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31 Digital Music Execs Sound Off On How P2P Battle Led To Music Industry Demise

File-sharing-networksA fascinating new report from Associate Professor Michael A. Carrier at Rutgers University School of Law, entitled “Copyright and Innovation: The Untold Story”, interviews 31 CEOs, company founders and VPs who have worked in digital music over the past 10 years. It illustrates the digital music landscape in the aftermath Napster’s shutdown, demonstrating how the battle between P2P and the music industry has stunted innovation, discouraged investment in the music technology sector, and ultimately led to a complicated copyright law-dominated environment that has widened the gap between technologists and music.

Among those interviewed include Hank Bank (former Napster CEO), Dalton Caldwell (Imeem founder), Kasian Franks (Seeqpod founder), Rob Glaser (Real Networks founder), David Hyman (former Gracenote CEO), Michael Merhej (AudioGalaxy founder), and Michael Robertson (founder of MP3Tunes), Hilary Rosen (former RIAA CEO) among others, as well as several other venture capitalists and label executives.

Carrier illustrates in the 63-page report, which was first spotted on TorrentFreak, that once Napster had lost the battle and was forced to shut down, venture capital funding for digital music “became a wasteland.” Some interviewees called the scene a “scorched earth kind of place” that housed a “graveyard of music companies,” as some go on to say in the report. Major labels began suing rampantly, so naturally, funding was hard to come by.

Some continued onward despite the lawsuits floating around, but those innovators seeking to get label approval found themselves in situations that were a bit tricky. Labels wouldn’t license if a startup didn’t have much traffic, but as soon as they would have solid numbers behind them, “they want to get paid for ‘infringement’ and the longer it takes to license you, the larger the ‘infringement’ number they can justify charging you,” as one interviewee mentions.

Interviewees also go on to mention how litigation could be described as a “Ponzi scheme”, as the money from settlements and other fees pulled from startups were used to fund the labels’ ongoing litigation strategy. The report notes more corruption from labels, as they would take “big, up-front fees” of “10, 20 million bucks” from startups they knew would fail.

Greed continued to plague the labels, even as those services that went to great lengths to avoid copyright issues and had millions of users with interest from high-level VCs were ordered to be shut down by the labels, rather than accepting “literally an offer of a blank check,” as one interviewee says.

The report goes on to describe the “very scary” scenarios labels presented with “multiple inch lawsuit for a couple billion bucks”. Things even became personal, as threats were extended to the families of innovators. One was even told it was “too bad” he had children “who are going to want to go to college and you’re not going to be able to pay for it.” Some threats even apparently became violent, with one interviewee speaking about “people being physically intimidated” and “being hung out of windows.”

For a download of Carrier’s full 63-page report, click here

Hisham Dahud is a Senior Analyst for Additionally, he is the head of Business Development for Fame House, LLC and an independent musician. Follow him on Twitter: @HishamDahud