Why the Era of Online Piracy Is Over (Correct)

Editor’s note: The chief executive of the Recording Industry Association of America was referred to by the wrong gender in an earlier version of this article. Cary H. Sherman is male. It has been fixed in the third paragraph.

NEW YORK (MainStreet) — While much of the Internet was still celebrating the success of the thousands of websites and protesters who rose up to successfully squash the Stop Online Piracy Act (SOPA) and the Protect Intellectual Property Act (PIPA) – two pieces of anti-piracy legislation that critics argued would wrongly censor the Internet – the chief executive of the powerful Recording Industry Association of America penned an op-ed in the New York Times to lament the demise of the bills and call for something similar to replace them.

“Perhaps this is naïve, but I’d like to believe that the companies that opposed SOPA and PIPA will now feel some responsibility to help come up with constructive alternatives,” Cary H. Sherman, the RIAA's chief executive, wrote in the paper. “Virtually every opponent acknowledged that the problem of counterfeiting and piracy is real and damaging. It is no longer acceptable just to say no.”

Sherman is certainly not the first to argue about the threat online piracy poses to content creators, and he certainly won’t be the last. What’s different now are the lengths the entertainment industry is willing to go to put a stop to piracy – and the outcry against those measures. Not only is the industry urging politicians to come up with alternative legislation to police illegal downloading, but there are ongoing efforts to finalize international trade agreements that target copyright violations, including the Trans-Pacific Partnership and the Anti-Counterfeiting Trade Agreement, the latter of which has already sparked protests throughout Europe.

Given how aggressively legislators and the entertainment industry are pushing for greater enforcement against online piracy even in the face of the tremendous public backlash, one might assume that online piracy is becoming more widespread. The truth, however, isn’t quite so clear cut.

The recording industry typically notes the decline in music sales and the billions of songs downloaded since Napster launched in 1999 as proof that online piracy is rampant, but several independent studies suggest that illegal downloading is becoming less and less common. The number of Internet users who resorted to peer-to-peer file-sharing services to download music dropped from 14% in the third quarter of 2007 to 9% in the third quarter of 2011, according to survey data provided to MainStreet by the NPD Group, a research firm. Moreover, a report from the Computer & Communications Industry Association found that box office revenues increased 25% between 2006-2010 and the value of the global entertainment industry increased by nearly $300 billion between 1998 and 2010.

That’s not to say online piracy has gone the way of the cassette tape, but according to tech experts we spoke with, it has become increasingly marginalized and will only become less popular going forward.

“There are always going to be those who look for bootlegs and songs you can’t find on sites like Spotify and Rdio, and there will always be people who see illegal downloading as a sort of game, but I think that number will just get smaller and smaller as other options become more convenient with all your devices,” says Russ Crupnick, senior entertainment industry analyst for NPD.

The reason for this, as Crupnick and others note, isn’t because of potential legislation that mirrors SOPA so much as the growing number of cheap, legal alternatives to illegal downloading combined with the decline of many well-known file-sharing sites.

Once popular peer-to-peer services like Napster, Kazaa and Morpheus are all long gone. Limewire, the last of these big name services to stay in business, was shut down by the courts in late 2010. Other options gradually replaced these, including torrent websites, which let users download entire catalogues rather than single files, online storage lockers and even hard drive swapping. Several of these services have been shut down or prosecuted as well, yet according to Crupnick they were comparatively niche to begin with since they require one to be more tech-savvy to use.

The music industry in particular admits they have seen some improvement in part because of these shutdowns.

“When LimeWire closed in October 2010, the industry began to see an uptick in sales starting in November 2010. This uptick continued into 2011 and, by many accounts, helped fuel last year’s positive year-end sales,” says Liz Kennedy, the director of communications for the RIAA.

Meanwhile, the entertainment industry gradually realized just how much consumers had changed since the birth of online piracy. Services like Napster didn’t just create a demand for free content, it awakened a desire for huge volumes of content.

“People had access to all the music in the world through these file storing services, so they kind of got accustomed to eat as much as they wanted to,” said the editor of TorrentFreak, a blog that tracks news in the file sharing industry, who goes by the pseudonym Ernesto. “That changed the motivation for people. Suddenly one CD a month wasn’t enough.”

At first, there were few options to cater to this change in tastes. It wasn’t until four years after Napster launched that the entertainment industry finally coalesced around Apple’s iTunes program, and even that didn’t offer unlimited streaming. For that, Internet users would have to wait several more years until cheap music services like Spotify and Rdio launched with an expansive selection (not to mention movie streaming services like Hulu and Netflix.)

“If there’s an option that’s more convenient than the opportunity to pirate content, then piracy will become virtually non-existent,” Ernesto says. However, the key word there is “virtually.”

The Last Stand for Online Piracy

If there was a heyday for online piracy, it ended years ago. File sharing first became popular among young males in the early 2000s and according to Crupnick, its popularity gradually increased as more people in the family caught on to the trend. That all began to change by the mid-2000s when the recording industry started going after illegal downloaders with threats of unimaginably large fines, scaring away many casual downloaders.

“What happened pretty rapidly around 2003 and 2004 is that it went from something that was starting to blossom in the mainstream back to younger consumers,” he says. “It definitely kind of reverted back to its origins a little bit.”

Today, college-age students and recent graduates continue to be the ones keeping online piracy alive. One survey released by Columbia University in 2011 found that 18- to 29-year-olds are significantly more likely than any other age group to have pirated music and movies. Some 27% of those 18-29 said they copied or downloaded most or all of their collections compared to just 14% of the population at large. What’s interesting though is that more than half (55%) of those 18-29 who get their music through these means say they do so less now because of legal streaming options. Of course, that still leaves a sizeable number of young adults who haven’t budged in their pirating behavior.

“That behavior is hard to stop. It was hard to stop even when I was in college and people were doing it with cassettes and LPs,” Crupnick says. “You will never be able to stamp out piracy, whether it’s swapping of files or stream-ripping from YouTube. … As long as you have some forms of storage lockers and stream delivery, someone will always find a way to get around the system.”

Any time a TV episode takes too long to make its way to Hulu, or an artist doesn’t allow its content on Spotify, piracy looks like a more appealing option. Likewise, for those who simply want to own an entire collection of music for whatever reason, piracy can seem like the best choice. But as free services get better and pirating services become riskier, the number of people willing to download content illegally online will drop or be contained.

The recording industry, for its part, seems to recognize that piracy can’t be eradicated completely.

“Will there ever be an end to piracy? Doubtful,” Kennedy says. “While there has been modest success in reducing illegal peer-to-peer file-sharing, there will always be hard-core users who will stop at nothing to get their music illegally.” But that doesn’t mean the industry won’t try anyway to hasten piracy’s demise.

The hope, Kennedy says, is that combining legal alternatives with more “targeted enforcement efforts” will continue to deter potential pirates. Likewise, a representative from the Motion Picture Association of America emphasized the need to “partner with the tech industry” to create more legal options for online content distribution as well as to develop a legislative solution that “protects American ingenuity from foreign thieves.”

Whether the legal options will snuff out piracy remains to be seen. “I always say that technology tends to outpace the attorneys,” Crupnick says, noting that when one service gets shut down, another version pops up somewhere else. “We’ve seen a decade of that already.”

If pirating content online is like shoplifting it from a store, as some have described it in the past, the entertainment industry may eventually have to accept that it will simply take place on occasion, just as shoplifting does.

Seth Fiegerman is a staff reporter for MainStreet. You can reach him by e-mail at seth.fiegerman@thestreet.com, or follow him on Twitter @sfiegerman.

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