Executive Summary This case analysis revolves around the ethics of downloading music from the internet.

The case began with Andy Decker who was problematic about what gift to give his sister. After a short and quick brainstorming, he ended up planning to buy a compilation of songs his sister likes. His dilemma began when he had to choose between purchasing an original CD from a music store or to simply get free copies from the internet. He came across a message on the internet while he was in pursuit for the perfect gift for his sister. The message said, Distributing or downloading copyrighted music on the Internet without permission from the copyright owner is ILLEGAL. This study focuses on the RIAA or also known as the Recording Industry Association of America. RIAA is a trade association which represented common interests with different U.S recording companies. This study also discusses when the problem of the RIAA started and the different internal and external factors that affected its operations. It elaborates the significant incidents that followed the growth of the problem and how the company dealt with the seemingly insurmountable challenges that came before them. In addition, this analysis also contains scanning of the companys environment which includes the internal and external environment that could affect the business operation of the company. Moreover, this study also explains the people responsible for solving the problems, the companys objectives and possible alternative courses of actions. This analysis also covers the groups recommendations to solve the challenges faced by the company.

Case Background RIAA (Recording Industry Association of America) is a trade organization that embodies the interests of the different U.S. recording companies. Its members include EMI Group Bertelsmanns BMG unit, Sony Music Entertainment, AOL Time Warners Warner Music Group, and Vivendis Universal Music Group. The sudden technological advancement led to the growth of interest in the free reproduction and distribution of music. The invention of CD manufacturing made a better and improved sound in recordings, made an easy to use and durable format. Moreover, computers became the source of multimedia creations including CD burning software and stereo sound systems.

The emergence of the internet as part of the technological advancement gave birth to modern applications which included P2P File Sharing software. 2002, CD sales plummeted by 11% according to Nielsen Soundscan and on the same time, the consumer electronics association believed that the sales of blank CDs would rise by more than 40%. 2003, the downloading of music from the internet became a prominent leisure activity. This was commonly done by students in their dorm rooms and even made copies and shared downloaded files with one another. A survey by the Pew Internet and American Life Project showed that 60% of college students uses had downloaded music files compared to 28% of the overall populations

Case Proper I. Time Context On May 1999, a P2P file-sharing service named Napster allowed users to exchange music for free and on December of the same year, Napster was accused of copyright infringement and encouraging of illegal copying and distribution of music. The Recording Industry Association of America (RIAA) filed a lawsuit against the said P2P file-sharing service. Since the growth of P2P file-sharing services, recording companies suffered a massive decline in worldwide CD sales. At the end of 2001, CD sales dropped by 5% and at the end of 2002, there was an 11% decline in sales of CDs. In 2003, a number of P2P file-sharing services announced upgrades to their software that would make it more difficult to uncover the identities of its users. II. Viewpoint According to the RIAA, there were an increasing and significant number of students using the networks of the university to participate in online piracy of copyrighted materials. Because of that, the College administrators, including the General Counsel/Chief Legal Officer, Director of Information Technology, and the Chief Financial Officer were asked substantial support by the RIAA to help bring the piracy under control. The RIAA, being the embodiment of different recording companies is also responsible in the continuous effort of putting a profound value in the meaning of ethical music downloading.

III.

Statement Of The Objectives Must Objective -To bring piracy under control -To educate online downloaders about how they could violate the Federal copyright law by simply uploading and downloading copyrighted works -To increase the sales of recording companies Want Objective - To specify what practices are and are not acceptable on the schools network - To impose effective remedies against violators -To improve security in university networks by monitoring student compliance

IV. o Cause o Effect

Statement of The Problem (CAUSE & EFFECT)

Music Piracy

According to RIAA (Recording Industry Association of America), Users who upload and download infringing copyrighted works without permission of the owners are violating Federal copyrighted law.

Common Examples of Online Copyright Infringement:

You make an MP3 copy of a song because the CD you bought expressly permits you to do so. But then you put your MP3 copy on the Internet, using a file-sharing network, so that millions of other people can download it. Even if you dont illegally offer recordings to others, you join a file-sharing network and download unauthorized copies of all the copyrighted music you want for free from the computers of other network members. In order to gain access to copyrighted music on the computers of other network members, you pay a fee to join a file-sharing network that isnt authorized to distribute or make copies of copyrighted music. Then you download unauthorized copies of all the music you want. You transfer copyrighted music using an instant messaging service. You have a computer with a CD burner, which you use to burn copies of music you have downloaded onto writable CDs for all of your friends. Somebody you dont even know e-mails you a copy of a copyrighted song and then you turn around and e-mail copies to all of your friends.

o Cause Consumers do not buy original CDs and they download music from the internet instead. o Effect Recording companies experienced declining of sales.

o Cause o Effect There are instances that files to be shared were susceptible to worms and viruses. Many users are not aware that their personal documents may be available for many of computer users to download Music piracy was not viewed as an ethical issue and because of this perception; a lot of people continue to patronize downloading of music for free without the authorization of the artists or composers who wrote the song. According to the national survey conducted by Edison Media Research, 74% of teenagers (12-17 years old) did not see anything wrong with downloading music for free. The RIAA is exerting too much effort on combating piracy instead of finding ways to change their business models and profit from digital music. Moreover, efforts being provided by different recording companies were not enough in order to catch the pace of digital music. Security and Privacy Risk from P2P (Peer to Peer) file sharing

V.

Environmental Scanning A. Internal Environment

Area Marketing Product

Strengths Price

Weaknesses

Legal products(music) there are still existing P2P file sharing services nowadays that the RIAA

Expensive cost of CDs and online copies -The costs of newly

pursues to abolish because of their illegal distribution, copying or recording of files. However, there are a number of legitimate subscription services such as ITunes and Emusic that sell music legally. Flexible payment options because of the advancement of technology, online stores was able to develop ways in providing different payment options for their customers in order to pave way for easy and convenient transactions.

released albums are very expensive whether

customers buy from music stores or online.

Place: Options to buy online or from stores P2P-file sharing networks are only available online but businesses offering legal music can be found in physical stores and online stores. Promotions Strong product advertisements - Music that customers are looking for are marketed or advertised in many different ways such as television, radio, newsprints, magazines, posters and

online advertisements. -In the fight for the abolishment of illegal copying, recording, or distributing of copyrighted music or files, recording companies have the support of artists or celebrities who also support the same advocacy. In fact, prominent

songwriters, singers, and musicians got together and formed a group called Music United for Strong Internet

Copyright or MUSIC. This is to ask their

fans not to download copyrighted music.

B. Area Degree Competition

External Environment (Industry Environment) Opportunities Threats Limited support from the

of Legality of transactions as their advantage -

The legality of their transactions can be public to fight music piracy used as their advantage to keep people from illegally downloading files. A national by survey Edison found of

conducted Media that

According to a research made by a Princeton University student for her thesis in Economics, she found out that 46 percent of students who took the survey said that they would be willing to pay for a legal online music service while only 27 percent said they would not. Advocacy to stop music piracy Other than partnering with prominent songwriters, singers, and musicians, the RIAA has also sent letters to University Presidents to build a bridge between the understanding of ethical principles of

Research 74

percent

teenagers (12 17 years old) did not see anything wrong with downloading music for free. High-costs of legal and clean file copies People view as recording greedy

companies

charging $20 per CD when the costs of

duplication were minimal.

downloading of music and the students.

Clean files Almost all of the legal online music services dont have viruses, adware or spyware hidden behind the files they provide for their customers as compared to P2P-file sharing networks that have less socially redeeming features. According to an Ipsos-Reid survey, 19 percent of Americans 12 years and older said that they had downloaded an audio file from a file-sharing network; more than half of people between 12 and 17 years old said they had done so. Because of this, its possible that young people were being exposed to age-inappropriate materials.

P2P-File excuse -

sharing

networks

Kazaa,

Morpheus,

and

Grokster did not distribute music; they merely

provided the software that enabled the exchange of files among members. A federal court judge ruled that the users, and not the networks software, offering the were

responsible for copyright infringement. As a result of a federal judges decision,

networks were able to stay in business and were able to attract additional investors and advertisers now that the viability of

their businesses models was more certain. Continuous growth of P2PFile sharing <> The continuous growth of P2PFile sharing networks provide alternatives for people who are looking for an easy and free access to music or any other kind of files.

networks

c. Area

General Environment Opportunities Threats A federal court judge

POLITICOLEGAL

As stated by the courts of law, anyone who digitally transfers files

of ruled that the P2P File-sharing

copyright-protected songs and keep services were not responsible for them on the hard drives of their copyright infringement, its the computers or laptops were breaking the users. Since then, these kinds of law. services continued to flourish and

When the RIAA found out about the in fact, were able to persuade entire business operation of Napster, it more investors and advertisers to filed a lawsuit against Napster on invest on their services. December 1999. Napster was accused of illegal distribution and copying of

music. According to the Ninth U.S Circuit Court of Appeals, Napster was fully well-aware of their users illegally traded music. A group of P2P File-sharing services receive their own lawsuits coming from a group of recording and movie picture companies for financially benefiting from the infringing of copyright works. A restraining order was issued to Madster, was also known as Aimster. Another P2P File-sharing service

established by Johnny Deep. Due to the restraining order, its operations were forcefully shutdown on December 2002. A federal appeals court in Chicago upheld an injunction that forced Aimster to shut down.(July 2003) To further combat music piracy, the RIAA settled more than 900 subpoenas with university administrators and

Internet service providers asking for the

names and addresses of people sharing music files. The RIAA stated that they would file lawsuits against these

individuals by the end of August. School administrators value their

students right to privacy but they also felt obliges to follow the Digital Millenium Copyright Act (DMCA)

ECONOMIC

Recording

Companies

experienced an 11% decline in worldwide sales 1.7 of CDs, billion

Approximately

blanks CDs were sold in 2002, up to 40% from 2001.(end of 2002) SOCIO CULTURAL Despite the culture of people when Most people did not see

it comes to their perception of music music piracy as an ethical issue. piracy, there are students who are According to a national survey willing enough to pay for legal music. held by Edison Media Research, Based on the study conducted by a 74% of teenagers from 12 to 17 Princeton University student, 46% of years believed that theres

the students who participated in the nothing

wrong

with

survey said that theyre will to buy a downloading music for free. legal copy of online music and only Most students couldnt accept 27% said that they would not. the analogy that downloading

There were less socially redeeming music can be viewed similar to

features being catered by P2P File- stealing a CD from a store. sharing services. An Ipsos-Reid survey clearly showed the negative impact of files being exchanged online and the advertising strategies used by the P2P File-sharing services on their primary users, teenagers. According to the survey by Ipsos-Reid, 19% of

Americans 12 years and older confessed that they had downloaded an audio file from a P2P File-sharing network and more than half of people between 12 and 17 years old also said that they had done so. Based on this study, there was a good possibility that the youth was being exposed to inappropriate

materials. Downloading files from a file-sharing network could expose

teenagers to pornographic images and advertisements luring them to visit an online gambling site.

TECHNOLOGICAL

Administrators

of

the

different

Screening software that hinders pornography

colleges and universities found the habitual downloading of movies, games, and songs would overload the computer network of the campus making it difficult for the professors to make use of the internet for teaching and researching purposes. -

materials from regular websites did not work on programs. The flourishing of the internet opened a door of opportunities for new applications to be made that includes P2P Filesharing services. Technological advances made the downloading of music a from the file-sharing

internet

prominent

leisure-time activity in 2003. Because of the

subsequent technological advancements, a

tremendous amount of interest in the free and of music

reproduction distribution grew. -

Some university students would set up search engines on their campus computer networks in order to keep files such as photographs, term papers and MP3 music files. Since these files are located in the campuss network, all of the students who study within the vicinity of the school can have access to any files available on the network.

VI.

SWOT Analysis STRENGTHS 1. Legal products 2. Flexible payment option 3. Options to buy online or from stores 4. Strong product advertisements WEAKNESSES 1. Expensive cost of CDs and online copies 2. Public perceptions of the RIAA

SWOT MATRIX

OPPORTUNITIES

S1, O1, O2: Educate the

W1, O1, O3: Offer lower costs of CDs and clean online copies.

1. Preference of the majority people about the illegal 2. Advocacy to stop music piracy 3. Clean files THREATS 1. Limited support from the public to fight music piracy 2. P2P-file sharing networks excuse 3. The continuous growth of P2P-File sharing networks provide alternatives for people T1, T3, S4: Strengthen advocacy about music piracy. Educate consumers about the possible viruses and malicious materials that could be harmful to people between 12 and 17 years old. transactions of P2P file sharing services.

T1, W2: Fix their accounting errors which will help them gain public support in order to regulate music piracy.

who are looking for an easy and free access to music or any other kind of files

VII.

Alternative Course of Action - Solution of the Problem

Those who participate in the sharing and distribution of music without the permission of the original artist or composer are violating the Federal copyright law. Education about Music Piracy ACA 1: To strongly educate the people, especially the students of different colleges and universities regarding Music piracy and how they are violating the Federal copyright law by simply uploading and downloading infringing copyrighted works without permission. ADVANTAGES This course of action will teach the people about the fundamental part of educating them about ethics, personal responsibility, and respect for the rule of law. Moreover, this will also make them understand that if they pirate DISADVANTAGES It takes a lot of time and effort for education about music piracy to completely spread. Theres no assurance that people will abide to the advocacy the company is trying to send across.

copyrighted works, they are subject to

legal liability. Education about music piracy could lead to a possible decline in the percentage of people illegally sharing and distributing music.

ACA 2: To change their business models that will help them earn profit from digital music. ADVANTAGES This course of action will allow them to compete against other P2P file-sharing services by providing a myriad of legal digital music. This will give options to the consumers that will result to them convenience. DISADVANTAGES Changing business models and keeping pace with the advancement of technology will require them a huge amount of investment

Recommendation They should modify their promotion and change it that will help them gain more customers. For example, they could offer a bundled music with a lower price. Offer lower prices that will not compromise their profit. Ensure the accuracy and correctness of their accounting papers in order to gain the trust of recording artist and the public. Detailed Plan of Action Activity People Involved Time Scheme -Education of people especially students - School administrators (General Counsel, Director of Information Technology, Dean of Student Affairs) Q1 Q2 -To see students encouraged to stop downloading music without permission from the original author or composer. -Hilary Rosen (Chairman and CEO of Recording Industry Association of America), Edward P. Murphy (President and CEO of National Music Publishers Association), -To see colleges and universities apply stricter rules when it comes to the students access to the internet and High Desired Results Priority

and Rick Carnes (President of the Songwriters Guild of America)

impose appropriate warnings and penalties to those who violate the rule.

-To see more people informed about what music piracy is and what penalties can be given upon them when its violated.

-Letters sent to different colleges and universities.

- Modification of business model

CEO and the board

Entire year

-Additional option for customers to buy music.

High

-Additional department that will handle digital music