In approving Permanent Normal Trade Relations (PNTR) for Russia this week, the U.S. House of Representatives can take a big step in establishing a relationship between the U.S. and Russia in the WTO. It is a useful moment to step back to survey the implications and future economic relationship of our two countries. The WTO is the bedrock agreement governing global trade, and is premised on accountable and transparent economic policies based on the rule of law. Unfortunately, to this point at least, the open and accountable implementation of Russia's system of laws has been suspect, and this has been particularly true in the area of intellectual property. Russia has appeared on the U.S. Trade Representative's list of worst intellectual property rights offenders for more than a decade. Even more worrisome, unlike some other habitual offenders, Russia has thus far demonstrated little inclination to modify its practices.
For example, Russia's music market lags far behind those of its partners--principally the result of allowing major actors such as vKontakte (a site identified as a ‘notorious market’ by USTR) to operate music services based on providing access to infringing materials. Against the backdrop of such significant unfair competition, legitimate music services struggle to find any oxygen.
Which is why this vote is a particularly opportune moment for a new beginning: vKontakte has been found liable for copyright infringement (see here). Meanwhile, the Russian government is poised to adopt new rules in which they can significantly enhance accountability in the online space to make room for legitimate commerce. Now is the time for the Russian government to demonstrate its willingness and ability to promote legal services and to meet its international commitments. Taking action to prevent vKontakte from operating illegally would be a major signal that this moment is indeed meaningful.
It is our hope that Russia's desire to join the global trade pact reflects a newfound willingness and intention to join the community of nations in modernizing its relevant legislation and in taking the steps necessary to create an environment conducive to innovation and creativity.
The marketplace for online music acquisition is increasingly diverse – good news for legal music - but also in ways that don’t compensate the creators of that music. It’s important to understand the full picture when we look at new data that speaks to what’s going on online. There have been a number of recent articles and studies that make implications about consumers based on data about their P2P usage, but unfortunately they rarely present the full story. As people interested in this space take in all this new information, we think it’s important that they look at the full picture of what’s going on.
First: while it might be interesting to see the patterns of music consumption through file-sharing protocols like BitTorrent, it should be kept in mind that the vast majority of what it’s being used for is illegally transferring copyrighted material. Independent source after source reveals that people aren’t using BitTorrent for legitimate purposes, but to simply avoid the legal marketplace that now makes virtually all music available to listen to for free in one form or another. Some examples: this study by Envisional found that of the 10,000 most popular files traded, literally all of the movies and music files were copyrighted material. In fact, virtually all of the non-pornographic files traded were copyrighted (not to be prudish, but the fact that 36% of them were pornographic is probably worthy of its own discussion). Here’s another study showing generally the same conclusion. And here’s another.
It’s also worth noting: any analysis of BitTorrent that leads to a wider conclusion about illegal music consumption is potentially flawed or, at the very least, incomplete. For it invariably ignores other forms of illegal acquisition: hubs like filestube, other P2P networks, hard drive swapping, ripping and burning, etc. That’s a point I made to NPR in an interview broadcast on November 7.
More evidence - even as the number of DMCA notices the RIAA has sent for infringing music content found on P2P networks like Limewire, Gnutella and Ares has fallen, notices on the BitTorrent network have continued to increase, with nearly 2 million notices sent in 2011, and on track to exceed that in 2012.
But what about the consumers? Some commentary has misleadingly reported that people who use P2P services like BitTorrent buy more music than non-users, implying that there’s some sort of causation. In reality, the comparison is unfair – what it’s comparing is people who are interested in music with people who might not be interested at all. Of course people interested in music buy more. But as research firm the NPD Group (which has been studying these issues for a decade) points out here, this data is neither new, nor illustrative. In their words, “Celebrating P2P users for their contribution belies the fact that the paid component of the music that they acquire, aka their acquisition mix, is 50% less than the average music consumer. Yes, that’s half the average.”
No doubt the “marketplace” for illegal music consumption is complex and more splintered than it was 10 years ago. And many of the efforts [see here, here] we have undertaken have made an important and noticeable dent in what was the most popular form of illegal acquisition – peer-to-peer – and steer users to the extraordinary array of digital music services. More so than ever, there are real challenges in obtaining an authoritative and comprehensive understanding of what’s happening online. But that remains essential – indeed, now more than ever.
Joshua P. Friedlander, Vice President, Research and Strategic Analysis, RIAA