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Compensating the record companies for piracy [UPDATED]

Joel Tenenbaum, music piracy, RIAA, statutory damages A federal judge in Boston took the unusual step last week of slashing damages that a jury had ordered a file-sharer to pay the major record companies for infringing their copyrights. Err, well, perhaps that's not so unusual -- not many of these cases have actually reached juries, and judges have tossed out the damage awards in the two most widely publicized cases so far. What made District Court Judge Nancy Gertner's ruling unusual was her finding that the amount of damages had violated the Constitution,  even though the jury had awarded damages in the lower range of the amounts approved by Congress.

The Times' editorial board, which has complained in the past about the magnitude of statutory damages in copyright law, will probably weigh in on the ruling within a few days. In the meantime, I asked the folks at BigChampagne to help me with a thought experiment about the right level of compensation for file-sharing infringements.

In the case of file-sharer Joel Tenenbaum, jurors awarded the major record companies $22,500 per song. I wondered what that would work out to if the Recording Industry Assn. of America managed to collect such a sum from everyone sharing those songs. Granted, that's not going to happen, especially with the industry no longer suing file-sharers en masse. But Tenenbaum was just one person sharing those files -- one of many sources for others to download from. And on a file-sharing network, there's not much difference between Source A and every other person offering a particular song.

I sent the titles of nine of the songs Tenenbaum had shared to BigChampagne. Diving into the data it collects from file-sharing networks, it reported that those songs -- all rock and rap hits by the likes of Eminem and Nirvana -- were being offered by nearly 6.8 million file-sharing computers. At $22,500 per song, that's $152 billion -- many orders of magnitude more revenue than those songs could have generated even in a world with no infringement. Assuming those nine songs were representative of all 30 of the tracks Tenenbaum infringed, the amount increases to half a trillion dollars.

Even at the reduced level set by Gertner -- $2,250 per song -- the extrapolated amount is staggering. If all 6.8 million file-sharers with those nine songs were dunned that amount, the labels would collect $15 billion. That's more than the total amount of music sales in the U.S. each year. Not bad for nine songs.

Updated, 4:32 p.m.: Eric Garland of BigChampagne points out that the numbers his company provided are just for file-sharers in the U.S. If I'm not mistaken, there's some of that behavior overseas as well.

The point here isn't to defend Tenenbaum, who first lied about his file-sharing and then tried to defend it in the most self-serving way possible. "Art is meant to be shared"? You might get away with saying that, Joel, if you ever paid for it. I'm just noting here that $22,500 per song makes sense only in a world where one infringer is held liable for the acts of millions. It's true that the Internet enables a single person to become a global infringer. But does that mean juries should act as if each pirate they encounter is devastating the industry singlehandedly?

Updated, 10:37 a.m. Friday: Cary Sherman, president of the Recording Industry Assn. of America, sent in a lengthy reply this morning. Here is it, unedited:

Your analysis (about how much money record companies would earn if all file-sharers paid the statutory damages award) implicitly presumes that statutory damages should reflect actual damages (i.e. the sales revenue that was actually lost).  But that's not what stat damages are about.

Statutory damages were specifically created by Congress as an alternative to actual damages -- in part because actual damages are often difficult to calculate, but even more importantly, to provide meaningful deterrence.  How much of a deterrent effect would you have if you reduced statutory damages to some modest amount on the ground that everybody else was infringing, too?  The greater the illegal conduct, the less each violator would have to pay, reducing the risk to the point that the deterrent effect is lost.  How, then, would you deter the theft?

Congress chose to impose meaningful risk on infringers that they could have to pay substantial damages even if it couldn't be proven that the actual damages were significant.  That's a sensible way of achieving a policy of deterring infringement. Your "experiment" yields precisely the opposite effect of what Congress intended.

As you may recall, we didn't ask the jury for any particular level of damages.  We left the amount completely up to the jury.  I presume that they took into account the fact that Tenenbaum forced us to spend a lot of time and money litigating the facts of a case in which the facts were completely clear except that he lied about them repeatedly, and under oath; that he tried to pin the blame on others; that he continued stealing music even after he was sued; that he never showed any remorse; all that kind of stuff, beyond just the impact on the industry.  Isn't that what you'd want a jury to consider in picking a damage award?

Isn't that precisely how a jury deters misconduct? Should such egregious misconduct (and disrespect for the court system) be beyond the scope of the jury's damage award because, if every infringer were also sued, we'd recover too much?

Statutory damages also reflects another basic practicality -- that every infringer is NOT going to be sued.  Just like every speeder is not going to be caught.  Or every looter captured.  So you provide real consequences for the unlucky few who get caught to deter all the others.

Should a looter's liability be reduced because, if he hadn't stolen the TV, another looter would have anyway?

I fear your "experiment" proves too much.  And your embracing it would give it credibility it doesn't deserve.

He makes a good point about damages needing to deter other infringers. Nevertheless, I don't think a jury needs to go to $22,500 per song, or $675,000 in all, to offer an appropriate deterrent in addition to compensating the labels for their losses. Gertner's formulation -- $67,500 for 30 songs -- strikes me as a whopping deterrent.

Battling file-sharing is a game of whack-a-mole, and copyright holders won't increase their score by using a bigger hammer.

-- Jon Healey

Illustration by M. Ryder / Tribune Media Services

 

Comments () | Archives (24)

The comments to this entry are closed.

DJR12

In theory, the way most peer-to-peer networks work, every person who downloads the song is also sharing it. So if they were hypothetically able to round up every person sharing the song, it seems to me that you could reasonably conclude that that group of individuals composed the entire audience for illegal downloads of the song. Therefore, the damage award should consist of the going rate that each one of those people should have paid for the song - about $1 per. That would be a much more reasonable amount. (Obviously that doesn't take into account any punitive damages .)

Dennis  Wilen

I guessed you missed this news, which shows how stupid and ridiculous Big Music really is:

"RIAA paid its lawyers more than $16,000,000 in 2008 to recover only $391,000"

http://recordingindustryvspeople.blogspot.com/2010/07/ha-ha-ha-ha-ha-riaa-paid-its-lawyers.html

Mark

Only losers cheer for piracy.

Carlos Jobim

Dennis Wilen -

besides not learning grammar, obviously you never learned that "two wrongs don't make a right"

downloading penalizes more than the Big Music fat cats you feel so strongly about:

It takes money from the writers, producers, engineers, and musicians who made the recording.

if they don't make money, they can't make recordings for you to download

see if you can wrap your head around that

Shucker

Peer-to-peer and file-sharing are NOT piracy. We should all get together and strive to abolish that P word.
Piracy does not exist because there is no proof of its existence, regardless of what the RIAA says.
WISE UP you people!

Dennis  Wilen

Carlos --

Actually, I've produced a bunch of records and many top quality FM radio remotes, some of which have been bootlegged -- as vinyl, cassette and later MP3s -- for years.

One of these (despite the Torrents) is going to get a real major label release soon.

If anything, all the trading and downloading have only increased interest in these sides.

RN Perkins

Lest we feel sorry for the same guys who spent millions in graft and payola for over sixty years-people who are flying jets between LA and NYC for lunch and the corrupt people who bought Time and AOL and shielded the crimes thru controlled press! The guys who lied. saying Elliot Spitzer used Government funds for his exploits, so as the prevent him from doing any real damage to the crooks at the top! Really, what about the authors and writers who create the products and get pennies on the dollar from the Gangster labels?

Jon Healey

@Dennis -- I don't think Ray's calculations prove anything, actually. The RIAA wasn't trying to make money off the lawsuits. It was trying to deter file-sharing. It was, in essence, a form of public education about the consequences of taking things without paying for them. Whether that investment yielded the right level of return is a whole 'nother argument. The RIAA says the trajectory of file-sharing changed because of the lawsuits - it no longer was accelerating steeply. BigChampagne's research, however, suggests that it has continued to grow as broadband penetration has increased.

jad

Why not take the libraries to court as well, for maliciously sharing those products known as books? But the fact that RIAA spent millions on lawyers in a last-ditch effort to save its obsolete business plan by suing its most ardent clients and customers--that brings joy to my heart.

Jon Healey

@Shucker -- What, piracy is only for Somalians? That's a losing argument, I think. The word connotes "theft," and I get the point that infringement doesn't reduce the supply of the goods being sold. So it's not "theft" in that sense. But it is "theft" in the sense of taking something that's for sale without paying for it, enriching yourself without compensating the people who supplied the goods you're adding to your collection. That's why "piracy" is appropriate in this context, IMHO.

Jon Healey

@Jad -- Libraries, like anybody else, are entitled to lend (or give away, sell or rent) the copyrighted items they buy. It's the "first sale" doctrine. The crucial difference between libraries and file-sharers is that when they lend books, libraries don't create copies of them.

Big Jim Slade

I misunderstood your headline. I thought finally the record companies were going to hand over checks to consumers finally for having sold us the same content on LP's, 45's, 8 tracks, cassettes, CD's, DVD's, and legal downloads. In other words, not doing a damn thing and selling us their catalog over and over and over.

Why have I paid for the same thing over half a dozen times at increasingly higher rates?

Just trying to find out who the real pirates are here... I know I've paid at least one record exec's cocaine bill over the years in recording purchases.

Garrick

It seems like the product stream to get a CD to Target and pay a clerk to collect $15 from someone is a lot cheaper for the record industry than paying attorneys to go after someone to collect money, so it makes sense that the record industry would want more money from the consumer/respondent when they use the legal collection method. Also, to those "file sharers" out there, exactly what business plan do you think the record companies should use? If people were stealing the cars that Ford produces, would you tell Ford that they need to create a new business plan to adapt to the changing circumstances? It is stealing, and, whatever your opinion of record companies, your stealing is also hurting musicians. When making music is no longer a viable financial option for musicians, they stop putting out music, that creativity disappears, and we are left with Justin Bieber and Lady Gaga. Great system, geniuses.

Garrick

Big Jim Slade, so you think that the record companies should provide you with free copies of any music that you have ever purchased every time a new music media is introduced? I'm sure someone could come up with a business model where that would work, but I'm guessing that the initial purchase prices of your Foghat LPs would have been WAAAAY higher than they actually were in order to cover any futer costs that the record company would incur when they produced your subsequent 8 tracks, casettes, CDs, and legal downloads. When you go to the theater to see a movie, do you expect to get a free copy of the DVD when it comes out? I would rather pay for good music, than listen to free crappy music any day.

James

The amount stolen and the penalty have nothing to do with each other. This goes for any crime of theft.

Greg Minor

One artist said it best:
You’ll excuse me if I laugh in your face as I itemize your receipts and PowerPoint your balance sheets. I hear this year’s Vans Warped Tour is “going green!” I guess they heard that money grows on trees. Hope they ship all those s----y bands overseas like they did the factories. Music’s power to describe, compel, renew … It’s all a distant second to the offers you can’t refuse. Anyone remember when we used to believe that music was a sacred place and not some f-----g bank machine? Not something you just bought and sold? How could we have been so naïve?

If you were in it for the money, it's not art.

Jon Healey

@James -- You're conflating criminal and civil law. Criminal penalties aren't intended to be compensatory; damage awards in civil cases are. Read Judge Gertner's ruling -- http://www.scribd.com/doc/34125455/Order-on-motion-for-new-trial-remittitur-in-Joel-Tenenbaum-case -- for a good discussion of the relationship Congress intended between statutory damages and actual harm suffered.

Richard  Sullivan

Anyone who has ever made a Xerox copy is guilty of piracy. Anyone who has ever videotaped a TV program is guilty of piracy. Which means, every one of us, including all those instigating these lawsuits, is a pirate.
As a producer of films, DVDs, books and other copyrighted material, nobody is out there looking out for me or my company as pertains to copyright infringement. MegaEntertainment companies have bottomless pockets and therefore are treated as special entities by the lawmakers they bribe, uh, I mean, make campaign contributions to. The US Copyright Law of 1976 protects all of us who produce copyrighted material EQUALLY, but obviously the film and music industries are far more equal than the rest of us.
Not one record label has a website where customers can purchase and download music from their vast archives, a la iTunes. These huge catalogs remain dormant in the dark, when they could be earning millions for Sony, Warner Brothers, and all the rest. Yet not a single major label has bothered to earn revenue from this rich, virtually cost-free source.

Ellen Hopkins

It's not just the music companies getting ripped off here, it's the artists and their crews. "If you make money at it, it's not music?" What kind of asinine statement is that? The same issue is happening with Torrent downloads of books. I'm a heavily pirated author. "If you make money at it, it's not really writing?" Is that what you think? Excuse me, but that's my career. My time. My talent. Yes, I make money on my books. If I didn't, I couldn't be an author. Yikes!

Marko Capoferri

@Ellen

I think you are conflating the sentiment of some of the critics of the piracy debate here. No one is saying "if you make money from it, it is not art." We are saying if you DO IT solely for the purpose of making money and not the joy of creating and sharing your ideas, then that is not art; or, it is art without substance and soul. You say if you didn't make money from your writing you couldn't be an author. Or are you saying that if you didn't make money from your writing you WOULDN'T be an author? Because if you didn't make a cent from your writing, you could still be a writer, if your heart was in it for the right reasons, which I am assuming for you it is. I'd recommend spending a Friday afternoon perusing the bookstore and archive at Beyond Baroque Literary Center in Venice (681 Venice Blvd). Take note of the shelves jam-packed with chapbooks put out by independent poets and fiction writers (including my own), most, if not all, of which are printed by the writers with their hard-earned money. They are not spending their valuable time and money writing and printing poems, essays, and stories for a profit. It is born from the primal desire of true artists who feel that they have something inside of them that needs to be expressed, and something of value to contribute to the world. Yes, it is a goal of mine to generate at least some of my income from my writing someday. Until then, I'll work crappy jobs, I'll fund my own printing and give away my chapbooks for free because I have the spirit inside of me and I need to get it out to the world.

Marko Capoferri

@Garrick

"When making music is no longer a viable financial option for musicians, they stop putting out music, that creativity disappears"

I have to ask you if you are a musician yourself, or if you have ever known a musician. All of the musicians I know work day jobs and create music for the joy of it, often at an expense: lessons, formal schooling, instrument repairs, travel to open mics and gigs, promotion, recording, cd duplication, website design and url domain names. It is for the love of creating, the love of coming together with other musicians and music listeners and sharing the power of art.

My main point is this: a creative person is a creative person, regardless of what their bank statement says.

Mitchell Young

Wow, an IP post that actually inspired some interest.

Jon Healey

@Mitchell -- Write enough of 'em and it has to happen sooner or later.

Leslie Shapouri, Heart of the Canyons Church, Santa Clarita

Regarding copyright infringement: If those who are entitled to royalties want to collect "damages," they should at least demonstrate that it's possible to legally pay for making copies.

Our church wants to create a CD with six songs and make copies for Sunday School to practice sign language for the songs. We are willing to pay for permission.

Try and find out who to pay and how much!! Each song has an original author, the producer, the performing artist and sometimes an “administrator”. Then you have to determine the type of license(s). None of the descriptions seem to fit. I tried to call…

Instead of just making a statement saying the song is copyrighted by law, why can't it say, "If you want to make copies of this song, please contact the following for permission _________ "

If the industry makes it easier to obtain permission, there would not be as many damages to collect for infringement - maybe that's the point.


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