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by Staff
emarketer
Jun 28, 2005
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The Supreme Court ruled unanimously against
Grokster and other file-sharing networks, finding that they can be held
liable for copyright infringement. But recent survey data suggests that
Internet users — especially younger ones — view things differently.
Amid the increasing use of portable devices capable of playing audio
and video files, the high court's unanimous ruling has significant implications
for the future of digital content delivery.
In research completed in May, the Solutions Research Group found that
Americans were evenly divided in their attitudes toward file sharing
— with age being the determining factor as to which side of the
divide users were on, although education and Internet usage habits also
accounted for significant differences.
In a random sample, 45% of respondents said file sharing services should
be outlawed, while 39% said they should be allowed and 16% are "not
sure." But among Internet users the "vote" was split
down the middle with 44% saying file sharing services should be outlawed
and 44% saying they should be allowed.
Support for file sharing was much higher among younger Internet users,
though, with 54% of those age 12 to 29 saying it should be allowed (vs.
34% who say outlawed).
Among owners of MP3 players, the majority said file-sharing should be
allowed (55% vs. 35%). Broadband users tended to support it as well,
48% vs. 38%. Support for file-sharing was strongest among respondents
who have downloaded music — free or paid — with 63% saying
it should be allowed vs. 27% saying it should be outlawed.
The strongest opposition to file sharing was among older Americans.
Some 51% of Americans over the age of 50 said file-sharing services
should be outlawed, while 27% said they should be allowed.
"The magnitude of the generation gap in attitudes toward file sharing
is striking," said Kaan Yigit, director of the study. "As
the first generation raised on the 'browse, sample and share' culture
of the Internet, young Americans are challenging the traditional notions
of intellectual property."
It wasn't just oldsters who were pulling against the free spirits of
P2P. Plenty of large corporations had money on the line.
"The Court's decision will have enormous consequences for copyright
owners and for those who currently thrive off of copyright infringement,"
said Christopher Ruhland, a lawyer who specializes in intellectual property
in the media and entertainment industries. "The studios and record
companies asked the Supreme Court to plug a significant legal hole created
by the lower courts."
A recent report from the Organization for Economic Co-operation and
Development takes a positive view of P2P, underlining the potential
of digital distribution, both as a new business model and as a new social
and cultural phenomenon. The OECD report did suggest, however, that
"given that the online distribution of content is a relatively
new phenomenon, legal frameworks involving issues such as rights protection
technologies and secure (micro)-payment systems may need to be revisited."
With that proviso, Sacha Vincent, an economist at OECD, and a co-author
of the report, told TechNewsWorld,"Online technologies could evolve
in a manner in which unauthorized use of copyrighted works are transformed
into legitimate businesses."
Findings from the OECD report include:
- Around one third of Internet users in OECD countries have downloaded
files from peer-to-peer (P2P) networks, with the number of simultaneous
users on all P2P networks reaching almost 10 million users in October
2004.
- In principle, file-sharing software is a innovative and promising
technology. However, many P2P users are making unauthorized copies
not only of music, but increasingly also of video and software.
- It is difficult to establish a basis to prove a causal relationship
between the 20% fall in overall revenues experienced by the music
industry between 1999 and 2003, but digital piracy may be an important
impediment to the success of legitimate online content markets.
- 2004 marked a turning point when a range of legitimate online music
services became available. By the end of 2004, there were 230 sites
offering over 1 million tracks online in the US and Europe.
- In the online business model, it is mainly the record labels that
generate direct revenues from the sale of online music over third
party services. In the current environment, online music providers
currently face low or zero margins, calling into question wholesale
and retail pricing.
- Online music sales account for only a small share of total revenues
(1%-2%), but they are forecast to rise by a factor of 3 to 5 by 2008,
representing 5%-10% of revenue. In addition, there are positive and
significant economic ripple effects for consumer electronics manufacturers,
PC makers, telecom companies, and new digital intermediaries, such
as makers of digital rights management software.
- In terms of price, unbundling of music tracks may work to the advantage
of the music consumer. However, there may be "cultural costs
of unbundling," including the loss of meaningful societal access
to an artist's less "commercial" offerings.
The ruling on MGM v. Grokster directly addresses the question of illegal
file sharing of songs and video over the Internet, but its impact —
over both business and society — could be ultimately much broader.
For more information on this subject, see eMarketer's eStat Database,
which features hundreds of charts, articles and analyst reports on digital
music.
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