We have been warning, and warning, and warning the record labels for years (as I have tried to document here in Chronicle of a Solution) that the cloud was coming and that they have a counterfeit problem that is going to get exponentially worse when the cloud arrives. They talk to us ... but then they don't listen .. or they don't do anything. Now, finally, their bus is parked in the proverbial blind alley and it will be even harder for them to steer out.
Here is the response I sent to Peter:
I cannot speak for the labels, but as an entertainment lawyer that has represented platinum-selling artists, I’ll take the bait.
Is Amazon any less aware than Limewire was (or indeed Napster was) that illegal downloads are going to be served to users by their servers? If not, then the same legal precedent is there that got Napster and Limewire shut down: contributory infringement. They take your illegal music and provide the player, they provide “management” (TOS), they provide Gracenote … and most of all they provide cloud-based access and mobile access, the best thing that’s ever been invented for music. That is way more than Limewire ever did. Limewire was “capable of non-infringing uses” as well.
There are an estimated multi-billions of illegal songs still out there from activity of the last 15 years. Amazon has to know that 1/2 the stuff that is uploaded to its cloud is illegally downloaded, ripped from a CD the owner no longer owns (e.g sold back or returned to the library) stream-ripped, etc. It is one thing for illegal downloads to be stuck on hard-drives and not widely available for mobile except on iTunes clunky side-loading system. But when you unveil the state of the art mobile app and don't bother to distinguish between legal and illegal it is very bad. If McDonalds announced tomorrow that it would accept counterfeit bills at all 10,000 of their stores in the US, what would that do to the value of US currency?
If you look on Amazon for physical items, you will see that most music is under a dollar and the biggest payday on selling a CD is the $2.98 “shipping and handling”. So Amazon, via the phenomenon of rip and ship specializes in driving down the price of music. Taking a billion or more illegal downloads, or rip and ship downloads, or stream-ripped downloads and giving people state-of-the art access to them … is guaranteed to drive the price of music down to zero. Why buy a download? Why buy Spotify or anything else?
Amazon, in the end, doesn’t care about the price of content. As pointed out in a chart in the WSJ on Tuesday, they are hawking business services now more than ever. This Cloud Player is a way of bringing more people under their sphere of influence in order to hawk other stuff. Thus, it is a naked power grab at the expense of artists and content owners in general.
The entire industry (record industry, cloud providers, publishers, apps, subscription services, etc.) needs to send this message loud and clear to users:
"If you downloaded illegal music from 1996-2011, good on ya’. But that doesn't mean you have the constitutional right to have that song be forward compatible w/ every new service that comes down the pipe."