On September 8, the Recording Industry Association of America (RIAA) filed lawsuits against 261 Internet users who allegedly distributed music over peer-to-peer (P2P) file-sharing networks. On Monday, the RIAA -- the trade group representing BMG, EMI, Sony (NYSE: SNE ) , Vivendi's (NYSE: V ) Universal Music, and Time Warner's (NYSE: AOL ) Warner Bros. -- announced settlements with 52 of them.
The settlements averaged about $3,000 each, with one settlement clocking in at $10,000. Out of intimidation, 838 others have admitted to illegally sharing music in exchange for amnesty from future lawsuits -- the next wave of which is expected to come in October.
The Big Five whom the RIAA represents account for approximately 95% of music distribution in Europe and North America. But these recent moves by the RIAA in the face of declining music sales might be heavy handed, especially since many of the targets of these lawsuits are teenagers.
Many are upset over the industry's use of subpoenas to identify those who participate in P2P file sharing. Internet Service Providers such as Verizon (NYSE: VZ ) and SBC (NYSE: SBC ) , for example, are working to stop the use of subpoenas.
But while the RIAA hopes to deter the 63 million or so Americans who use P2P software, such as Kazaa, Grokster, Morpheus, and LimeWire, the decentralized nature of the newer networks might also make the use of lawsuits a futile task with no end. The record companies would likely do better to actually serve their potential customers rather than sue them anyway. Last we checked, lawsuits were not among Warren Buffett and Peter Lynch's precepts for good business practices.
Jeff Hwang welcomes your feedback at[email protected].