Thursday, 3 July 2008

BT joins Virgin Media in music sharing clampdown

It seems like the stakes have been raised in the cat and mouse game that is the music industry versus the pirates (aka the customers). BT have announced that they are about to go down a similar route to Virgin Media and start to issue warning letters to web users suspected of downloading music files without the permission of the copyright holder.

In the interests of full disclosure, much of this post is comprised of material from 2 articles over at The Register which you can find here and here

An article over at The Register suggests there is an increasing consensus forming between ISPs and the music industry. Geoff Taylor, chief of UK record industry trade body the BPI claims,
"Everyone agrees on where we need to be, and we are working closely with our colleagues across the music community, the more progressive ISPs, and government to get us there."
So how is this processes panning out? In brief, an agent working on behalf of the BPI will search file-sharing networks for files labelled as music and harvest the ISP address of the computer hosting it. They will then time and date stamp the file and contact the ISP responsible for hosting the customer. The ISP will then issue a warning letter or two (one from the BPI and one from the ISP) warning the customer about the illicit nature of the behaviour. One of the letters may hint at a possible disconnection. It would seem that the ISP odes not relay customer details back to the BPI (for now).

TorrentFreak have a host of articles describing the rather dubious nature of the accusatory methodology employed to 'prove' that file-sharing activity is what it seems to be, with some IP addresses that were supposedly participating in piracy were actually attributed to network printers. Hardly fool-proof evidence.

The threat of disconnection is the preferred deterrent of record industry in its battle against the filesharing of music. It has pressed hard for "three strikes" process, and has the support of the UK government, who do not want to interfere directly, to come to a voluntary agreement with ISPs that satisfies both sides. There are similar plans afoot in other European countries (eg France, Netherlands, etc) to implement a "three-strikes" approach despite the MEP Guy Bono report on the Cultural Industries condemning this approach.

In order to make this activity attractive to ISPs, the BPI have been proposing that the music industry comes up with more innovative ways to make money from the sector, by offering better services, which may benefit the ISPs via increasing customer retention. The decision to threaten customers with disconnection seems counter to that ethos but there may be some new ventures ahead.

A recent press release from the BPI suggests that new business models are proving successful:
"record company revenues outside direct sales of music increased by 13.8% to £121.6 million in 2007, from £106.9m in 2006. These additional revenues now account for 11.4% of record companies’ domestic income."
Retail sales are the traditional avenue for income generation but this is clearly changing. Digital sales and licensing are helping the industry, but newer services are also proving attractive. These include generating income from:
  • Synchronisation licence income - associated use of music in games, adverts and films
  • Broadcast and Public Performance Licensing (PPL) - getting income from venues which play music publicly
  • Multiple-rights deals ("360 degree deals") - deals which generate income from merchandising, touring, image rights, sponsorship and digital products like wallpapers for mobile phones
Such practises are believed to have resulted in a 16.2% increase in revenue generation in 2007. These service may soon be complemented by legal file-sharing services in the near future, once complications have been ironed out. It would seem these services could be very different to the types of subscription services ran by Napster in which artists would awarded on the basis of popularity. Music sales have long since been on the decline whilst the popularity of music has remained (see the slide courtesy of The Register).

When the industry introduced the CD format it allowed for the renegotiating of royalties, but with the death of the CD in the face of unlicensed filesharing, the industry is having to look to alternate methods of revenue generation, which may lie in the restructuring of licence deals in as similar vein to the model employed by Last.FM. However, the decision by Warner Bros to pull their content from the service in a dispute over royalties may highlight just how far this matter has yet to go before being resolved.

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