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How would you feel if you went to your local music store, bought a tape of your favorite band’s latest release, and discovered that playing it in your car damaged the stereo so severely that your entire car needed to be brought in for servicing? Or what if the tape you just bought were incompatible with your walkman, so you couldn’t listen to it at the gym or while jogging? What would you think if you found out that the music industry intentionally manufactured tapes so that their customers would suffer this damage and inconvenience?
This sort of thing is already happening, not with tapes and cars but with CDs and computers. In a new effort to reduce online music swapping, record labels have been quietly releasing CDs whose data tracks have been deliberately corrupted in order to make the discs unusable in PCs. Unsuspecting consumers have discovered that these corrupted discs can crash computers and, in some cases, prevent them from starting up. Some computers may even require a trip to the repair shop to get them functioning properly again.
In the late 1970s, the CD was invented by Philips Electronics and Sony. The CD specifications—known in the industry as Red Book and Blue Book—dictate to manufacturers of CDs and CD players exactly what constitutes a CD. These specifications ensure that anything claiming to be a CD is compatible with anything that claims it can play CDs. Without this guaranteed compatibility, some CDs wouldn’t work in some players, and the CD format would have been dead on arrival in the marketplace.
The corrupted discs being released by record labels deliberately deviate from the CD specifications, which is why they don’t function properly in PCs. Philips Electronics, which maintains the CD trademark, is now threatening to sue record labels that release corrupted discs in order to stop them from claiming that the discs are CDs. Because the corrupted discs don’t follow the CD specifications, Philips argues, record labels shouldn’t be allowed to call them CDs. “Those are silver discs with music data that resemble CDs, but aren’t,” said Philips spokesman Klaus Petri to Financial Times Deutschland (translation by Wired News).
Not wanting to be blamed for the problems that the corrupted discs cause, computer manufacturers have been working to deflect complaints. Apple Computer, for example, recently released the following statement about the corrupted discs: “A small number of audio discs use a copy protection technology that can prevent the disc from being read by a computer. This may also prevent the disc from being ejected. [Copy protected] audio discs are technically and legally not Compact Discs. [...] Audio discs that incorporate copyright protection technologies do not adhere to published Compact Disc standards. Apple designs its optical disc drives to support media that conform to such standards.”
What is really at issue here is the doctrine of “fair use”, a provision of U.S. copyright law that allows material to be copied for certain non-commercial uses. For example, it is perfectly legal for you to tape a CD so you can play it in your walkman while jogging. You may also legally make a mix CD and give it to a friend. With the rise of the Internet and the MP3 music file format, however, the same technology that enables you to make a mix CD also simplifies music piracy. In order to fight the potential piracy, the music industry is launching a full-scale assault against fair use. Consumers stand to lose fair use rights as well as choice in the marketplace.
All this comes just as consumers are realizing that music stored as MP3 files is much more convenient than music stored on CDs. Like any physical object, CDs have limitations. They take up space. They can be scratched or lost. They are portable only in small quantities. Other media types—such as computer hard drives—can store massive quantities of music data in the form of MP3 files in a very small space. During the last few years, a whole new class of electronic devices has been invented that provide a far more consumer-friendly experience than CDs themselves. The newest incarnation of these devices can hold a significant portion of a person’s entire music collection in a space smaller than the average walkman.
I’m a very satisfied owner of one of these devices, an iPod. The iPod is a truly revolutionary device which has forever changed the way I listen to music. The iPod utilizes a small hard drive—the same kind found in laptops—to store MP3 files. It can hold many hours of music, enough to store just about any song I could ever want to hear. It’s light, it fits in my pocket, and it has survived 6-foot drops without skipping. I take it to the gym, on the subway, and rollerblading in Central Park. When I’m at home, it’s hooked up to my stereo so I can find the music I want to hear by scrolling through a list of songs instead of digging around in a pile of CDs.
Unfortunately for consumers, the music industry feels threatened by devices like the iPod, so such devices may be an endangered species. Rather than try to understand what’s driving the popularity of these devices, the music industry is desperately clinging to a distribution model that new technology is proving to be obsolete. The music-as-data model represented by MP3 files has clear consumer benefits over the music-as-physical-object model represented by CDs, tapes and vinyl. But record labels insist on acting like stubborn buggy-whip salesmen who refuse to acknowledge the superiority of the automobile. Where would we be if every industry that felt threatened by new technology were able to prevent it from coming to market?
Ironically, the music-as-data model affords many benefits to the music industry as well as the consumer. Imagine what would happen if all music were distributed electronically instead of physically: Factories that make CDs would no longer be necessary. Shipment of CDs from factories to warehouses and from warehouses to stores could be eliminated. Distribution costs could be reduced dramatically, and the benefits to the environment would be substantial. The cost savings would give the industry higher profits, while providing more money for marketing and artist development. And if the record labels had any conscience at all—not likely given how they currently treat artists and consumers—they’d use some of the cost savings to provide more favorable royalty schedules to artists themselves.
This isn’t the first time entertainment distributors did everything in their power to rob consumers of convenience and choice. In the early 1980s, the movie industry tried to stem the tide of technological advancement by killing off the VCR through lawsuits. At the time, Motion Picture Association of America president Jack Valenti went to the ridiculous extreme of comparing the VCR to a mass murderer: “The VCR is to the American film producer and the American public as the Boston Strangler is to the woman alone.” Today, however, the movie industry is making a mint from the homicidal VCR: nearly half of all movie studio revenue comes from video rentals, while less than a quarter comes from box office receipts.
Record labels are also ignoring an important historical lesson from another industry. In the 1980s, the software industry routinely used copy protection mechanisms to fight software piracy. As with corrupted music discs, copy-protected software often caused serious problems for legitimate users. Pirates, though, always found a way to defeat copy protection, so the only people who suffered were the paying customers. Because unhappy customers usually don’t become repeat customers, the software industry eventually ditched copy protection. Since that time, the software industry has remained one of the fastest-growing components of the economy, and—despite the current downturn—is still one of the most profitable as well. Even though the software industry has faced the problem of piracy for years, it has not only survived, it has thrived.
Consumer electronics companies, with their better understanding of technology, see the futility in trying stop the determined pirate. “[Copy protection is] not going to work, because any hacker can still make copies. It’s only going to affect legitimate consumers, and we know there have already been considerable complaints”, said Philips’ Gary Wirtz to New Scientist. In the case of the corrupted discs, it turns out that high-tech hacking isn’t even required. Copy protection mechanisms have already been defeated using low-tech tools like Magic Markers, Post-It Notes and electrical tape, any of which can be used to mask the corrupted data track. Sooner or later, pirates will find a way around any copy protection technique. So why, then, does the music industry insist on punishing the honest consumer because crimes might be committed by others?
I wonder whether the music industry is just using piracy as an excuse to extract even more money from consumers. As Wired News put it, if the music industry had its way, “consumers would be required to pay once for a physical CD and once for the digital music file.” Looking at the industry’s current distribution model, this does not sound like a paranoid thought. Over the years, as the cost of manufacturing CDs has fallen dramatically, the retail price of CDs has risen. Selling individual songs on the Internet might not be palatable to record labels, because consumers must now purchase an entire CD even if they’re only interested in two or three songs. Perhaps the real fear of the music industry is that packaging their product in a consumer-friendly way—in effect allowing the consumer to pick and choose music song-by-song—will put an end to their gouging of the consumer.
Some might mistake the arguments I’m making as running counter to the concept of free markets. Actually, it’s quite the opposite: it is the current structure of the music industry that does function according to free market ideals. Music is not a commodity, like gasoline, where the consumer is equally willing to purchase from any vendor. When a consumer wants to buy a CD, it’s typically the case that the consumer has a specific artist in mind. Because each artist is controlled by a single label, there is an effective monopoly; the consumer can only buy a given title from a single vendor. As a result, there is less of an opportunity for market forces to be applied, and therefore there is little chance for price competition.
The current structure of the music market serves neither the artist nor the consumer; only the record labels benefit. In order to fix the problem, exclusive contracts between artists and labels must be eliminated. Instead, artists should be able to specify a “wholesale price” for their music—the price at which they would offer their music to record labels. Any interested label would pay the wholesale price to purchase the right to re-sell the music to the consumer. Labels could then differentiate themselves by price and packaging: bargain hunters would pay low prices for minimal packaging, the average consumer would pay a mid-level price for standard packaging with liner notes, and collectors would opt for elaborate, limited-edition packaging, just as they do now. Artists would be better compensated for their creations, while market forces would finally be applied to the industry. The competition among labels would push prices downward, benefitting the consumer.
Record labels, of course, would not like this solution. Sooner or later, though, the music industry is going to discover that bullying customers and exploiting artists is not a strategy that leads to long-term success. I can’t think of too many businesses that have thrived while treating their customers and suppliers like adversaries or by ignoring the technological realities of the day. Sure, the record industry may remain profitable in its current state, but even higher profits are to be made by listening to consumers and catering to their desires. As long as I’m not violating the copyright laws, I have the right to listen to the music I’ve paid for in any way I choose. If that means putting music on an iPod or making a mix CD, the music industry should not assume I’m a criminal and try to prevent me from doing it.
We do have power as consumers. I’ve decided to exercise my power by boycotting any label that releases corrupted discs or otherwise takes any action that prevents me from using what I’ve paid for in a legal fashion. I won’t pirate, but I also won’t give money to companies that are then going to use that money against me. If we all did this, we could bring the music industry to its knees. I’ve always believed that the tactics of the music industry would do more to hurt sales than piracy itself. As consumers, we can make that a self-fulfilling prophecy.