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The Limits of Internet Freedom

November 12, 2000|Mike Clough | Mike Clough, a research associate at the Institute for International Studies at UC Berkeley, is the author of "Can Hollywood Remain the Entertainment Capital of theWorld?" a report to be published by the Pacific Council on International Policy

BERKELEY — Late last month, Bertelsmann AG, one of the world's leading media conglomerates, surprised the music industry by embracing Napster, a free file-sharing service that Bertelsmann's music subsidiary, BMG, had been trying to shut down, along with other major record companies. The new relationship seeks to produce a global "membership-based service" to distribute music. But the effects of the alliance could reach far beyond the music business. Specifically, the Bertelsmann-Napster union could lead to the development of a new business model in which profits would come from creating and controlling digital-content networks rather than from individual CDs, films or books. Such a model would fundamentally affect the people who supply entertainment content--the musicians, artists and writers. More fundamentally, it may influence whether the Internet becomes a truly free and open public space or a segmented world of closed, mostly private networks.

Bertelsmann CEO Thomas Middelhoff signaled the need for the music industry to consider a new approach to the Internet in a little-noticed speech last August. He praised Shawn Fanning, founder of Napster, as a "pioneering entrepreneur" and confessed his admiration for Fanning's file-sharing software. He then sharply criticized music companies for "grossly" underestimating the effects of the Internet. While warning that "if there were only Napster, there would soon be no more new songs to be downloaded," he declared that music is "predestined" to be distributed via the Internet and called on the industry to turn file-sharing into "a legal business."

For the Record
Los Angeles Times Sunday November 19, 2000 Home Edition Opinion Part M Page 3 Opinion Desk 2 inches; 38 words Type of Material: Correction "The Limits of Internet Freedom," published Nov. 12 in the Opinion section, it was incorrectly reported that was bankrupt and had been acquired by In fact, is solvent and currently listed as a public company, located in San Diego.

Middelhoff seemed to be acknowledging that the technological underpinnings of the traditional business model used by music, film and publishing industries have largely collapsed. In the old analog world, media companies dominated the production, packaging, promotion and distribution of music, films and books. To control this process, these companies depended heavily on their ability to enforce copyright protections and prevent products from being easily duplicated and distributed.

The advent of audio tapes, photo copying machines and video cassette recorders constituted the first serious threat to the old order. Record companies, film studios and book publishers initially responded with the same kinds of legal threats that they are now using against new-media technologies such as digital file-sharing.

But the first wave of duplication technologies proved to be far less of a threat to old-media companies than first feared. One reason was the poor quality of the copies these technologies produced. More important, reproducing analog copies on a large scale required production facilities beyond the reach of the law--for example, in countries such as China--and selling the copies required the creation of alternatives to the retail-distribution channels used by established media companies.

The digital revolution changed this equation dramatically. Using formats such as MP3 and Windows Media, it is now easy for individuals to turn audio, video and print into files of "bits" that can be easily stored on a variety of different media, transferred via the Internet and read (played) by computers, cell phones and other personal digital devices.

One avenue the music industry is pursuing to reestablish its ability to control music files is the Secure Digital Music Initiative (SDMI), which aims to create a digital "watermark" that could be used to distinguish legal copies from pirated ones. However, given the pace of technological change and the ingenuity of software programmers, many experts doubt that this initiative will succeed in eliminating the ability of users to copy and transfer files.

So far, the music industry has used traditional copyright laws to attack Internet sites that allow users to copy music files for free. They have succeeded in bankrupting and, both of which have been acquired by an industry-supported site, Even though Bertelsmann says it will financially help Napster become a paid service, the industry may still succeed in shutting down Napster. But these are Pyrrhic victories.

Internet users upset with Napster for "selling out" are already turning to alternative file-sharing programs such as gnutella and freeshare, which do not use central servers and thus are much more difficult to shut down.

Moreover, the threat posed by the Internet will multiply with increases in the bandwidth of the digital "pipes" that carry digital content into homes. Right now, the vast majority of users around the world are still connecting to the Internet via phone lines that make it very time-consuming to download large music files and nearly impossible to download large video files. But these limits will eventually disappear as more users have access to broadband connections using cable, DSL or wireless.

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