Monthly Archives: September 2003

Krugman is a favorite regular read. His latest is a favorite among favorites.

Apparently, the FERC has now settled with “energy companies accused of manipulating markets during the California energy crisis.” Through various price manipulations, those companies cost Californians $8.9 billion — not including the extraordinarily high prices we now face because of long-term contracts signed at the height of the crisis.

The FERC has now imposed a $1 million fine on the energy companies. As Krugman calculates, though they imposed costs of at least $250 on each Californian by their games, they’re required to pay 3 cents.

$1 million for $9 billion in real harm.

Let’s put this in some perspective.

Jesse Jordan (the RPI student who ran a search engine and was sued by the RIAA) was, the RIAA claims, liable for $15,000,000 in damages. When you add up the damages claimed against all four of these students (who again had built search engines), the RIAA was asking, on some estimates, for $100 billion dollars. That’s because, under our law as interpreted by the RIAA, downloading one song makes you liable for $150,000. Or, on the RIAA’s view of the law, cheaper to defraud Californian’s of $9 billion than download 10 songs from a p2p server.

“Oh,” you say, “but that’s unfair. You’re comparing actual fines imposed to the maximum fines that could be imposed.”

Ok, so let’s compare actual to actual.

In January, 2000, MP3.com launched a service called my.mp3.com. Using software provided by MP3.com, a user would sign into an account and then insert into her computer a CD. The software would identify the CD, and then give the user access to that content. So, for example, if you inserted a CD by Jill Sobule, then wherever you were � at work, or at home � you could get access to that music once you signed into your account. The system was therefore a kind of music-lockbox.

No doubt some could use this system to illegally copy content. But that opportunity existed with or without MP3.com. The aim of the my.mp3.com service was to give users access to their own content, and as a byproduct, by seeing the content you already owned, discover the kind of content the users liked.

To make this system function, however, MP3.COM needed to copy 50,000 CDs to a server. (In principle, it could have been the user who uploaded the music, but that would have taken a great deal of time, and would have produced a product of question-able quality.) It therefore purchased 50,000 CD from a store, and started the process of making copies of those CDs. Again, it would not serve the content from those copies to anyone except those who authenticated that they had a copy of the CD they wanted to access. So while this was 50,000 copies, it was 50,000 copies directed at giving customers something they had already bought.

Nine days after MP3.com launched its service, the five major labels, headed by the RIAA, brought a lawsuit against MP3.com. MP3.com settled with four of the five. Nine months later, a federal judge found MP3.com to have been guilty of willful infringement with respect to the fifth. The judge imposed a fine against MP3.com of $118,000,000. MP3.com then settled with the remaining plaintiff, Vivendi Universal, paying over $54 million.

So defraud Californians of $9 billion, pay $1 million. But develop a new technology to make it easier for people to get access to music that they have presumptively purchased: pay more than $54 million.

Such are the values of our time. Continue reading →