the advance, production and marketing of the release. This is called "recouping". Among independent labels, the artists share is often half and sometimes even more. Major labels generally do deals where the artist gets a much larger advance and a smaller share of the sales, with the assumption that the sales will be much higher due to the investment the major label can make into getting the recording into the public eye.
In the world of physical releases, the label will take the final master recording and have it made into a physical product, or several, based on sales projections it has made. The product is then shipped to distributors, and then on to retailers, who put the release out for sale.
Where digital distribution is concerned, the label may choose to deliver directly to retailers or to use a so-called "aggregator", which is simply a digital distributor. Regardless of who actually does the work, they take a copy of the master recording and convert it into one or many file formats that the retailers need to "ingest" the release into their system, then they add all the information retailers need to have about the recording--the "metadata". The metadata is almost never just the titles and names on the recording, but also the right holders for the recording and the artwork, the territories in which the release may be sold (yes, even on the internet), the release dates, and some guide information for pricing the release. All of this is then packaged up in an agreed format and sent to the retailer, who puts the product up in its online shop.
From this description, you can see that the people who profit from this supply-driven system include songwriters, performers, record companies, distributors and retailers. Each step along the music supply chain is dependent on the premise that the artist has the right to sell their music and that there is someone willing to pay to listen to it.
Who benefits from illegal file sharing?
How illegal downloading of music works is probably easier to explain if you follow back the supply chain from the consumer. Of course, there are also more philosophical implications from looking at things this way, and it does appear as though the illegal system is, in large part, demand-driven.
The basic scenario involves someone who is looking for music to download for free--an obvious benefit over having to pay for the music. The downloader has quite a few options for getting new music, such as using software to connect to a peer-to-peer (P2P) network, file sharing forums, browsing blogs, searching on "pirate" sites, and simply asking for something via instant messaging (IM). The supplier may change, but the thing that does remain constant is that all the downloads go via a connection that is provided by the the downloader's internet service provider (ISP).
On the other end, there may be someone connecting via their own ISP, or a site that is on the network of a hosting company (HC). Regardless of whether the download is located on a dedicated web server or on a number (often a large number) of personal computers connected via a file sharing protocol, there is one more commonality in the illegal download supply chain--the uploader.
What exactly motivates uploaders depends on the means of distribution. For example, the BitTorrent P2P protocol (which is also widely used for perfectly legal downloads) discourages "leeching" by throttling their download speed according to how much they upload to others for a given file--helping make sure the download remains available. Thus, motivation is built in. With blogs and file sharing forums, often it is a feeling of prestige that motivates uploaders. With forums in particular, members can earn "kudos" from other members for uploading files. With so-called "pirate" sites, uploaders are often members of groups who compete with each other to provide the best / most popular material the quickest, analogous to the groups that crack the copy protection on computer games.
The owners of these sites can also benefit financially through advertising revenues. Nothing is quite as appealing as "free", so these sites often have very high traffic, making them attractive to advertisers. You will frequently see advertisements from perfectly legitimate companies in places where illegal activities are taking place. In addition to paying a site owner, advertising revenues are used to pay for the costs of maintaining the site, such as hosting fees (from hosting companies willing to host such sites), and so these HCs also benefit from illegal downloads.
It is the ISPs who remain the common denominator in this entire system. While stopping short of actively encouraging illegal activities, many ISP customers consider the ability to download music for free as part of the package of services the ISP offers. Of course downloading music isn't really free, since you have to pay an ISP for a connection to the internet. And thus the ISP also benefits from illegal downloading, with customers buying faster services with fewer download restrictions in order to be able to access more "free" content.
The Shadow Economy
We have seen that the parties who profit directly or indirectly from illegal file sharing are the downloaders, the site owners, the advertisers, some hosting companies and the internet service providers. The fact that many advertisers, HCs and ISPs profit from illegal activities has created a shadow economy which, on the face of it, is legal, but which isn't particularly ethical. In fact, the fact that these companies benefit from illegal activities encourages a kind of wilful ignorance of those activities.
This shadow economy has external power, as well. Governments don't like to involve themselves in matters that can end up being very messy, so are loathe to take on anything without a clear legal mandate. Solutions have been suggested and experiments have been carried out, such as the recent UK-wide letter-sending scheme in which ISPs sent out letters to their customers who were caught by (major label) record industry organisations while distributing illegal downloads.
I doubt whether such measures will have any effect without the threat of access termination. This was just about the only point on which I agreed with the BPI and IFPI at a recent talk I attended where the spirit of the discussion indicated the move from scaring 15 year-olds with legal action to sticking it to them using technical means. Unfortunately, BPI research from the beginning of March this year indicates that abstract warnings do not appear to affect the average illegal downloader.
Monetise It
My personal preference for addressing the problem is a monetisation scheme in which ISPs monitor customer downloads and the customer is charged for the download. There are a couple of problems with the idea, though, not the least of which is a privacy issue. One could argue that any right of privacy ends when the activity becomes illegal, but I personally would not feel comfortable knowing my ISP is actively monitoring my every move regardless of any legal issues. Another problem with the monetisation scheme is how to charge the customer. Do you add the price of anything the customer downloads to their monthly bill? How do you determine the price? In a perfect world, the artist or label would set the price, but in the digital world, nearly all retailers reserve the right to set the price at what they think the market will bear. What it all boils down to is this: Should ISPs be treated differently to retailers where recovering money for artists and labels is concerned?
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