Is peer-to-peer downloading just digital gluttony?

***Very Interesting please Read***

Adam McDowell, National Post Published: Tuesday, April 01, 2008


On a message board for the group People With An Absurdly Large Music Collection on last.fm, a user with the handle AndretheDark boasts of his hoard of 30,281 songs. It would take him 94 days to listen to each one. With a catalogue of more than 75,000, Pale_Court has him beat. She writes that her music pile takes up 368 gigabytes of space, and counting.

In the era of hard drives measured in terabytes, anything less than 10,000 songs is modest. Eric Garland, CEO of BigChampagne, says larger hard drives are pushing the number of illegal downloads worldwide past the 15-billion-song mark, and some are gorging at the trough with insatiable appetites.

"There's a really significant population who are downloading hundreds of songs a month - more than you could listen to if all you did is listen to them," says Garland, whose online media metrics company was among the first to chart the popularity of illegal downloads. "Are these people who are feeding at the all-you-can eat buffet of free music greedy? The answer, by the numbers, is absolutely. They eat till they make themselves sick. People hoard music that they never even listen to."

The music industry is so worried that the Canadian Association of Songwriters has proposed slapping a $5 levy on every Internet subscription, with the money to be distributed to musicians. Even prince of darkness Ozzy Osbourne has complained that sales of his latest album, Black Rain, have been "suffering terribly" because people are helping themselves to left-click discounts.

On the face of it, hoarding tens of thousands of digital music files for which one has paid nothing looks like greed, plain and simple. Economists, however, are accustomed to soberly examining human beings' acquistive tendencies while declining to moralize. For analysts of digital downloading trends, the question is often not whether music piracy is wrong: It's whether the greed (or rather, self-interest) of digital packrats can create positive externalities (that is, benefits) for others.

"We do not use the term ‘greed.' We never try to put that label on it. You want to find out why this phenomenon is happening," says Sudip Bhattacharjee, an associate professor at the University of Connecticut's school of business. "We always try to understand the ‘why' of it. We look at it from an economic perspective."

Bhattacharjee has spent much of this decade studying the behaviour and motives of digital pirates and their effect on music sales. His research has indicated that chronic downloaders' collecting is often as much about sharing as it is about owning music for themselves.

"Almost all college students are on Facebook, and the reason is they want to know about others and let others know about themselves," he says. "Music is a great way of letting other people know about themselves: This is what my taste is, these are my favourite artists."

Mega-collections then become music libraries for others. Keiran Reilly's collection of 4,477 songs (about 12½ days' worth) looks puny by comparison to some of the libraries on last.fm, but it's as much as he can possibly store. "The biggest thing that's keeping me from getting more music is that I've run out of space on my computer," says the 29-year-old Torontonian. He has 1½ gigabytes of hard drive space left, "which is barely enough to run the computer." He estimates around 75%-80% of his stockpile was downloaded without paying via a peer-to-peer application called Azureus.

Reilly (his name has been changed) is a connoisseur of genres some people have never heard of. His playlists of late have been built around Calle 13, Alexis y Fido and Daddy Yankee - Puerto Rican stars of reggaetón, which he describes as "salsa-infused Latin hip-hop." He's proof of the idea that the larger and more varied one's shared music collection becomes, the more one is doing musicians' marketing for them. You don't even need to be linked to Reilly's collection online to benefit from his collection of reggaetón. You just need to be in his car.

"If anything, having a larger library allows me to share more," Reilly says. "With the recent fad of reggaetón in my life, it's funny how many people have been in my car and said, ‘Wow, what is this? Where can I get more of this?

"That's totally exposing them to more music. The fact that I have more music available to me and I can easily create a high-quality copy means I'm sharing stuff to other people that they otherwise wouldn't be exposed to at all."

Research backs up the idea that free downloading gives breaks to smaller artists. In a 2002 paper titled Stardom, Peer-to-Peer and the Socially Optimal Distribution of Music, M.X. Zhang of the Sloan School of Management at MIT argued that marginal and up-and-coming musicians benefit from the way file sharing disseminates their music from hard drive to hard drive. In a 2003 review of the economics literature about digital piracy for the German economics institute CESifo, researchers Martin Peitz and Patrick Waelbroeck summarized Zhang's findings: With the help of peer-to-peer networks, "marginal artists can gain from the exposure effect ... in an asymmetric world (with stars and niche performers), the current techonology [i.e., CDs] favours the promotion of stars. With digital copies, niche performers can more easily access consumers."

As well as the star system, illegal downloading discourages another strategy from the CD era that was designed to maximize record companies' profits by reaching deeper into customers' pockets: the packaging of songs into albums. Economists refer to this kind of sales strategy as "bundling."

"For example, we see bundling going on when we see a toothbrush sold with toothpaste," Bhattacharjee says. "What is an album? It is basically a bundle of songs. Some of them are good, some of them are not so good. A lot of consumers have indicated they do not like bundling."

Garland recalls that prior to the advent of CDs in the 1980s, the music industry generally divided its sales between singles and LPs. "In the days of vinyl, a song was pretty cheap." Then, he says, "The industry got greedy."

In the era of the compact disc, the single all but disappeared. Consumers were forced to spend $15 or more on an album, buying 10 songs they didn't want in order to get the one song they did.

The result? "Oh my God, they minted money," Garland says. "The torrential downpour of cash from the late '80s through the middle '90s was unprecedented. If you talk to the executives and the artists who were there during this gold rush and they talk about it like Camelot, as a time when all you had to do was show up in the morning and you got rich."

Through interviews and focus group sessions with digital packrats, Bhattacharjee and Garland have both concluded that many people are motivated to download songs for free in retaliation for what they perceive as the greed of the recording industry.

"One of the drivers in the customers' greed is vengeance. People feel that they were exploited by the music industry for years," Garland says. "People justified downloading music for free by saying, ‘The music industry stole from me and my parents, and now it's our turn.' "

Today the big four record companies are back to where they were in the 1970s and prior: Having to sell each song individually, even to the customers willing to pay full price. Sounds like a victory for the listener.

The economic arguments in favour of file sharing should not be interpreted to suggest you shouldn't pay. In fact, there's never been a better time to buy music legitimately, and it could be argued that the average, conscientious consumer has greed to thank for it. If not for the popularity of the original, all-free version of Napster around the turn of the century, Garland says, legitimate music download sites - such as iTunes, Canada's Puretracks and the contemporary, for-pay version of Napster - might never have developed in the first place.

At the very least, competition from illegal downloading motivates for-pay sites to offer the customer the best deal possible. Fortunately for the recording industry, it is possible to offer a better deal than free. As economists observe, "cost" does not merely refer to money.

"Going to an illegal site has its costs," Bhattacharjee says. "The time you spend searching and the time you spend downloading. When you download something illegally there's a very high chance there will be a virus in that, so you are killing your own machine. And the whole idea that you are doing an illegal activity and you may be caught. When you download an illegal file, very often it is not of high quality. These are all things that deter you from going the illegal way."

Given the pains of piracy, it's not surprising that more and more consumers are choosing to spend a dollar a song instead. "It is a much more satisfying experience than going to an illegal site," Bhattacharjee says.

Techonology may have changed the game, in other words, but the recording industry could still win it. If greed got them into this mess, greed can get them out.

But even if the recording industry triumphs in the battle for some hard drives, the consumer has already won the war. Thanks to innovations forced on the industry by illegal downloading, Garland says the 21st-century model would favour the little guy even if everyone started paying for every track tomorrow.

"As it turns out, iTunes and their ilk are almost as bad for big music as people downloading songs for free. It's devastated the business," he says. Garland has explained to record company executives, " ‘If you guys could obliterate piracy and replace it with people buying songs a buck at a time ... people are spending [a dollar] instead of $18.' You're arguing about the difference between losing 100% of your gross and losing 90%-plus."

Either way, the listener wins, and not because anyone is deliberately arranging for it to be so. For it is not from the benevolence of the record company, nor the artist, nor Apple - nor indeed of the digital packrat - that we expect to be able to download a track from iTunes for 99¢ with little or no hassle. It is from their regard to their own self-interest. Adam Smith might have liked the sound of that.