The entertainment industry is an overarching term for the business of entertainment. It consists of a large number of sub-industries devoted to entertaining customers, ranging from traditional live entertainment, (such as a circus, ballet or play), to present-day mass media, (film, broadcast radio and television, music industry), video and electronic gaming. Worldwide, the entertainment industry employs hundreds of thousands of people and generates trillions of dollars in revenue, worldwide.

The entertainment industry basically sells the manifestation of talent and intellectual property for public consumption. At their core, entertainment companies’ ability to generate revenue is tied directly to their ability to control the distribution of said intellectual property. Central to the sustainability of the entertainment industry, as a whole, is the protection of their talent and intellectual property from unauthorized reproduction and distribution. Infringement on these intellectual property rights – whether real or perceived – is a substantial threat to the industry in terms of lost income and property/brand devaluation.
Copyright/IP infringement has always been a major issue and topic of concern for the entertainment industry. Seeing the obvious need to protect intellectual properties, most countries have some form of IP protection/anti-piracy laws in place. However, with recent advances in technology, combating IP infringement and piracy is becoming increasingly difficult, as technology can sometimes blur the line between what is and is not actually piracy and infringement. Since technology advances extremely quickly, it is very difficult for most countries to keep their IP protection laws up-to-date to include the latest methods and tools of infringement, as most legal processes are relatively slow-moving.

The interests on this issue are numerous. Foremost among these are the producers and distributors of entertainment properties. These include film studios and distributors, music labels, television networks, production companies, video game publishers, software programmers, artists, musicians, actors, writers and directors. But there are also many ancillary businesses that have an interest in the proper distribution of IP. Retail home entertainment distributors, movie theaters, commercial radio stations, and media and platform manufacturers… basically anyone who makes money from the sale of entertainment products. The list is simply too long to continue here.

On the other side of the issue are consumers, who benefit from lower costs of the entertainment products produced and distributed by the entertainment industry. These interests are served by “pirates”, or people who duplicate and distribute protected IP unlawfully and outside of the intended usage of the producer – typically at a substantially lower cost to the consumer. While such cut-and-dry activities are clearly theft, and illegal almost everywhere, new advancements in digital technology has raised significant questions about what is considered infringement and piracy, and what exactly are the rights of the purchaser of media.

New digital peer-to-peer file sharing platforms – known as bit torrents - facilitate the exchange of digital media files directly between multiple users without any intermediary servers. This allows companies such as The Pirate Bay, the largest ad-supported torrent search site, to serve as a directory for peers to find and exchange music, movies, video games, computer programs, and other digital media. There are hundreds of similar sites, including torrent aggregators such as SumoTorrent, Torrentz and Mininova. They generate revenue by monetizing traffic to their websites – in search of free peer-shared media – with ad serving.
Of course the representatives of the entertainment industry contend that the users of these sites directly infringe on copyrights, and that the torrent sites should be held liable for such infringement. The major point of contention here is the tracking of user information, including lists of connected systems and the files exchanged, which was the information used to deem file-sharing precursor Napster liable for copyright violation in 2001, (A&M Records, Inc. v. Napster, Inc.). It is this user information that has become central in assessing the liability of the torrent sites, and why most of the torrent sites in question do not maintain this information. This lack of record keeping makes it much more difficult for the entertainment industry representatives and counsel to actually find and track peer exchanges and possible copyright and IP violations.

Another piece of information vital in assessing the legality of peer-to-peer sharing is the statement of rights of entertainment consumers. The industry has clearly set rules for the distribution and sharing of legally purchased media content, such as DVDs and music albums. These rules expressly forbid any additional distribution or exhibition, (without prior permission of the producers or rights holders). However, these rules have never been seriously tested for legality, and it is unknown at this time just how far these rules extend, and how they can be enforced.

To combat peer-to-peer sharing, the entertainment industry has launched publicity campaigns in the numerous media outlets promoting the idea that “sharing is stealing”, and that it is only fair that the producers of entertainment be fairly compensated for their hard work. The contrary view is that the prices for entertainment are disproportionately and artificially inflated, and that the producers are greedy and don’t deserve the exorbitant compensation they are perceived to already receive.

Additionally, many of the large media companies like Universal Pictures, Sony BMG and Time Warner have begun collecting their own file sharing user data, and use this data to prosecute perceived infringements in federal and state courts. This has met with some modicum of success, but the sheer scale of peer-to-peer file sharing is such that these prosecutions are simply drops in the much larger bucket, and most file sharers don’t feel that the threat of litigation is significant, and therefore it is not a great deterrent to the activity.

These same media companies have also been lobbying governments in the major media consuming countries worldwide to adopt more stringent laws governing this activity. So far, these efforts have not generated any significant legislation. However, on noteworthy result of the pressure and lobbying exerted by these entertainment companies is the recent trial of The Pirate Bay in Sweden.

In May of 2006, Stockholm police raided the offices of The Pirate Bay, seizing company documents and computer servers. Pirate Bay management claims that the raid was a result of lobbying and pressure on the Swedish government by the Motion Picture Association of America (MPAA), a powerful industry advocacy group. Based on the information seized from the highly publicized raid, and the consequent immediate shut-down of The Pirate Bay website, the MPAA regarded the action to be highly successful. However, the website was back on line three days later with web traffic more than double the web traffic. With file-sharing now very visible in the Swedish media and worldwide, and more and more people heading to The Pirate Bay and similar torrent trackers, it is difficult to share the MPAA’s view of the matter. While there has been fairly low coverage of this issue in the traditional print and broadcast media, internet-based media and specialty print periodicals has covered the issue fairly widely, because of the importance and appeal of the issue to their audiences.

On January 31, 2008 Swedish prosecutors filed charges against four of the individuals behind The Pirate Bay for "promoting other people's infringements of copyright laws" . The charges were supported by a consortium of IP copyright holders led by the International Federation of the Phonographic Industry (IFPI) – the organization that represents the interests of the recording industry worldwide. They also filed individual compensation claims against the owners and proprietors of The Pirate Bay: Fredrik Neij, Gottfrid Svartholm, Peter Sunde and Carl Lundstrom. The trial began on February 16, 2009 in the district court of Stockholm, Sweden, and the hearings concluded on March 3 with the verdict – rendered by a judge and three appointed “laymen” - scheduled to be announced on Friday 17 April. If found guilty, the defendants could be fined up to $188,000 USD and sentenced to up to two years in prison. A damages claim of approximately $13 million USD has also been filed. The result of this trial will clearly have enormous repercussions throughout the entertainment industry, both on the production and consumer sides.
The question here is not whether or not there is copyright violation going on here, but where the responsibility lies for copyright infringement through file-sharing: with the service provider, or with the internet users who trade files in violation of copyright laws.

Currently this issue is in the enforcement stage of the nonmarket issue lifecycle. Rules governing IP rights have been clearly established, and this trial uniquely both enforcement of the status quo, and a challenge to it. If the trial verdict is in favor of the entertainment industry, the status quo is likely to be left unchanged, and the issue will remain in the enforcement stage. However, if The Pirate Bay should win the case, the issue will likely revert back to the legislation stage, not only in Sweden but in many other countries, who will continue to be pressured by industry coalitions to change the law to reflect the results of this case, and create tighter regulations for IP control. It should be noted that tighter control of media could create unforeseen consequences, such as stunting technological development or restricting legal, non-infringing peer-to-peer file sharing.

Since the status quo already includes laws for IP protection, the alternative would be even tighter constrictions on IP distribution and restriction on peer-to-peer file sharing. The benefits of the alternative are tightly concentrated, in terms of the entities that stand to benefit from it; entertainment and media producers and distributors. Those employed by these companies and businesses related to the entertainment industry stand to benefit as well. By sheer number of people, the benefits would seem to be widely distributed, as these companies employ over a million people.

Conversely, the harms stemming from tighter control of IP and restrictions on file sharing seem - at first glance – to be fairly concentrated to simply users who currently use file sharing to infringe on copyrighted materials. However, the full potential of peer-to-peer data and file sharing has not been realized yet, and it is possible that hampering its development could potentially harm many other people who do not currently use the service, but may do so in the future if it is developed and robust enough. Also, tightening control would continue the entertainment oligopoly that is the entertainment industry today, with 3-5 major companies owning a large chunk of the content, and artificially inflating the prices of it, even as costs go down significantly… as was the case with CD albums in the late 1990’s and early 2000’s. As such, millions of people could be potentially adversely affected by tighter control.

The most potent political strategy for those interests in favor of changing the status quo and instituting tighter control would be majority building – continuing to target political office holders and policy makers and lobbying them to push for additional laws that would provide tighter control. This would be best done in a low-profile manner, through closed meeting and campaign contributions, as many of these companies are already publicly perceived as somewhat greedy, their public PR campaigns for “fairness” notwithstanding.

I believe that the Swedish government’s intervention and prosecution of The Pirate Bay’s file sharing facilitation would be considered justified by just about any economist; Chicago, Berkeley and anyone in between, because the main rational for the intervention is the protection of tangible property rights – one of the primary reasons that governments exist in the first place. If the outcome of the case is in the favor of the entertainment industry, the government has done its job and protected their IP rights. If it goes against them, the government of Sweden is clearly stating the limitations of the laws protecting these property rights. Either way, the intervening action of the trial is clearly warranted.