Digital Entertainment: Piracy Fight Shows Encouraging Signs

The fight against digital music piracy appears to be making headway, offering hope for industry initiatives to move legitimate digital distribution into the mainstream.

According to figures released last month by the International Federation of the Phonographic Industry, the number of paid online music sites quadrupled in 2004 to a global total of about 230. The content available from such sites rose to 1 million songs, and consumers worldwide responded by purchasing more than 200 million digital tracks last year, more than 10 times the number purchased in 2003.

In addition, use of portable music devices has exploded, with 22 million Americans owning an iPod or other digital player, according to the Pew Internet & American Life Project.

The result, according to Jupiter Research, is a global digital music market of $330 million, a figure expected to double in 2005.

Although the number of peer-to-peer users has decreased steadily during the past year, traffic figures remained consistent, as only low-volume swappers stopped using such services. However, P2P traffic is expected to ebb this year, according to Jupiter Research data and a report from the Deloitte Technology, Media & Telecommunications Group.

"By year-end, the growth of illegal downloading will start to slow, with occasional but high-profile litigation scaring off many casual pirates," the Deloitte report states. "Nonetheless, illegal downloads will continue to cost the music industry billions of dollars in lost revenue."

The Recording Industry Assn. of America and the Recording Academy have each stepped up anti-piracy efforts. The RIAA has not backed down from its aggressive legal strategy. In late January, it filed its largest block of file-sharing lawsuits yet—717, almost three times its previous record.

Taking an educational approach, the academy launched the next phase of its What's the Download initiative during the recent Grammy Awards. The academy created an advisory board of a dozen 18- to 24-year-olds to foster dialogue between music fans and industry representatives. The board's inaugural meeting featured a round-table discussion between board members and recording acts Kanye West, Mark McGrath and Earth, Wind & Fire (Billboard, Feb. 26).

"To tell kids not to download is like telling them not to have sex," West said during the meeting. "The only thing we can do is make the best music we can and weather this storm."

While the recent proliferation of digital music players and online services is credited with tempering P2P file sharing, concerns remain that the fragmented market may lead to a backlash. A recent study from research firm Shelley Taylor & Associates criticizes the slew of online services as being too confusing and controlling, limiting their mass-market appeal.

"Users' initial enthusiasm is being deflated as they realize . . . there are more limitations imposed on legitimate digital downloads, media players and portable devices than advertised," Shelley Taylor says.

Looking forward, the music industry hopes to use next-generation wireless networks as a distribution channel. Companies may even embrace a paid P2P model for this medium.

"These wireless networks are less vulnerable to the kind of piracy that has plagued our industry over the last four years," Warner Music Group chairman/CEO Edgar Bronfman Jr. said during an address to the Entertainment Law Initiative (Billboard, Feb. 26). "So long as protections are in place, technology will remain an opportunity, not a threat."