This article is useful background as you consider the future prospects for DESTRA in its legal mp3 facility.
See http://www.smh.com.au/articles/2003/11/21/1069027326313.html
Can't stop the music November 22, 2003
Voting for technology ... Nikki Hemming, head of Sharman Networks.
The music industry has claimed a victory against illegal downloads from the internet. But the future may lie more in offering alternatives to consumers than prosecuting them, write Kirsty Needham and Richard Jinman.
ON THE edge of their seats, more than 30 students who had crowded into court for the verdict on Australia's first criminal prosecution for online music piracy braced for the worst.
The judge had declared student music pirates deserved to be imprisoned, and he would send a message that society did not accept the spread of such behaviour, dismissing it as trite to say that "everyone is doing it".
Deputy Chief Magistrate Graeme Henson calculated 18 months to be the appropriate sentence for Peter Tran, 19, and Charles Ng, 20, caught by federal police officers and music industry investigators operating a free music download website.
But the judge also stressed that courts sentenced by law, and "not to the loudest or most strident" voice. Because of the defendants' age and the fact they made no money, the sentences were suspended, criminal convictions still recorded, and orders of community service made.
The Australian music industry's chief piracy investigator, Michael Speck, who had been publicly pushing for jail, unhappily appeared on television declaring "a banana republic".
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The young spectators formed a commiserating "group hug" outside the courtroom, and some claimed to be permanently turned off music.
The score after round one of the Legal Battle for the Online Future of Music? Probably nil-all.
"The music industry has run down its goodwill," said Charles Britton, policy officer at the Australian Consumers Association.
Tactics of high-profile litigation wouldn't stop online file-sharing or illegal downloads, but instead drive "these people to go deeper underground and make themselves smaller and harder to be detected and traced", said Britton.
"Why is this phenomenon occurring? It is occuring because of the inability of the music industry to grapple with new technology and new consumer perspectives of the marketplace."
Litigation may push internet users to legitimate downloading services - when they became available - but equally, "they might stop buying music", said Britton.
This week's verdict was the end of a small skirmish in a long battle over the future of web music between the music industry, the website owners, the pirates and the consumers. Change is coming rapidly as some file-sharing sites want to become legal, some record labels want their own sites to sell tracks while others vow to step up prosecution of individual downloaders.
The company behind the internet's most popular file-swapping software, Kazaa, called for a truce with the record industry this week with a global advertising campaign urging millions of users to "mobilise" and lobby American politicians to help pirate music go straight.
"There is a better way to engage fans that doesn't involve suing them," said Nikki Hemming, chief executive of Sharman Networks, the Sydney company that owns Kazaa.
Sharman is being chased through the American courts by the record industry. However, Hemming said previous legal action ruled Kazaa was a legal product, despite the behaviour of some of the consumers who used it, and her company wanted a commercial deal to allow licensed music product from the major labels to be swapped, for a fee, by Kazaa users.
Some artists, such as Ice-T and Billy Bragg, sell music through Kazaa, which has 60 million users, and the company says it is trying to educate consumers on "responsible use".
The music industry has been "deaf" to the request, hence the advertisements urging file-sharers to make their voice heard and contact music company executives directly. "The consumers are already voting for the technology," Hemming said.
She said record industry litigation against individual Kazaa users in America had led to an increase to 45 million a month in Kazaa downloads of licensed content files. Almost half of these legal files are games, and Hemming said "16 out of the top 20 game publishers are starting to give us new-release product at the same time as retail stores".
If it weren't for the huge expense of the litigation, Sharman Networks would be self-funding, she said.
Domenic Carosa, the 29-year-old chief executive of Destra Music, formed the mp3.com.au website five years ago. It has carried only licensed music, he said. At first, it featured only unsigned artists and independent labels, because "back then the music companies viewed the internet as the Antichrist.
However, Carosa said Destra has clinched a deal to offer 100,000 tracks from "most" big labels for download by Christmas, priced from 99 cents to $1.99. They will be sold through the websites of record stores including Sanity, HMV and Chaos. He also plans a prepaid voucher for teenagers without access to a credit card.
"It has taken longer than expected, and has been very frustrating, but I can now see the light and the record companies have realised they are sitting on a goldmine," said Carosa.
The success of Apple's iTunes service in the US has encouraged record companies to wholesale tracks to Destra at US99 cents ($1.37), he said. An earlier attempt to sell a limited range of songs online in Australia for $3 to $5 proved "too expensive" for users.
Carosa said he has little sympathy for file-sharing networks such as Kazaa which have supported millions of pirates but are now pleading for similar deals: "Kazaa have alienated the record companies and the relationship will be difficult to rebuild."
Carosa sees two main future drivers of online music: record companies making their catalogues available at a reasonable price and continuing legal action against copyright infringers.
"It is sending a very clear message to teenagers that record companies won't tolerate the copying of music," he said of the Sydney verdict. "My personal view is that for a first offence a suspended sentence seems reasonable because it is highly probable they have learnt their lesson."
Caroso is concerned, however, to hear industry rumours that Australia's music piracy investigators will next launch prosecutions against individual file-sharers, who until now have not had the choice of a legitimate option. "They will be a lot more justified going into next year when a lot more services are available," he said.
Senior Australian music industry figures say aggressive litigation should be only part of the record industry's campaign against illegal file-sharing. User education and the establishment of legitimate, paid download services are just as important.
Charles Caldas, chief executive of Shock Music Group in Melbourne, expressed mixed feelings about the students' sentences this week. While acknowledging the damaging effects of piracy, he said his industry must provide a "viable alternative".
"I think the industry has to be very careful who it prosecutes and for what reasons," Caldas said. "I don't think that consumers should be targeted by this. The RIAA [Recording Industry Association of America] stance seems to be whoever shares files gets burnt. Without a viable alternative that seems a bit cheeky, frankly."
Caldas said it would be pointless for Shock to establish its own service, because consumers want to buy all their music from a single retailer.
"The iTunes model is certainly a pointer," he said. At the end of day it's all about ease of use, convenience and making it a pleasurable experience."
The managing director of the record label BMG Australia, Ed St John, said there was broad agreement that a "multi-pronged" approach was needed to combat illegal file-sharing. He said the development of "legitimate, paid download models" was the first part of that strategy and highly publicised litigation should be a final resort.
"Most of us who work in record companies come from a marketing background and the last thing you want to do is alienate the customer," he said. "[Litigation] could possibly reinforce the image of record companies as mean, arrogant, penny-pinching organisations that slam the little guy."
St John considers the prosecution of the three students was clearly designed to make a "public statement".
"These kids were doing something illegal and it had widespread, damaging implications for the music business."
Michael Parisi, the managing director of Festival Mushroom Records, said file-sharing was "not going to go away" and the industry had to establish legal services.
"I think kids these days think they have a divine right to free music," he said. "I don't condone what's going on out there, but I understand it."
Unlike most of his peers at other labels, Parisi believes Festival Mushroom should have its own online retailing service.
"We have an Australian catalogue that ranges from AC/DC to George and it's important that we have our own identity and platform," he said.
Most Australian labels are looking to wholesale music to new online retail services such as Telstra's BigPond Music.
Warner Music Australia has signed an in-principle deal to provide music and most major labels are expected to be on board by its launch next month.
Shaun James, chairman and chief executive of Warner Music Australasia, said there was a misconception that illegal file-sharing was not theft.
"If you put three university students in court for stealing $60 million of jewellery, there wouldn't be a problem," he said. "It was found by a court of law to be a flagrant breach of copyright."
But James also believes the development of legitimate services will help reduce the level of music piracy.
"It won't cancel it out, but it may reduce it," he said. "It has been a 100 per cent pirate market and we're trying to get it as close as possible to a 100 per cent legitimate market."
Meanwhile, Speck said litigation against the operators of allegedly illegal file-sharing services in Australia was intensifying. His organisation is pursuing another "major case" in the Federal Court against the Sydney internet service provider ComCen and the Brisbane operator of the mp3s4free service.
"Beyond that we are also part of an automated web surveillance project which in 2002 was responsible for taking down 700 million files and shutting down more than 900 illegal servers."
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