The One-Two Punch

Suing downloaders and smammers isn’t going to get the job done all by itself. But when combined with practical solutions to the underlying problems, legal efforts can and will help.

I’ve been catching up on my online reading since I got back from vacation and I read with interest Jim Cramer’s take on Eliot Spitzer and Microsoft’s efforts to sue the leading spammers. Since too few of you probably subscribe to Jim (but you really should), I’ll quote from his piece:

What Microsoft and Spitzer have figured out is that there are only a couple of really huge spam artists behind the all the spam. They make lots of money. But if you add a line-up, legal expenses, to the mix, they lose money. If they lose money and have a chance to go to jail to boot, they rapidly will pick other professions and their places will not be filled because the word will be out that it is too expensive a business to go into.

Capitalism is the only thing that stops spam. Not technology, capitalism. And the cost of spam just may have gotten too high for the bad guys.

I disagree with Jim about lawsuits being the ultimate solution. They won’t do the trick all by themselves. But when combined with the technology of spam filters and their economic implications, spam will mostly be a thing of the past within 18-24 months.

Look at digital music. Despite all the naysayers, it is the future of the music business. iTunes and all the other leading services are selling a lot of music these days. iTunes has sold over 20 million songs as of early December. I figure that all of the other services have probably sold another 20 million, so the industry has probably sold 40 million songs online this year. At $1/song, that isn’t a huge number for an industry that measures its revenues in the billions, but that is $40 million more than the industry got from online last year.

This summer I was at a friend’s house right after we picked up our kids from the bus bringing them back from summer camp. My friend’s son, who is 15 or 16, asked me if he’d get sued if he used Kazaa to download a bunch of songs he listened to at camp. I told him I didn’t think so, but why wouldn’t he just go get them from iTunes? I don’t know if he did, but I bet that a lot of kids his age were asking that question this summer and that many of them, and their parents, ended up at iTunes and its competition as a result.

When asked this November about the logic behind paying $2.6 billion for Warner Music, Scott Sperling, a partner with TH Lee, was quoted in the NY Times as saying that the music business was in the process of solving the issues surrounding digital music piracy. That sounds to me like a bet that digital distribution is going to take hold and that legal downloading will be the norm in the future.

In closing, I’ll point to John Schwartz’ column from New Year’s Day’s New York Times because I think 2004 is going to be the year that the Internet goes legit.

#VC & Technology