KATHOLIEKEUNIVERSITEIT

LEUVEN

EU actions against online music piracy

How far can they go?

GROUP 10Koen DE BOOSER

Kristien DENTENEERSam KINDS

Dorien MEEUSPolitical Business Strategy Kwan Jau SIUProf. Dr. C. Crombez Ward VAN DE VELDE

2009 – 2010

Table of contents

1 Introduction ....................................................................................................................... 1

2 EU Legislation on Internet piracy ..................................................................................... 3

2.1 France ......................................................................................................................... 4

2.2 The Netherlands ......................................................................................................... 4

2.3 United Kingdom ......................................................................................................... 5

3 How does the creative industry cope with piracy? ........................................................... 6

3.1 Musicians ................................................................................................................... 6

3.1.1 Metallica and Radiohead: Two major players. ................................................... 6

3.1.2 The Featured Artists' Coalition (EU) & The American Federation Of Musicians (US). ........................................................................................................... 7

3.1.3 New forms of promotion ..................................................................................... 7

3.2 Record Labels ............................................................................................................ 8

3.2.1 Institutions ........................................................................................................... 8

3.2.2 Mixed reactions and opinions ............................................................................. 8

3.3 What official institutions help the creative industry in their fight against piracy? .... 9

3.3.1 IFPI ..................................................................................................................... 9

3.3.2 SABAM ............................................................................................................ 11

3.3.3 BAF (Belgian Anti-piracy Federation) ............................................................. 12

3.3.4 BEA (Belgian Entertainment Association) ....................................................... 12

3.3.5 BREIN ............................................................................................................... 12

3.4 Financial consequences for the creative industry .................................................... 13

4 Distribution industry ....................................................................................................... 13

4.1.1 Legal platforms ................................................................................................. 14

4.1.1 Illegal platforms ................................................................................................ 14

4.1.2 Grey zone ......................................................................................................... 14

5 Consumers’ point of view ............................................................................................... 15

5.1 Which consumers are especially involved in downloading illegal music? ............. 15

5.2 Why do illegal downloaders engage in such a behavior? ...................................... 15

5.3 Potential solutions regarding illegal downloading and sharing ............................... 16

6 Conclusion: actions against Internet piracy: how far can the EU go? ............................ 16

7 References ....................................................................................................................... 18

1 Introduction

The phenomenon of Internet piracy has always been a hot debate topic in Europe. It all began with the case of Metallica, the rock band, and RIAA (Recording Industry Association of America) versus Napster, a sharing program, in America in 2000. That was the year when popularity of broadband Internet and Peer-to-peer (P2P) sharing had a significant influence on the Internet population, with declining CD sales, partly as a consequence of online and offline piracy via CD burners. In 2001, real P2P programs, such as Kazaa, Morpheus and Grokster, were sued in L.A.. Songbird, MusicNet and PressPlay were the initiatives that the music industry launched. It is also when Apple launched its iTunes, an online music shop and media player, in 2001. Also in that year Songbird was a tracking software, which monitors the behavior and actions of users, used on the Napster platform launched by IFPI London (The International Federation of the Phonographic Industry). Another Songbird has been launched in 2005 that is an open source alternative for the music player of Apple’s iTunes and its Music Store. MusicNet, an online music shop, now MediaNet, has been launched in 2001 and it is an alliance of more than 200 music labels. Ironically, Roxio, the CD burning software company has taken over PressPlay, which offered music from Sony and Universal and rebranded it into Napster 2.0. IFPI announced that in 2005 over 200 million songs have been sold online in the US and the EU. After the conviction of The Pirate Bay, there will be more websites offering torrents trying to take over the pole position.

The last two years a lot of court cases regarding Internet piracy took place. In 2005, SABAM and IFPI sued SeniorenNet, a Belgian online forum, after determination of users sharing copyrighted music files.

In 2007 SABAM in Belgium complained against ISPA, the ISP Association, that ISPs (Internet Service Providers) do not take responsibility to block illegal music downloads. It won the case against Scarlet, an ISP, in 2007 and Tiscali had to block illegal downloads through P2P software.

In 2007 the Court of Justice in the EU deemed it not necessary for Telefόnica, the Spanish Telecom company, in Spain to provide the identity of Internet users to Promusicae, an authors rights organization, in civil cases such as illegal music downloads.

BUMA/STEMRA, the Dutch author’s rights company, in the Netherlands sued Suplacon, a Dutch company, for not paying consumer fees, when its employees are listening to music via iPods during office hours in 2009.

In 2009 a Swedish court accused The Pirate Bay as guilty of infringement of copyrights. The founders of The Pirate Bay went into appeal, but Brein, the antipiracy organization in the Netherlands sued them in June. They went into appeal again.

The future is not clear, the online distribution of music will need technology that protects copyrighted content. It is very likely that ISPs and the creative industry will cooperate. In 2009 the US and the EU and other countries are working on the Anti-Counterfeiting

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Trade Agreement (ACTA) in Seoul, which will have huge impact on providers.

The remainder of the paper is structured as follows. In the first part, the focus lies on the discussions and decisions on the European level and the decisions made by its largest Member States. The legislative part is then followed by the interests of record labels and artists, and the financial impact piracy has on these parties concerned. Anti-piracy organizations and intellectual property rights organizations give this discussion an important additional dimension. Further, we discuss the online distributive sector, which plays an ambiguous role in this phenomenon, since there are several types of distribution platforms, offering legal or illegal services. Subsequently, the dimension of the consumers is added. We investigate how consumers perceive these measures against piracy and why they participate in this illicit behavior. In the conclusion we propose possible solutions to the problem and evaluate the past behavior of the EU and propose possible future actions of all parties involved.

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2 EU Legislation on Internet piracy

The European Union does not have a specific legislation for music piracy via the Internet. The EU legislation on the topic contains rules concerning counterfeiting and piracy in general, which also apply to the specific case of Internet piracy.

The rise of the Internet started the emergence of illegal downloading, but the phenomenon of piracy already existed earlier in the 20th century. At that time, it included non-Internet practices such as the taping of radio emissions on cassette tapes. Governments and other organizations at that time already voiced their concern about this problem, but there were no real actions against piracy. The legislative means to take coordinated action were not available at that time. Later on, the emergence of the compact disk and the illegal copying that accompanied it, moved the European Union to take actions to constrain these illegal practices and to protect intellectual property rights.

In October 1998, the Commission of the EU presented a Green Paper on the fight against piracy in the European internal market. This paper had the intention to launch a debate with all the interested parties on the subject. The conclusion of this consultation was that there were differences between the different Member States in the systems of intellectual property rights. These disparities posed a problem for the proper functioning of the internal European market.

Two years later, in November 2000, the Commission presented a follow-up Communication to the Green Paper in which they proposed an action plan to improve the fight against piracy. One of the items proposed in that plan was a Directive which would harmonise to some extent the legislation of the different Member States on piracy. The Directive would propose a minimum level of penalties, to counter infringements of intellectual property rights.

In April 2004, the Directive on the enforcement of intellectual property rights was approved by the European Parliament and the Council. The Member States had to adopt the content of this Directive in their national legislation on the subject of piracy. In this way, the European Union wanted to ensure that intellectual property would enjoy the same level of protection in the entire European internal market.

A few years later, in September 2008, the Council presented a Resolution on a comprehensive European anti-piracy plan. The Council hereby asked the Commission and the Member States to take action to fight against piracy more effectively. The Resolution instructed the Commission to establish a European counterfeiting and piracy Observatory, which should provide regular evaluations and a more accurate analysis of the piracy situation in Europe. Next to that, the Council asked the Commission to communicate with actors taking part in the fight against piracy, by sharing related information. The Commission was also instructed to develop awareness-raising activities in order to inform consumers about the dangers of counterfeiting and piracy. In April 2009 the Observatory has been installed by the Commission and a list of other non-legislative measures were taken to improve the protection of intellectual property rights.

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Recent voices in the European Union state that more legislation will not stop the problem. A better solution would be the enforcement of the existing laws in combination with intensive cooperation between the private sector, consumers and governments to protect intellectual property rights. Viviane Reding, the EU Commissioner for Information Society and Media, blames the current Internet business model for the rise in online piracy. She poses that a central part of the plan for the next five years will be to provide greater access to good quality online content. Also EU Commissioner for Competition Neelie Kroes argues that European consumers want and deserve a better offer of digital online music. She has recently convinced important online music providers such as iTunes and Amazon to do more efforts to provide European consumers with a large offer of legal downloading opportunities.

The European Union realizes that legal means are not sufficient to take action against new types of Internet piracy such as torrents. Some Member States, such as France and the United Kingdom, have introduced their own anti-piracy laws, which state that pirates will be banned from the Internet after several infringements. However, blocking pirates of the Internet is not an option for the EU, since this opposes to human rights and privacy regulations. That is why the European Union chooses for campaigns that try to make people aware of the fact that illegal downloading is a crime.

Next there will be a closer look at the recent developments of 3 Member States of the European Union. We will discuss legislation of France, the Netherlands and the United Kingdom.

2.1 France

The France parliament has recently decided that anyone who downloads films and music without paying can be suspended from the Internet for a year. It is one of the world’s toughest laws against illegal downloading. More specific, they use the Hadopi law, which is known for its '3-strike' procedure. It requires the disconnection of Internet users who are repeated offenders of copyright violation. The first time, the illegal Internet user will receive an e-mail from Hadopi that the user must break down his downloading. If the violation to the law is repeated within six months, the user will receive a next, final warning. If the Internet user repeats this offence, the suspension of the Internet connection will occur. In this case, the Hadopi state agency will not be able to implement the punishment itself, but it will be undertaken by a judge.

On the other side, the European Parliament and the Member States have voted in favor for a law in which EU Member States cannot just cut off the Internet. That way, Europe hopes that the France ‘3 strike’ procedure will now be altered.

2.2 The Netherlands

In the current law, downloading music and movies is not illegal. In the Netherlands, only uploading copyrighted music and movies is against the law. Remarkable is that downloading games and software, on the other hand, is illegal.

Recently, the government has decided to design a law that makes downloading music

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illegal under one condition; there must be alternatives provided by the music industry itself. Considerable is that Justice already has decided not to punish individual downloaders, but it will take action against websites and firms that offer these illegal files. This prohibition will be announced at the earliest in 2012. First, the government will make a conclusive law about the copying charge.

2.3 United Kingdom

The British government, Internet providers and companies in the entertainment industry go up to fight against illegal downloading and copying music. They now promise to detect potential downloaders and support sending warning letters. These letters will highlight the illegality of downloading. Also, it will warn the downloaders by communicating that they will be watched. The United Kingdom actually wants to use a similar procedure as France. After the first two warnings of infringement, their Internet contract can be terminated. In this case, ISPs will be legally required to take action. Moreover, broadband companies who fail to administer the procedure, would be sued and the information of the customer could be made disposable to the court. Though, the Government has to determine if information of customers should be shared between Internet providers.

Put under pressure by the National laws in France and The United Kingdom, the EU Parliament in October 2009 has taken a U-turn concerning its opposition against cutting Internet access for people violating the intellectual property rights by using the Internet. Parliament and Commission are having formal talks about the subject this month. The new proposition says that Internet access will only be cut off after a “fair and impartial” procedure, which will include the right of the user “to be heard”. The final voting on the subject will be on the 24th of November.

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3 How does the creative industry cope with piracy?

Musicians and record labels are two parties that can be affected by Internet piracy in the music industry. Although at first sight it seems that they have the same interest to oppose file sharing, both groups are dealing with internal differences concerning the issue of the illegal download culture. Some musicians fight thoroughly against piracy, while others rather try to benefit from the new opportunities that are revealed in the industry. A similar struggle can be found in the behavior of the record labels, as some players can barely keep up with the number of lawsuits they are involved in, and other players use the data available from piracy networks to increase their revenues.

3.1 Musicians

3.1.1 Metallica and Radiohead: Two major players.

On the musician side there are two cases that are well known when Internet piracy is mentioned. First there is the case of US hard rock band Metallica vs. Napster and second there is the dispute between the rockers of UK's Radiohead and their record label EMI/Capitol. It is interesting to see that two of the greatest modern rock bands both cope totally different with the changing music industry.

In the beginning of this century Metallica, among several other artists, filled a lawsuit against Napster for loss of earnings because Napster made it possible for millions of people to download and share their intellectual property for free. Lars Ulrich, the drummer of Metallica, became the face of the action against Napster. Later, a settlement was made and Napster became a pay-to-use service, which became the start of the legal download platforms that we now use. But, despite their legal win, Metallica was hugely criticized for the move and the band became well known for their fight against the illegal downloading of music. Every illegal download meant fewer royalties for the band, but Lars Ulrich stated that it was not a matter of money. It was about remaining in control over their material. The dispute between Metallica and Napster took place in the year 2000 and in Internet terms, that is a long time ago. That becomes even more clear when we compare Metallica's behavior with the way that UK band Radiohead took matter in own hands in 2007.

It seems that Radiohead is not only innovative and creative when it comes to music, but also their business approach is rather interesting. Moreover, the music industry was shocked when they revealed their plans to break the contract with their record label and to release their new album, In Rainbows, as a digital download. The album was available only via the band's website, www.radiohead.com. On top of that, the band gave their fans and consumers free choice whether to pay or not when they downloaded the new Radiohead album. This meant that there was no label or distribution partner to cut into the band's profits, nonetheless the possibility existed that there would be no profit at all since the fans could choose to pay nothing at all. Later the band members stated that from all seven albums that were released so far, they never made more profit than they did

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with the digital release of In Rainbows. Of course, this could have never been achieved without the current Internet, file sharing and download culture we live in.

3.1.2 The Featured Artists' Coalition (EU) & The American Federation Of Musicians (US).

At this moment it seems to be difficult to conclude if there are still a lot of antagonists in the creative industry all around the world. But most musicians do declare that we are at a turning point. Recently, even Lars Ulrich stated that their success has expanded enormously in far corners of the world due to illegal downloads. Thanks to the World Wide Web Metallica's fan base is more extended than ever. The downside of course is that the band is less in control of their music.

In Europe a similar reaction occurred when the UK government proposed to kick file-sharers off the Internet in last September. Promptly an alliance of musicians, singer-songwriters and producers formed, named The Featured Artists' Coalition (FAC). The FAC reacted against this proposal and stated: “It's going to start a war which the government can never win and moreover those heavy-handed tactics may turn fans away from music for good.” The FAC also states that artists should not want to make enemies of their fans and many young fans that only discovered music through file-sharing, paid for music in other ways, such as buying gig tickets. Illicit downloading encourages people to become music fans.

'The American Federation of Musicians', an association that promotes the interests of American and Canadian musicians, on their turn does not react very lenient. In 2007, they urged Congress to enact broad legislative measures that really can make a difference. They addressed Congress after revealing shocking figures of job losses and cost cuttings due to Internet piracy. The study showed that sound recording piracy annually costs US workers 71,060 jobs and $2.7 billion in earnings. Moreover the US federal state and local governments lose a minimum of $422 million in lost tax revenues.

3.1.3 New forms of promotion

Overall there is a tendency to believe that musicians need to learn to live with this new Internet culture. And most of the artist and their management will have to keep doing what they do best; they will have to be creative. It has become easier to reach the masses, but it became more difficult to get noticed in the masses. Consequently, new forms of promotion are a necessity. Some Belgian artists provide a package deal with well-known magazines, for example the Belgian band Absynthe Minded and the Humo-magazine. Others give away their records in addition to qualitative newspapers, just like K's Choice and De Morgen. Flemish pop band Clouseau played live in helicopters and Singer-songwriter Milow broke the world record of deepest artistic performance in a mineshaft ever. Even the international artist Prince does everything to promote his music. Prince launched his latest album as a free giveaway with a national Sunday newspaper. Later he announced 21 concerts in London that were all sold out in no time.

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3.2 Record Labels

3.2.1 Institutions

There are a couple of institutions that represent the record label industry. 'The recording Industry Association of America' (RIAA) represents the recording industry in the United States and 'The Recording-media Industry Association of Europe' (RIAE) has the objectives to represent and promote the interests of the recording media industry in Europe. The third large institution and the most important concerning record labels is IFPI, 'The International Federation of the Phonographic Industry'. The IFPI is the organization that represents the interests of the recording industry worldwide and is an important mediator between record labels and governments in the fight against music piracy. The operations of the institution are explained in more detail further in this paper.

3.2.2 Mixed reactions and opinions

Similar to the reactions of musicians, some record labels tend to cope in rather creative ways with the pirate culture while others act with legal procedures. Some examples are discussed below.

A first phenomenon that used to demotivate people that are downloading are “decoys”. These decoys are fake files that claim the top spot on download sites and have been put there by record labels in collaboration with technical companies, like Mediadefender. The decoy will frustrate users because they fail to download even though the rating says it is a highly recommended file in the chart. The ultimate victory for record companies occurs when the file is eventually downloaded or purchased in a legal way.

In a second approach, record labels and artists work together with multinationals like Coca-Cola. American rapper Jay-Z, for example, let the Coca-Cola company put up a video on a P2P site. The rapper and record label got paid and in the video they put up advertisement room for the brand Coca-Cola. This strategy is called file-sharing marketing.

Another way that record labels try to cope with piracy is by using P2P sites as a marketing research tool. Record labels ask P2P sites to give them access to the facts and figures that go together with a recent single of an artist. That way they can see if the song gets high rates and whether it is profitable to market that artist or the song. This strategy is definitely not supported by the entire music industry because it seems rather paradoxical that the RIAA is constantly suing downloaders while they use P2P information that is very valuable for their business.

A fourth strategy, to end with, is the strategy of fixed monthly rates. To combat piracy, UK Internet provider Virgin Media and record label Universal teamed up with some smaller labels. At the end of this year they want to offer their customers unlimited free music download possibility at a fixed monthly rate. Other record labels do not want to support the consumers demand to unlimited access to music. They do not believe that this strategy will convert illegal music downloaders into legitimate customers.

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3.3 What official institutions help the creative industry in their fight against piracy?

3.3.1 IFPI

IFPI represents the recording industry worldwide. As stated above, its mission is promoting the value of recorded music, safeguarding the rights of record producers and expanding the commercial uses of recorded music.

The association has around 1400 members in 72 countries and has affiliated industry associations in 44 countries. Any person or company that produces sound recordings or music videos that are available to the public in reasonable quantities is qualified for membership of IFPI.

The central IFPI Secretariat in London is responsible for the coordination of international strategies regarding anti-piracy enforcement, technology, lobbying of governments and representation in international organizations, legal strategies, litigation and public relations.

For the European Union there is an IFPI office in Brussels that interacts with the EU institutions and coordinates the industry’s representation throughout Europe.

IFPI is also affiliated with the Recording Industry Association of America (RIAA), the organization responsible for the world’s largest music market.

3.3.1.1 IFPI activities

One of the five broad areas where IFPI’s legal affairs activities concentrate is the development of the legal infrastructure for the electronic music market. The organization promotes the ratification and implementation of the 1996 WIPO Copyright and Performers and Phonograms Treaties worldwide. These treaties bring copyright into the digital age. In particular, IFPI stimulates new laws against Internet piracy and hacking of technological protections.

3.3.1.2 Piracy problems

According to John Kennedy, CEO and Chairman of IFPI, Spain and Greece are the biggest piracy problem countries in Western Europe. They join countries like Estonia, Czech Republic and Slovakia, all with piracy levels above 45%. He says that fighting piracy is the number one challenge of the industry. Internet piracy has already had a destructive impact in markets of high broadband growth.

Regarding piracy, IFPI has a clear twofold vision. First of all they want cooperation between governments and the creative community worldwide to tackle the piracy problem. Secondly they want to destroy the social prestige involved in buying a pirate record. According to IFPI people should feel the same way about piracy as about stealing a shirt.

In their strategy, IFPI holds three major objectives. First of all, they want to preserve local culture, as it is the greatest victim of piracy. A lot of money is invested in new talent each year and they do not get the chance to reap the benefits because their repertoire can be purchased for free. Second, they fight against organized crime, which is nurtured by

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piracy and very often money obtained from piracy flows back into drug organizations or other criminal activities. Finally, IFPI tries to encourage growth of investment and jobs, which are lowered by piracy.

While record companies try to build a legitimate music market, there are other operators working against them. These other operators abuse the technology to devaluate music and compromise the take off of the legitimate business.

Examples of these operators are the unauthorized file-sharing services, pirate websites and uploaders who, on a massive scale, illegally distribute copyrighted music. The activities of these actors are described further in this paper. At the moment, it is an uneven contest, but the member record companies of IFPI are determined to win.

Because the recording industry is advancing unambiguously into the age of digital distribution, it is not only the industry’s challenge to make it more difficult to steal music, but also to make it easier to buy music online than to steal it.

IFPI states they owe it to producers, artists, composers, retailers and to those employed by the music industry to do their up most to combat online piracy. Education before litigation has been key to their strategy. However, IFPI believes that litigation, although not very popular, is working. Surveys show that seven out of ten Europeans know that it’s illegal to share music files without permission. Consumer attitudes are changing: the insertion of legal online services is rising while the use of unauthorized services is declining. There is still a long way to go, but the trend is promising.

On the one hand, IFPI tries to attack those who abuse P2P technology to take the content and deliver it for free. On the other hand, it works together with those who want to transform those technologies into legitimate commercial use.

IFPI claims the need of support in raising awareness in public organizations, in schools and among parents and young people, explaining the reasons to buy music legally as well as the consequences of illegal file sharing.

Because Internet Service Providers (ISPs) are the business partners of the future for the recorded music business, IFPI also needs cooperation from ISPs in the fight against piracy.

Since their existence, IFPI tried to take a lot of measures against piracy. For instance, in 2008 they teamed up with the four big record labels –EMI Records (Ireland) Ltd, Sony BMG Music Entertainment (Ireland) Ltd, Universal Music (Ireland) Ltd and Warner Music (Ireland) Ltd– and started legal proceedings against Eircom, Ireland’s largest ISP. These labels run 90% of the music market in Ireland and together they want to force Eircom to end all music piracy carried out by its subscribers. They want to do this by implementing filtering technology, something Eircom opposes strongly.

Governments of several countries have woken up to the catastrophe their cultural industries are facing and understand the inherent benefits of a system that addresses piracy near its source, via the ISPs who can help to do something against the piracy problem.

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3.3.1.3 IFPI and the government

IFPI has the most renowned and professional anti-piracy enforcement operation in any industry. It consists of a team of 250 investigators and analysts who track pirate traffic, advice and train governments and help enforcement authorities to arrest, convict and sentence the illegal traders. But IFPI underlines the necessity of appropriate governmental actions to achieve the postulated results.

Examples of negative effects of piracy for the governments are lower tax revenues, costs in anti-piracy activities and corruption. The illegal purchasing of copyrighted work creates billions of Euros in annual losses for the European film, video, music, business and interactive leisure software sectors. Consequently there is a drop in jobs in the Member States, funds get lost to governments due to reduced tax revenues and the capability to invest in new creative works decreases.

Organizations like IFPI and their worldwide subdivisions denominate France and the UK as magnificent examples of countries where the government is willing to take action against piracy. IFPI considers the new French anti-piracy law as a very positive step for creators and the sectors involved. It will help improve the environment for new digital music services and protect the creative industries from the huge threat of digital piracy.

3.3.2 SABAM

SABAM is the Belgian association of authors, composers and publishers. The acronym stands for “Société d’Auteurs Belge – Belgische Auteurs Maatschappij”.

SABAM represents the interests of its members in the field of intellectual property rights and they collect all the royalties due to its members in Belgium, and sister organizations in other countries and then distributes these rights to the copyright holders.

Unlike Buma/Stemra (the Dutch pendant of SABAM) that limits its actions to music copyright, SABAM is active in all disciplines where copyrights are involved.

SABAM also monitors the Internet to check illegal supply of art.

3.3.2.1 SABAM vs. Tiscali

A well-known example of SABAM in action is the case SABAM vs. Tiscali. (Tiscali is now renamed as Scarlet extended NV.) In 2004, SABAM held Tiscali responsible for illegal music. SABAM argued that Tiscali (an ISP) had to deny their surfers the access to sites offering illegal music files, but Tiscali did not want to give in to the claim of SABAM because downloading happens through P2P-software and all Belgian Internet providers give access to sites in which such software is present. Only Tiscali was charged, to set an example to all Internet providers in Belgium.

The court of first instance appointed an expert to investigate whether the claim from SABAM to block the access to P2P networks is feasible and appropriate or not. This expert reported some technical solutions for the problem; consequently the judge concluded it was technically feasible for an Internet provider to eliminate the exchange of illegal files.

Most of these solutions involve blocking all P2P networks, which is quite a drastic

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option, as these networks can be used for useful applications like making calls through Skype. That is why SABAM prefers the other technical solution, which is a filtering technique, screening all traffic of the network for the presence of protected material. Since the enormous amount of information exchanged through the Internet, there must be constantly invested in the capacity of those filters. Chances are real that the speed of the Internet will fall because of the queues at the filters. It is no surprise that customer organizations such as "Tik vzw" (a Belgian association for telecom and Internet clients) are not delighted with this verdict, not only due to the decline in speed, but also because of privacy issues. Tik vzw fears that the legal diffusion of music will be impossible because of the high costs and delays these measures bring along.

3.3.3 BAF (Belgian Anti-piracy Federation)

The BAF is an association without lucrative purpose, funded in 1985 by the Belgian video producers. Meanwhile the organization expanded into an organization that fights against piracy of movies, music and videogames in Belgium and Luxembourg.

The BAF has a dual approach regarding the struggle against piracy. On the one hand, they organize information campaigns about the risks of illegal downloading, the existence of legal alternatives, the consequences of piracy, etc. On the other hand, they undertake legal actions against pirates. Further, it has cooperative agreements with SABAM, VOTP, VFPB and eBay.

3.3.4 BEA (Belgian Entertainment Association)

BEA is the fraternity of the Belgian game, music and video industry. BEA unites the forces of BLISA, BVF and IFPI Belgium. Therefore BEA unites more than 50 companies that are active in de production and distribution of games, interactive software, music and video. Together, the members of BEA represent nearly 90% of the Belgian entertainment industry.

BEA tries to promote the value of music, movie and games in the social, economic and cultural environment of society. It also protects and defends the interests of the sectors and in particular their members.

In the fight against piracy, BEA has a cooperation agreement with BAF and SABAM. They are active in fighting the game, movie and music piracy online and offline for the repertoire of their members.

3.3.5 BREIN

The “Stichting Brein” was founded in 1998 and formalizes the cooperation between authors in the area of the fight against piracy. Brein investigates online and offline piracy, takes civil actions and provides information and expertise for legal actions by legal authorities like FIOD-ECD and the police.

BREIN undertakes action against piracy in Holland. Because of the transgressing character of piracy it works close with international organizations like MPA and IFPI and their national anti-piracy units.

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3.4 Financial consequences for the creative industry

Although record labels and musicians both search for creative manners to cope with piracy, according to the graph, showing the UK music industry revenues, their financial situation does not follow a similar evolution.

There is a clear decline in revenues of artists and labels. The latter lose a lot more then

the artists do. On top of that, an artist has an extra income from their live performances. As we stated earlier several musicians got more airplay and worldwide fame because of the illegal file sharing. That way it has become possible for more and more artist to expand their live act on a wider and more profitable scale. Consequently musicians and concert promoters saw their revenues related to live performance increasing significantly in the last 4 years.

Since CD sales are deflating enormously, but consumers pay more than ever for live music, it seems that musicians are rather safe. Especially the record labels will need to revise their strategy and business plans in the future.

4 Distribution industry

We divided the distribution industry into three different zones, namely a legal zone, an illegal zone and a so-called ‘grey’ zone. This grey zone is that part of distribution industry that is being used legally, as well as illegally. We followed a bottom-up strategy, starting from the consumer’s point of view, to define in which zone a specific distribution medium, company or service belongs. In this way we try to indicate that, although the distribution medium, company or service has the right intentions, it is the consumer who ultimately decides in what way – illegal, grey or legal – the distribution method will be used.

This being clear, we came up with an example for each zone: on the legal side we

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Figure 1: Timesonline.co.uk

highlighted iTunes, Apple’s music platform. Concerning the illegal zone, we looked at the Pirate Bay. For the grey zone finally, we discussed YouTube.

4.1.1 Legal platforms

As a legal platform the most well known application is iTunes of Apple. This company has launched this media player and media shop in 2000. It has been improved several times in such a way that in the US and all over the world iPod users can experience pleasure from music anytime and anywhere with this fine product and service. The timing of its launch coincided with the conviction of Napster and other sharing software. It started with an exceptional business proposal and it ends up earning quite a lot by selling songs and albums for an acceptable low fee.

First it offered DRM songs, which meant for the user that he or she could not enjoy the music experience on another application. Recently the big music labels started to offer DRM free music, which allowed Apple to sell device free music as well.

4.1.1 Illegal platforms

Gottfrid Svartholm and Fredrik Neij are two Swedish inhabitants who ran the world's most notorious file sharing website, known as The Pirate Bay. This online platform uses Bit torrents - a P2P file sharing protocol - to share all kinds of media files. After the Los Angeles Times, The Pirate Bay is one of the world's largest facilitators of illegal downloading. Nowadays, The Pirate Bay community exists out of 3,970,584 registered users.

In January 2008 the administrators behind the website, were accused of helping to illegally distribute copyrighted material and ultimately sentenced to a year in prison and fines totaling 2.7 million Euros.

“The music, film and entertainment industries were celebrating a rare victory over Internet copyright pirates last night after a Swedish court handed down prison sentences and hefty fines to four men behind the world's most notorious file sharing website. […] The ruling by a judge in Stockholm marks the culmination of a two-year case brought by a consortium of media and entertainment companies, led by the International Federation of the Phonographic Industry (IFPI).”

After: the Guardian.co.uk

4.1.2 Grey zone

Regarding the grey zone of distribution, we take a look at one of the most well known online media platforms, namely YouTube. On YouTube anyone can upload and share videos. Most of the content uploaded on YouTube comes from individuals, but some major media corporations like Universal Music Group and BBC offer some content.

As an individual can upload all sorts of video and audio files instantly, only by registering on YouTube, it is not hard to understand that copyright rules are broken regularly. YouTube tries to avoid this by informing the user with a warning message.

Despite this announcement, a considerable amount of unauthorized music remains available on YouTube, also because YouTube does not view videos before they are posted online. Furthermore, copyright holders have to undertake actions themselves if they feel some of their creative products are being used unauthorized.

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Another recent problem is the usage of YouTube in combination with stream ripping conversion tools. Here, YouTube users utilize specially developed software to rip video or audio files that are posted on YouTube.

5 Consumers’ point of view

A fourth category of groups whose interests play a role regarding the purchase of online music, are the consumers. As a matter of fact, concerning the demand side, we can distinguish two kinds of consumers on each side of a continuum: people who legally buy online music at one side and people who obtain online music illegally at the other side. Of course, there are many types of consumers in between. In the face of this paper topic though, we focus on these persons who (repeatedly) illegally obtain music.

Firstly, we will try to compose a ‘profile description’ regarding these illegal downloaders. Thereafter, we discuss the reasons why they engage in such an illegal behavior and try to find out in what way they get their illegal music files. Finally, we discuss some potential solutions regarding illegal downloading and sharing from the consumers’ point of view. Let us start with our first objective.

5.1 Which consumers are especially involved in downloading illegal music?

“The taste for illegal music is strongest among youths. Of those consumers between 15 and 24 years old, 34 percent are illegal file sharers and, […], have little concept of music as a paid commodity.”

This is what Jo Best, reporter of Silicon.com, derives out of a survey conducted at the end of 2005 by the analyst house JupiterResearch. In his article, Best cites Mark Mulligan, an analyst at JupiterResearch, who says that despite the growth in legal sales from services like Apple Computer's iTunes, as well as the growth in legal actions against uploaders, illegal file-sharing is here to stay.

5.2 Why do illegal downloaders engage in such a behavior?

“In a nutshell: they simply want what they love - the music - and they want it now.”

Concerning the next sections, we rely heavily on English research conducted by the University of Hertfordshire, commissioned by UK music. More specifically, we look at a comprehensive survey of 2009 profiling the music consumption habits of 1808 14-24 year olds across the UK. The sample included a representative mix of all ages within the target demographic and originated from all over the UK. We believe, however, that the research presented here can be applied to most Western European countries.

The study reveals that the main reasons for file sharing (downloading and sharing illegally) are: saving money/because it’s free (40%), getting music that could not be bought like for example DJ-remixes (23%), and experimenting as a try-before-you-buy-technique (22%).

On the other hand, it might be interesting to examine why people who do not download

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illegally, do not do it. Here, the most mentioned reasons were: concern about downloading a virus or spyware (34%), because the artist/songwriter does not get paid (27%), because it is illegal (23%).

5.3 Potential solutions regarding illegal downloading and sharing

In this paragraph we try to come up with some potential solutions to promote legal distribution of music files. The following solutions are especially interesting because they are proposed and advocated by the people who consume music themselves. The creative and distribution industries need to adapt their sales and marketing departments, and methods to the needs and desires of music consumers, if they want to stay in business. Hereafter, we briefly discuss the possible solutions:

1. Paying for an online music streaming service. 78 percent of respondents indicated that they would not pay for such a service. Furthermore, 49 percent of respondents answered they would still download music over P2P, even if they paid for an online music streaming service. In the majority of cases, this is caused by the fact that music consumers want to ‘own’ their music.

2. Paying for an unlimited, all-you-can-eat download service. After the research, 85 percent of illegal downloaders would be interested in such a formula. When they engaged in such a formula, only 15 percent would still use P2P sites to download music.

6 Conclusion: actions against Internet piracy: how far can the EU go?

As we can see in the parts above, there are a lot of different groups that have an interest in the problem of Internet piracy. They all have their own opinions and most of them want what is best for them. The creative industry, record labels and the distributors pursue profits for the efforts they make. Consumers want music, preferably at reasonable prices.

Governments should try to bring the wishes of these interest groups together in a policy, which preferably meets the needs of all parties involved. Such policy however, is, in most cases, an utopia. In the case of Internet piracy, it is hard to give the creative industry large profits and at the same time keep prices low. That is why all parties in our opinion should give in on their claims.

The creative industry has to face the fact that their earnings from music sales will keep on falling and that they should rethink the way in which they want to make profits out of their music. Nonetheless, in this Internet culture it is easier to reach consumers and music fans all around the world. Earnings from concerts and live performances have become very important in the income of the music industry. The legal music downloads on the Internet keep on rising and also other forms of unusual music distribution seem to be successful.

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Many consumers use the Internet to download music illegally. The main problem is the mentality of these downloaders. They do not want to pay for music, as long as it is possible to get it for free. Some of them do not know that this is not legitimate, but most of them do, but they do it anyway, thinking that the chance of getting caught is extremely small. This problem is very hard to overcome. Governments can inform people about the illegal character of downloading pirated music, but this will only stop a very limited group of illegal downloaders. To stop that group of people that knows it is illegal, the only possible solution might be to hunt them down and bring them to court. But this is not possible in reality, because it is not easy to track these violators without cooperation of ISPs and police forces are too small to take action.

The solution here might be creating incentives for consumers to download music in a legal way. These incentives might be easily accessible platforms to download music at reasonable prices. The quality has to be good and the music files should be safe. The distribution should listen to the content consumers want. The European commissioners Reding and Kroes have already mentioned these points. The EU has already been put under pressure by several Member States such as France, because in their minds the EU acts too slowly.

Consequently, it is save to conclude that the European Union has not yet gone far enough in its actions against Internet piracy.

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7 References

Three strikes lawshttp://www.openrightsgroup.org/blog/2008/european-parliament-condemns-3-strikes-approach/

Multimedia newshttp://www.zdnet.behttp://www.zdnet.co.ukhttp://www.cnet.com

How does the creative industry cope with piracy?http://blogs.mercurynews.com/aei/2008/12/17/metallica-talks-about-napster-the-loudness-war-and-their-love-for-the-bay-area/http://www.time.com/time/arts/article/0,8599,1666973,00.htmlhttp://news.bbc.co.uk/2/hi/8247376.stmhttp://prince.org/msg/7/232610/Prince-to-launch-album-as-free-UK-newspaper-giveawayhttp://en.wikipedia.org/wiki/International_Federation_of_the_Phonographic_Industry#The_Pirate_Bay_incidentshttp://www.riae.org/mission.htmlhttp://www.ifpi.org/content/library/Piracy2002.pdfhttp://torrentfreak.com/record-labels-fear-virgins-piracy-solution-090909/http://torrentfreak.com/record-labels-use-piracy-data-to-please-fans-070918/http://www.mediadefender.com/news/20061018_WSJ.pdfhttp://torrentfreak.com/ifpi-vs-isp-p2p-means-less-sex-and-drugs-for-rock-stars-090116/

Enforcement of intellectual property rightshttp://europa.eu/legislation_summaries/internal_market/businesses/intellectual_property/l26057a_en.htm

Combating counterfeiting and piracy in the single markethttp://europa.eu/legislation_summaries/fight_against_fraud/fight_against_counterfeiting/l26057_en.htm

European anti-counterfeiting and anti-piracy planhttp://europa.eu/legislation_summaries/fight_against_fraud/fight_against_counterfeiting/lf0001_en.htm

Meer online muziek na aandringen Kroeshttp://www.europa-nu.nl/9353000/1/j9vvh6nf08temv0/vi9ggwhxulxa?ctx=vi0diy20vwdg

Brussels claims failed business model is causing online piracyhttp://www.montesquieu-institute.eu/9353000/1/j9vvhfxcd6p0lcl/vi6lo5pol9ze?ctx=vi0diy20vwdg

Internetpiraterij: een probleem of een zegen?http://www.montesquieu-institute.eu/9353000/1/j9vvhfxcd6p0lcl/vi0diy20vwdg

Intellectual Property Rights: Commission comes forward with practical, non-legislative measures to combat counterfeiting and piracyhttp://www.montesquieu-institute.eu/9353000/1/j9vvhfxcd6p0lcl/vi8gf5u0q8np?ctx=vi0diy20vwdg

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Napster vs Metallicahttp://blogs.mercurynews.com/aei/2008/12/17/metallica-talks-about-napster-the-loudness-war-and-their-love-for-the-bay-area/

Financehttp://www.time.com/time/arts/article/0,8599,1666973,00.html

The Featured Artists' Coalitionhttp://news.bbc.co.uk/2/hi/8247376.stm

Promotionhttp://prince.org/msg/7/232610/Prince-to-launch-album-as-free-UK-newspaper-giveawayhttp://www.portfolio.com/views/columns/2008/05/09/Trends-in-Music-Distribution/index.html

IFPIwww.ifpi.orghttp://www.ifpi.org/content/library/Piracy2002.pdfhttp://en.wikipedia.org/wiki/International_Federation_of_the_Phonographic_Industry#The_Pirate_Bay_incidentshttp://torrentfreak.com/ifpi-vs-isp-p2p-means-less-sex-and-drugs-for-rock-stars-090116/

BAFwww.anti-piracy.be

Breinwww.anti-piracy.nl

SABAMwww.sabam.be

RIAEhttp://www.riae.org/mission.html

Record labels strategyhttp://torrentfreak.com/record-labels-fear-virgins-piracy-solution-090909/http://torrentfreak.com/record-labels-use-piracy-data-to-please-fans-070918/http://www.mediadefender.com/news/20061018_WSJ.pdf

French legislation

http://www.trouw.nl/nieuws/europa/article2758344.ece/Franse_wet_tegen_illegaal_downloaden_niet_netjes_.html

http://www.express.be/sectors/nl/internet/wim-roggeman-van-ispa-over-p2p-en-illegale-downloads/100930.htm

http://www.demorgen.be/dm/nl/991/Multimedia/article/detail/1000913/2009/09/22/Franse-wet-tegen-illegaal-downloaden-strengste-in-EU.dhtml

http://www.demorgen.be/dm/nl/991/Multimedia/article/detail/995383/2009/09/15/Frankrijk-gooit-illegale-downloaders-dan-toch-offline.dhtml

http://www.demorgen.be/dm/nl/991/Multimedia/article/detail/852766/2009/05/13/Internetverbod-voor-illegale-downloaders-in-Frankrijk.dhtml

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http://www.demorgen.be/dm/nl/991/Multimedia/article/detail/1025610/2009/11/05/Surfers-zomaar-van-internet-gooien-mag-niet.dhtml

http://www.demorgen.be/dm/nl/991/Multimedia/article/detail/845073/2009/05/06/EU-parlement-stemt-tegen-afsluiten-illegale-downloaders.dhtml

UK legislation

http://www.demorgen.be/dm/nl/990/Buitenland/article/detail/357677/2008/07/24/Verenigd-koninkrijk-strijdt-tegen-illegaal-downloaden-muziek.dhtml

Dutch legislation

http://www.parool.nl/parool/nl/38/MEDIA/article/detail/266159/2009/11/02/Einde-illegaal-downloaden-in-zicht.dhtml

http://www.goeievraag.nl/vraag/muziek-downloaden-illegaal.28591

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