What Grokster Means for Independent Musicians

This is a troubling ruling.

As we have discussed on our conference calls, file sharing has always been a threat to labels and a benefit to artists. Yes, as some folks will probably e-mail me later today, a file that gets shared potentially robs the songwriter of 8.5 cents in royalties.

However, I stand by the opinion that most folks who participate in file sharing would probably not end up buying that song anyway if they couldn’t get it for free. Instead of fixating on the perceived loss of eight and a half pennies, I have always encouraged my clients to focus on the long term gain of adding a new customer, especially when that customer supports you through merchandise sales and concert tickets.

Although the ruling does not make file sharing networks illegal, it requires companies that want to dip their toes into this space to face punishing economic realities of educating users and monitoring traffic. Nobody’s figured out how to monetize this yet, and there may not be enough upside to encourage someone to do so.

Moving forward, this ruling gives too many large entertainment companies the opportunity to further marginalize themselves by suing ISPs and software developers. For those clients of ours who have been successfully using file sharing to grow their audiences, it will probably become harder to encourage listeners to actively share songs with their friends.