By Dr. Philip Baczewski, Director of  Academic Computing and User Services

Dancing Indiscrete

I don't know if the RIAA and MPAA are dancing in the street, but they've had good news lately. In particular, the Supreme Court of the United States recently ruled apparently in their favor in the case of MGM versus Grokster. Against this landscape, the interest in online music purchases is higher than ever.

A Bad Day for Grokster

On June 27, 2005, the Supreme Court issued its ruling in the "Grokster Case." The original lawsuit listed Grokster, Ltd., and StreamCast Networks, Inc. as defendants and sought damages for copyright infringement based on the fact that the peer-to-peer software produced by both companies enabled people to download unpurchased copies of copyrighted materials. An appeals court had ruled that Grokster and StreamCast could not be held liable for copyright infringement because their software had significant "non-infringing" uses. This ruling invoked what known as the "Betamax case" or more formally as Sony Inc. versus Universal City Studios. In that case, the Supreme Court ruled that Sony could not be held liable for producing its Betamax video cassette recorders even though some people used it to make "illegal" copies of movies.

In the Grokster case, however, the court ruled that a company could be sued for infringement when their support for their product included the promotion of infringing activity as a way to increase business. They did not change any of the basis for the Betamax case, but rather said that the appeals court had misapplied it when it ruled that because Grokster and Morpheus software had substantial non-infringing uses, neither company could be held liable for copyright infringement. In other words, the Supreme Court did not find fault with peer-to-peer software, but rather noted that Grokster and StreamCast may have behaved badly.

The Grokster case is not over, however, since the Supreme Court's action was to send the case back to the lower courts for further argument. In other words, Grokster still has a chance to have their day in court, but MGM now has a valid argument with which to take them to court. But more importantly for the rest of us, the Betamax case was left in place and not overturned as MGM sought. This is at least a balanced decision and possibly a bit of a win for new technology.

A Good Day for Apple

It's ironic, then, that so close on the heels of the Grokster case, Apple Computer Inc. sold their 500,000,000th online song via it's iTunes Music Store. It would seem, that people will pay to download music and a recent report would support that contention. According to that story from the CBC web site, "Paid music downloads through the internet have tripled in the U.S. in the first half of this year, compared to 2004 according to Nielsen SoundScan."

You'd think that such news would wake the RIAA and MPAA to the fact that licensing content can be as or more profitable than controlling the sales of media containing it. Perhaps this is the case according to an article in the Detroit News. It describes two peer-to-peer (P2P) software companies which have the blessing of record companies in the form of licensing deals. Mashboxx is in testing right now, while Peer Impact is up and running, providing $5.00 in free music when you download their P2P client and allowing you to earn money towards more music based upon how many people download from your computer. P2P programs have always relied on the end user clients to be part of the distribution network, your contribution toward finding the files you needed. Peer Impact provides a monetary incentive to participate in the P2P network, while providing licensed, and thus legal, music downloads.

You have to wonder if these companies would have been able to make agreements with the RIAA record companies if Apple hadn't proven that people will indeed pay money for reliable and convenient access to music. You also have to wonder if Steve Jobs isn't kicking himself for not making those original deals exclusive arrangements. Still, with the complete hardware (iPod) and software (iTunes) package, Apple has quite a head start.

A New Day for Online Music Lovers?

Perhaps the RIAA has had a tremendous awakening and will concentrate on making licensing deals for their members which will make those "illegal" downloads a thing of the past by making the online sale of music as ubiquitous as banner ads. Still, I doubt that twelve-year-olds are yet safe from those marauding RIAA lawyers. And, I doubt that MGM will drop the Grokster case.

Still, the movie studios could learn a thing or two from the record companies. Broadband networking makes downloading high-quality video a technical possibility. It's obvious now that they can't stop the technology. Perhaps they will embrace it and reap the same kind of substantial profits that video cassette rentals have brought them. Of course, there is the recent rumor of a video iPod. Will Steve have to lead the way yet again?

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