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"We should no longer permit our trading partners to openly steal this country's greatest assets."
——Hilary Rosen
HIL ON THE HILL
RIAA's Rosen Testifies on Piracy Before Senate Committee; "Yo Ho Ho and a Bottle of Rum" Joke Gets Big Laugh
RIAA President/CEO Hilary Rosen testified today before the U.S. Senate Committee on Foreign Relations, asserting that physical piracy costs U.S. industries the "staggering sum" of more than $4.5 billion per year, and online piracy an untold amount more.

"We sold less music last year than we did the year before, despite the fact that consumer interest in music has, according to reliable surveys, never been higher," she related. "They are getting it around the world supplied by a pirate network of services and manufacturers."

Rosen's remarks were part of hearings on digital piracy and the global protection of intellectual property overseen by Committee Chairman Joseph Biden (D-Del.).

"We should no longer permit our trading partners to openly steal this country's greatest assets," Rosen asserted, presumably referring to Albanian bootlegs of Color Me Badd.

The RIAA chieftain—viewed by many as the entertainment world's most avid and rhetorically effective advocate on issues of copyright protection—underscored the dangers of both "the piracy of physical recordings and Internet piracy."

While acknowledging progress with CD bootlegging in Russia and China (but noting the need for "prodding" in some cases), Rosen was particularly pointed in her criticism of Brazil's lack of "resolve" in dealing with the problem, declaring its neglect "is killing a thriving industry."

Other nations "whose enforcement practices leave a great deal to be desired" in the area of black-market CD dupes, according to Rosen, include Ukraine (the subject a U.S. Trade Representative sanction for piracy), Taiwan, Pakistan, Philippines, Paraguay and Thailand. These countries "all harbor organized criminal syndicates that are involved in the manufacture and global distribution of pirate CDs," she insisted.

But Rosen's characterization of unauthorized digital distribution online as a "global and borderless threat" seemed more likely to raise some eyebrows. But it did offer her a chance to rebuke Netherlands-based FastTrack and its KaZaA network, which licenses its technology to peer-to-peer systems worldwide.

Though a Dutch court ordered KaZaA to cease operations, the wide dissemination of its decentralized operating software makes the implementation of the order impracticable. The company then sold its assets to Australian concern Sharman Networks Ltd.

"We estimate that over 3.6 billions songs or files are being copied per month," Rosen said of the network, which has begun to offer additional features to file-swappers, adding, "the pirates take too much comfort in their ability to move to multiple jurisdictions around the world."

She declared that "with Internet piracy, the lack of real protection is actually stifling the development of a new marketplace."

Rosen praised the Committee's ratification of a past treaty on copyright and "Phonograms," but urged further action. "While federal law enforcement's intentions are extremely good, their resources are still far too limited," she opined, suggesting making D.C. the base for "multi-jurisdictional cases" and holding Internet service providers (ISPs) worldwide "to reasonable standards of liability."

But likening P2P file-swappers to international CD black-marketers rubs many in the digital space the wrong way.

"The egregious thing is to lump these two phenomena in the same bucket," argues Eric Garland of Big Champagne, a firm that monitors P2P network activity and crunches the data for industry marketing purposes. "Of course piracy is a problem, but this consumer demand [for file-sharing applications] is the thing that's happening in online distribution right now. You have tens of millions, conservatively, probably more than 100 million users, who have one time or another accessed content in this venue. To me this says not that everyone is a pirate, but that here is a superior delivery system that will have to be reckoned with. That may be terrifying, but it's also exciting.

Garland insists that the widespread availability of cheap CD-Rs to consumers is far more corrosive to the industry's bottom line than file-sharing could ever be.

"There's a strong and persuasive case to be made that there's massive lost revenue online," Garland avers, "but on the Net you have a captive population that considers P2P a superior product. The clear expectation is that this will be a new model and will provide a much greater platform that will generate revenue. Even unauthorized swapping generates impressions that can help sales. Yes, it's cannibalizing sales, because it's a free-for-all for consumers, even though it might generate aftershocks at retail. You can't demonize the consumer for trying to get the best product, whether the industry has figured out how to meet the demand."

Of course, the industry has backed two online subscription services, Pressplay and MusicNet, that owe much of their offerings to user-magnets like the original Napster. But today's testimony by Rosen underscores the intense threat posed by unauthorized P2P in the minds of many industryites.

"Piracy of music is not a private offense," Rosen emphasized earlier in her testimony. "It hurts everyone by diminishing the incentive to invest in the creation of music. Pirates do not invest in recorded music and pirates do not pay taxes."

That last remark may finally get the Pirate Auditing Act of 2002 off the back burner.

A full transcript of Rosen's testimony can be find at riaa.com.

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