RIAA’s Perfect Record

To date, only two P2P lawsuits have made it through the trial system. So far the Recording Industry Association of America is batting a thousand.

Earlier this summer, a federal jury ordered Minnesota resident Jammie Thomas-Rasset to pay $1.92 million in damages to the labels for willfully violating copyrights by distributing songs via peer-to-peer file sharing networks.

The second case reached a verdict on July 31 when a federal jury ordered Boston University grad student Joel Tenenbaum, of Providence, R.I., to pay the major labels $675,000 for infringing upon the copyrights of 30 songs, which works out to $22,500 per song.

The lawsuit was one of the last filed accusing individual P2P users of infringing on music recording copyrights. The RIAA announced late last year it was discontinuing its litigation efforts against P2P users so it could concentrate on working with Internet service providers to deter music piracy.

For court watchers, the Tenenbaum trial promised to be a must-see, with Harvard Law School professor Charles Nesson heading up the defense. Nesson had been critical of the RIAA’s lawsuit policy against individual P2P users, leading many to expect a little courtroom drama featuring record label representatives squirming under the laser-like focus of Nesson’s cross-examination questions.

Instead, Nesson spent the first day of the trial trying to rearrange the courtroom furniture, claiming the traditional layout where defense and plaintiff tables face the judge was not a good “rhetorical space.” What’s more, when he wasn’t arguing in favor of moving the furniture, he was questioning jurors about their attitudes toward marijuana.

Although U.S. District Court Judge Nancy Gertner ordered him to flush the pot questions, she did compromise on the furniture and allowed him to move the defense table so it faced the jury box.

Then the trial got under way with Tenenbaum admitting to downloading and sharing songs since 1999 when he discovered Shawn Fanning’s Napster. When Tenenbaum took the stand he was unapologetic and freely admitted to downloading and swapping hundreds of songs from 1999 to 2007, according to the Boston Globe.

Furthermore, Tenenbaum also admitted to lying in sworn statements in which he falsely blamed others, including members of his family, as having had access to his computer. So he was hardly the image of the innocent music fan falsely accused of music piracy.

So, what was the point? He admitted to downloading and sharing songs, and he admitted to lying in sworn statements. Why did he even bother with a trial? Why didn’t he just settle with the labels?

Apparently he did try to settle. At least, that’s what Tenenbaum claims. Although the judge ordered each side to refrain from describing pre-trial settlement negotiations while in court, Tenenbaum did testify he wanted to settle, saying he offered the labels $3,000 but the record companies wanted $4,000 instead.

Which, when you think of it, hardly sounds like a legitimate settlement negotiation. In other P2P infringement cases, the labels have named the settlement figure, not the accused.

What’s more, RIAA spokeswoman Cara Duckworth said Tenenbaum didn’t tell the complete story at one point during the described settlement negotiations tried to demand the labels pay him, according to the Globe.

At one time Nesson was planning on mounting a defense where he would claim Tenenbaum’s file-sharing ways were protected by fair use. However, the judge would not allow it and barred Nesson from pursuing that line of defense.

All trials eventually come to that moment when the defense attorney looks into jurors’ eyes and tells them his client is innocent. In Nesson’s closing argument, the law professor asked jurors to award the least amount of damages possible under the law, which would have worked out to $22,500, or $750 per song.

Instead, Tenenbaum is now looking at a $675,000 judgment against him, an amount so high he says he’ll file for bankruptcy if the decision stands. Nesson says his client will appeal the decision.

Spotify Expanding?

A U.K.-based online music service is expected to expand into the U.S. once it closes investment deals reportedly totaling $50 million.

The company is Spotify, which streams music from peer-to-peer network participants, and signed up 2 million users in 2006 during its first year of operation in the U.K. and Sweden. In addition to streaming, Spotify also sells music downloads.

The Financial Times reports Spotify is on the verge of closing deals with several investors, including Hong Kong tycoon Li Ka-shing’s charitable foundation.

Spotify comes in two flavors – free and subscription. The former is advertising-supported while the latter charges a monthly fee for ad-free music streaming.

From a U.S. point of view, Spotify could be the next big thing when it comes to free music, especially if it can place an app on Apple’s iTunes App store. Gaining access to Apple’s iPhone / iPod Touch user base could mean millions of new users for the company.

Why is Spotify expected to succeed in the U.S. while other free-music services, most notably SpiralFrog, which folded in March, have failed? One word – inventory. According to the Telegraph, Spotify currently boasts of giving users access to more than 6 million tracks from all major record labels, and is adding approximately 10,000 new songs every day.

While Spotify will have to obtain licensing agreements from record labels if it wants to operate in the U.S., the fact the music streams from P2P users instead of centralized servers means an almost unlimited number of songs in the inventory. No matter how obscure your tastes, chances are someone on Spotify has the song, band or CD you’re looking for. Let’s see iTunes top that.

Plus, if Spotify closes on $50 million in investment funding, paying big bucks to the major labels in return for licensing won’t financially hamper it. Published reports indicate services such as SpiralFrog had to pay as much as $1 million to each label for licensing, and that was before they actually opened for business.

One factor holding Spotify back from conquering the world is portability, or, in Spotify’s case, the lack thereof. Users can listen to Spotify only on their computers, which is why an iPhone / iPod Touch app is important to the company’s growth.

But such an app may not be for all users. The Telegraph also reports the app currently awaiting Apple approval would be for Spotify users opting for the subscription service, thus leaving those seeking a free ride chained to their computers.

Spotify is yet another example of how music fans are moving away from owning music and embracing a more “on-demand” model of music appreciation. For them, it’s more important to be able to hear a song or CD whenever the mood strikes than it is to have that CD sitting on a shelf.

Of course, having your favorite tracks sitting on your personal player is more an example of possession than “cloud computing.” Spotify just might be able to combine the two concepts into one winning platform. That is, until the next big thing comes down the pipeline.