Criminal Friends Of Entertainment (2007) 5:1 SCRIPT-ed 31 (2008)

1. Introduction

Peer to peer has turned out to be a disruptive technology that has had had profound impact to the content ecosystem. Copyright owners are worried that file sharing is destroying their business and legislators have reacted by enacting laws that criminalise illegal file sharing. Industry and researchers disagree on how the illegal file sharing affects legal sales. IFPI estimates tens of billions of illegal music files are traded annually worldwide at an estimated ratio of 20 illegal downloads per every track sold.1 The conservative International Policy Institute calculated the total piracy loss to US sound record industries from global piracy to equal $5,3 billion.2 Such numbers are only reliable if file sharing is a direct substitute. A recent Canadian study3 did not uncover either a positive or negative relationship between the number of files downloaded from P2P networks and CDs purchased.4 However, the study suggested that of the Canadian P2P file sharing subpopulation, there is a strong positive relationship between P2P file sharing and CD purchasing. The study estimated that the effect of one additional P2P download per month increases music purchasing by 0.44 CDs per year. According to a widely discussed study by Oberholzer-Gee and Strumpf, “downloads have an effect on sales that is statistically indistinguishable from zero.”5 They concluded that file sharing is not the main reason for the decline in music sales. However, Oberholzer-Gee and Strumpf’s results have been since questioned.6

Getting a reliable result of the impact of illegal file sharing is hard. Nevertheless, rights owners consider it a serious enough problem to warrant spending a considerable amount of money on copyright enforcement in massive and costly trials. In recent case, Sony BMG’s head of litigation Jennifer Pariser testified that record labels have spent “millions” on the lawsuits, and that the record companies are losing money with the litigation program.7 Yet the file sharing phenomenon has not disappeared and some studies suggest it to be on the rise.8 Why are people massively infringing copyright law? Do file sharers see changes in their consumption from legal sources? Do they know what they are doing is illegal or do they just not care? The problem calls for further study. We conducted a web survey and asked questions about file sharing and copyright law. This paper describes the results of that survey.

2. Survey Methodology and Demographics

We conducted an online survey, the goal of which was to find out about the attitudes of P2P users to law and their practices of file sharing [the HPS survey].9 The questions concentrated on the use of P2P, the users’ attitudes to laws governing file sharing, how they saw their file sharing affecting the media industry and vice versa. Previous surveys conducted in 2007 in the UK10 [DMS], Sweden11 [RB] and Canada12 [CAN] were used as reference points for drafting the questions. Some results from the previous surveys are presented in footnotes. The goal of the survey was to produce numbers for the public discussion. The aim of this paper is to describe the data set, but the detailed explanation and cross analysing will be done later. The collected dataset is available for further study at HIIT website and the authors invite anyone interested in this subject to work with it.13

The survey was conducted online on three Sanoma WSOY magazine’s web pages.14 During the time the survey was online (15 to 22 August 2007) it was filled out 6103 times.15 Two of the three websites where the survey was displayed were technology news sites. This partly led to selection of the respondents to users of file sharing services. A typical respondent was a male with a technical background who used file sharing networks at least once a week.16 Even though 37% of the respondents were students, over 50% reported monthly income that exceeded €1500. Most of the respondents were 17-35 year old.17 The young age and high rate of file sharing use are in line with previous studies that found that there is a digital divide among age groups.18 According to Statistics Finland, the Internet was used by 79% of the Finnish population at the beginning of 2007.19 41% of the Internet users used Internet for listening to music online or downloading music on a PC or another device.20

87% of the participants had used P2P file sharing sites.21 Three quarters of the respondents had downloaded unauthorised music or videos from P2P networks22 and 59% had shared illegal music, movie or TV series files,23 while less than 10% of the respondents had been the first peers to upload content.24 10% of the participants had used P2P sites only for legal purposes.25 This use can be explained by free and open source software and Creative Commons licensed works26 that are shared legally.

Fig. 1: I have downloaded unauthorized music, movie and TV series files	Fig. 2: I have shared unauthorized music, movie and TV series files	Fig. 3: I have been a first file sharer

Nearly 80% of the users had used BitTorrent to download files.27 About half of the respondents had used Direct Connect and less than half had used FastTrack based services like Kazaa.28 It appears that peer-to-peer use is still connected to computers as mobile phone P2P client programs Symella and SymTorrent were almost unknown.29

Many of the survey respondents connect to file sharing network frequently. Half of the respondents share or download files at least once a week.30 Both music and video file downloading were considerable. The most common answer to the question regarding the amount of downloaded files was over 100 albums (over 1000 files) of downloaded music31 and over 200 movies or episodes of TV series.32

Fig. 4: How many music files have you downloaded from P2P file sharing sites?

Fig. 5: How many movies or TV series episodes have you downloaded from P2P file sharing sites?

Conducting surveys with people who are involved in activities that carry criminal punishment can be challenging and thus the results must be taken with a grain of salt. P2P file sharing is a subject that generates passion. This was seen in the comments that several discussion forums received. Some of the comments thought that the survey makers were collecting data for future prosecution or that the researchers were errand boys of the record industry. The general suspicions lead to a point where only two thirds of the respondents left their contact information for a prize raffle. The first prize had to be redrawn as the winner had left in the place of contact info a message “up yours KRP, I won’t give you my contact info; [email protected].”33 Some of the commentators even thought that the two mobile phones that were offered as a raffle prize were bugged by the police to collect incriminating evidence.

3. Finnish Law and File sharing

The Copyright Act (1961/404) and the Penal Code of Finland (39/1889) set forth the remedies that a copyright holder may obtain upon a finding of infringement. Illegal peer-to-peer downloading is not criminalised. Due to year 2005 amendments, downloading from an illegal source might, however, lead to civil sanctions, such as liability to pay compensation or damages (section 57 of the Finnish Copyright Act) to the rights owners. The technical structure of the BitTorrent blurs the line between file sharing and downloading. The downloaded pieces of the work are instantly shared. It is hard to draw a line when an infringement occurs: is it when the first package is shared or the whole file downloaded?

When the copyright law was amended in 2005, the provision in the Penal Code concerning unauthorised file sharing in information networks was also made tighter. In contrast to other copyright offences, an intention to benefit financially is not required when the infringement takes place in information networks. Because of this, the maximum penalty for unauthorised file sharing is now two years in prison even when there is no commercial intention involved in sharing. The raising of the maximum penalty allows the usage of coercive means, such as house searches and computer confiscations. The courts have so far used their powers to punish the file sharers cautiously. Typically, the most effective parts of the file sharing sentences have been the confiscation of the computer and considerable compensation rewarded to rights owners. It seems that the sudden raising of the maximum limit is mainly serving the rights owners’ needs to use coercive measures when investigating the infringements. In addition, the threat of sanctions is used to prevent undesired behavior.34

In 2004 police raided dozens of homes and confiscated servers in investigation of Finreactor service. Finreactor was a closed BitTorrent tracker and website that had over 10,000 members. Over thirty administrators of the service and dozens of users who had shared files were prosecuted in the case. The compensations that the right owners were seeking rose to nearly €4 million. One issue that the court had to solve was who was responsible for the illegal file sharing. Was it the users who submitted the torrent files that link to the content, the people who were downloading the content or the service providers that enabled the file sharing? The district courts have sentenced both individual users and service administrators to fines. The courts have typically cut the civil compensation claims to one tenth of the rate that were originally claimed. It must be noted that the Finnish courts have not found that rights owners have suffered damages but only awarded them compensations for the unauthorised reproduction and making available to public. The Finreactor administrators’ case is currently at the appeal court. The Finreactor case may have an affect on Swedish Pirate Bay litigation because Finland and Sweden share a common legal tradition.

According to the respondents’ evaluations, there have not been significant changes in their behaviour due to rights owners' actions. Only about 10% of the P2P users answered that the new copyright law had at least somewhat decreased their P2P usage.35 It appears that the maximum penalty for P2P file sharing is not matching the respondents’ sense of justice. When compared to other crimes with the same maximum penalty, illegal file sharing was seen as less condemnable.36 However, it should be noted that in fact most of the respondents had infringed copyrights and committed a copyright offence according to the penal code. Offenders typically perceive their own actions less harmful than the general population. When analysing the results of the survey this fact must be taken into account.

Fig 6: How would you rate the following activities in comparison to the large-scale file sharing? (The acts below the red line are crimes with the same maximum penalty. However, in case of aggravated action the maximum penalty is higher than two years imprisonment in tax fraud, drug offence and making and sharing of child pornography.)

3.1 File Sharers and the law

The Finreactor case has been well discussed among the Finnish file sharing community. Our survey suggests that the community thinks that the responsibility should lie on the individuals who are making the file sharing possible. Only 12% of our survey respondents thought that the administrator of a file sharing site should be primarily responsible and 52% thought that initial up-loader or the person who is allowing others to download the content should be primarily responsible for the illegal file sharing.

Economics views law-breaking as both rational and irrational behaviour.37 Several aspect or variables affect human behaviour: the understanding of right and wrong, the chance of getting caught, the expected punishment/payoff of the crime and moral valuations. The payoff for the infringement in file sharing includes getting files for free but also better service and access to works that are not available otherwise. We asked the respondent a series of questions to find out how they perceive the other factors.

The respondents understood typically what is illegal according to copyright law. Almost 90% of the respondents answered that it is illegal to download unauthorised music from P2P file sharing sites.38 Nearly half of the users saw the use of illegal file sharing sites as morally questionable.39 Evidently the file sharers are not breaking the law because they are unaware of it.

One of the reasons why copyright law might have little affect is that people generally consider the risk of getting caught miniscule.40 When asked how the risk of getting caught at illegal file sharing compares to other risks the closest comparison was to winning a lottery jackpot.41 Other free-riding offences like shoplifting, getting a speeding or parking ticket or getting caught for not paying for public transport or TV licenses were considered less probable.42

The entertainment industry has been busy enforcing its rights. According to Litman, by 2005 RIAA alone had sued over 15,000 individuals.43 IFPI and affiliate recording industry bodies continued the global campaign against illegal file sharing in 2006, bringing legal actions against more than 10,000 individuals in 18 countries44 while the total number of legal actions by recording industry is over 30,000.45 Most of the cases have been settled out of court46 and the majority of trials were won by rights owners. There are different views how legal actions affect the file sharing in the industry. IFPI is of the view that legal actions have helped to contain the illegal file sharing and refers to Jupiter Research’s finding that “while broadband household penetration is rapidly rising, the percentage of internet users engaged in frequent unauthorized P2P usage is actually falling.”47 In contrast, the DMS study suggests that while there was a slight reduction in 2006, in 2007 unauthorised downloading in UK increased to its all time highest level to date (43%). Jupiter’s numbers (11%) deviate substantially from DMS’s (36%). According to Litman, research done by businesses that monitor traffic over peer-to-peer networks does not suggest a reduction in the number of people engaging in peer-to-peer file sharing or in the volume of files they trade.48

Although IFPI has carried out several actions, according to its statement: “the principal aims of the [legal] campaign are education and deterrence,”49 the actions taken by rights owners such as campaigning for the awareness of copyright law or media attention had no significant effect on the popularity of the P2P services among the respondents. However when we asked specifically about the trial against the users and system administrators of Finland’s biggest BitTorrent tracker, Finreactor, numbers were larger. The usage of P2P had decreased among 20% of the users. News of on-line piracy in the media had a minor impact on the P2P usage, since only 10% of the users had decreased their usage as a result.50 General campaigning for the awareness of copyright law had also insignificant impact among the respondents.51

Fig. 7: Please rate how the following incidents or issues have impacted your P2P-usage.

The film and recording industries try to send a strong message that P2P file sharing is illegal. Buying a pirate CD or downloading songs from P2P networks is compared to stealing a car and P2P users are told that file sharing can compromise their computers.52 The rhetoric used by the copyright owners was not considered believable.53 Respondents found it hard to relate to a car thief or the mafia. Only a couple of percent of respondents at least somewhat agreed to the statement that P2P usage supports terrorists and less than 10% of the respondents considered P2P usage to support criminal organisations.54

Fig. 8: The following statements relate to the usage of P2P file sharing:

Nearly all of the respondents knew that illegal file sharing can lead to fines, monetary compensations and to confiscation of computers.55 Even though survey participants knew what counted as copyright infringement,56 they had difficulties in recognising the legal uses of works that copyright law permits. Over half of the respondents answered that it is not in accordance with law to “to make a copy for myself of a CD borrowed from a library” or “to make a copy for myself of a CD purchased by a friend,” even though the Copyright Act permits copying for private use from a legal source.57

Fig. 9: As far as I understand the following actions are in accordance with the law:

The concept of legal source is rather new, having been introduced in the 2006 Copyright Act. A purchased or borrowed CD constitutes as a legal source but a private copy does not. It is clear that the concept is not understood. Over 50% of the respondents thought that it is legal to copy a TV show recorded by a friend [illegal].58 While this is an example where people conceived illegal copying to be legal the converse also applied. Nearly half of the respondents saw copying a borrowed CD [legal] to be as condemnable as large scale file sharing59.

3.2 The impact of file sharing

As previously noted it is hard to get reliable results of file sharings substitute effects. One of the ways is to ask directly the users of file sharing networks. Over half of the respondents of our study at least somewhat agreed that P2P file sharing sites increase music sales.60 The survey suggested that the use of P2P file sharing sites has not significantly affected the use of other media, except for portable record devices, like iPod, the use of which it had slightly increased.61 In reality consuming, for example, an illegally downloaded TV series must inevitably have an impact on the consumption of that same programs legal TV-broadcast. More than 80% of the respondents were aware that they can watch shows from file sharing networks before they are broadcasted on Finnish TV.62 Other studies have shown that as people have limited time for media consumption, the consumption of illegally acquired programs has an effect on time spent on other entertainment.63

P2P file sharing may help to increase the diversity of culture consumption in two respects. First, over 80% of the participants thought that there are works available in P2P file sharing sites that are not available in digital download stores.64 Second, over 80% of the participants thought that P2P file sharing sites allowed new music and artists to become known.65 Limited sampling features, where songs can be listened for 30 seconds, have been introduced into most web stores as well. In addition, record companies have used data from P2P networks to find out about consumer demand for newly released songs.66

Quality of downloads might be one issue that affect whether file sharing services are supplements or complements to legal services. In some contexts there have been statements that the files downloaded from P2P file sharing sites often have poor quality and contain malware.67 However, this claim was not supported in this survey. Only about 20% of the respondents somewhat agreed at least to the statement that the files downloaded from P2P file sharing sites often are of poor quality.68 The result is similar to the earlier studies made in UK (17%) and Sweden (22%).69 Moreover, about 10% of the respondents in the DMS answered that they are likely to download tracks more often from unauthorised file sharing sites due to improving quality of the tracks.70 In addition about 50% of the respondents in the Swedish survey were extremely satisfied with the quality of downloaded content on top of almost 40% being fairly satisfied. All things considered it is reasonable to conclude that the P2P users are fairly satisfied with the quality of downloaded files, and that for P2P services subject to a charge, it is not necessary to change the downloaded tracks to tracks of better quality, such as was the case with early commercial file sharing sites.

4. Legal Web Stores and Willingness to pay in the P2P Environment

According to IFPI in 2007 there were some 500 legitimate music services that provide over 4 million songs to download.71 Several online video stores provide on-demand movies and TV-series. As there are more and more legal alternatives to file sharing, why has illegal file sharing not disappeared? In addition to the main answer: “You can’t compete with free product,” there are other factors as well.

Those who had not used legal web stores considered technical restrictions or Digital Rights Management (DRM) as the main for not doing so, with price coming second.72 Those who had used web stores valued their ease of use and the possibility to buy a single song instead of an entire album.73 Online stores have reacted by offering DRM-free downloads for purchase. Market leader iTunes charged a 29 cent premium for DRM-free tracks, but had to soon lower the price to the same level as DRM tracks because of competition.74 Even though a lot has been done to satisfy consumers’ demand for DRM-free products, the playing field is not even. While the legal stores have to compete with inferior products with P2P network’s restriction free formats, they are format wise in a worse position.

The Digital Music Survey suggested that the music companies should consider introducing price discrimination, as 84 % of the respondents were of the opinion that older downloads should be cheaper and almost half of the respondents indicated willingness to pay more for newly released tracks.75 Web stores have tried out some new pricing methods with bundled content.76 The pricing is not solely in the hands of web stores. A large portion of the cost for downloads goes to collecting societies. Collecting societies’ pricing is very limited as they are acting under monopoly regulation. This means that all clients and members must be treated equally which has thus far limited dynamic pricing.

It seems apparent that it is not enough to develop different kinds of pricing systems. On the contrary, it is vital to seduce customers with convenient access to a more diverse range of entertainment.77 Current web-based stores can be improved to enable attractive features that are already available through file sharing services. However, we suggest that there are even more attractive market opportunities within reach. Tapping into consumer willingness to use P2P sharing can provide additional income sources for rights owners. Previous surveys show that price is definitely one of the key advantages of file sharing. Almost 50% of the respondents in the Swedish study regarding video file consumption answered that lack of cost is the primary reason for downloading.78 On the other hand, 5% agreed somewhat to the statement that there are no good alternatives available for filesharing.79 In the United States, Apple’s iTunes has taken steps toward becoming a universal web store where users can download anything from games to TV series. Finding a single source for extensive legal media downloads in Europe has proved impossible. It appears that illegal file sharing has managed to provide this service and users are quite satisfied with the file sharing services.80 On this account we were interested in willingness to pay in the P2P environment. The results were somewhat encouraging.

In our survey almost 80% of the respondents were interested in, and almost 50% of the respondents would be willing to pay monthly for, a service that enabled unlimited music and video filesharing and downloading. In contrast the majority is not at all interested in a corresponding service with digital restrictions used on the files. In addition it is noteworthy that over 50% of the respondents are interested in a service that would enable converting single files downloaded from P2P file sharing sites to legal files, however only some 20% would be willing to pay for it. A free mobile phone P2P client program received more interest than mobile phone music subscription service with unlimited downloading.81

Fig. 10: The following questions relate to services that require payment. Please indicate, how interested you are in the following services (The question is abbreviated from the original form presented to the respondents).

When it comes to willingness to pay it can be concluded that the traditional album format is losing its value for digital consumers. In web stores consumers are interested in buying single songs82 instead of entire albums, and in the P2P environment consumers are interested in a single fixed fee (flat rate) for a service regardless of the amount of use. This can be generalised in the following statement: in web stores quality rules over quantity, while in the P2P environment it is the other way around. In the light of the core features of P2P downloading this is quite understandable.

5. Conclusions and Discussion

5.1 Conclusions from the Survey

We conducted the survey to get information about file sharing services users’ attitudes to, and knowledge of, copyright law. We were especially interested in how they perceive the chance of getting caught and what factors affect the punishment/payoff valuation. The data gives an overview of the file sharing community’s views. The survey results show that P2P users are aware that they are breaking the law and most people also consider illegal file sharing morally condemnable. File sharers are aware of the punishments, but the risk of getting caught were considered very distant. The traditional method of tighter enforcement of harsher laws does not seem to work. Amendments in the legislation and raising the level of punishments have not had a noticeable impact on respondents’ file sharing. The new Copyright Act that has raised the penalty for sharing files online to the level of involuntary manslaughter was not considered proportionate. This suggests that raising the punishments may not raise the deterrent effect. Copyright enforcement is costly and easily creates negative PR, which draws the file sharers further away from the rights owners’ camp. Our data suggests that even the recent massive legal suits against file sharers have only a minor impact on the file sharing community.

Even though survey participants knew what constituted copyright infringement, they had difficulties in recognising the legal uses of works that copyright law permits. Rights owners have used public money for copyright awareness campaigns but failed to inform the public about fair use rights. Having balanced information that also emphasises users’ rights for fair use would generate a more balanced view of copyright law. This would most likely create a more positive view of the legislation and make it more acceptable.

The biggest payoff for the illegal file sharers was the immediate access to a large catalogue of works which were available free of charge and without DRM restrictions. The zero price was only one reason among others as nearly half of the respondents were willing to pay monthly for a service that enabled unlimited music and video file sharing and downloading.

5.2 Discussion of Issues Arising from Survey

Legal web stores have tried to adapt the features that file sharing has had like sampling and MP3 format. Nevertheless the legal stores cannot compete with their catalogue as film and TV industry likes to stick to the tiered release of their works and some record companies are not willing to sell tracks without DRM. This means that legal web stores do not only have to compete with free but also otherwise superior file sharing services.

Developing new services and licensing models that would take advantage of the P2P models could solve the problem. This would necessarily mean less control for the record and film industries. Legalising file sharing with compulsory licenses could tip the market equilibrium and would most likely mean hard times for current web stores. Such new innovative business models are necessary to solve the existing market failure that illegal file sharing has generated. Opposition from record industry and online stores would be likely but copyright is meant to protect society’s ability to produce and consume culture – not the intermediaries who distribute it.

The music industry has had “rock star economics” where a few Britney Spears-type artists collect most of the revenues.83 The concept of a “celestial jukebox” was introduced in a 1991 United States Copyright Office report.84 The celestial jukebox has every song ever released available through digital technology. Having every work ever released available would most likely change the music market.85 Wide selection in file sharing networks brings more listeners to the long tail86 of obscure forgotten songs. At the same time it would not reduce the rock star music consumption. Legal, unrestricted P2P file sharing system would best approximate the long tail concept.87 Web stores are growing but their catalogue is still limited and they may never reach the celestial jukebox status.

United Kingdom Journals

Criminal Friends of Entertainment: Analysing Results from Recent Peer-to-Peer Surveys