Song Pirates

Adam L. Penenberg
Forbes.com, 07.11.97

HE’S 18, HIS NOM D’INTERNET IS “THE LAIR,” AND IN MANY respects he’s your typical T shirt-clad teen. It’s summer vacation, so he sleeps until noon, grabs a bowl of Honeynut Cheerios and pads over to his computer, where he checks on his web site-to make sure it hasn’t crashed-answers E-mail and swaps music over the net.

Those who know where to find his site are free to “leech” from his personal cache of tunes, hundreds of them, neatly organized by artist. Want a taste of Will Smith’s rap, “Men in Black?” Just surf over to The Lair’s site, click on your mouse and let the music pulse into your hard drive. Feeling nostalgic? How about a trip down “Penny Lane” with the Beatles? Care to sample the latest Sheryl Crow or Pearl Jam? The Lair, a self-professed music junkie, has got you covered. Because on his site, the hits keep on coming.

It’s like the 90s version of trading baseball cards, except for one off-key difference: It’s illegal. And if you listen to the strains emitted by the Recording Industry Association of America, an organization that represents the interests of the major labels, The Lair, and the thousands of other music pirates who call the net home, are causing the record industry “incalculable harm.”

RIAA estimates that record companies lose $300 million a year in the U.S. alone to illegally copied cassettes and bootleg CDs, and as the technology to download music off the Internet advances, online piracy may end up costing the industry billions more. Last year, 1.1 million counterfeit cassettes and more than 200,000 CDs were seized in the U.S. But with the introduction of a new compression system called MPEG-1 Layer 3, or MP3 for short-available as freeware over the net-it’s now possible to stash whole CDs on off-the-shelf hard drives.

If you have an album with 72 minutes of music, that’s 650 megabytes of disc space. Download an MP3 player, also free over the net, make an MP3 file out of it and it takes up about one twelfth that space-about 55 megabytes-with little or no sound degradation (unlike RealAudio, the previous Internet audio standard). The result is bootlegger’s nirvana: CD-quality music that can be infinitely copied and distributed-even via E-mail-to anyone with a fast modem.

In the past, the authorities, with much fanfare, raided warehouses stacked floor-to-ceiling with records, then later, cassettes and CDs. But like an irritating tune they can’t get out of their heads, the question reverberating inside the minds of industry executives today is: What are the copyright cops going to do in the near future, when all the average Joe will need to warehouse millions of bootlegs is a laptop and a fast modem?

David Weekly, whose music archive site was shut down by Stanford in April after Geffen Records contacted University officials, has a suggestion. Since it’s no secret that record companies lose money on singles, viewing them as promotional tools, a way to whet consumers’ appetites, “instead of coming after us, they should either work with us, or think of us as free distributors for them: They have no risk factor, no inventory, no costs associated with shipping.”

Although RIAA doesn’t dispute that record companies take a hit on singles, they claim that since only 15 percent of released albums actually recover costs, and most songs available from illegal music archive sites are in the top 100, the pirates are stealing money that could be used to sponsor less-mainstream acts.

Music has entered a brave new domain: the Internet, the largest and most efficient copying machine in history. It’s also the world of music pirate guerrillas, geeks armed with powerful computers and high-speed Internet access who get a thrill playing cat and mouse with the recording industry. Since it’s hard to feel sympathy for a multibillion-dollar industry, the recording industry has trouble rallying the public around its cause. Whether offered knockoffs of Rolex watches, illegally copied videocassettes, or CD bootlegs, Americans have shown they are only too happy to shave a few bucks off the retail price-often for shoddy merchandise-even if it means, technically speaking, breaking the law.

As The Lair says, “My parents were kind of concerned when I told them what I’m doing is illegal, but as long as I can supply them with some songs by the Beatles and Tom Jones, it doesn’t seem to bother them.”

So far, RIAA’s response has been to juice up its antipiracy division and, in June, went to court to shut down three of the more “egregious” illegal music archive sites-with promises of more to follow. “If the Internet goes unchecked,” Hilary Rosen, RIAA president, told Forbes Digital Tool, “the very medium that’s supposed to bring creative outlets to music will end up killing it.” Record companies like Geffen, which has been waging its own quiet campaign against illegal music archive sites, and Oasis, a British rock group whose management, in May, warned fans about posting copyrighted sound and video clips of the band on web sites, have already jumped into the fray.

But for record companies, more important than lost potential earnings-there’s no guarantee someone who buys a bootleg would have bought the CD, so estimates of losses due to piracy are mere guesswork-is their intention to use the Internet as the next great distribution channel. In the past, digital downloads like David Bowie’s “Telling Lies” were merely promotional gimmicks, teases. But later this year, according to Geffen, record companies plan to release music on the net in digital download form. The problem is, if the same product the companies intend to sell online will be available free from the pirates, no one’s going to pay for it.

Which is why Jim Griffin, Geffen Record’s technology director, is on a mission to make the Internet a pirate-free zone; usually, he says, all it takes to convince most pirates to cease and desist is a warning letter. “The reason we go after pirates is to clean up the Internet for commerce, otherwise, anarchy reigns. They’re not hard to find: We just plug ‘MP3′ into a search engine and go after the first site we come to. Every pirate we’ve gone after, we’ve caught.”

The Lair, who claims he has a 2.1 gigabyte hard drive crammed with two gigs of music files and a site that has been visited by 100,000 users, says he isnt worried about the music industry coming after him: “The software industry said the same thing about warez”-pirated software-”and look what happened. Software piracy has existed from the moment they introduced ‘command copy’ in DOS.”

The Business Software Alliance estimates that illegal copying costs the $74 billion U.S. software industry $15 billion and no matter how many encryptions, watermarks and other high-tech approaches to stamping out piracy software companies have tested, nothing has worked. According to Griffin, success will be even more elusive with pirated music: Watermarking is useless, since record companies know their product when they hear it, and when you’re moving half-a-million CDs in a week to different locations, encryption isn’t a viable option either. Furthermore, pirates have displayed an ingenious talent in cracking whatever new techno-wrinkle is thrown at them, often within 48 hours.

“By coming after sites like mine with court orders, RIAA is bashing a thumbtack with a sledgehammer,” The Lair says, “but if they’re not careful, that thumbtack is going to get caught underfoot and hurt. The MP3 scene has already begun to adapt by going deeper underground, and these days, all you need to adapt is to change your IP address.”

The battle lines have been typed.

Within the anarchy of the Internet, the pirate world is a breath of hierarchy. There are two major components: the release groups, which locate and crack software and MP3s, and the courier groups, in charge of distributing the pilfered product to the masses. They communicate either publicly, often brazenly, through Internet Relay Chat or via ICQ, a program that lets them chat privately with anyone on their lists.

No money changes hands: The whole world is about competition, who gets what first and gets it out to its membership. Since, without them, there would be nothing to traffic in, release groups are at the top of the digital chain. They provide the content, the software, videogames and, now, MP3s. With greater access speeds and bandwidth, and with video compression technology making strides, the problem could be compounded a hundredfold when regular users get wise to what’s out there.

But there is another way. David Weekly, with Geffen’s blessing, has been approaching the major labels with a plan to bring his fellow pirates under the umbrella of the record industry. The idea would be to leave the online distribution to the experts, mostly college kids plugged into powerful university networks, and charge a fee for each download. By offering pirates a profit motive-each site would be free to attract advertising-he says he hopes to legitimize these sites.

“The record companies have to be careful not to alienate their consumer base,” Weekly says. “Take the Grateful Dead. When they first found out people were redistributing their music for free, they tried to stop it, but realized they were stomping on their fans.”

Geffen agrees, which is why it has been treading carefully in cyberspace, monitoring IRC and sending polite E-mail warnings to sites advertising stashes of music. The issue is so sensitive, Sony wouldn’t even comment on its antipiracy position. Both companies’ target demographic, teens and twenty-somethings, are the most likely to be online and savvy to the latest technology. They also get a kick out of getting stuff free and thumbing their noses at the establishment. So for Geffen, the idea is to educate music lovers, not drag them into court.

In May, the last time RIAA cracked down on illegal music archive sites, their numbers dipped dramatically; two months later, they’ve bounced back to full strength. And in the fall, when students return to their dorms-and to their university-sponsored high-speed computer networks-it’s likely the number of MP3 sites will shoot up again.

But not if Griffin gets his way. “Imagine a world where your customers are clamoring to manufacture your product with their materials at the point of sale, which happens to be their home,” he says. “But it won’t happen if these same customers are stealing your products to make them themselves.”

The Lair sees a different netgeist. “Isn’t that what the net is all about, helping out brothers in need of free stuff?” he asks.

Copyright 1997 Adam L. Penenberg (penenberg.com)