Category: Web/Tech

Is music file-swapping down?

Maybe not, according to Business Week, from the issue of 16 January. Some sources will tell you the practice is plummeting:

Two widely cited surveys seemed to show that legal action, which began in September, was chilling file-sharing activity. In December, a phone survey by the Pew Internet Project of 1,358 U.S. Net users found music downloading had dropped by half since May. And in November, comScore Media Metrix, monitoring 120,000 U.S. users, saw big yearly declines at four popular file-sharing services — KaZaA, Grokster, BearShare, and WinMX.

But the reality is more complex:

…those surveys provide a relatively narrow view of the file-swapping universe. BayTSP, a Silicon Valley watchdog that works for three of the major record labels, tracks the number of songs available for download worldwide. It sees just a 10% drop since July and also notes steady migration from older, virus-ridden programs like KaZaA to hipper peer-to-peer networks such as eDonkey and Bit Torrent — which were absent from comScore’s tally.

And Los Angeles-based researcher BigChampagne, which monitors millions of global file swappers, actually sees a 35% increase in illegal traffic from 2002 to 2003. Given BayTSP’s and BigChampagne’s broader sample sizes, says John Palfrey, of Harvard Law School’s Berkman Center for Internet & Society, “They’re going to have more accurate empirical data.”

Note that the Pew study simply calls adults and asks them if they break the law. It underrepresents children and of course the respondent might think he is talking to the RIAA instead of a researcher. And much of the current growth in file-sharing is coming at the international level, not in the United States.

My predictions: Within two years Congress will revisit the 1998 Digital Act and give the music companies some extra legal weapons. It still won’t work, as downloaders will move to anonymous networks, possibly emanating from outside the United States.

Women now outspend men on electronic gadgets

Yes it is true:

Women actually spent more on technology last year than men, according to the Consumer Electronics Association. It says women accounted for $55 billion of the $96 billion spent on electronics gear.


* Women are involved in 89 percent of all consumer electronics purchase decisions.

* Eighty-four (84) percent of women believe that new technologies can help improve their lives.

* Forty-eight (48) percent of women age 18-34 own a digital camera.

On the downside, nearly three-quarters complain that sales personnel ignore, patronize, or offend them while shopping.

Read the full post of Robert Tagorda to learn how retailers and manufacturers are making greater efforts to appeal to this customer segment.

Get a (Virtual) Life!!

The NY Times has a nice article on the Sims online game, where for a monthly fee you can join a virtual society and create an alter ego. Since your online personna can accumulate possessions that only exist in the game, people sell these virtual possessions for real dollars on ebay, especially the rare Sims pet – the cheetah! If you accumulate enough virtual dollars, you can sell these for real cash.

Trouble’s brewing, though. The owners of Sims online have expelled Peter Ludlow from their game, presumably because he was a virtual muckracker. In the Alphaville Herald, he’d report on criminal rings and teenage prostitution. The problem is that these are all constructs in a computer, not real world events. Of course, free speech issues come into play because Sims online has become a sort of quasi-public space, like the shopping mall. But there are important differences – you have to pay to get in and you sign away certain rights. It will be interesting to see if any regulation is ever applied to virtual online communities aside from the laws applying to any legitimate business.

Alex on blogging, writing, and teaching

The Washington Times interviews co-blogger Alex about what makes for a good blog, and how blogging can get students to write better. The article opens with Kevin Brancato, a George Mason University graduate student and the driving force behind As the article points out, blogs are just starting to be used in teaching. Someday I will teach a course where each student is responsible for writing a daily blog. I will evaluate the students by grading the blogs, no other test, paper, or quiz. Usually when I make that sort of claim it means someday soon!

Cool stuff

I am wowed by my flash-memory MP3 player, the IRiver 190T. It has enough memory (256 MB) to store 5 or 6 albums at CD quality and more at slightly lower quality. There are no moving parts so it doesn’t jog or skip and one AA battery (included!) will run it for 20 hours or so. It weighs just slightly more than the battery and will fit on a key chain. It has a surprisingly good FM radio and can also record FM radio or voice. Finally, you can set it up like a small hard drive so it can store any file, not just music – handy for carrying around backup power-point files (USB cable needed but included). The only thing I dislike is the ear buds – I hate ear buds, they just fall out of my ears! I recommend instead the Sony MDR-CD180s headphones which are a great value at less than $20 (Consumer Reports rates them higher than headphones costing 3 or 4 times as much) – you can buy better headphones but these are cheap enough to lose on an airplane – an important factor in my book. Here is a picture of the 190T (actual size is a little larger at 80 x 32 x 25 mm).


A Reader’s Dilemma

A reader, who wishes to remain anonymous and whom I shall refer to only as Jedi Knight, writes with a difficult problem:

I love your Marginal Revolution blog enough to read it every day. In fact, I check back several times a day and I’m disappointed when I find no new entries.

However, I have told no one about it. Your blog makes me appear smart and full of interesting takes on the topics of the day. If I shared with people where I get my information, people would not be anywhere near as impressed with me.

So, I have a dilemma. I should hope that your blog stays popular enough to encourage you to keep up your publishing efforts, but I don’t want to be the one who spreads the word. I can only imagine that there are many others out there like me…

Dear Jedi Knight,

First, you imagine correctly. Many readers have come to us with exactly this dilemma. How can one keep a public good private? We at MR have puzzled over this and have several suggestions. Instead of telling your friends about MR try telling strangers. Sidle up to someone on the street and whisper “Pssst, want some good econ blog? Marginal Revolution is phat.” We have found that this works well. Also, as Cowen and Tabarrok (2000) discuss, there are two strategies in the arts. Sell to a lot of people at a low price or sell to a few cognoscenti at a high price. You, Jedi Knight, are among the cognoscenti! Send cash. Or at least shop at Amazon with the MR link /marginalrevol-20.

Is file-sharing dead?

The recent RIAA lawsuits have severely blunted the practice of file-sharing. The music industry has gone after the on-line users who share copyright-protected songs. The movie industry may someday follow suit. Although the number of people prosecuted has been small, the negative publicity has caused many people to shy away from Kazaa, Grokster, and other services.

I don’t know of any good estimates of how much file-sharing has gone down in recent times. All parties to the disputes have incentives to fudge the numbers. But based on conversations and anecdotal observations, combined with written sources, I find it plausible that file-sharing has declined by at least a third.

The days of file-sharing, however, are far from over. First, a judge just ruled that the RIAA cannot petition Verizon for the names of potential file-sharers. reported as follows:

…in a strongly worded ruling, the appeals court sided with Verizon, saying a 1998 copyright law does not give copyright holders the ability to subpoena customer names from Internet providers without filing a formal lawsuit.

This ruling should come as no surprise. After all, why should the RIAA have a special right to petition Verizon for the names of potential copyright infringers? I hold some copyrights too. I and many others could petition Verizon for the information concerning various account holders. Without any legal standard of proof privacy is meaningless. More significantly, Verizon would end up swamped under the requests. Imagine various hackers and cyberpunks flooding Verizon with identity requests just to make the reporting system unworkable.

Even if this ruling is reversed, or John Doe suits prove effective in generating the names, file-sharing is likely to return in force. Anonymous networks are becoming more popular rapidly. Read the analysis of Clay Shirky. Right now users are not sure whether these networks are useful or trustworthy. But that information will spread rapidly. Within a year, we will know whether the Palestinian file-sharing network is indeed reliable. If that source of files turns out to be crooked, something else will arise to take its place.

Consider the whole problem in terms of consumer option value. File-sharers have not given up on the idea. They are waiting to see when and how they can start sharing files again. When the proper time comes, they will return in full force.

Addendum: Here is a Washington Post article on the decision. Hit and Run links to the full decision.

Will the FCC regulate Internet phone calls?

Hearings start today, here is the full story. A month ago a Federal court ruled that state governments may not regulate such calls. And the FCC traditionally has left the Internet alone. Nonetheless long-distance service over the Internet costs only a fraction of most calling plans, which threatens both telecommunications companies and government revenues from long-distance calls.

The problem has arisen, in part, because of previous regulatory decisions, most specifically access fees:

Long-distance companies now pay local companies $25 billion a year in “access charges.” The fees cover the cost of connecting long-distance customers to the local network. The long-distance companies argue they should not have to pay access charges for calls that travel over the Internet.

In other words, Internet calling is cheaper in part because the calling services do not have to pay access fees to the long distance network. Over time we can expect such accees fees to fall apart, they will prove to be neither a political nor an economic equilibrium. Here is what one industry spokesman predicts:

Nortel Networks, the Canadian telecommunications equipment maker, estimates that local telephone companies could cut their costs of running a network by 30 percent by shifting to a Internet-based network. Nortel also contends that carriers can cut their capital investment costs by 50 percent. “The market is absolutely moving in the direction of the convergence of these networks,” said Martha Bejar, president of carrier solutions at Nortel.

The bottom line: Competition will become more intense, calling will continue to become cheaper, but the long-run problem of paying for the telecommunications network will become more severe.