Can't Stop the Music Downloading

Does the record industry attach file-sharing sites such as Madster to protect copyrighted material—or to claim dominance over online distribution?

By Peter Hanson

People generally don’t look forward to Michael Greene speeches. Because he’s the president and chief executive officer of the National Academy of Recording Arts & Sciences, the organization behind the Grammy awards, Greene has appeared on numerous Grammy broadcasts to deliver oratories so ponderous that wags in the music industry have run pools to see who can guess how long he’ll drone on. But when he took the podium on Feb. 27, he elicited a stronger reaction than usual—a reaction that included everything from spontaneous applause to boos from the back of the packed auditorium.

What topic prompted such vehement response? The same topic that may well herald the fate of the recording industry, which pundits says is on its last legs: online file-sharing.

“No question the most insidious virus in our midst is the illegal downloading of music on the Net,” Greene said. “It goes by many names, and its apologists offer a myriad of excuses. This illegal file-sharing and ripping of music files is pervasive, out of control and oh so criminal. Many of the nominees here tonight, especially the new, less-established artists, are in immediate danger of being marginalized out of our business. Ripping is stealing their livelihood one digital file at a time.”

Greene then provided dramatic evidence by indicating that NARAS had recruited three youths to spend the two days leading up to the Grammy broadcast downloading as many song files as possible. He said that Numair, Stephanie and Ed nabbed 6,000 tunes from the Net in two days, then added that the Recording Industry Association of America estimates that 3.6 billon—that’s billion with a “b”—songs are swiped via the Net every month.

The parallel between the rise of illegal downloading and the current decline in album sales is impossible to overlook. Earlier this month, the Times Union reported that profits for Albany-based retail behemoth Trans World Entertainment Corp.—which operates such franchises as fye and Coconuts—declined modestly in 2001 after massive growth throughout the ’90s. A more notable statistic, however, is that whereas recorded music constituted 75 percent of the company’s income a decade ago, it now constitutes 67 percent. Another striking number: Last year, the recording industry made $600 million less than it had the previous year.

It’s not as if the industry is taking this punishment without a fight. At just about this time last year, the RIAA won its battle with Napster.com, the most infamous file-sharing service, forcing Napster to block free distribution of copyrighted songs. At the height of Napster’s popularity, an estimated 64 million people regularly visited the Web site to download MP3 files of music at no charge. But Napster, it turns out, was simply the best known of many sites on which music files are illegally traded.

One such site is based right here in the Capital Region. Madster.com, formerly known as Aimster.com, uses an intricate system of legal loopholes to provide its estimated 5 million users with access to MP3s of songs. Madster hasn’t escaped the recording industry’s notice, however: Now in Chapter 11 bankruptcy, the Cohoes-based operation may well be the next casualty in the battle over file-swapping.

But even if Madster loses this battle, the music industry could still lose the war over online distribution.

Rock stars have always squabbled with labels and managers and agents, but in recent months, an increasingly vocal group of high-profile artists have brought their grievances to the public. Don Henley and Sheryl Crow cofounded a group called the Recording Artists Coalition, which staged a series of all-star benefit concerts the week of the Grammys. The RAC wants to change how music contracts are written so that artists can’t be held to their deals with labels for more than seven years; the group also wants to help musicians retain ownership of their creations. Meanwhile, superstar country trio the Dixie Chicks are suing Sony over profits that the band say their label illegally withheld.

So even as the recording industry is using its considerable muscle to squash Web-savvy entrepreneurs who want to trade song files without paying copyright owners, the people who actually make the products that the recording industry sells are demanding a greater say in how their professional fates are determined. Combine these factors with a key third element—the fact that independent musicians are finding success by charging listeners to download music from the Web—and the larger picture starts to come into focus. It’s now conceivable that record labels as we know them are endangered, and that control of the music industry might transfer from labels to musicians. Given how largely this paradigm shift is looming, it’s no wonder that labels are cracking down on file-sharing services. In the most extreme reading, labels are grabbing whatever money they can before the revolution comes.

March 5, 2001, probably was a gloomy day in the offices of what was then known as Aimster.com. On that day, U.S. District Court Judge Marilyn Hall Patel lowered the boom on Napster, thereby giving the recording industry a key victory in the conflict over file-swapping. Chances are the court ruling didn’t catch Aimster staffers by surprise, as they already had come up with a clever way of circumventing the procedures that got Napster in trouble. Whereas files on Napster were originally traded under names reflecting their contents—a file called “smooth.mp3” would contain Santana’s tune “Smooth”—Aimster began renaming files using Pig Latin. So any legal folks scanning the Web for illegal song files might breeze right by something like “oothsmay.mp3.”

Finding such creative ways around the law has been a cornerstone of Aimster’s approach since the site was founded. The site’s proprietor, Johnny Deep, who has worked as an author, classical pianist and software programmer, has said that he created Aimster to increase the privacy of e-mails sent by his teenage daughter, Aimee. Aimster piggybacks on services such as America Online’s popular Instant Messenger program, allowing users to attach MP3s to instant messages, and Deep has long contended that Aimster file swaps are private correspondence. Therefore, he and his lawyers have argued, no one—including recording-industry representatives—has the right to peer into the messages and examine the contents.

“We’re really trying to defend the right to privacy on the Internet,” Deep told Web site CNET.com last year. “I think that’s a cause worth fighting for, even if it’s at some risk or peril to yourself. I think it’s also a defense of Internet services in general. Internet services themselves are going to come under the burden of having to police if the trend continues, and then there won’t be an Internet at all.” (Reached by phone on Monday, Deep declined to comment, and referred all questions to his lawyers.)

Once Napster was forced to convert from a free service to a paid service, recording-industry lawyers set their sights on Aimster and other so-called “Napster clones.” Deep’s company was also sued by Internet giant America Online, whose lawyers argued that the name Aimster encroached on an AOL copyright, because the Instant Messenger service is sometimes called AIM. In May of last year, Aimster lost the case when the National Arbitration Forum voted 2-to-1 in AOL’s favor, despite Deep’s various arguments in defense of his company’s name—he has said that “Aimster” is Aimee’s nickname and that the name was chosen to reflect the way his software “aims” for particular files.

“The arbitration board has made a horrendous error in its judgment,” Deep told CNET.com. “Arbitration forums are obviously prejudiced in favor of multinational corporations, and they’re trying to knock down small companies wherever they can.”

In January of this year, Aimster changed its name to Madster.com, and added a pay service called Club Madster. While the basic Madster services are still available at no charge, upgrades now cost $4.95 per month. Additionally, Madster has for some time solicited donations from members. Deep’s bitterness about the name change was clear in a poem featured on Madster.com:

More changes in Madster’s identity seem inevitable at this point, including the biggest change of all: As debts mount and challenges to the legality of its service grow more powerful, Madster may be forced to close up shop entirely, or convert to a Napster-style pay service.

This state of affairs is quite a comedown from a year ago, when the Deeps became minor celebrities for their role in fighting corporate control of music distribution. Aimee in particular caught her share of the limelight because sexy pictures of the youth, taken shortly after she turned 16, have been featured on the site; a photo showing the blonde in a tight, low-cut top sits atop the icon that users click to join the Madster service. The glamour shots won Aimee, who helped guide the design of the Aimster software, appearances at New York movie premieres and other social events. A picture of her even appeared in Time magazine.

Entertainment lawyer Paul Rapp, of Albany firm Cohen Dax & Koenig, has worked extensively on copyright issues pertaining to the music industry. He says he’s not surprised by how corporations regard the Deeps’ enterprise. “They’re beating Aimster up just like they did Napster,” Rapp says. “I would be sympathetic if the major labels were doing anything to provide music digitally the way people want it provided, but they’re not, so the Napsters and Aimsters and Morpheuses and all the rest are inevitable.”

Rapp, a Metroland contributor, argues that the characterization of no-fee file- sharing as theft is inappropriate. “It’s not nearly as cut-and-dried as the industry would like it to be,” he says. “It’s noncommercial trading. It’s like making a cassette for your friends, on a humungous scale, but it’s still the same thing. If people were counterfeiting and making a profit by making copies of someone else’s music, that would be different.”

The image that the Deeps cultivated last year—or that was cultivated for them by lawyers and sympathetic members of the media—is indicative of how divisive the issue of file-sharing has become. Prior to the rise of the Deeps, Napster founder Shawn Fanning enjoyed even greater celebrity as a champion of Information Age music fans who seem to feel entitled to free music, and Fanning found himself caught in a very nasty, very public squabble with Metallica drummer Lars Ulrich. Name-calling and veiled threats were involved in the dispute, which was broadly satirized on the Internet and even in TV cartoons. Ulrich came off as a wealthy rock star trying to protect his sizable piece of a lucrative pie, and Fanning came off as a grassroots cult hero with iffy ethics.

A year after the Napster drama reached its climax, the lines in this ongoing battle have become even more clearly drawn, as seen by the fighting words of Michael Greene’s Grammy speech in February. Music fans are being asked to choose between traditional distribution, in which record companies control the flow of money from consumers to performers, and the free-for-all of online distribution, in which control over the flow of money is still up for grabs.

Last month, rock band Weezer got into a tussle with their label, Interscope, because the band issued new music to radio, press and fans via, among other means, MP3 files on the band’s official site. The problem? Interscope was the last to hear the tracks, which are from Weezer’s upcoming CD, Maladroit. Much to the dismay of front man Rivers Cuomo—who told Entertainment Weekly that his relations with Interscope are strained, and that he didn’t have Interscope’s permission to distribute the tracks—Interscope pulled the Maladroit tunes from the Net. “Unfortunately, they have the right to claim ownership of the tapes,” Cuomo said in Entertainment Weekly. “It’s totally unfair.”

The performers who comprise the Recording Artists Coalition seem to be pursuing incremental change. It appears that Henley and his peers want not to destroy record labels, but to knock labels down from their lofty perch so that artists have equal say in business decisions, rather than being held under the labels’ collective thumb. Some independent musicians, however, are pursuing a more drastic solution to the inequities of the music industry.

Here in the Capital Region, a handful of indie artists use online distribution portals such as MP3.com and Amazon.com to sell their stuff directly to consumers, thereby circumventing the need for traditional recording contracts. By selling their own music, artists such as Latin-music bandleader Alex Torres and electronica experimentalist Sara Ayers know exactly how many units are being shipped and paid for, and therefore know exactly what profits to expect. This kind of control is a huge change from the traditional music-distribution model, in which record labels track sales, compute royalty rates, deduct various expenses, then toss whatever money is left at artists.

While some have difficulty sympathizing with high-profile RAC members such as Henley, who are criticized as millionaires angling to make even more money than they already do, the fact remains that rank-and-file musicians usually take a beating when they work with record labels. Area rock act Super 400 were dropped from Island Records during an industry consolidation; local duo GreayStar backed out of a contract with Epic Records when the musicians determined that Epic expected to own their services for nearly a decade; and so on. The callous treatment even extends to small labels, as Saratoga Springs indie-rock act Dryer recently learned when their label, New Jersey-based Gig Records, left the band high and dry during a problematic national tour.

In short, one need not look far to find musicians willing to characterize record labels—particularly those owned by giant, multinational corporations—as unfeeling monsters who chew up and spit out young bands who don’t produce Top 10 hits right out of the gate. That puts young, struggling artists roughly in the same camp as the wealthy RAC members, meaning that the coalition interested in sweeping changes to the music business extends well beyond the superstars who joined Henley and Crow onstage at the February benefit concerts.

But if such changes are forced, how will they manifest in an age when young consumers—the buyers whose dollars are crucial to keeping the record industry alive—have grown accustomed to getting music for free from Napster, Madster and the many other sites that offer no-charge MP3 files, including KaZaa.com and AudioGalaxy.com? One popular prediction is that major recording artists will emulate the success of regional acts by ditching record labels and distributing MP3 files, for a fee, via their Web sites.

The big obstacle to that model right now is piracy. Given how easy it is for consumers to copy store-bought CDs, then load the contents onto the Web, artists are hesitant to make things easier for pirates by providing them with ready-made MP3s. Recording-industry types have been scrambling for the last couple of years to create means by which CDs can’t be copied and MP3s can’t be illegally downloaded, but it seems to be a losing battle: So far, tech-savvy pirates have managed to stay ahead of every anti- duplication measure that’s been introduced.

Interestingly, not all retailers feel the pinch of the current changes the same way. Jim Furlong, proprietor of used-music concern Last Vestige, which has stores in Albany and Saratoga Springs, says that he saw a downturn in music purchasing during Napster’s heyday, but that sales eventually leveled off.

“It’s hard for me to gauge because I’m not selling new product,” he says. “I would say the college-age people, and older people, are definitely downloading things I may have in the store from the Net. I’ve actually seen more of an increase of people buying vinyl, because people want a nice, clean copy that they can burn copies of. The nature of our business, with used being cheaper than new—that helps us weather that storm.”

Rocky Roy, owner of Music Shack, with stores in Albany and Troy, says he’s having a harder time weathering the storm, because his stores sell new CDs. “I believe downloading has quite an effect, especially among the college crowd,” he says. “Over the last two years, we’ve lost over a third of our business. I don’t think that’s all attributed to downloading, but at least a third of it is. I’m not a real big fan of the downloading thing.”

Roy says that even though some music fans preview music online, then buy the actual CDs in stores, the writing seems to be on the wall about the future of his industry: “I’ve overheard people actually say in the store, ‘I don’t know what we’re doing here. We can download this at home.’ ”

While the future of the music business is in flux, the future of Madster seems clear—and grim. Earlier this month, Johnny Deep declared personal bankruptcy, telling the Albany office of the U.S. Bankruptcy court that he owes nearly $770,000 to creditors. A week later, Deep filed for Chapter 11 bankruptcy protection for AbovePeer Inc. and BuddyUSA Inc., the corporate entities behind Madster. Concurrent with these filings, Deep is embroiled in Madster’s most important court battle to date: The Recording Industry Association of America, the Motion Picture Association of America and a number of record labels have jointly sued to shut Madster down for violating their copyrights.

“The broader rights of the public are being infringed on by the large companies that guard copyright,” Deep told CNET.com. “The rights of privacy, rights in your own home, for your home not to be searched, evidence not to be seized without a warrant, freedom of expression. There are all sorts of rights that are more basic and more fundamental than my own self rights. . . . So I guess I have to put myself below the other rights and try to guard the rights of citizens everywhere.”

Deep’s and Madster’s representative in their bankruptcy actions is E. Lisa Tang, a lawyer with Albany firm Thuillez, Ford, Gold & Johnson. She says that that the bankruptcies were declared to protect Deep’s and Madster’s assets in the face of mounting legal costs. Deep and Madster are being sued by a whopping 11 companies and organizations, all of whom accuse the site of facilitating the theft of copyrighted material.

“The Buddy/AbovePeer position has always been that because of the way the program operates, there is no copyright infringement,” Tang says. “The programmer, if you will, cannot be responsible for what people do, just like the United States Postal Service cannot be responsible for what people do one way or another.”

Tang says that Deep’s and Madster’s best hope is the suit that Deep brought against various members of the RIAA. That suit, which is still pending, seeks a legal declaration that the Madster program doesn’t violate copyrights. Were Deep to win that case, it would set a precedent that could knock the 11 suits against Deep and Madster out of court. However, the fate that Napster suffered during similar litigation suggests that the odds against Deep setting such a precedent are considerable.

Tang argues that Deep’s moneyed opponents are using strong-arm tactics by requesting that hearings and other pretrial motions related to the various suits occur in locations such as Chicago, thereby forcing Deep to dig into his pocket for travel expenses on top of legal fees. “John Deep is an individual,” she says. “[His] companies are not rolling in dollars. It is not easy to litigate in Chicago. The strain of that commitment . . . is what we are trying to alleviate by filing the bankruptcies. Litigation ain’t cheap in this day and age.”

Were Madster to suffer the same fate as Napster, the factors behind the rise and fall of Deep’s online enterprise would remain unchanged. Musicians are still angry with record companies, consumers are still angry about how much music costs, and Webheads are still finding ways to help Net surfers download music for free. Just as Aimster (oops, Madster) rose to prominence after Napster fell, so too will another Internet concern rise to fill the gap if Madster disappears from the World Wide Web. Consumers accustomed to swiping 3.6 billion songs a month aren’t going to be discouraged by the closure of any single file-sharing service.

So some big questions are left hanging: Will the recording industry keep lawyering the Napsters and Madsters of the world to death, even as new sites arise to offer comparable services? Will the recording industry create a means of legal file-sharing that caters to the habits of online music fans but still protects copyrighted material? And, the most provocative question of all, will consumers continue to drift away from purchasing CDs, choosing instead to download particular tunes at their leisure?

Attorney Rapp says that the trend toward online music distribution is too far along to be reversed—as he puts it, “the toothpaste will not go back in the tube.” Therefore, he argues, the major labels have no choice but to adjust to the new realities of how people acquire music. “They should be providing music conveniently and cheaply in a listenable format over the Internet,” he says. Rapp believes that in the future, fans will get their tunes via an assortment of high-tech means. “I think it’ll be a combination of satellite radio, Internet radio, Internet streaming and downloads. . . . As fast as the industry tries to lock it down, some kid in a dorm room at RPI or MIT will figure out how to unlock it.”

Because he’s the drummer in storied Albany band Blotto, Rapp has his share of horror stories about dealing with music-biz bigwigs. So there’s audible enthusiasm in his voice when he explains that a reckoning is coming between the corporations that have traditionally held the power in the music business and the tech-savvy listeners and musicians who support file-sharing, MP3s and downloading.

“The worst case would be that the industry would shut down all of these renegade trading sites and not offer any alternative,” he says. “I don’t think that will happen, just because the alternatives that are springing up to Napster are springing up so quickly and so strongly that they’re unstoppable. The best case is that all recorded music will be available on the Web for a modest fee and that some centralized body would see to it that the copyright holders of that music got paid.”