White Paper – Jesse Samaritano

The Topic Background: File Sharing

File sharing is the practice of distributing or providing access to digitally stored information, such as computer programs, multimedia (audio, images and video), documents, or electronic books.  File sharing allows anyone with a computer and access to the internet the ability to directly download copyrighted files and programs for free from people who post them in public peer-to-peer networks illegally. In 2004, an estimated 70 million people participated in file sharing. The website Megaupload, which was shut down January 2012, had claimed to have 50 million people a day using illegal file sharing. A large portion of file sharing and one of the most talked issues is the sharing of music via peer-to-peer file sharing.

In the past few months, the U.S. congress has introduced the SOPA bill, which is a bill introduced by U.S. Representative Lamar S. Smith to expand the ability of U.S. law enforcement to fight online trafficking in copyrighted intellectual property and counterfeit goods. This controversial bill has caused a great debate between those who oppose and those who are for file sharing, even between famous musicians who are affected the most by file sharing.  Many musicians and artists of the music industry, such as Metallica, Bob Dylan, and U2, have argued against file sharing because their intellectual property is being given away for free without their permission and some artist, such as David Grohl Foo Fighters, Radiohead guitarist Ed O’Brien, and Pink Floyds drummer Nick Mason, of the  have backed illegal file sharing saying that it is not a big deal.

Counterintuitive Note:

Those who are in favor of file sharing defend illegally downloading music off the internet are twisting their morals by defending it to benefit their own good and keep their consciences’ clean. It is a basic understanding taught to people in their childhoods that taking something that is not yours without asking permission is considered stealing. File sharing fits that same exact criteria, yet so many people try and defend it saying that it is not stealing. It is obvious to see how the average person benefits from getting music for free, but so many people try to say that file sharing is not stealing.

50 Cent File Sharing Statement:

Before going on stage at a concert in Oslo, Norway in 2007, Curtis Jackson, better known as 50 Cent, made the statement, “What is important for the music industry to understand is that this really doesn’t hurt the artists.”

When he was asked about the status of his record company with the effects of file sharing, G-Unit Records, he responded saying that it was not doing so well. He also said, “The advances in technology impacts everyone, and we all must adapt. Most of all hip-hop, a style of music dependent upon a youthful audience. This market consists of individuals embracing innovations faster than the fans of classical and jazz music.”

50 Cent later goes on to state that he appreciates his fans wither they pay for his music or not.  These statements from an artist who is also a record company CEO really helps bring to light the true effect of file sharing to the music industry and to the artists.

Record Companies Cut on Artists’ Profits:

A common argument that is used by people who are for music file sharing is that the artist barely get any money from CD sales because the record companies keep most of the money. On high end royalty deals, a band may make up to 50% of  what the record label’s  profit is, and on a low end royalty deal the artist may only make 15% of what the record label is making. Even when selling albums on iTunes or Napster, the band will make about the same amount as they would on a high end royalty deal, but the record label will make over 300% profits selling music online.

This information backs up the argument made by those who support music file sharing, but is it still a valid excuse? Just because the artist is not receiving a large profit from CD sales does not mean that it is okay to cheat them out of any profit from fans listening to their work. Also, the record label plays a very valuable role in the music industry. They are the people who discover the talent and give them a chance to become famous. Without the record companies, artist would not be able to produce, market, and advertise themselves like a record label can. Artists make most of their money through touring  and merchandise, but they would not be able to book large concerts and sell merchandise without the help of record labels getting their name in the spotlight. So it is not right to deprive artists and record labels through CD sales out of spite that artists don’t make enough money from it.

Topics for Smaller Papers:

One reason that people who defend file sharing say that they choose to download music for free instead of buying music is because CD prices are too high. Why CD prices are so expensive would be an interesting side topic for a smaller paper because record companies only pay about $.50 per CD made and make about $2.00 or more on each sale and the bands make half as much as the record companies at the most, so where does the rest of the money go and why are prices for hard copy CDs more than $10.00 sometimes?

Current State of the Research Paper:

At first after only touching on the research for my paper, I was quickly informed that my original assumption on file sharing’s effect on artists in the music industry that artist are losing large amounts of income seems to be wrong. I was unaware about how little the artists in the industry make on CD sales through record labels and how many artists back file sharing even though it effects their record sales. What I learned is that artists are not the ones being hurt in the music industry, but the record companies are the real victims. The  Recording Industry Association of America (RIAA) posted the financial problems the music industry faces due to the piracy of music online saying, “One credible analysis by the Institute for Policy Innovation concludes that global music piracy causes $12.5 billion of economic losses every year, 71,060 U.S. jobs lost, a loss of $2.7 billion in workers’ earnings, and a loss of $422 million in tax revenues, $291 million in personal income tax and $131 million in lost corporate income and production taxes.”

With this information, I am able to say that I was correct in my assumption that file sharing has a negative financial impact on the music industry, but not necessarily in the way I thought it was affected. Finding a solution to the dilemma that the music industry faces economically may prove difficult considering that I am not an economist and that if such a problem was to be solved by a college freshman record companies would have probably solved it themselves by now, but nevertheless, I will try and find a solution for the problem.

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