Kazaa Goes Legal

Agreeing to pay $100 million in damages to Sony BMG, Universal, EMI and Warner Music Kazaa will now become a pay service for downloading films and songs.

THE music industry hailed a victory in the battle against illegal downloading yesterday after forcing one of the world’s most prominent file-sharing sites to pay $100 million in damages and become a legal business.

While this is indeed a victory it is a rather hollow one though.

Despite the settlement, and the popularity of legal alternatives such as the iTunes store, figures show that illegal music downloading is still on the increase. An estimated 20 billion songs were swapped illegally or downloaded last year, according to the annual piracy report of the International Federation of the Phonographic Industry (IFPI).

This is in addition to the £2.4billion lost last year in pirated CD sales.

This whole downloading/RIAA/suing people is one gigantic exercise in rent-seeking/rent-protection.

John Kennedy, chairman of the IFPI, said: “The Kazaa ruling is a major step forward because the industry can now put their powerful distribution software to a legitimate use. But the increasing take-up of broadband means more opportunity for illegal downloading. We are surprised that a sophisticated nation like Canada takes so little care over its intellectual property.”

Actually, intelectual property probably needs less protection that non-intellectual property. Suppose I come up with a really nifty idea. So long as I keep the idea to myself, nobody can steal the idea. My car on the other hand is at risk every time I park it somewhere…even my own garage. The problem comes when people want to cash in on their nifty idea and want to enjoy the temporary (sorta) monoploy statust that many countries convey upon intellectual property. However, recently many corporations that own intellectual property, namely copyrights have had huge winfalls due to the Sonny Bono Bill which extended the time that owners of intellectual property can enjoy their monopoly position. This does little produce more more new copy righted material and in fact, could reduce such production.

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Steve Verdon
About Steve Verdon
Steve has a B.A. in Economics from the University of California, Los Angeles and attended graduate school at The George Washington University, leaving school shortly before staring work on his dissertation when his first child was born. He works in the energy industry and prior to that worked at the Bureau of Labor Statistics in the Division of Price Index and Number Research. He joined the staff at OTB in November 2004.


  1. There are also some interesting grey markets. For example, there is an internet company operating out of an island nation in the Caribbean (can’t remember which one). They offer to download a program to rip DVD’s of copy protection so you can copy them. The program (which is not likely to have a significant non-infringing use in the US courts) is legal in that jurisdiction. Downloading it in the US would probably not stand up to a legal challenge, but you are now prosecuting at the retail level (vs Kazaa going after the central source). Result is that DVD technical copy protection is basically worthless to anyone willing to shell out $40. Updates to the program included.

    The question I have is where did Kazaa get the $100M. I didn’t think they were nearly that successful.