iPiracy

Between the iPad and the Kindle, there has been a lot of talk lately about the future of books and magazines online.  As a writer, I’m happy with anything that keeps people reading – especially if it makes reading fun for people who might not otherwise pick up a book.  The only downside?  The coming wave of piracy that will crash the publishing industry just as it hit music and movies before.  But hopefully publishers can learn from the others mistakes.

Just look at how the music labels screwed up.  Labels lost billions each year, with annual drops of more than 25% since 2000.  The blame often falls on piracy. Post Napster, the industry’s strategy was Scared Straight:  sue a 12-year-old for illegally downloading Metallica, and hope his friends get the message.  It didn’t work.  Sales continued to plummet.  Hackers grew more sophisticated.   Then, on the heels of a precedent-setting Supreme Court ruling, the industry switched targets:  the geeks who coded the pirate sites.  Turns out, the three biggest ones are harbored in New York City.  The labels went gunning.  The plan wasn’t just to destroy them.  It was to own them.  They’d sue for an ungodly amount of money, and pressure the sites to settle, in part, by converting to legal services – services which would compensate labels for the downloaded tunes.

First went eDonkey, a global operation ran by two hackers out of an apartment in Hoboken – settled for a whopping $30 million.  The scrappy cofounders, who blasted the industry in congressional testimony, would rather go down with the ship than sell its soul.  Across the river in Manhattan, a site called iMesh was more than eager to cash in.  The start-up, founded in Tel Aviv by a former chief information officier for the Israeli Defense Forces Command, not only converted to a legal site, it hired Sony Music president Robert Summer to be its executive chairman.  Then iMesh became busy striking up deals with labels, and gobbling up (then converting) other peer-to-peer file-sharing sites.  Only one more site remaind in the balance – LimeWire, a site run by Mark Gorton, who runs the file-sharing site out of his capital management firm in Tribeca.  The Recording Industry Association of America sued LimeWire for hundreds of millions, trying to force LimeWire convert to a legal service, like iMesh, or make it die like eDonkey.  Either way, the music industry seemed to win.

And, yet, did they?  In truth, they were pursuing a negative strategy - spending millions to hunt down the pirates, meanwhile Apple makes all the money by creating iTunes.  At the same time, kids around the world are churning out more and more file-sharing sites every day.