The U.S. should solve the Internet piracy dilemma due to job loss, government tax loss and music industry revenue loss by implementing additional provisions regarding ISPs responsibility. However, civil rights endorse personal privacy of every individuals. In order to avoid privacy violations, the ISPs might need to build a software program that would detect only music downloading actions. Music companies should also need to support ISPs companies by offer them some financial incentives. That might be to give the ISPs a certain percentage of total fine they impose upon violators. This action would alleviate the accountability burden that recording companies put on the ISPs. Neutralizing two major negatives of the legislative implementation proposal will make this plan more viable.




Executive Summary

I.          Introduction

II.        Methodology

II.        The Online Pirates

A.        Defining Online Music Piracy

B.        Internet Service Providers position

IV.       Findings

A.        Business Impact of Online Music Piracy

B.        The Thriving of File-Sharing Networks

1.         International Nature of File-sharing Community

2.         Sweden the Pirate Bay

3.         Uploading Community

C.        Legal environment

1.         The United States Copyright Law

2.         The South Korea Case

D.        The Failure of Current Methods against Music Piracy

1.         Litigation against Individuals and File-sharing Sites

2.         Other Preventive Approaches

E.         The Free Psychology of Music Consumers

V.        Final Analysis

A.        Pursue a Legislative Implementation

B.        Assign a New Government Agency

C.        Adopt a Music Tax Approach

D.        Do Nothing



Internet Service Providers

Almost everyone now uses the Internet. To use the Internet, people need to open an account or subscribe to the Internet Service Providers (ISPs).

Basically, ISP is a company that supplies Internet connectivity to everyone that wants to access the Internet. However, some ISPs also provide different service to their customers. Verizon and AT&T only sell service for Internet connectivity to the public, later on this ISP type will be mentioned as ISP1. Other ISPs, such as Iweb and Amhosting provide service to set and fully manage a computer server for customers, later on this ISP type will be mentioned as ISP2. Computer server is a computer that is used to create a website for company, business, or personal use. Computer server can also be used for database, game server, etc. There are also ISPs that only rent the server to public without manage the server, so the responsibility to manage the server belongs to customer. From this point, this type of ISP will be mentioned as ISP3.

Online music piracy all started from these three types of ISP. To create a website, people need a server and Internet connectivity to make the website be up and running. People with lack knowledge to manage a server would rent a server from ISP2, but someone with a good information technology skill would rent a server from ISP3.

Music companies think that the ISPs have the most important position to prevent and decrease online music piracy. ISP1 should check what the customers use the Internet connection for and cut customers’ Internet connection whenever they use the connection for online music piracy. ISP2 and ISP3 should not rent servers to anyone that want to build website or database for facilitating online music piracy.

On the other hand, the ISPs think that online music piracy is not their responsibility. The ISPs only provide service to their customers and do not break any law. The ISPs’ concern is only to provide good service to customers and generate more profits (Fildes, 2007).

The only one that can ask the ISPs contribution and prevent online music piracy is the government. Right now, all these ISPs are currently working together with the government to prevent and decrease online music piracy. For example, India government has commanded India’s ISP1 to block Pirate Bay to be accessed in India (TechZilo, 2011). The U.S. government has also asked ISP2 and ISP3 to shut down several servers, such as Limewire,, and Rmx4u.

Defining Online Music Piracy

So, what is online music piracy? According to Recording Industry Association of America (RIAA), if someone makes unauthorized copies of copyrighted music recordings by online, it would be considered as online music piracy. Nowadays, digital information can be downloaded easily, and they seem to be available everywhere on the Internet. However, the U.S. copyright law has clearly stated that it is prohibited to download or upload copyrighted music without permission (RIAA, 2011).

It is not really clear when people started downloading music. But downloading music was become famous in 1998 after Napster was released and created by Shawn Fanning. Napster was a software program that allowed people around the world to share each other’s music files for free. Within several days, Napster was downloaded and used by thousands of people. Later on, music industry thought that Napster caused the decrease in their revenue, and Napster pirated music. Eileen Richardson, Napster’s CEO in 1998, said that Napster did not violate any law since Napster did not actually host any music. However, music industry kept complaining about Napster. Then in 1999, RIAA sued Napster for facilitating music piracy that was followed by several litigation cases from musicians. Because of so many litigation cases, Napster changed the purpose of their business from offering a music file-sharing software program to offering an Internet music subscription service that sell legitimate online music (Funding Universe, 2011).

After Napster, a lot of software programs and websites are created that provide free music downloading, such as Pirate Bay, Limewire, BitTorrent, 4share, etc. People find it really easy to download and get music for free, which lead to the online music piracy dilemma.

Introduction to Music Piracy Problem

Online piracy has caused a drop in digital and physical sales of the music industry in the United States (U.S.) because instead of buying legitimate song tracks, people download it for free. As a result, trade value of the U.S. music market decreased significantly by 10.7% in 2009 (Borthakur, Brandle, Cobo, Ferguson, & Paine, 2010). Regardless of the rising concerns of the artists, record label companies, and others seeking compensation in the music industry, the pirate community persists. In essence, file-sharing sites are a big part of the pirate community. They usually offer free peer-to-peer software programs which are powerful tools that illegal file-sharers use to transfer files such as music tracks, movies, games, and software. A few peer-to-peer sites were seized by the government in October, 2010. One example is The others still openly operates and challenges American music companies and authorities. Many of them are owned and operate in different European countries where the U.S. authorities do not have jurisdiction.

Acknowledging the economic impact of music piracy to the recording industry is very important to measure the significance of the problem. During a six year period since 2004, the digital section of the music industry has expanded its net income by 1000% world-wide. On the other hand, in the same time frame, observers see a decline in the digital and physical sales of the global music market by 31% because of the digital pirates (RIAA, 2010). 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 U.S. and Spotify in Sweden did not compensate for the losses of the overall industry. 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 that has been successful in protecting its domestic music market. In 2008, this country enacted a new policy called the three-strikes law. The provisions of this policy give Korean recording industry the right to require Internet service providers to mail notifications to their customers once these providers find irregular activities. The letters inform the violators that their Internet services might be cut if they continue to commit illegal sharing activities. The name three-strike law relates to the maximum number of warnings one receives before their Internet services are terminated. This approach seems working for Korea because their digital sales in 2009 went up to 27% after two previous flat years (Borthakur et al., 2010). However, more research needs to be done by legislators before similar law could be adopted in the U.S. The reason is that legislators do not want new provisions of the copyright law to violate American civil rights which support consumerism and user privacy.

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