As just about everyone knows, the launching of Apple's iPod has been an overwhelming success, with more than 3 million of the portable MP3 players already sold. But this cute and seemingly innocuous little machine has a dark side. I know it's like way uncool to dis' the iPod these days, but there's a dirty little secret about this amazing device that neither Apple nor the record industry nor the media is evidently willing to discuss.
"It's the elephant in the room. No one's talking about this," says music industry analyst Eric Garland of Big Champagne, a market research and consulting firm specializing in peer-to-peer technology. "Steve Jobs knows this, consumers know this. The only ones who don't seem to know it are journalists. No one's covering this aspect of the story because it's contrarian, it has no happy ending. I've talked myself hoarse telling journalists this, but they just don't seem to want to tell this story."
In fact, Apple's iPod not only allows for illegal downloading, it encourages it. But you haven't read about it in your favorite newspaper or magazine or online rag because media nerds who cover the technology sector refuse to see the forest fire through the trees. Collectively hailing the iPod as a savior for the ailing music industry, these wide-eyed techie geeks are typically so giddy about technology that they rarely see the damage or potential damage it can do.
Most tech writers don't see anything wrong with stealing intellectual property, anyway, so they don't view this as a legitimate story. But just wait until their technology columns start appearing without their permission on the web, and they stop getting paid for their writing. They might change their minds then about the importance of protecting intellectual property.
Apple's logic is that because it has approval to sell music and have that music be transferred to iPods, it's off the hook at least among the record labels that have cut deals with Apple. But no one says an iPod owner must buy music legally you can still very easily download songs illegally and move them to iTunes and onto your iPod. Jobs was smart enough to make the iPod an MP3 player, not just a device that only played songs in synch with its specific online music service. Jobs knew there'd be millions and millions of songs illegally downloaded and placed on his new little machine. He's smiling and winking at all of us.
Big Champagne's research has concluded that if an iPod owner has 1,000 songs, typically about a dozen or two are from iTunes, and about the same, or perhaps even more maybe even several hundred come from his own CD collection. Yep, with 3 million iPods sold and 100 million tracks legally purchased on iTunes, that means that on average each iPod owner carries only 25 songs from iTunes.
The rest is simple math: CD sales remain desperately flat, and last year roughly 150 billion yes, with a "B", folks music files were transferred over so-called file-sharing networks, up nearly threefold from 55 billion in 2002. The 100 million downloads from iTunes over a year's time are a drop in the bucket compared to more than 1 billion P2P downloads every month.
Despite the iPod's sales and all the Recording Industry Association of America's lawsuits against illegal downloaders (more than 3,400 to date in the United States), illegal downloading activity has in fact increased. Graham Mudd, a researcher at comScore Networks, recently said that the number of people downloading songs legally from iTunes and other legal sources still "pales" in comparison to the number of folks taking songs off P2P network clients like Kazaa, LimeWire and others. Recent research also has revealed that many U.S. file traders use eDonkey and other lesser-known P2P networks more than Kazaa now because the RIAA has only sued people who are using Kazaa.
One record industry insider who deals directly with the major labels on a daily basis tells me that while the record labels won't say this publicly, they are "collectively devastated" by the failure of iTunes. "While 100 million downloads sounds like a lot, it isn't considering there are 3 million iPods sold, and hundreds and even thousands of songs on each iPod," says the record exec. "They thought it was going to be huge, but it's basically just been a failure. The iPod is doing nothing to save the music industry. In fact, it's contributing to its slow demise by encouraging illegal downloading. The iTunes is a very small fraction of what people are putting on their iPods."
I talked to one iPod owner who perused his hard drive and determined for me that more than 600 of the 3,000 songs he has on his iPod were downloaded illegally. Another told me that "about 90 percent" of the songs on his iPod were illegally downloaded. In fact, among the several iPod fanatics interviewed for this story, though understandably few of them wanted to go on the record with their illegal downloading practices, almost all of them admitted that many and in some cases almost all of the songs on their respective iPods have come not from iTunes or other legal pay sources or sites, or from their own CD collection, but from illegal downloading.
Many music artists, songwriters, publishers, music engineers and others in the music industry and I'm not talking about the fat-cat record executives and the other very small percentage of folks in the music biz who are actually filthy rich, but the rest think the iPod is cool in one sense but are still very wary of the iPod and other services that don't inherently discourage illegal downloading.
The thing is, when it comes to illegal downloading, most people still just don't get it. I've never been a defender of the major record labels. They have in the past been greedy and shortsighted, no question about it. But it is simply wrong to steal property that doesn't belong to you, be it intellectual or physical. It's rampant now, illegal downloading, especially among people between 12 and 25, which speaks volumes about the ethically challenged world in which we are now living.
Most twits who continue to justify and rationalize illegal downloading typically say such things as, "I wouldn't buy this music anyway." Others defend the sleazy practice by saying that "CDs are too expensive," or by insisting that "all those rock and rap stars are rich already so it doesn't matter." Each one of these explanations/excuses is an equally large pile of horse shit.
The fact is, the most popular illegally downloaded songs also happen to be the most popular purchased music. The paradigm has simply shifted in this country, in this world. The notion of art as a commodity is slowly but steadily swirling down the drain along with other things such as public decorum and saying "thank you" and "excuse me." Can so-called file-sharers really not grasp the simple concept that when they downloaded songs illegally, they're not just taking money out of already-wealthy musicians' hands, they're also hurting an entire industry made up of regular folks like you and me? File-sharers have no respect, no understanding, no clue. And the iPod is their newest buddy.
The latest iPod-related controversy involves RealNetworks, which has unveiled new software that will make downloads from its online music store compatible with the iPod. The move could potentially allow users to take music from Real's store and transfer it to an iPod, or any other player. RealNetworks has announced that its new Harmony software will make commercial songs from its RealPlayer Music Store compatible with FairPlay, the digital rights management standard Apple uses to protect songs from unauthorized copying and playback.
Apple is publicly incensed. "We're stunned that RealNetworks has adopted the tactics and ethics of a hacker to break into the iPod and we are investigating the implications of its actions under the DMCA and other laws," read a recent statement from Apple, whose outrage is, well, outrageous, given the fact that the company knows full well that its iPod encourages millions and millions of illegal downloads. Heaven forbid it should encourage some legal ones from anyone else but iTunes.
A friend of mine who is a high-ranking executive in the music industry, who asked for anonymity, tells it like it really is. "This whole 'we love Apple' brave face sounds good, but we're supposed to be excited about 100 million songs a year?. Yeah, right," he says. "I admit that sounds good in a vacuum, or to a casual reader who has no context for that number, but how about this: this means $100 million annual gross. And only part of that flows back into the biz $60-$70 million dollars represents 0.7 percent (that's seven tenths of one percent) of a 13 billion dollar global business. That's a laugh, no more.
"The RIAA supports the iPod, as most record executives do, because it's a win for the music business. No joke, the RIAA and member companies don't make a penny off iPod sales, obviously, and proceeds from the iTunes store are at this point no more than a cruel joke. There's just no 'there' there, except the press loves Jobs, Apple and the iPod, and this gives the music industry something to crow about, which they have not had in years."
It's telling that a piece of hardware that just about everyone privately acknowledges only helps to popularize illegal music downloading is the best thing going in the music business. I guess that's because, well, at least some people are buying some tunes legally for their iPods. That's something positive in an industry that has been down in the dumps for the last several years.
Without the iPod story, we're left with virtually no good news at all. As my friend in the music biz says, "music is free and there are billions of illegal downloads a year, record sales are in the toilet, we have exposed nipple scandals, convicted murderers and accused child molesters, and we're suing children. Of course record executives publicly praise the iPod. It's a symbol of the supposed 'turn-around' of our business. Only problem is, there's no turn-around."
In the music biz, like in politics and the stock market, perception is reality and spin is the thing, and the current spin is that Apple's iPod has arrived like Mighty Mouse to save the day. But we all know that in spin there lies little truth. The real truth is, these remain dark days for the music business; the epidemic of illegal downloading continues to cripple this industry. It's just too bad that in this story, journalists are the ones doing the spinning, not the unraveling.
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