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RIAA's Subpoena Strategy is Chilling Downloads: NPD

The possibility of a copyright infringement suit from the Recording Industry Association of America is apparently having a chilling effect on individuals who swap online music, according to new research from The NPD Group.

The market research firm said households acquiring music files online illegally reached a high of 14.5 million in April of 2003, but that the number dropped off to 12.7 million households in May, followed by another drop to 10.4 million households in June.

The drop appears to coincide with the RIAA's legal campaign to not only clamp down on music file trading by targeting ISPs, colleges and corporate networks, but to also target individual file-swappers with lawsuits.

"Today, file sharing is the most popular method of digital music acquisition," said Russ Crupnick, vice president of The NPD Group. "While we can't say categorically that the RIAA's legal efforts are the sole cause for the reduction in file acquisition, it appears to be more than just a natural seasonal decline."

Crupnick told internetnews.com that the research firm, which has been tracking the online music market for two years, found the decrease in the past few months is sharper than the declines it has tracked in the offline retail world.

"When we see the drop like we saw [recently] in file acquisition from the digital world, it sends up a red flag that is not explained by normal seasonality, such as people going to summer camp, or fewer [music] releases," he said. "In addition, because the initial drop followed well-publicized legal efforts, there's evidence to show that the RIAA's tactics may be having their desired impact on reducing file sharing among consumers."

In April, a federal court ruled that ISPs such as Verizon have to release to the RIAA names of subscribers who are suspected of trading files. Verizon is appealing the ruling, while other ISPs such as SBC are waging a legal battle to stop the RIAA from enforcing a similar subpoena.

Just this week, U.S. Sen. Norm Coleman (R-Minn.) released information he requested from the RIAA that showed it has issued more than 1,000 subpoenas to individuals as part of its legal fight against illegal file-swapping.

Coleman's request to the RIAA expressed concern over whether the association might be abusing the broad-based subpoena authority under the Digital Millennium Copyright Act (DMCA) to unfairly target consumers who are "innocent or unknowingly guilty of violating copyright infringement laws."

As federal lawmakers move to look into cases involving ISPs being forced to turn over the names and addresses of their customers to the RIAA, and with the RIAA no less determined to stop illegal copying of copyrighted material, NPD officials say their data show the uncertain atmosphere over liability has chilled the thrill for some file-swappers.

"In fact, we know that it's really only about 5 or 6 percent of all the file traders who download and swap about half of all the files online," added Crupnick. "But as an individual, you don't know whether 20 downloaded files or 2,500 is a lot because you don't have that baseline."

Anecdotal evidence is also starting to pile up about parents of teenagers snooping over their children's shoulders as they use their computers -- and either cleaning out music files or shutting down their ability to swap, Crupnick noted.

Using an online panel of 40,000 consumers to help compile the data, NPD's MusicWatch Digital division also found that total music files acquired per month also dropped from a high of 852 million files in April to 655 million files in June. Conversely, among those consumers who continue to download files, the average number of music files acquired actually increased from 59 in April to 63 in June.

Crupnick said NPD's data suggests that the RIAA's legal tactics have had more of an effect on the attitudes and actions of lighter downloaders.

"A near-term decline in file acquisition should hearten music industry executives, because the bulk of this activity can be ascribed to illegal P2P sites," he said. "However, it will be interesting to see in the future if these numbers turn upward again, as new paid online music services begin to break through."