For every two steps forward, you've got to take one step back. That's the way Warner Music Group CIO Tsvi Gal sees the music industry's legal struggle with file swappers on peer-to-peer (P2P) networks.
But over the last 10 days, the music industry has taken three steps back. Last Friday, an appeals court in Washington, D.C., threw out one of the prongs in the Recording Industry Association of America's (RIAA's) attack -- the ability to subpoena Internet service providers for the names of customers who might be downloading music illegally. Record companies will have to take the more costly route of filing formal lawsuits if they want Internet firms to name names.
The day before the ruling in Washington, Holland's supreme court proclaimed that the owners of P2P site Kazaa could not be held liable for people who use their software to violate copyrights. And the week before, regulators in Canada ruled that downloading copyrighted music off the Internet is legal in Canada, although uploading it is not.
But one person's downloader is another person's freeloader. "There is no justification for piracy period," Gal said. "To call it 'sharing' is misleading -- you're not sharing, you're stealing. [Swappers] aren't for freedom as they claim. They're just people who aren't willing to pay a penny for a song."
Gal stepped into this tempest 19 months ago when Warner Music Group named him senior vice president and chief information officer. Before that, he'd been CIO at ATT.com, the e-business arm of AT&T.
Since Gal took the Warner job, he's been on the front lines of the RIAA's (of which Warner Music Group is a member) contentious battle with music file swappers.
Gal thinks that the rulings from Washington, Holland and Canada prove that the saga over copyrights and wrongs will not have a quick solution. He doesn't think that the issues will be settled by the end of 2004, nor does he think the court ruling in Washington is a huge blow to the RIAA's case -- or cause.
"The court did not say that P2P is legal. It just said that giving names [of customers] isn't as mandatory as was foreseen.
"I see this as a legal dance -- two steps forward, one step back."
The RIAA argues that swapping music freely over the Internet is damaging the industry by eating into CD sales and forcing record companies to lay off staff. Warner Music reportedly faces up to $300 million in cuts from Edgar Bronfman, Jr. Bronfman led the investment group that bought Warner Music from AOL Time Warner last month for $2.6 billion.
"Music was slow to realize the potential and the danger of the Internet and paid a dear price," Gal said.
But according to Gal, the file swappers could pay a dear price too. The more an artist's work is swapped for free, the fewer CDs that artist sells. If the labels lose money, that artist may end up not getting a paycheck much less a place to record. In this sense, the file swappers are killing the very music they claim to hold so dear. "If you like them, you don't want to put them out of business," Gal said.
Gal said that the RIAA could take much more aggressive steps against illegal file swapping. But to fight the "good fight" through legal channels takes longer. "I believe that we do have right to protect ourselves, and we are only going to use legal and ethical ways to do that," he said. "My view of the rightness of our act has not changed."
Gal insists that his industry isn't at war with P2P technology or the Internet and doesn't have a problem with the legal trading of music online. He welcomes the Apples and Wal-Marts of the world that sell individual songs for download. Apple claims that customers have bought 25 million songs from the iTunes site since it opened in April. Wal-Mart is testing its online service -- 88 cents per song -- and plans to launch the full service next year.
"We welcome any legal channel, any mechanism for people who are honest and looking for an alternative to get media content," Gal said. He's happy to see honest customers have a choice of brands and prices (Wal-Mart songs will be a dime and a penny cheaper than Apple's). "At the end of the day, it comes down to basic human values. If you're looking for legal mechanisms to get music, there are channels."
It is those basic human values, as well as basic common sense, that Gal thinks will help his industry win out in the end.
"We'll prevail. Common sense will prevail because if there is no copyright, there is no financial incentive for people to create."
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