One Year After Grokster: The Music Industry Falters

• One year ago the Supreme Court ruled that P2P’s like Grokster could be held responsible for illegal file sharing activity activity on similar networks is up more than 10%.
• One year ago the industry said it would shut down offending P2P’s.
• One year ago Andrew Lack, then CEO of Sony BMG declared, "We will no longer have to compete with thieves in the night whose businesses are built on larceny."

One year after the Grokster court decision the music industry faces some harsh realities.

The average number of simultaneous file-sharing users was at 9.7 million worldwide in May with 6.7 million in the U.S. according to BigChampagne which tracks file-sharing activity. One year ago BigChampagne tracked 8.6 million average users globally and 6.2 million in the United States.  And the companies behind popular applications like eDonkey, LimeWire, Morpheus, Kazaa and others are still in business.

Despite filing approximately 18,000 lawsuits that have fostered consumer distrust, the best that the Recording Industry Association Of America can claim is that it could have been worse. "We don’t suggest that (unauthorized file-sharing) has been conquered, far from it," Bainwol said. "But it’s not fundamentally decapitating the legal marketplace from growing in a pretty robust fashion."

What Bainwol bases his optimism on is unclear as CD sales continue to decline – 7% last year alone. And while paid downloads are on the rise, revenues have not come close to replacing losses.  Some hoped for solutions including licensed P2P’s and music subscription have also failed to gain traction with consumers.  Copy protection and DRM software added to CD’s and downloads have often confused and sometimes angered a public increasingly used to consuming media wherever, whenever and however they want to particularly after they’ve paid   for it.

Cost cutting and mergers have solved some of the problems caused by declining revenues. But how far can cost cutting go?  What is the future of an industry that is not investing in itself?  And what is the future of an industry who treat’s its customers as enemies?