But you need not go to the Web to find digitized music. A very large percentage of the music industry's current content is already available in an unprotected digital form: CDs. Widely available software programs known as ''rippers" (or "digital audio extractors," in more polite circles) can read the digital data from CD tracks and rewrite it in a variety of formats, notably as MP3 files.4 These files are easily shared among friends or posted around the Web.
The third reason that the problem has surfaced first in the music world is that music is popular with a demographic group (students in particular, young people generally), many of whom have easy access to the required technology, the sophistication to use it, and an apparently less than rigorous respect for the protections of copyright law.5 Students also constitute a well-defined and geographically proximate community, which facilitates the sharing of digital music files.6
Fourth, music can be enjoyed with the existing technology: Good speakers are easily attached to a computer, producing near-CD quality sound, and a variety of portable players (e.g., the Rio from Diamond Multimedia) are available that hold 30 minutes to an hour of music. By contrast, even if it were available on the Web, downloading a best-selling novel is not enough; it would still have to be printed before you could enjoy the work.
What are the consequences for the recording industry? It is facing an age-old question that lurks in the background of most innovations that affect intellectual property: Something is about to happen, but will it be a disaster or an opportunity? New technology and new business models for delivering content are almost always greeted with the belief that they will destroy the existing market. In 17th century England, the emergence of lending libraries was seen as the death knell of book stores; in the 20th century, photocopying was seen as the end of the publishing business, and videotape the end of the movie business (Shapiro and Varian, 1998). Yet in each case, the new development produced a new market far larger than the impact it had on the existing market. Lending libraries gave
4Rippers copy the digital data from the CD to the computer's hard drive, reading the CD as if it were a (very large) floppy disk.
5On college campuses, the use of digital music files has created sufficient levels of network congestion to cause some network administrators to put MP3 servers on their own subnet to minimize the disruption to the main campus network (as reported by a briefer at the committee's meeting on July 9, 1998).
6See Gomes (1999).