Introduction

Online piracy has caused a drop in digital and physical sales of the music industry in America because instead of buying legitimate song tracks, people download it for free. As the result of this norm, trade value of the overall U.S. music market decreased significantly by 10.7% in 2009 (Borthakur et al., 2010). Regardless of the rising concerns of the artists, record label companies, and others seeking compensation in the music industry, the pirate community remains existent. In essence, file-sharing sites are a big part of the pirate community. They usually offer free peer-to-peer software which is power tools that illegal file-sharers use to transfer files such as music tracks, movies, games, and software. A few sites were seized by the government, for example limewire.com in October, 2010. The rest of them are still operating under the nose of American music companies and authorities. Furthermore, many of them are founded and operated in different European countries which law enforcement in America would not be able to reach.

Acknowledging the economic impact of music piracy to the recording industry is very important to measure the significance of the problem. From 2004 to 2010, the online music business has increased its revenues by 1000% world-wide. However, in the same period, global physical and digital music market has suffered a decline of around 31% due to online piracy. The Internet revolution clearly has a negative impact on the music industry. The emergence of digital distribution channels such as iTunes or Amazon music store in the United States and Spotify in Sweden (launched 2008) did not compensate the losses of the overall industry. Particularly in the first half of 2009, global music sales were down double-digit by 12% (physical and digital sales). Similar trends are expected until the end of the year (RIAA, 2010). Without the implementation of current copyright law regulating music downloading practices, newly invented techniques for peer-to peer file transfers such as BitTorrent seem to benefit the pirates.

South Korea may be the first government  to come up with an official policy to tighten copyright laws in 2009. They also enforce harsher punishment such as cutting the pirates’ Internet service. The new copyright laws allow media firms to demand that Internet service providers send warnings to music pirates. Ignoring  such warnings will result in Internet disconnection. The new law is usually referred to as “three strikes” law because of the number of warnings. This approach seems working for Korea because their digital sales in 2009 went up to 27% after two consecutive flat years since the law came into effect in 2008 (Borthakur et al., 2010). However, more research needs to be done by legislators before similar laws could be adopted in America. The reason is that legislators do not want new provisions of the copyright laws to violate American civil rights which support consumerism and Internet user privacy.

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