Case 4:20-cv-07572-JSW Document 54-12 Filed 08/25/21 Page 1 of 18
`Case 4:20-cv-07572-JSW Document 54-12 Filed 08/25/21 Page 1 of 18
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`The Music Industry on (the) Line?
`Surviving Music Piracy in a Digital Era
`
`Jelle Janssens, Stijn Van Daele and Tom Vander Beken
`
`Institute for International Research on Criminal Policy (IRCP),
`Ghent University, Belgium
`
`European Journal of Crime,
`Criminal Law and Criminal Justice 17 (2009) 77–96
`
`
`
`1. Introduction
`
`After successive years of growth during the 1990s, decreasing compact disc (CD) sales have
`been plaguing the music industry since 2000. Although several reasons have been cited to
`explain the decline in sales, the music industry mainly puts the blame on physical and digital
`piracy, more specific on CD and Internet piracy [1].
`Piracy is not a new phenomenon. In the last decades, technological developments have
`allowed the music industry to discover and promote new music formats, but have also
`enabled commercially-minded pirates and private citizens to pirate music on a larger scale.
`Piracy was a minor problem for the music industry until the arrival of the compact tape
`cassette in the late 1960s and the wide-spread availability of home cassette recorders in the
`1970s [2]. The advent of the CD in 1982 heralded a new era. Although this format boosted
`global music sales, the technology enabled master-quality copying in large quantities. Firstly,
`the development of encoding formats such as MP3 allowed users to easily transfer music to
`computers, transmit it via the Internet or decode the digitally recorded music for recording
`onto CDRs [3]. Secondly, when the switch was made from cassettes to CDs, most computers
`had limited storage capacity and were not always equipped with a sound card or external
`speakers. During the last decade, however, personal computers have become much faster
`and more powerful and most of them nowadays come with CD-ripping software and CD-
`burners. Contemporary pirates are now able to create perfect, quasi-identical copies.
`The possibilities offered by the new technologies did not go unnoticed. Whereas the
`music industry always had some sort of monopoly over the distribution of music to
`customers, they soon met with competition from entrepreneurs making the most of their
`chances to get a piece of the pie. Besides concerns about private citizens copying CDs onto
`CD-Rs, the music industry was – and still is – gravely concerned about full scale commercial
`music piracy. It did not take long for them to link full scale commercial piracy to organized
`crime [4]. Organized criminals would use CD revenues to finance other activities such as
`trafficking drugs, humans or weapons [5]. In combating organized crime, the music industry
`has found an ally in public and law enforcement authorities. They too, link – to some extent –
`CD piracy to organized crime [6]. In several criminal cases, links have indeed been
`established between criminal organizations and CD piracy and counterfeit products in
`general [7].
`Music industry’s monopoly position being shattered, consumers are now able to shop
`around. It is not, however, physical piracy that has received a lot of attention recently, but
`digital piracy (due the rise of the Internet and the plummeted costs of personal computers)
`which is seen as one of the biggest threats to the music industry today. Although Internet
`piracy can take many forms, one variant, file sharing through peer-to-peer (P2P) networks, is
`said to have a devastating impact on global CD sales [8]. The very idea behind these
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`networks is to allow users to share music files with others for free. With the global wide-
`spread of the personal computer (PC)[9], the increasing pervasiveness of the Internet and
`broadband connections[10], and the emergence of digital compression technologies, this type
`of piracy can indeed assume vast proportions.
`New technologies provide both opportunities as well as challenges. This article discusses
`opportunities to tackle organized crime involvement in music piracy and opportunities for
`the music industry to survive in the digital era. In a first part, the piracy problem facing the
`contemporary music industry is examined. In this context, the music industry is scanned for
`its own vulnerabilities and on the involvement of organized music pirates. In a second part,
`the future for the music industry and organized music pirates in the digital era is examined.
`Finally, options for the music industry in dealing with piracy in the digital era are proposed.
`The ideas and findings presented in this article apply only to those countries and regions
`where Internet pervasiveness is high. If there is no access to the Internet, there is no digital
`piracy.
`
`
`2. The music industry and piracy
`
`According to the International Federation of the Phonographic Industry (IFPI), CD sales have
`been falling continuously (except for a status quo in 2004) from 2,5 billion units in 2000 to 1,8
`billion in 2006 (see figure 1). This decline is without doubt hurting the music industry since
`CD sales still account for a crucial part of the recorded music sales. From 1999 till 2002,
`global sales dropped 19.8 percent (from US$38,6 billion to US$30,9 billion). While the
`industry was doing better in 2003 (+ 3.3%) and 2004 (+4.7%), global sales dropped again in
`2005 (-0.5 percent) and in 2006 (-4.9 percent) (see figure 2) [11].
`
`Figure 1: Global CD sales in million units
`2600
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`2400
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`2200
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`2000
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`Units (in million)
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`1800
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`1600
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`2000
`Year
`Source: IFPI, 2004 and IFPI “The recording Industry” 2000-2007:
`http://www.ifpi.co.uk/content/section_statistics/index.html.
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`2001
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`2002
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`2003
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`2004
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`2005
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`2006
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`1994
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`The reasons cited for the disappointing results are numerous. Some simply blame the
`economy; others point the finger at major labels’ practices, including price-fixing by the Big
`Five[12] making consumers pay too much for their CDs [13]. From 1999 to 2001, the average
`price of a CD rose 7.2 percent from US$13.04 to US$14.19. Simultaneously, new album
`releases went down as well, making it rather difficult to procure similar revenues to the year
`before [14]. Oberholzer-Gee and Strumpf also point towards an evolution in how music is
`distributed (from record stores to discount retailers), the ending of a period of high sales
`when consumers replaced older music formats with CDs, and the growing competition from
`video games and DVDs [15].
`
`Figure 2: Global music sales in millions US$ (IFPI, 2004)
`Local currency values are converted to dollars at the exchange rate of each year.
`45000
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`1994
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`1995
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`1996
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`1997
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`1998
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`1999
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`40000
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`35000
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`30000
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`Millions US$
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`25000
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`20000
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`According to the music industry, however, physical and digital music piracy is the very
`culprit for the decline in CD sales. Each year, the IFPI releases a figure indicating the global
`value of pirated music. In 2005, the IFPI estimated the value of the global traffic of pirate
`products at US$4.5 billion [16]. It equals out at about 13.5 percent of the total amount of
`global legitimate music sales. Not included in this figure, however, is file sharing over peer-
`to-peer (P2P) networks, which is said to be responsible for a fall in global music sales of 22
`percent between 1999 and 2004 [17]. The IFPI distinguishes CD-R piracy, pressed CD piracy,
`cassette piracy, Internet piracy and new forms of digital piracy such as LAN file sharing,
`digital stream ripping and mobile piracy. Internet and CD piracy are reported to have the
`biggest impact on legitimate CD sales [18].
`
`2.1. Internet Piracy
`
`Internet piracy can take many forms. It can involve making available databases of music files
`on websites or File Transfer Protocol (FTP) sites, up- and downloading files via Internet
`newsgroups or sharing files via peer-to-peer (P2P) networks. According to the music
`industry, there is a causal relationship between the growth of P2P networks and the decline
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`2001
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`2002
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`2003
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`2004
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`2005
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`2006
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`2000
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`of CD sales [19]. Liebowitz estimates that between 2000 and 2003 online file sharing reduced
`CD sales by as much as 30 percent, or about $4 billion annually [20]. A lot of research has
`been conducted into the effects of Internet piracy on CD sales. The outcome of this research
`is not unambiguous. Some studies found that file sharing had no or little impact on music
`sales [21]. In a recent study, Andersen and Frenz found that P2P file-sharing tends to
`increase rather than decrease music purchasing [22]. Still there are many others who confirm
`the impact of file sharing on the music sales decline [23]. Others argue that a causal
`relationship is quasi-impossible to ascertain and piracy figures are often used for their
`rhetorical impact [24].
`According to the data in figure 1 and 2, presented by the music industry, the year 1999
`can be considered as a turning point. Although in figure 1 the decline starts in the year 2000
`(due to regional dissimilarities), global sales (figure 2) started to drop in 1999. It is in that
`same year that Shawn Fenning started Napster, a type of P2P network, which would
`eventually attract as many as 70 million registered users [25]. While other factors (such as the
`economic climate for example) undoubtedly will influence global music sales, based on the
`data presented in figure 1 and 2, music industry’s claim that P2P file sharing is at least
`partially responsible for the decline in CD sales seems legitimate.
`
`2.2. CD Piracy
`
`The amount of attention given to physical piracy, such as CD piracy, in literature does not
`quite correspond to the significance of the problem. All the indications are that the scale of
`the pirate business is considerable. It is thought that more than one in three of all music discs
`purchased around the world is an illegal copy. In 2005, the global value of traffic of pirate
`music products was estimated at US$4.5 billion. 1.2 billion pirate CDs would have been sold
`worldwide in that same year [26]. Because the prices for pirated discs are used and not the
`legal prices, the full economic loss to the music industry is not measured [27].
`
`Figure 3: The evolution in legitimate music CD sales and pirate music CD sales
`3000
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`Legitimate music CD sales
`Pirate music CD sales
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`2500
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`2000
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`1500
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`1000
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`500
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`0
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`Units (in million)
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`1999
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`2000
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`2001
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`2002
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`Year
`Source: IFPI, 2004; IFPI “The recording Industry” 2000-2007 and IFPI piracy reports 2000-2006:
`http://www.ifpi.co.uk/content/section_statistics/index.html.
`
`2003
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`2004
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`2005
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`Figure 3 shows the evolution in both legitimate music CD sales and pirate music CD
`sales. The latter category constitutes pressed pirate CDs as well as pirate CD-Recordable
`discs (CD-Rs). While the total amount of legitimate music CD sales is reasonably well-
`known, figures relating to pirate music CD sales are merely estimates and based on the
`number of seizures which provides information rather on law enforcement activities.
`Nevertheless, the figures in figure 3 show that in the year 2000 pirate CD sales rose sharply
`and have followed an upward trend since 2001. It is remarkable that both curves more or less
`mirror each other: when legitimate CD sales drop, pirate CD sales rise. Even when the
`figures of pirate music CD sales are an underestimate, this would theoretically not change
`the global trend that is set.
`
`
`3. Organized crime involvement in music piracy
`
`The threats to the music industry are well-known: both CD piracy as Internet piracy threaten
`music industry’s most essential product, the compact disc. Of all music sales in 2004, CD
`sales accounted for 86 percent [28]. An extra dimension can be added to those threats: the
`involvement of organized crime in music piracy.
`
`Organized crime is best described as a profit-driven illicit shadow economy. This is also
`reflected in the definition used by the UK National Criminal Intelligence Service and
`adapted by the music industry for the purpose of examining organized crime involvement in
`music piracy: “Organized crime constitutes any enterprise, or group of persons, engaged in
`continuing illegal activities which has as its primary purpose the generation of profits, irrespective of
`national boundaries” [29]. Although this definition does not cover all aspects of organized
`crime (the EU definition of organized crime defines eleven characteristics[30]) it is of use for
`this article. The reason why organized criminals would get involved in the music business is
`simple: just like all entrepreneurs they strive to maximize their profits. When organized
`music pirates have the same production technology at their disposal as the music industry,
`they become fearsome competitors. Their marginal costs will be the same, but not their
`average total cost function because they do not bear the fixed costs associated with
`developing the CDs [31]. In that way, organized music pirates’ production costs will be less
`than those of the music industry providing them with a competitive advantage.
`
`Legal and illegal activities do not always operate on distinct levels but are often connected
`and interdependent [32]. Moreover, legal and illegal organizations would strive to maximize
`economic and political advantages and try to minimize the risk of arrest and conviction [33].
`Within the global music market, organized music pirates have found and exploited a
`thriving segment: the segment of people who are not willing to pay the price demanded by
`the music industry. To analyze the involvement of organized criminals in the music business
`and to understand why they are involved, it is necessary to look beyond their characteristics
`and activities and look to the markets in which they operate [34].
`
`3.1. Scanning for vulnerabilities in the music industry
`
`Since criminal or deviant behaviour takes place in a certain context [35], it is crucial to scan it
`for vulnerabilities. Methods have been developed (e.g., Method for Assessment of
`Vulnerability of Sectors (MAVUS) [36]) to scan for context-specific opportunities which
`could be exploited by criminals. The vulnerabilities of an organisation, sector or industry
`facilitate crime or irregularities and are found in the music industry as well [37].
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`An industry can be looked at from different perspectives. An important first perspective
`in the vulnerability approach is the economic perspective scrutinizing the entire production
`chain. To recognize the vulnerabilities of an industry, an understanding of the nature of the
`product is imperative. In the case of the music industry the actual product is not the CD, but
`the intellectual property which is in fact an intangible good [38]. In case of CD distribution,
`the intellectual property is linked to a certain carrier, i.e. the CD. The link to a carrier is
`important since copying a song is only punishable if the song is copied onto a different
`carrier. The fact that the actual product is an intangible good, combined with the relative
`ease with which CDs are now copied (as discussed above), music industry’s product can be
`considered as highly vulnerable for criminal activity. Furthermore, CDs can be shipped very
`easily and do not require specific conservation methods, so they can be shipped together
`with other illegal goods [39].
`Not only the product, but also the environment may well lead to crime. Since every
`sector is subjected to (governmental) regulations, the level of implementation and
`enforcement of these regulations determine the pervasiveness of criminal activities. Some
`countries, like Russia for example where CD manufacturing plants are not (effectively)
`combated [40], still lack proper legislation and are thus creating safe havens for criminals to
`produce counterfeit CDs [41]. In the past, legislation and enforcement in many countries was
`not that strong. Music industry’s lobbying, increased media attention and global awareness
`of music piracy caused various regions to improve their fight against the phenomenon. In
`Europe, the 1998 Green Paper on Combating Piracy indicated a first commencement in this
`perspective [42].
`Besides the product and the environment, pricing issues play an important role in piracy.
`Because of customers’ increased mobility and to avoid “white van smuggling”, record
`companies try to maintain a worldwide uniform price, so there is no use in shopping abroad.
`Yet, in countries where the average wages are about the equivalent of US$70-100, most
`people cannot afford to pay US$15 for a music CD [43]. CD piracy provides to some extent
`an answer to this discrepancy. This is reflected in the value of the pirate market as well.
`Although the number of pirated CDs is said to be up to 35 percent, its value only
`corresponds with a market share of 15 percent [44]. This implies that the pirated CDs cost
`less than half the price of their legal counterparts. In this perspective, pricing strategies need
`to take the efficiency of the black market into account [45].
`Finally, although technological developments have offered opportunities to the music
`industry, they also have brought new challenges. First of all, the ease with which one
`nowadays can copy CDs adds to the vulnerabilities of the music industry. Although the
`equipment for CD manufacturing plants is more expensive and less mobile compared to that
`of home-made copying, low risks of being caught and weak deterrents make the investment
`worthwhile [46].
`
`3.2. The future of organized crime in music piracy
`
`Whereas the music industry used to have control over their product, technological
`developments have offered new opportunities to music pirates. Given the vulnerabilities of
`the industry: low (law) enforcement in some countries, the ease by which copies can be
`made, the fact that legal CD are not affordable in some countries, etc., several windows of
`opportunity are left open for organized crime networks.
`The involvement of organized crime in music piracy has particularly been linked to
`physical piracy, more specific CD piracy. The CD as a product is therefore as important for
`organized criminals as for the legal music industry. Since the rise of Internet piracy is hurting
`the legal music industry, it also must hurt illegal CD sales. Figure 4 presents the evolution of
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`physical piracy by format. In 2000 and 2001, the percentage of CD-Rs has increased with
`more than 10 percent, but the percentage of cassettes has declined with nearly the same
`proportion. Since the introduction of the CD, tape cassettes have gradually lost their market
`share. Commercially-oriented pirates and private citizens have lost interest in tape cassettes
`as principal music format. The proportion of pirated CDs (no CD-R) was nearly stable [47].
`
`Figure 4: The evolution of physical piracy by format
`
`CDs
`CD-Rs
`Cassettes
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`2002
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`2003
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`2004
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`report
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`2003,
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`2004,
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`2005:
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`1998
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`1999
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`2000
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`2001
`Year
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`1400
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`1200
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`1000
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`800
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`400
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`200
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`0
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`Units (in million)
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`Source:
`commercial piracy
`industry,
`recording
`IFPI, The
`http://www.ifpi.org/content/section_statistics/index.html
`
`
`The discrepancy between the volume of pirate cassettes sold in 1998 and the volume of
`pirate CDs and CD-Rs is however remarkable. Whereas 1,900 million pirate cassettes were
`sold in 1998, both pirate CDs as well as CD-Rs have trouble to cross the border of 600 million
`units. One would well expect that the CD-R would partially replace the function of the tape
`cassette and as such obtain higher sales figures. Although the rise of CD-Rs in 2001 is
`notable, it is clear that the CD-R does not come near to the volume of pirate cassettes. Even
`though the CD has dethroned the tape cassette, the volume of physical piracy, in terms of
`million of units, has decreased over the last decade. There are three aspects that have to be
`considered in this perspective. First, the rise of CD-Rs can be accounted for by the decline in
`cassette piracy, as the CD is taking over tapes. Secondly, piracy rates can only be measured
`by the number of seizures. Hence, they tell at least as much about the activity of enforcement
`agencies as they tell about actual crime prevalence. Third, in 1999 Napster came along.
`Perhaps the limited growth of physical piracy from 2001 on may point towards a change in
`consumers’ behaviour. If Internet is available, why buy (pirated) CDs when you can get your
`favourite music for free? In some countries, like Taiwan and Korea, Internet piracy has,
`according to IFPI, replaced not only legitimate businesses but also physical piracy [48].
`Indeed, through file sharing the customer can not only listen to music freely, he or she can
`download it free of charge. In that way file sharing could also endanger the survival of
`physical pirates. A testimony:
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`… According to Tony, the first 2 hours of every Saturday and Sunday morning at the local flea market always
`proved the most exciting. “We’d take 60 cases of CDRs down in the van and as soon as we got there a crowd
`would swarm around us. We had no competition and it was obvious the punters had no other suppliers. Inside
`30 minutes, 90% of the stock would be gone with some customers taking 2 or 3 cases each, presumably to sell on.
`After 3 hours we were cleared out and on our way home, always with huge amounts of money.”
`
`By 2001, Tony was renting a factory unit and employing 3 people to operate duplicators 24 hours a day, 7 days a
`week but although business was lively right up to 2004, profits were being squeezed every year. Forced to
`increase the amount of media burnt each week to make up for the shortfall in profit, it became clear that the
`business was in trouble - demand was falling dramatically. ....
`
` …
`
` Tony is very clear about why his rags to riches story has gone back to rags again. “File-sharing, P2P - call it
`what you like. When you asked a customer why he wasn’t buying anything, 9 times out of 10 it was ‘BitTorrent
`this, LimeWire that’. Add that to the fact that huge numbers of PC users have burners and fast broadband and
`its obvious why I had to get out and earn a living another way. We had it good for a while but I don’t think those
`days are coming back.” [49]
`
`Organized music pirates have sponged on the achievements of the music industry. While the
`industry was investing in new talent, organized music pirates took advantage of their
`successes. When an artist was doing well, the demand for CDs of that particular artist rose.
`That is when organized music pirates came on the scene by offering low-priced pirated CDs
`of that same artist. When those CDs no longer sell, they are confronted with a huge problem.
`The question is whether they will share Tony’s fate, or whether they will be able to alter their
`“business plan”.
`
`4. The music business goes digital
`
`The Internet did not play a major role in the distribution of music until the spread of the MP3
`[50]. The success of this format is not only due to the absence of security features, making it
`extremely appealing to consumers as they do not encounter restrictions on the use of the
`content, but most of all, it compresses audio files with little loss in quality [51]. The
`application of this technology is extremely popular among file sharers. MP3 technology
`enables users to compress music files in easily transferable data. Whereas a three minute
`track on a CD would use for example 30 to 40 Megabytes (Mb), the same track, converted
`into a MP3 files would use merely 3 Mb. This has of course, irrespective of the bandwidth,
`consequences for the speediness of transferring music files through the Internet.
`The advent of Napster in 1999 ignited P2P file sharing [52] and in its two years of
`existence, Napster has changed the music business and its relationship with consumers. As a
`reaction to the growing threat of file sharing, the music industry responded in two ways.
`First it tried to dissuade people to get involved in P2P file sharing by setting up awareness
`campaigns. Secondly, it tried to scare people off by threatening with legal actions. Essentially
`three types of legal actions have been engaged by the music industry: against file sharing
`platforms, against Internet service providers (to reveal user’s identities or to pay damages for
`the infringement or block illegal sites), and against individual P2P users [53]. The people
`being sued by the music industry range from college students, laboratory assistants to
`parsons [54]. The results of these actions are ambiguous and have not done the image of the
`music industry any good. Today there are much more P2P services than there were in the
`time of Napster and they are more difficult to be shut down. Progress in technology, the
`growth of consumer broadband and cheap data storage makes it impossible to prevent this
`type of activity [55]. Napster operated a central server that indexed its users and song titles
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`[56]. Contemporary P2P services do not longer rely on a central indexing server. By
`downloading the necessary software onto the user’s computer, the network would still
`function even if the company that provided the software would cease to exist. Therefore,
`some say that file sharing should be made legal and new ways to compensate copyright
`holders developed and implemented [57].
`File sharing can have three possible effects on the music industry. The one the industry is
`focusing on the most, is the substitution effect. If consumers are able to download entire CDs
`through the Internet for free, they would no longer be willing to buy a CD legally. This
`vision is however strongly contested since it is unlikely that each download would displace a
`market sale [58]. Van Wijk correctly argues that people, who would download a free copy,
`would not necessarily buy the same product at a legal market price. Another effect of file
`sharing is the sampling or exposure effect. Through file sharing, people can experience the
`product thoroughly before making a purchase decision [59]. The traditional way of the music
`industry to inform consumers of new products is to spend large costs on advertising and
`promotion. The Internet can increase both demand and consumption for it enables users to
`discover and acquire new music and artists quicker, easier and more flexible [60]. This
`positive effect on music sales is confirmed by recent research [61]. A third potential impact of
`file sharing is the network effect which can be more or less compared with the effect of radio
`play [62].
`Understanding that consumers had to have legal alternatives, and the evolution of online
`distribution of music had become insurmountable, the music industry decided to go online.
`In December 2001, MusicNet was setup by three major labels, Warner, EMI and BMG. Sony
`and Universal soon followed with PressPlay [63]. Subscription-based, the number of users
`was rather disappointing. First of all, the choice of music was rather limited since the labels
`merely offered a selection of their libraries. Secondly, the Big Five were concerned that their
`downloaded music would be easily copied and distributed. Therefore technological
`restrictions were put in place. Customers found themselves restricted by, for example, the
`period of time a download could be kept, the numbers of copies that could be made etc.
`These limitations did not provide the music industry a competitive advantage vis-à-vis file
`sharing where such restrictions are absent.
`It was not until the advent of Apple Corporation’s iTunes in 2003 that the music industry
`broke through in the online music distribution. Apple met the shortcomings and offered
`customers access to a larger music catalogue and for the price of US$0.99 one could purchase
`a song with few restrictions on the use of it. In 2004 the IFPI began publishing online music
`reports [64]. Downloaded digital single tracks climbed from 160 million units in 2004 to 795
`million units with revenue of US$397 million in 2004 and US$2000 million in 2006. Although
`the transition to online distribution of music has had its difficulties, it is now relatively
`successful. However, it does not look like digital music sales will be able to compensate for
`the decline in CD sales in the near future. The challenge now is for the music industry to try
`to compete effectively with P2P networks and promote themselves in a new (digital)
`environment [65].
`
`4.1. Online music distribution: the choice between a legal and illegal purchase
`
`In the presence of the threats facing the music business, the industry had to alter their
`business plan. One of the adaptations to the new (digital) environment is distributing music
`online. Although digital sales are doing relatively well, they have a long way to go before
`they can replace CD revenues (if at all). Nevertheless, the industry has opened up a new
`(thriving) market: they run online music stores, provide music for digital music players and
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`ring tones, cut deals with the mobile phone industry etc. Are organized music pirates able to
`do the same?
`It would be naïve to think organized criminals are not able to sell music through the
`Internet as well. It is well known that criminals (individually as well as organized) are
`perfectly able to adapt to changes in the environment [66]. They too are perfectly capable to
`set up online music stores and provide customers with for example ring tones. They will,
`however, have to put in a great effort to stay as invisible as possible for law enforcement
`agencies for although criminals are resourceful, transactions through the Internet leave traces
`behind. Furthermore, the ICT-knowledge of enforcement agencies does not stay behind
`either. Besides concerns about detection, organized criminals may very well consider if the
`effort is worth it. Why would people be willing to purchase music online illegally if there is a
`legal alternative? Price differentiations will no longer be as significant as before since the
`production costs of CDs are now irrelevant. Moreover, how could illegal online music stores
`add value to their product in the presence of file sharing and still be able to compete with
`legal online music stores?
`To analyze the online music business an economic approach is less valuable since it is not
`bound to a static carrier. A rational choice perspective, however, provides information on the
`choices customers have to make during their purchase decision. First of all, in making the
`decision whether or not to purchase music legally or illegally, the prime cost plays an
`important role [67]. Secondly, since the customer wants value for his money, the quality and
`the perceived quality of the product is at least as important [68]. There is also an ethical value
`involved: not everyone is keen on purchasing a product illegally [69]. Besides the risk of
`inferior quality (there are no guarantees with illegally obtained music), there is a risk of
`receiving digital malware. Music will be bought legally when the price is worth the
`differences in ethical consideration, (expected) quality and (perceived) risks. As ethical
`beliefs of consumers are independent variables, it is for legal providers important to combine
`high quality with competitive pricing and minimal risks [70].
`Should consumers nevertheless opt for purchasing music through organized crime
`networks, ethical beliefs are no longer relevant. The risk of receiving malware and
`encountering legal actions makes it, on the other hand, more likely that people will only buy
`and download music legally if the high quality and low risks compensate for the higher
`price. The internet and its embedded risks may therefore very well reduce the profit mar