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Executive Summary
This case analysis revolves around the ethics of downloading music from the internet.
The case began with Andy Decker who was problematic about what gift to give his sister. After a
short and quick brainstorming, he ended up planning to buy a compilation of songs his sister
likes. His dilemma began when he had to choose between purchasing an original CD from a
music store or to simply get free copies from the internet. He came across a message on the
internet while he was in pursuit for the perfect gift forhis sister. The message said, Distributing
or downloading copyrighted music on the Internet without permission from the copyright owner
is ILLEGAL.
This study focuses on the RIAA or also known as the Recording Industry Association of
America. RIAA is a trade association which represented common interests with different U.S
recording companies. This study also discusses when the problem of the RIAA started and the
different internal and external factors that affected its operations. It elaborates the significant
incidents that followed the growth of the problem and how the company dealt with the seemingly
insurmountable challenges that came before them. In addition, this analysis also contains
scanning of the companys environment which includes the internal and external environment
that could affect the business operation of the company.
Moreover, this study also explains the people responsible for solving the problems, the
companys objectives and possible alternative courses of actions. This analysis also covers the
groups recommendations to solve the challenges faced by the company.
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Case Background
RIAA (Recording Industry Association of America) is a trade organization that embodies
the interests of the different U.S. recording companies. Its members include EMI Group
Bertelsmanns BMG unit, Sony Music Entertainment, AOL Time Warners Warner Music
Group, and Vivendis Universal Music Group. The sudden technological advancement led to the
growth of interest in the free reproduction and distribution of music. The invention of CD
manufacturing made a better and improved sound in recordings, made an easy to use and
durable format. Moreover, computers became the source of multimedia creations including CD
burning software and stereo sound systems.
The emergence of the internet as part of the technological advancement gave birth to
modern applications which included P2P FileSharing software. 2002, CD sales plummeted
by 11% according to Nielsen Soundscan and on the same time, the consumer electronics
association believed that the sales of blank CDs would rise by more than 40%. 2003, the
downloading of music from the internet became a prominent leisure activity. This was
commonly done by students in their dorm rooms and even made copies and shared downloaded
files with one another. A survey by the Pew Internet and American Life Project showed that 60%
of college students uses had downloaded music files compared to 28% of the overall populations
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Case Proper
I. Time ContextOn May 1999, a P2P file-sharing service named Napster allowed users to
exchange music for free and on December of the same year, Napster was accused
of copyright infringement and encouraging of illegal copying and distribution of
music. The Recording Industry Association of America (RIAA) filed a lawsuit
against the said P2P file-sharing service.
Since the growth of P2P file-sharing services, recording companies
suffered a massive decline in worldwide CD sales. At the end of 2001, CD sales
dropped by 5% and at the end of 2002, there was an 11% decline in sales of CDs.
In 2003, a number of P2P file-sharing services announced upgrades to
their software that would make it more difficult to uncover the identities of its
users.
II. ViewpointAccording to the RIAA, there were an increasing and significant number of
students using the networks of the university to participate in online piracy of
copyrighted materials. Because of that, the College administrators, including the
General Counsel/Chief Legal Officer, Director of Information Technology, and
the Chief Financial Officer were asked substantial support by the RIAA to help
bring the piracy under control.
The RIAA, being the embodiment of different recording companies is also
responsible in the continuous effort of putting a profound value in the meaning of
ethical music downloading.
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III. Statement Of The Objectives Must Objective
-To bring piracy under control
-To educate online downloaders about how they could violate the Federal
copyright law by simply uploading and downloading copyrighted works
-To increase the sales of recording companies
Want Objective- To specify what practices are and are not acceptable on the schools
network
- To impose effective remedies against violators
-To improve security in university networks by monitoring student
compliance
IV. Statement of The Problem (CAUSE & EFFECT)o Cause
Music Piracyo Effect
According to RIAA (Recording Industry Association of America), Users whoupload and download infringing copyrighted works without permission of the
owners are violating Federal copyrighted law.
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Common Examples of Online Copyright Infringement:
You make an MP3 copy of a song because the CD you bought expressly permitsyou to do so. But then you put your MP3 copy on the Internet, using a file-sharing
network, so that millions of other people can download it.
Even if you dont illegally offer recordings to others, you join a file-sharingnetwork and download unauthorized copies of all the copyrighted music you want
for free from the computers of other network members.
In order to gain access to copyrighted music on the computers of other network
members, you pay a fee to join a file-sharing network that isnt authorized to
distribute or make copies of copyrighted music. Then you download unauthorized
copies of all the music you want.
You transfer copyrighted music using an instant messaging service. You have a computer with a CD burner, which you use to burn copies of music
you have downloaded onto writable CDs for all of your friends.
Somebody you dont even know e-mails you a copy of a copyrighted song andthen you turn around and e-mail copies to all of your friends.
o Cause Consumers do not buy original CDs and they download music from the internet
instead.
o Effect Recording companies experienced declining of sales.
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o Cause Security and Privacy Risk from P2P (Peer to Peer) file sharing
o Effect There are instances that files to be shared were susceptible to worms and viruses. Many users are not aware that their personal documents may be available for many
of computer users to download
Music piracy was not viewed as an ethical issue and because of this perception; a lot of
people continue to patronize downloading of music for free without the authorization of the
artists or composers who wrote the song. According to the national survey conducted by Edison
Media Research, 74% of teenagers (12-17 years old) did not see anything wrong with
downloading music for free.
The RIAA is exerting too much effort on combating piracy instead of finding ways to
change their business models and profit from digital music. Moreover, efforts being provided by
different recording companies were not enough in order to catch the pace of digital music.
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V. Environmental ScanningA. I nternal Environment
Area Strengths Weaknesses
Marketing Product
Legal products(music)there are still existing P2P file sharing
services nowadays that the RIAA
pursues to abolish because of their illegal
distribution, copying or recording of
files. However, there are a number of
legitimate subscription services such as
ITunes and Emusic that sell music
legally.
Flexible payment options because of the advancement of
technology, online stores was able to
develop ways in providing different
payment options for their customers in
order to pave way for easy and
convenient transactions.
Price
Expensive cost of CDs andonline copies
-The costs of newly
released albums are very
expensive whether
customers buy from music
stores or online.
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Place:
Options to buy online or from stores P2P-file sharing networks are only
available online but businesses offering
legal music can be found in physical
stores and online stores.
Promotions
Strong product advertisements- Music that customers are looking for
are marketed or advertised in many
different ways such as television, radio,
newsprints, magazines, posters and
online advertisements.
-In the fight for the abolishment of
illegal copying, recording, or distributing
of copyrighted music or files, recording
companies have the support of artists or
celebrities who also support the same
advocacy. In fact, prominent
songwriters, singers, and musicians got
together and formed a group called
Music United for Strong Internet
Copyright or MUSIC. This is to ask their
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B. External Environment (Industry Environment)
fans not to download copyrighted music.
Area Opportunities Threats
Degree of
Competition
Legality of transactions as their advantage
- The legality of their transactions can beused as their advantage to keep people
from illegally downloading files.
According to a research made by a
Princeton University student for her
thesis in Economics, she found out that
46 percent of students who took the
survey said that they would be willing to
pay for a legal online music service
while only 27 percent said they would
not.
Advocacy to stop music piracy
- Other than partnering with prominentsongwriters, singers, and musicians, the
RIAA has also sent letters to University
Presidents to build a bridge between the
understanding of ethical principles of
Limited support from the
public to fight music piracy
- A national surveyconducted by Edison
Media Research found
that 74 percent of
teenagers (12 17 years
old) did not see anything
wrong with downloading
music for free.
High-costs of legal and clean
file copies
- People view recordingcompanies as greedy
charging $20 per CD
when the costs of
duplication were minimal.
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downloading of music and the students.
Clean files
- Almost all of the legal online musicservices dont have viruses, adware or
spyware hidden behind the files they
provide for their customers as compared
to P2P-file sharing networks that have
less socially redeeming features.
- According to an Ipsos-Reid survey, 19percent of Americans 12 years and older
said that they had downloaded an audio
file from a file-sharing network; more
than half of people between 12 and 17
years old said they had done so. Because
of this, its possible that young people
were being exposed to age-inappropriate
materials.
P2P-File sharing networks
excuse
- Kazaa, Morpheus, andGrokster did not distribute
music; they merely
provided the software that
enabled the exchange of
files among members. A
federal court judge ruled
that the users, and not the
networks offering the
software, were
responsible for copyright
infringement.
- As a result of a federaljudges decision,
networks were able to
stay in business and were
able to attract additional
investors and advertisers
now that the viability of
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c. General EnvironmentArea Opportunities Threats
POLITICO-
LEGAL
- As stated by the courts of law, anyonewho digitally transfers files of
copyright-protected songs and keep
them on the hard drives of their
computers or laptops were breaking the
law.
- When the RIAA found out about theentire business operation of Napster, it
filed a lawsuit against Napster on
December 1999. Napster was accused of
illegal distribution and copying of
- A federal court judgeruled that the P2P File-sharing
services were not responsible for
copyright infringement, its the
users. Since then, these kinds of
services continued to flourish and
in fact, were able to persuade
more investors and advertisers to
invest on their services.
their businesses models
was more certain.
Continuous
growth of P2P-
File sharing
networks
The continuous growth of P2P-
File sharing networks provide
alternatives for people who are
looking for an easy and free
access to music or any other
kind of files.
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music.
- According to the Ninth U.S CircuitCourt of Appeals, Napster was fully
well-aware of their users illegally traded
music.
- A group of P2P File-sharing servicesreceive their own lawsuits coming from
a group of recording and movie picture
companies for financially benefiting
from the infringing of copyright works.
- A restraining order was issued toMadster, was also known as Aimster.
Another P2P File-sharing service
established by Johnny Deep. Due to the
restraining order, its operations were
forcefully shutdown on December 2002.
- A federal appeals court in Chicagoupheld an injunction that forced Aimster
to shut down.(July 2003)
-To further combat music piracy, the
RIAA settled more than 900 subpoenas
with university administrators and
Internet service providers asking for the
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names and addresses of people sharing
music files. The RIAA stated that they
would file lawsuits against these
individuals by the end of August.
- School administrators value theirstudents right to privacy but they also
felt obliges to follow the Digital
Millenium Copyright Act (DMCA)
ECONOMIC - Recording Companies
experienced an 11% decline in
worldwide sales of CDs,
Approximately 1.7 billion
blanks CDs were sold in 2002,
up to 40% from 2001.(end of
2002)
SOCIO
CULTURAL
- Despite the culture of people whenit comes to their perception of music
piracy, there are students who are
willing enough to pay for legal music.
Based on the study conducted by a
Princeton University student, 46% of
- Most people did not seemusic piracy as an ethical issue.
According to a national survey
held by Edison Media Research,
74% of teenagers from 12 to 17
years believed that theres
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the students who participated in the
survey said that theyre will to buy a
legal copy of online music and only
27% said that they would not.
- There were less socially redeemingfeatures being catered by P2P File-
sharing services. An Ipsos-Reid survey
clearly showed the negative impact of
files being exchanged online and the
advertising strategies used by the P2P
File-sharing services on their primary
users, teenagers. According to the
survey by Ipsos-Reid, 19% of
Americans 12 years and older confessed
that they had downloaded an audio file
from a P2P File-sharing network and
more than half of people between 12
and 17 years old also said that they had
done so. Based on this study, there was
a good possibility that the youth was
being exposed to inappropriate
materials. Downloading files from a
file-sharing network could expose
nothing wrong with
downloading music for free.
Most students couldnt accept
the analogy that downloading
music can be viewed similar to
stealing a CD from a store.
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TECHNOLOGICAL
teenagers to pornographic images and
advertisements luring them to visit an
online gambling site.
- Administrators of the differentcolleges and universities found the
habitual downloading of movies,
games, and songs would overload
the computer network of the campus
making it difficult for the professors
to make use of the internet for
teaching and researching purposes.
- Screening software thathinders pornography
materials from regular
websites did not work
on file-sharing
programs.
- The flourishing of theinternet opened a door
of opportunities for new
applications to be made
that includes P2P File-
sharing services.
- Technological advancesmade the downloading
of music from the
internet a prominent
leisure-time activity in
2003.
- Because of the
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subsequent
technological
advancements, a
tremendous amount of
interest in the free
reproduction and
distribution of music
grew.
Some university students would
set up search engines on their
campus computer networks in
order to keep files such as
photographs, term papers and
MP3 music files. Since these
files are located in the campuss
network, all of the students who
study within the vicinity of the
school can have access to any
files available on the network.
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VI. SWOT AnalysisSWOT MATRIX STRENGTHS
1. Legal products2. Flexible payment option3. Options to buy online or
from stores
4. Strong productadvertisements
WEAKNESSES
1. Expensive cost of CDsand online copies
2. Public perceptions of theRIAA
OPPORTUNITIES
1. Preference of the majority2. Advocacy to stop music
piracy
3. Clean files
S1, O1, O2: Educate the
people about the illegal
transactions of P2P file
sharing services.
W1, O1, O3: Offer lower
costs of CDs and clean online
copies.
THREATS
1. Limited support from thepublic to fight music
piracy
2. P2P-file sharing networksexcuse
3. The continuous growth ofP2P-File sharing
networks provide
alternatives for people
T1, T3, S4: Strengthen
advocacy about music piracy.
Educate consumers about the
possible viruses and malicious
materials that could be
harmful to people between 12
and 17 years old.
T1, W2: Fix their accounting
errors which will help them
gain public support in order
to regulate music piracy.
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who are looking for an
easy and free access to
music or any other kind
of files
VII. Alternative Course of Action - Solution of the ProblemThose who participate in the sharing and distribution of music without the permission of
the original artist or composer are violating the Federal copyright law.
Education about Music Piracy
ACA 1: To strongly educate the people, especially the students of different colleges and
universities regarding Music piracy and how they are violating the Federal copyright law by
simply uploading and downloading infringing copyrighted works without permission.
ADVANTAGES DISADVANTAGES
- This course of action will teach thepeople about the fundamental part of
educating them about ethics, personal
responsibility, and respect for the rule
of law.
- Moreover, this will also make themunderstand that if they pirate
copyrighted works, they are subject to
- It takes a lot of time and effort foreducation about music piracy to
completely spread.
- Theres no assurance that people willabide to the advocacy the company is
trying to send across.
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legal liability.
- Education about music piracy couldlead to a possible decline in the
percentage of people illegally sharing
and distributing music.
ACA 2: To change their business models that will help them earn profit from digital music.
ADVANTAGES DISADVANTAGES
- This course of action will allow them tocompete against other P2P file-sharing
services by providing a myriad of legal
digital music.
- This will give options to the consumersthat will result to them convenience.
- Changing business models and keepingpace with the advancement of
technology will require them a huge
amount of investment
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Recommendation
They should modify their promotion and change it that will help them gain morecustomers. For example, they could offer a bundled music with a lower price.
Offer lower prices that will not compromise their profit. Ensure the accuracy and correctness of their accounting papers in order to gain the trust
of recording artist and the public.
Detailed Plan of Action
Activity People Involved Time
Scheme
Desired Results Priority
-Education of
people especially
students
- School administrators
(General Counsel,
Director of Information
Technology, Dean of
Student Affairs)
-Hilary Rosen (Chairman
and CEO of Recording
Industry Association of
America), Edward P.
Murphy (President and
CEO of National Music
Publishers Association),
Q1Q2 -To see students
encouraged to stop
downloading music
without permission
from the original
author or composer.
-To see colleges
and universities
apply stricter rules
when it comes to
the students access
to the internet and
High
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- Modification of
business model
and Rick Carnes
(President of the
Songwriters Guild of
America)
CEO and the board Entire
year
impose appropriate
warnings and
penalties to those
who violate the
rule.
-To see more
people informed
about what music
piracy is and what
penalties can be
given upon them
when its violated.
-Letters sent to
different colleges
and universities.
-Additional option
for customers to
buy music.
High
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-Additional
department that
will handle digital
music