What About File Sharing?

My co-blogger Solveig Singleton has a new paper out about the DMCA. I’ll probably have some crticism of it in a future post, but I wanted to start off with a point I find pretty persuasive:

In the world of some libertarian DMCA critics (including a slimmer version of myself, some years back), legal barriers enforced in lawsuits against myriad copying individuals are a mainstay. More vigorous enforcement is sometimes presented as an alternative to the DMCA. With respect to my peers, this is non-responsive. The problem that the DMCA is intended to solve is in large part the limited usefulness of ordinary enforcement mechanisms; it does not solve the problem to invoke them…

The Internet lacks a dispute resolution mechanism appropriate to quickly resolve millions of small-value disputes, especially where the parties are geographically dispersed. The courts have serious limitations here; they are far too slow and far too expensive. They will work as a last resort in disputes where large value is at stake. This simply does not describe illicit personal copying by individuals. One sometimes hears commentators speaking as if it would work to just crack down on individuals in a few token, high-visibility cases. But this is neither fair to those individuals, nor will it deter. Study after study of deterrence suggests that harsh penalties do little or nothing if the probability of being caught remains below a certain threshold.

In my paper, I cited lawsuits against file-sharers as one possible weapon available to the recording industry, but I did so half-heartedly. I fear SIngleton may be right about the futility of ever more lawsuits as a means of deterring casual infringement. When I was in DC for the Cato copyright conference, I had lunch with two good friends who are fresh out of college. When I told them the subject of the conference, the conversation soon turned toward their own experiences with peer-to-peer files sharing. They told me–with no apparent guilt–about the peer-to-peer programs they use to download copyrighted content.

Now, these friends would be mortified to be caught stealing a candy bar at 7-11. And in my experience, their attitude is typical of young adults their age. I didn’t ask, but if I had, I suspect they would have been nonchalant about the possibility of being hit by an RIAA lawsuit. The odds of being caught are pretty low, and for logistical and PR reasons the RIAA can’t be too draconian with the people they catch.

Laws only work if the overwhelming majority of people obey them voluntarily. If most retail shoppers saw nothing wrong with shop-lifting, there’s little or nothing the police could do to prevent it. They simply wouldn’t have the time or resources necessary to prosecute everyone caught with a candy bar in their pocket. And once this fact became widely known, customers would become increasingly brazen about their theft. What allows the deterrent effect of anti-shoplifting laws to work is the fact that shoplifting is rare enough that the police can afford to prosecute most of the people caught doing it.

Singleton’s solution is digital rights management, which she conceives as the high-tech analogue of putting the merchandise behind the counter. The problem, as I’ve argued repeatedly, is that DRM doesn’t actually have any significant effect on peer-to-peer file sharing. Hence, her solution is every bit as “non-responsive” as the lawsuit-happy approach she criticizes.

But I’ve already beaten that horse to death. I’d like to turn some attention to the other side of the coin: critics of the DMCA, and of the RIAA’s lawsuits. Most of them claim that they’re not anti-IP as such, yet I haven’t found their proposed alternative mechanisms very persuasive. Consider the Electronic Frontier foundation, an organization that does a lot of work that I support. They’ve proposed collective licensing (voluntary if possible, compulsory if necessary) that would give users an unlimited right to share songs. The revenue would be distributed to artists and/or labels in proportion to the popularity of their songs.

But it’s not clear to me that this solves the central problem solved by file-sharing, namely that we don’t have an effective mechanism for punishing rule-breakers. If the RIAA took EFF’s suggestion and organized an ASCAP-style collective licensing scheme, it’s not clear to me how the enforcement problem would get any easier. I see two possibilities: a per-song rate, and a per-user rate.

The per-song rate wouldn’t differ significantly from the status quo. There are already per-song download services. Although I think DRM is probably holding these services back to some extent, I don’t think we can reasonably put them at fault for the prevalence of illegal peer-to-peer networks. Lower prices would certainly reduce the allure of file-sharing networks, but in any event, you’re still going to have a significant number of people who break the law. And if we don’t have some way of penalizing them, what incentive will they have to pay for music?

Licensing individuals is a more interesting idea. In this scheme, you’d pay a flat monthly fee for the privilege of unlimited use of peer-to-peer networks. This might lure more people over to legit services, since they could offer the same functionality as the now-illegal sites. But there are two problems with this scheme. First, you still are going to have to sue (or otherwise penalize) those who continue using the illegal services. Although the number of them will be reduced somewhat, it’s still likely to be too large to sue all of them. Secondly–and more seriously– you’d have to have some way of dealing with account-sharing. Since there’d be no limits on the number of songs you could download with a single account, families, friends, neighbors, and others would likely pool their money to purchase a single license. This kind of sharing would be very difficult to detect and police. But if it wasn’t policed, it would likely get out of hand, as the per-license rate would have to rise, and anyone playing by the rules and not sharing would begin to feel like a chump.

So it’s not clear to me how collective licensing would get you away from suing people. Which, as both Singleton and EFF seem to agree, isn’t going to deter people.

Another position is that peer-to-peer file sharing isn’t actually hurting the music industry. Steve R recently pointed out an analysis by Felix Oberholzer and Koleman Strumpf (the latter was a visiting fellow at Cato while I was there) purportedly showing that peer-to-peer networks haven’t harmed record sales. I need to read up on that, but I’ll confess I’m skeptical. Doing an empirical analysis like that seems extremely difficult given that there’s no good control group available. And I suspect that non-collapse of the music industry over the last 6 years is due more to older consumers who aren’t as comfortable with the technology. Over the next 20 years, more and more consumers will have gone to college post-Napster. I don’t believe that my generation will buy CDs (or patronize iTunes) in the same volume as my parents’ generation.

Yet another position is the position that we should abandon intellectual property entirely. Whatever the merits of that position, most prominent critics of the RIAA insist that it isn’t their position.

So where does this leave us? Are there other possible enforcement mechanisms that ought to be explored? Can the music industry survive with widespread casual music sharing? If not, is intellectual property in music doomed?

Comments Posted in: DMCA, DRM & Piracy