Steal This Column!

Regular readers of my column (i.e. my parents and roommate) know that I’ve often written about the changes in the music and entertainment industries brought about by the Internet and digitization. I’ve always held that the worst-case scenario would be one in which competing record labels, unable to come to agreement on a Napster-like service for digital subscriptions to music, would fracture into a handful of incompatible download sites. Yet I could never have imagined just how bad the situation would be.

This summer I had the fortune of sitting next to an attorney for the record label Universal on a transcontinental flight. The lawyer told me something about the industry that I had never understood. While the record labels are ambivalent to online distribution, the real resistance in the industry comes from the performing rights organizations like the American Society of Composers, Authors and Publishers and Broadcast Music, Inc. These organizations manage the royalty collection and distribution for “public performances” of music, like the placement of a song on a movie soundtrack or its use in a bar’s karaoke machine. In recent years, they have increasingly brought the distribution of music on the Internet under their control. And because these organizations are accustomed to charging users of music on a per-use basis, they mean to charge consumers on a per-use basis for music legally downloaded from the Internet.

Of course, owners of intellectual property have always wanted to do just this—look at the silly warnings on the inside of paperbacks that urge you not to give the book to a friend. Nevertheless, until very recently, there was no practical way for owners of IP to prevent their users from sharing content. Now, everything is changing. As former Harvard Law School Professor Lawrence Lessig has written in Code: And Other Laws of Cyberspace, on the Internet, owners of intellectual property can enforce their one-user, one-payment dreams. They can architect the format and means of downloading such that you simply cannot e-mail or Instant Message an MP3 file to a friend. Even worse, they can extend the per-use model of the public performance companies to end users, forcing individuals to pay miniscule amounts—say 10 cents—every time they want to listen to an MP3. The enabling technology is called digital rights management (DRM), which codes the rules of use favored by the record publishers and forces users to adhere to those rules if they wish to listen to the music files. The record labels are now setting up competing download sites—Pressplay and Musicnet—which will each have some implementation of DRM technology, even if they may be nothing more than simple subscription services at launch.

Infuriatingly, the entertainment industry has chosen this path not out of constraint but out of greed. Digital distribution dramatically reduces the costs of business for intellectual property companies, because it eliminates the need for companies to move atoms in the physical world in favor of pushing digital bits across the world information grid, in the words of MIT futurist Nicholas Negroponte in his book Being Digital. It’s common knowledge that out of a $16.99 CD price, artists get about a dollar, record labels get $5 to $10 and the rest goes to the retailer. These prices reflect the costs of doing business—artists, who often pay for their studio recording time, seldom profit on an album. Record labels, which bear heavy promotion costs, usually make a dollar or two of profit per CD, as do the record stores, which must pay rent and salaries.

Digital distribution not only eliminates the record store entirely—meaning that an album sold online should cost $7-$10 less than one bought in a store—but it reduces the cost of promotion, because record labels can use customer profiling technology to make recommendations like Amazon.com does for books. In addition, because bandwidth is so cheap, there is essentially no marginal cost in digital distribution. That means that beyond the fixed cost of studio time, promotion software and bulk bandwidth, record labels will have essentially no cost. And yet they will still try to charge us $16.99 for albums downloaded over the Internet, meaning that they could potentially realize $14 of profit per album.

I point all of this out to highlight the excesses of this greedy industry and the degree to which they want to insult their customers. Until the industry delivers a model in which users pay a single subscription of $10-$20 per month for unlimited and unhindered access to music, movie and other entertainment files—a model which would still guarantee monstrous profits—I can see no moral problem with downloading files through post-Napster tools like Gnutella and Morpheus. Owners of IP must recognize that marginal pricing should only reflect marginal cost. Until then, the only way to express our dissatisfaction is to refuse to participate in this new, awful model. So steal this column!

Alex F. Rubalcava ’02 is a government concentrator in Eliot House. His column appears on alternate Mondays.