Group 3:Suhyun Lee, Anton Melnikov, Teegan Moore, Michael Smith, Hyunggun Song --- Buying music vs. Downloading music

Music Distribution Industry
Recording industry experiences revolution as it faces the challenges from peer-to-peer technology that enables downloading MP3 music format from a remote host in Internet. Prior to the internet era, the music distribution is subject to the recording label. However, in web-based supply chain model, recording labels are massively legalizing licensing strategy that significantly fire up a legal digital music subscription (in contrast to Napster that was illegal).



Figure 1	Web-based Supply Chain of recording companies Source: Daugherty, 2002

Napster
Napster is an example of popular file sharing media that has been terminated due to the legal action performed by musicians, pioneered by Metallica, a famous heavy metal band, which protests such file sharing action due to the elimination of royalties that musicians must obtain. However, the termination of Napster does not stop others to set up new websites that enable the file sharing; they include the multiply.com etcetera. Similarly, Scott (2001) and Dong et.al (2002) reveals that file sharing remains a popular services due to their offering for free downloading music and video.

Kazaa
Similar to Naspter, Kazaaa also carry out the same operation with Napster that enables a user to share music in MP3 format over the Internet. However, the difference is Kazaaa service is not limited to share MP3 since it also enables users to share other type of files like documents, videos, and other applications (Figure 2).

Figure 2	Kazaa Source: http://baixaki.ig.com.br/imagens/shots1/kazaa-3-b.jpg

Audio Galaxy
Growth from the original objective to develop FTP site index called The Borg Search, www.audiogalaxy.com turns out to be a robust peer-to-peer system that provide free client software at. The popularity of audiogalaxy rose quickly following the termination of Napster in 2001. Another key feature that audiogalaxy provides is the generation of community among the company customer. The community is carried out through chat-enabled groups and per-artist internet forums. At this time, although the music sharing is no longer exist, the company still activate some message boards.

Figure	3	Features of iPod that improve relationship with customers. Source: www.apple.com

Legal Music Downloading
The popularity of portable music player from Apple, iPod, has created the demand form providing the legal contents since the number of iPod owner reaches more than 15 million iPods, in addition to other owner of similar iPod model (iPod, 2005). In order to present legal music download, Apple also offer the iTunes where users of iPod can download the music with a price.

Introduction


In the 20th Century, there was a revolution in music listening as the radio gained popularity worldwide and new media and technologies were developed to record, capture, reproduce and distribute music. Music was no longer limited to concerts and clubs. Conversely, music of all kinds also became increasingly portable. Headphones allowed people sitting next to each other to listen to entirely different performances or share the same performance. From phonograph to a single computer audio file by digital recording, distribution of the music has changed significantly. Previously, listeners somehow had to pay for the copyright of the music. That was the incentive to the music composers and how the music industry has developed itself until the MP3 audio file format was introduced. The development of the MP3 audio file format and internet, and legal issues involved in copying such files, has driven most of the innovation in music distribution since their introduction in 1999. In 1987, The Fraunhofer Institut in Germany began research code-named EUREKA project of digital audio broadcasting. Exactly a year after, Fraunhofer received a German patent for MP3(file format). In 1996, United States patent was issued for MP3. Fraunhofer started to enforce their patent rights. The first company who distributed music tracks in the MP3 format was a record company called SubPop. Fraunhofer Gesellschaft has this to say about MP3:"Without Data reduction, digital audio signals typically consist of 16 bit samples recorded at a sampling rate more than twice the actual audio bandwidth (e.g. 44.1 kHz for Compact Discs). So you end up with more than 1.400 Mbit to represent just one second of stereo music in CD quality. By using MPEG audio coding, you may shrink down the original sound data from a CD by a factor of 12, without losing sound quality." In the early 1990s, Frauenhofer developed the first, however, unsuccessful MP3 player. In 1997, developer Tomislav Uzelac of Advanced Multimedia Products invented the AMP MP3 Playback Engine, the first successful MP3 player. Two university students, Justin Frankel and Dmitry Boldyrev ported AMP to Windows and created Winamp. In 1998, Winamp became a free MP3 music player boosting the success of MP3. No licensing fees are required to use an MP3 player. Mp3 is more than a technology. It is a sensational development that has reconnected musicians to music lovers, speakers to their listeners, creators to their audience.

Brief Timline of the Major Events of P2P File Sharing
While the majority of events involving sharing music has occurred over the past seven years, it shows how crucial and conflicting of an issue it so for so many people. The timeline below lists the most important and well known events of the issue.

1999 - Napster, the first P2P network for music is developed

2000 - Heavy metal band Metallica sues Napster for copyright infringement

2001 - A judges decides Napster must remove copyrighted material from its service within 72 hours of the request Napster pays 26 million for copyright infringement, and 10 million for future royalties

2002 - Napster files Chapter 11 bankruptcy Universal Music Group begins the first subscription download server KaZaa becomes Napsters replacement with over 60 million users, in 150 countries CD creating company Roxio purchases Napster

2003 - Multiple large music corperations begin Echo, a planned online music server RIAA begins and wins suit against four college students guilty of operation computer networks that distribute copyrighted songs RIAA continues to file 261 lawsuits against individual networking users Napster returns online as a pay by use service

2004 - The RIAA sues 532 people for allegedly sharing digit music files over the internet The FBI becomes involved in the first federal action against a peer-to-peer network

2005 - The Supreme Court Rules that file-sharing services may be liable if they primarily intend for their customers to swap materials illegally.

Pros and Cons of Downloading Music
For most of us, downloading music is one of our favorite activities when on the Internet. Most of us love surfing web sites that facilitate music downloads. Downloading music from the Internet may make it conveniently available. But does it have a negative effect on the music industry? Does it, in some way affect the earnings of the artists? What are the pros and cons of downloading music? Let us see.



Downloading Music - The Pros
-Downloading music makes it readily available to the masses. Music reaches the masses in minutes. When it can be downloaded, music lovers get what they need without struggling for long periods of time. When music becomes available within sometime after its release, it is a real musical treat for those waiting for the release. Their favorite music becomes handy. -When you download music, you save on the costs that would be incurred if you would have decided to buy it. Music cassettes, CDs and DVDs cost handsomely. The original copies of music need you to shell out big bucks. If music is downloadable, you are sure to save money, thanks to the facilities of free downloading. -Supporters of downloading music claim that making music readily available contributes to the increased popularity of the artists. The concept of making music available for free downloads has in fact contributed to the fame of the music industry. Being available for download, music reaches the crowd in a relatively lesser amount of time thus boosting its popularity.

Downloading Music - The Cons
-Though downloading music makes it easily available to the masses, it also makes it spread far and wide overly. Something that is very easily available is also of a lesser value. Something that is scarce is precious while something that is plentiful tends to be of a lesser value. -The practice of downloading music leads to the diminishing of sales of music cassettes, CDs and DVDs. It reduces the sale figures of music companies. It has an adverse effect on the music industry. -Some of the web sites offering the facility of downloading music take registration fees or mandate subscriptions or memberships. It is not always that downloading music is free. You might end up spending an amount close to what you would have spent on the original copies. The resources expended on the download may actually nullify those you would have spent on the original version. -Downloading music gives rise to copyright and piracy issues. By downloading music you lose its originality. When you use the copied versions of music; you indirectly encourage piracy. As you download music, you do not go for the purchase of the original copies of music, which may result in an indirect violation of copyright. While the facility of downloading music increases the demand for music, it brings down the legitimate sales of the original music. While the artists reach millions in a go, their works of art become an inexpensive commodity. So the next time you find your favorite music just a click away, do not take the simplest road of clicking on it. Think for a while whether your click is going to affect someone's living.



How the sharing music through P2P programs affects society and its industry?
It is evident that the drawbacks to sharing music outnumber the benefits simply because of mere fact that people are downloading music for free. However there are drawbacks that go even further than the slight possibility that an artist may lose a slight amount of money. When downloading a P2P network such as KaZaa or Limewire, a person is downloading a variety of unwanted addition software. Regardless of whether or not the computer even uses that software, what is downloaded is put onto the computer to assist in the ability for the computer to become a part of the network. As a result of this people are often getting viruses, pop-ups and variety of other computer problems that come solely from downloading this program. Studies have proven that as a result of downloading these networks more times than not a computer will be the victim of one of the problems stated above, which could have easily been avoided had the program not been downloaded. Moreover, it is difficult for artists to not feel threatened by the thought of entire world downloading music through free servers. Megan Taylor, better known by her musical name Sapphirecut, a musician whose first single went straight to the top of billboard charts, sold 15,000 vinyl copies of her single, and was headed towards great success was incredibly discouraged and confused to see that that her CD sales were incredibly low, selling a total of 110 discs. While it is true that radio play and concerts take in a good revenue for the artists, the industry as a whole is suffering in that the record label and producers are losing income from the sell of the CD's. It is important to understand that in order for musicians to make money, there must be people willing to produce songs and albums, and with the slow deduction in industry income, all levels of the industry greatly suffer. Lastly, the issue of copyright infringement is the most common and validated argument against downloading and sharing music over the internet. Many consider downloading music without the proper access, and more importantly without paying stealing and thus the issue falls under the right to prosecute for such an offense. Multiple record labels have spent time and money working against people who have been caught exchanging music, and have the proper copyright laws and acts to back them up. Because this example has sufficient hard copy evidence behind it, it presents itself to be most accurate and based on the issue of legality. Furthermore, many people are being prosecuted for copyright infringement, which in turn is more expensive then had they just purchased the music.

Pros
-You can do it 24/7 You can shop whenever you want. If you want to buy a new Eminem CD at 3am, you sure can. And that means anywhere in the world where you have access to the Internet.

-Saving time and money When you download music through iTunes or any other site, you save on the costs that would be incurred if you would have decided to buy it at a store. CDs and DVDs cost a lot more than buying it of iTunes for example. The original copies sold at stores wants you to shell out big bucks while on other hand direct download of the net lets you decide whether to buy one song or the entire album compilation. Think of the valuable time you would save by few clicks.

-All kinds of music available

Sites such as iTunes or Napster provide essentially millions of music file in all varieties that you can download legally. You can find the latest billboard hits and searching for songs have become very practical. Download speed on most sites are considerable fast that won’t disappoint the buyer.

-Buying a single song compared to buying the entire CD/album

Most songs cost only $1 on iTunes, so why pay $20 for a whole CD when you only want your favourite songs.

-You can shop from the comfort of your own home

If it is hot outside, you don't have to go out in the heat. If you don't feel like getting dressed, you can wear your pjs (or even nothing at all). If there is a foot of snow on the roads and you can't get out, you can still shop. Also, if you don't feel well, this is definitely the way to shop

Cons
-Buying music online comes with the legality and copyright laws

Some download sites are fly by night that offer illegal music. By purchasing the songs, you are indirectly violating copyrights. In other words, you are encouraging piracy.

Download speed can a problem if you are downloading music videos, the probable cause is when the original owner decide to skimp on hosting. This is frustrating to many customers since most music download sites do not provide any customer support at all.

Music Industry
What is happening to the music industry?

Although its not for certain whether file sharing is the main reason why, but in Canada, retail sales of CDs have fallen almost 30 percent since 1998 and sales in the US have dropped almost $2 billion between 2000 and 20003. The Canadian Recording Industry Association estimate losses to the Canadian industry of about $250 million in sales over the past three years, which is a 20 percent drop in annual sales. Unlike the US, it is completely legal to download shared music over the Internet because of the death of Bill C-60 in 2006, resulting from the defeat of the Liberal Government. This Bill intended to crackdown on the downloading of copyrighted material over the Internet. Although it is legal to download copyrighted material over the Internet, it is still uncertain that this is the main cause of such a drop in sales. Many people believe that this could be a result of a decrease in recorded music, an increase in other forms of entertainment such as DVD’s or just a general economic downturn affecting other industries as well.

Are people downloading music the “right” way?

People have and will continue to pay a small fee for downloading their music. This is seen on Apple’s ITunes, which generated 10 million downloads at 99 cents a song in the first four months of operation. Also online music grew from less than $1 billion in 2003 to $3.3 billion in 2008 and has accounted for 26 percent of U.S music spending

Conclusion
Regardless of the circumstances, people have always been exchanging things such as music through different means. The issue of sharing music with other people over the Internet has been one of the most controversial issues and there are many opinions on whether this is fair to the music industry. Many people feel that downloading a shared file is a useful way to preview music in order to make a decision on whether to buy the song or not. Others feel downloading and/or sharing music files is breaking constitutional laws and must be dealt with, so that the music industry no longer suffers from the millions of freely downloaded music files. There are so many differing opinions, so perhaps the issue will never be completely solved. However, advances are constantly being made so that people are still able to download millions of songs, but with a small fee such as on ITunes. Regardless of what happens to the peer-to-peer music sharing system, people will always find a way to download music for free. The only thing that can be done to reduce the number of downloader’s is to introduce new technologies such as ITunes where people are still able to download music at their own convenience, but with a small fee attached.