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Main Content
Megaupload - The Latest Target in File Sharing Clash of the Titans
Record companies, not artists, are the real victims of file sharing and they will have to fight hard to survive
The founder of file sharing website Megaupload remains in custody in New Zealand after a court refused him bail last week. 38 year old Kim Dotcom was arrested at his home on January 20th. He is accused of being the ringleader of a scheme that allegedly made more than $175 million since 2005 from illegal file sharing of music, films and other copy-righted content. The FBI wants him and three of his associates extradited to the America on charges of internet piracy, copyright infringement, racketeering and money laundering. Dotcom says he is innocent and that the US is trying to paint the blackest possible picture of him. If convicted in the States, he faces a lengthy jail term.
File sharing, the practice of distributing or providing access to digitally stored information, has been widely condemned as harmful to record sales, artists and creativity. The entertainment industry says it has already cost them billions of dollars and threatens hundreds of thousands of jobs. John Woodward, chief executive of the UK Film Council, said that the effect of illegal file-sharing is that "films go unmade, DVD sales deteriorate and jobs are lost in production and distribution of content".
However, many have argued for a long time that the practice is not necessarily harmful to artists. Counter-intuitive though it seems, it may even help them. US Rapper 50 cent told a Norwegian magazine in 2007 that ‘what is important for the music industry is that this (file sharing) doesn’t really hurt the artists.’ 50 Cent is a wealthy and successful rapper, who arguably can survive the financial impact of illegal downloading more easily than others, but it does not follow that his observation does not apply to smaller scale musicians.
A 2004 study from Harvard Business School suggested that peer-to-peer file sharing is a potential promotional tool, much like the radio. Millions and millions of people participate in online file sharing, downloading billions of illegal copies each year. A significant proportion of these are time rich, cash-poor teenagers and students, who do not have the means to buy the records they are downloading. These ‘sales’ are not really lost, as those downloading the tracks would not have bought them anyway.
Most importantly, small time and new artists get exposure that they may otherwise never have had, especially if they have no record label. Some of those that stumble across such musicians, particularly conscientious music lovers, will pay if they find something they admire. Such sales will effectively have been generated by piracy. Other users may pay in the future when they have more money. Some, having sampled a track or two, will even buy a whole album.
British student Robin T says he downloads about 250 MB worth of music each month. ‘I feel a little guilty for depriving musicians of their income. If money wasn’t an issue I’d certainly pay to download films and music. I have sometimes bought the music of some talented but small indie bands as they struggle to pursue a career.’
Some analysts even suggest that it is worth musicians’ while to offer some tracks for free on their websites in the hope that revenue will be made from concerts, merchandise and album sales.
Essentially, artists may be able to survive, or even profit from file sharing, whether it be legal or not. The real losers are the record companies and they are going to struggle more if they do not find a way to fight the new competition: the ever-evolving and mysterious world of the internet.
Megaupload was shut down just hours after opponents of the Stop Online Piracy Act (SOPA) and Protect IP Act (PIPA) staged a mass online protest which saw sites like Wikipedia voluntarily shut down. Hackers attacked the public websites of the US Justice Department and the world's largest music company Universal Music. They also targeted the Recording Industry Association of America and the Motion Picture Association of America. Seven million people signed an online petition by Google, demanding free speech on the internet. The result was that lawmakers postponed a critical vote on the bill.
Many within the entertainment lobby are not very technical and simply do not understand their opponents’ actions or methods of attack. While technology companies had the power of the Internet at their fingertips, entertainment heavyweights such as Hollywood relied on old-media weapons such as television commercials. In recent years, the technology industry has spent more than the entertainment companies too, $1.2 billion between 1998 and 2011, compared with $906.4 million spent by the entertainment contingent.
Apart from anything else, the tech industry has more conscripts. Prior to its closure last week, Megaupload was estimated to be the 13th most visited site on the Internet, accounting for 4% of all worldwide Internet traffic. It had 180 million registered users with over 50 million visiting the site each day. Fears have been expressed at the apparent ease with which the FBI and the Department of Justice could close down the site, without even the aid of legislation such as SOPA. The reality is that the vast majority of these technically skilled users are going to continue to download. A growing number of these are people who have no idea what it was like to save up and buy a tape or CD. Music has always been ‘free’ to them; they simply will not accept the idea of paying every time. No legal threats are going to stop them.
One theory circulating the Internet contended that Dotcom’s empire was targeted not because it was regarded as criminal, but because it attempted to take the music industry head on. Dotcom gave an interview to the site TorrentFreak in December 2011, outlining his plans for ‘Megabox’. This was to be a music store and DIY artists’ distribution service which would cater to unsigned artists, allowing anyone to sell their creations and retain 90% of the revenue. Effectively, Megabox would have bypassed the record labels.
Maybe Dotcom and his associates are guilty as charged or maybe they were indeed targeted because they posed too big a threat to the entertainment industry’s heavyweights. Whatever the truth, they have been caught up in an epic battle between two titans, from which there can only emerge one winner. What started as a moral battle has become a fight for survival. In some senses, the moral arguments surrounding piracy are irrelevant because file sharing is here to stay. The online reaction to SOPA has demonstrated the power, strength and determination of the technology industry. The record companies must adapt or die out.