The Napster Software And The Worlds Reaction to

The Napster Software: And The World’s Reaction to its First Widespread Peer to Peer Sharing Architecture CSE 190/Spring 2002 Mostafa Azizi Devin Lee Drew Daniel Issakharian Felip Nelson Ulip

Napster: From Where Did it Come? Though MP 3 encoding available, it was difficult to find publicly distributed music on the internet. l Small sites hosting public music would become uselessly slow once widely discovered. l l Peer to peer file sharing with a centralized server indexing user shared files surmounted these problems.

Napster: How it Works

The Decision l The architecture of the Napster software did not address copy protection in any way. – By design, Napster simply facilitated the sharing of mp 3 encoded music and the discussion thereof. – This design propelled the eventual userbase of 30+ million.

Who Are the Stakeholders? l The driving force: – Joe computer-owning public l Those who responded to demand: – Shawn Fanning et al , creators and capital behind Napster l The status quo dinosaur health care system: – RIAA, legal team, lobby team l The creative foundation: – Makers of music l The technical mortar: – Providers of Internet services

History l l l l l 1877 ~1960 ~1970 1972 1977 ~1985 1990 1992 1998 -The first recording of a human voice -Personal tape recorders reach reasonable price -Predecessors of the Internet -Copyright law extends protection to sound recordings -PCs get (relatively) easy -2400 baud modems, AOL, Microsoft goes public -first World Wide Web browser -MPEG-1 (MP 3 superset) standard introduced -DMCA becomes law

History l Late 90’s May 99 l Dec 99 l July 00 l Oct 00 l l Feb 01 -A high school grad can easily afford a new computer -Fanning et al create Napster -RIAA sues Napster just in time for Christmas -District judge issues injunction which would shut down Napster service while case in progress -9 th US court of Appeals (SF, CA) stays injunction -Bertelsmann initiates collaboration to make the next version -9 th rules district court injunction was overboard

History July 01 l Feb 02 l l May 15 l May 17 -District court revises injunction -”Dead Napster Gets Deader” 9 th upholds injunction -Sale falls through, employees offered unpayed vacation -Bertelsmann buys Napster

Copyright Law in the US Promotes progress of science and arts l Protects all original works of authorship that last for the life of the author plus 50 years l

Previous Copyright Cases: l Betamax case – Reject entertainment industry’s effort to keep the VCR off the market. – Supreme Court said: “Copyright is first and foremost about promoting progress in the arts and sciences. Monetary rewards are secondary. ” – Napster believes this is the case with their peerto-peer file sharing.

Napster’s Peer-to-Peer file sharing Napster user A & B find each other using a directory maintained by Napster. l User A copies digital music of user B. l File is transferred over the Internet and NOT through Napster’s servers. l

Accusation Against Napster l Contributory infringement – contributing to the direct copyright infringement of its consumer-users l Vicarious infringement – profiting from infringing activity under its control

Defense of Napster: l “staple article of commerce” doctrine – provider of technology is NOT liable if technology is capable of significant noninfringing use – VCR can be used both for copyright infringement and for legal non-infringing uses

Defense Against “Contributory Infringement” l Capable of significant non-infringing uses – – Distribution of songs for independent record labels Introducing new artists Free authorized distribution of songs Sampling and “space shifting”

Defense Against “Vicarious Infringement” l There is liability if Napster has both: – (1) Ability to supervise activity of its users – (2) Direct financial interest in infringing activities • However, there is no way for Napster to distinguish between legal or illegal copying.

Additional Defense l Napster users may have “fair use” defense to copyright infringement: – Most consumer copying is not for commercial purposes – Instead, most are for sampling or space shifting, which are “fair use”

Additional Defense. . . Audio Home Recording Act (AHRA) – Consumers have right to create and transfer music for non-commercial purposes l Napster users typically share files for free – Copying is arguably for “non-commercial” purposes l Napster users are therefore not direct infringers l

The Other Side: l RIAA sued Napster – Napster’s service enables piracy of music. – Millions of users may be logged onto Napster trading millions of pirated recordings.

MP 3 Files Offered on Napster l Majority are infringing – Court found that Napster knew, and even encouraged it. • Napster is enabling illegal copying.

Copyright Law l Contributing to infringing activity is a copyright violation. l Knowledge of infringing activity is a copyright violation.

RIAA’s Argument Audio Home Recording Act cannot be applied to Napster. l AHRA covers devices for primary purpose of making digital music recording. l These covered devices are required to incorporate technology to prevent serial copying. l Manufacturers of covered devices also pay royalty to copyright owners. l

RIAA’s Argument cont. . . l General purpose computers are not covered by AHRA – AHRA does not apply to Napster • Napster has no immunity under AHRA l Even if covered – AHRA would not allow widespread distribution

RIAA’s Argument cont. . . l Case against Napster is nothing like Betamax case (VCR). – VCR can be used lawfully • Never infringe on a copyright Overwhelming use of Napster is for infringing purposes. l Napster does not have any non-infringing use that are commercially significant. l

RIAA’s Summary of Allegations Napster users are committing copyright infringement. l Napster promotes infringement. l Napster advertises the ease of finding songs through their server. l Napster should be liable. l

Napster and Music Sales l Two sides of argument: – (1) Napster caused a decline in music buying. – (2) Napster increased music sales.

RIAA vs Napster “Napster hurt record sales. ” RIAA claims that sales of compact - Hillary Rosen, discs singles fell by 39% last year. And that “Napster has delayed the development of an online music marketplace. ”

Record Sales l Music sales decline due to the illegal trading of MP 3 s: “I have not bought a cd since Napster rocked my world. I download all of my favorite hits totally free, and without the hassle of outlandish music store clerks. I am a sharing kind of guy, so I don’t mind sharing my tracks with others. ” - Stu Fraser, college senior Reciprocal Inc. study: CD sales within a 5 -mile radius of colleges declined 4 percent.

Napster hurts CD sales (? ) “Record sales are up despite the widespread use of p 2 p software, not because of it. ” - Larry Miller President, Reciprocal Inc. Shows how national album sales in the US has increased steadily over the past three years when album sales in US college stores has decreased steadily.

Napster increased music sales: l Jupiter Communications survey: – Napster users are 45 percent more likely to purchase music. – Because Napster itself is a catalyst for sales. – Napster was the greatest predictor of music spending. l Cyber Dialogue report: – Adults going online to access music increased 48%. – Flocking music sites and spending money. – Average music user spends $610 annually; compare to $509 spend by average adult online. – More than 66 percent said listening online has prompted them to buy a CD.

Napster is indicative of a new form of buying and selling of music: Record Companies for Napster l “Even piracy, that’s hands-down a copyright infringement, can in certain instances speed up the pro - Strauss Zelnick President, BMG Entertainment l new. webnoize. com believes that Napster did not hurt CD sales as claimed: “They may owe Napster a larger debt than they would care to admit. Napster showed the way for th - Webnoize analyst

Napster’s Defense The biggest decrease of CD sales occurred between first quarter of 1998 an l Reciprocal study doesn’t take into account online sales. l Napster gives music industry a scare.

Artists For Napster l Simple logic: Napster helps non-RIAA artists – Napster helps artists to market/promote their music without the backing of a record studio. How a typical RIAA artists’ CD cost is distributed: Non-RIAA artists: Production: $50, 000 Album sells for: $16 Manufacturing: <$1 Retailer: $4 or $5 Record Company: $8 Artist: $2 Production: $2, 000 Album sells for: $10 Manufacturing: $1 to $3 Retailer: $2 or $3 Record Company: $2 Artist: $4 “On Napster, I think it is a good thing. The decentralization of the process of buying and selling music will ultimately be positive for artists. I don’t think that people will stop buying records even if they are free. This is the future and to deny it is to lock yourself into the feudalism of the old major label system. ” - Chris Ballew musician, Presidents of the USA

Artists For Napster – Offers a potentially better way to deliver music to consumers. Allows fledging artists to promote/expose their music to a larger audience. “It is a great way of getting music to people. If you are in some far flung part of the world or in South Croydon, there is no better way of accessing music. ” - Rob Lord, musician

Artists Against Napster – Hurts CD sales, thus hurting artists’ royalties “Napster is theft…” “Napster is robbing me blind. ” - Scott Sapp musician, Creed “I spent $15, 000 on my website. I paid a publicist from out of my own pocket. Now some kid’s going to tell me that my catalog should be free? They’re just entrepreneurs setting themselves up to make a ton of money off other people’s work. Where’s the compensation for the artist? - Jonatha Brooke, musician

Artists Against Napster – Poor CD sales also impact future potential record deals: “A record company’s decision to release a second or third CD is based on the ability of the first release to sell enough to offset the cost of subsequent releases” – Chris Krege, musician – Copyright issues…

Arguments of Napster Users – CD prices have gone up in the last 10 -15 years, instead of down, as the record company promised: • CD sales jumped 10% in 1999, while the cash from sales jumped 12%. • FTC accused the Big 5 distributors of using their power to set artificially high prices in the CD music market. – Napster allows widespread distribution of music, which can lead to more CD sales and more people at shows.

International Music Community – More diversity in music; that music is not “controlled by the Big 5” A Social Issue: – Provides an international music community: “You’re going to have a massive international pot of artists making their material in the basement and marketing it on the Web. ” – Chuck D, Rapstation. com

Service Providers l Decisions not based on the ethics, but on the cost of bandwidth / performance. – Commodity internet bandwidth • ~$250 per ( Mbps * month ) • $100 per month to watch the koalas on a 384 kbps stream

Cases: l UCSD – blocked Napster server ip’s in housing – generally open • security problems are the exception l Qualcomm – strict policy against use of any software which violates copyright law l Time Warner – bandwidth attenuation

Summary of the Effects on Stakeholders l Artists were arguably unaffected. l Record companies claimed negative effects, but market data ambiguous. l Napster benefited, till shut down. l Users benefited from variety of free music. l ISPs inundated with traffic.

Conclusions l It is a legal “fact” that Napster as first implemented, violated copyright law. l This architecture propelled it to a 30 million user base in a short time. l Reality is somewhere between perfect copyright protection, and free exchange. l “Perfect protection kills innovation, just as perfect absence of protection kills innovation” - Lessig in a slashdot. org interview

The Future l Any capitalized entity which approaches Napster’s popularity will be taken out legally* l Not-so-easy fair use will live on. MP 3 technology is in the public domain. l A more restrictive means of purchasing songs and albums will emerge.

References: l l l http: //history. acusd. edu http: //www. personal. psu. edu http: //wired. com/news http: //www. newsbytes. com http: //www. delasallehs. com http: //www. adam-smith. com http: //www. google. com http: //www. stanford. edu/aigenta http: //news. bbc. co. uk http: //www. salon. com http: //www. lawgirl. com http: //www. epinions. com