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File sharing was supposed to stick it to The Man. Instead music investment withers while tech companies get fat, artists don't get paid... and some people think that pirated music is their human right. Eamonn Forde meets the fundamentalist "freetards" and finds out why - for your favourite band - Free could mean slavery. This is Part 1 of the full piece that appeared in Q311. Read Part 2 here.

On 20 January, two helicopters landed in the grounds of a 20-hectare estate in Coatesville on the northern tip of New Zealand. Seventy armed officers stormed the building looking for one man - Kim Dotcom, about to turn 38 the next day and founder of Megaupload, a file-hosting service that had netted him an estimated $175m since it launched in 2005.

In a panic, Dotcom (born Kim Schmitz in 1974 in Germany) pulled the switch on electronic locks that the police had to cut through. He was eventually found, like a digital Bin Laden, cowering in a safe room with a firearm. He and three senior members of his staff now face extradition to the US accused of facilitating mass piracy of music, games, films and TV shows as well as racketeering, wire fraud and money laundering. New Zealand media reported that the grounds of his Bond villain-like compound - rented, not owned, because he had failed a "good character" test for immigrants - were littered with luxury vehicles with plates that read "HACKER", "MAFIA" and "GOD". He had already been convicted for insider trading, computer hacking and embezzlement. Bizarrely, he also paid for 2011's New Year's Eve fireworks display in Auckland.

Kim Dotcom is the web's most divisive character today - the latest in a long line dating back to Shawn Fanning in 1999 with Napster. "Cyber-lockers" like his Megaupload service let users store and share any material online, no questions asked - and Dotcom pocketed the ad and subscription revenue. He could either be the greatest thief in record music's history, profiteering from other people's copyrights while living a gaudy lifestyle; or else he's the poster boy for an open web and the latest casualty in the Big Corporations' war on our online and civil freedoms.

At the turn of the millennium - in an age before mass broadband, iPods, YouTube and Spotify - only geeks and early adopters used emerging technologies like peer-to-peer networks. These computer-to-computer sharing networks loosened the entertainment companies' grip on distribution, sales and the copyrights they had invested in. We were, we were promised, coming into a glorious new age of DIY where musicians could go it alone without record companies. In 2005, it was all about MySpace. Now the story is the self-release platform Bandcamp. The names may have changed, but the rhythm of the revolution remains the same.

What turned this new technology from esoteric geekery into a cause was the new philosophy of "Free" - held up as an ideal that only Luddites could oppose. Wired magazine editor-in-chief Chris Anderson's book of the same name described a new reality where core products like MP3s are given away and bands make their money elsewhere, from touring or T-shirts or ads. Music would become a loss leader - a 100 per cent loss leader. But at the same time something else happened. The Free brigade imagined that new technology would get music out from under the thumb of record labels. And sure enough, the music companies suffered under Free's onslaught. But, as former New York Times writer Robert Levine details in his fascinating book Free Ride, a new generation of corporate giants took the place of the music companies. Tech, telecom and internet firms got fat on the hard- and software that played pirated music and movies, and the bandwidth that spread it. Someone, somewhere was making a fortune out of Free. And unlike the unloved record labels, they didn't invest in content at all.

So what does "free" mean anyway? Are its advocates just freeloaders, or principled defenders of a free internet? The debate becomes impossibly heated almost instantly, with phrases like "tyrant" and "freetard" only inciting anger and obfuscating the issues.
There's no denying that Free - willing or unwilling - has had a huge impact on music. Record companies point to a huge slump in their sales: global record revenues were $36.9bn in 2000 but stood at $15.9bn in 2010 according to IFPI figures. They've seen downsizing and layoffs, consolidation and a somewhat desperate attempt to move out of recorded music alone and sign acts to "360 deals" where labels share in everything an artist generates: live, merchandise, ads, songwriting and so on. Critics of labels (who always mean major labels) jeeringly point out that the record companies need to adapt their "business model" while hooting that they are too arrogant and stupid to change. It's payback for all those overpriced CDs in the '80s and '90s, they say, as well as the terrible contracts they made artists sign. Labels are dying and artists no longer need them when they can put music out themselves. If they no longer have huge advances and marketing budgets, they have snared the greatest "free" of all - creative freedom, where they are finally the masters of their own destiny.

It's an image to fire the blood, but it ignores a few important facts. Labels have their faults, but at least they still invest money back in new music. You may not like all the music they back, but they still make those bets when Kim Dotcom most certainly doesn't. Lady Gaga may sell millions and SBTRKT only a few thousand, but they both benefit from a system that few others will invest in. Ah, say the labels' critics, but what about Bandcamp? The direct-to-fan retail system is surely a shining example of what can be done without label meddling. But though it's easy to attack the labels for their bland, safe signings, the reality is that Bandcamp is bloated with hobbyist musicians. The freedom to do what you want can also mean the freedom to be unlistenable without someone to guide you. Some acts on Bandcamp are great. But many are very far from great. The bad outnumber the good because there is no quality filter - no one to tell them where they're going wrong.

Meanwhile the advocates of Free and the defenders of copyright have all but ceased to talk to one another. Labels say that online piracy costs jobs, kills investment and robs artists of their just income. "What we object to is people running businesses ripping off artists, musicians and labels," says Geoff Taylor, chief executive of the BPI. On the other hand are the zealots of Free - or "freetards" as their enemies call them - who say that anti-piracy laws will geld a free and open internet, destroy civil liberties and reward the lobbying of a failing music business. Loz Kaye, part-time composer and leader of Pirate Party UK, says that anti-piracy laws are a smokescreen distracting from the real issue - copyright reform.

"We want to see a major reform of copyright," he says. "It's no longer fit for purpose as we see it - particularly in the digital age." Kaye argues that legislation like the UK's new Digital Economy Act (DEA) are "a pathway to censorship" and that "we hand government the tool of censorship at our peril." Opponents of the law, which was passed in 2010 and could come into force this year after appeals from ISPs failed, argued that slowing down or terminating a customer's broadband, even if they were guilty of file sharing, was an attack on basic human rights. ISPs and others like Google claimed that blocking sites which facilitate file sharing was against the ethos of an open web. Every solution, every measure to make people pay for the stuff they use was somehow morally wrong. There's a word for this: fundamentalism.

"What we stand for is not to do with free stuff," counters Kaye. "It's about free speech and freedom. That's the core of what we believe in." Megaupload, he says, had legitimate uses. "What the Kim Dotcom case shows is the extraordinary point that the US now thinks the entire world is its jurisdiction." Others in the Free movement use even more emotive language. "Copyright is itself a form of restriction on speech and expression," says Mike Masnick, founder of influential blog TechDirt and a boundless critic of music industry thinking. Well, yes - but only to the extent that laws against theft restrict your "right" to enjoy other people's stuff.

It's become a dialogue of the deaf. "The debate is often not about whether people at labels deserve to get paid," says Cliff Fluet of UK legal firm Lewis Silkin. "It's: Those guys messed it up and they tried to sue us or lock us down. The Free guys see what they're doing as an act of rebellion against that."

Without dialogue there's slow progress towards "three strikes and you're out" laws such as the anti-piracy measures in South Korea, France, Sweden and New Zealand. But in the USA it hit the buffers. Earlier this year the Stop Online Piracy Act and Protect Intellectual Property Act - known as SOPA/PIPA - were derailed after a day of protest online. It looked very much like popular outrage: Wikipedia blacked out its page for 24 hours to show the potential consequences of the legislation, and many Twitter and Facebook users changed their profile pictures to black. But behind the protest was fierce politicking from digital giants like Google, which spends more heavily on lobbying than the record labels and makes a fortune from search advertising and traffic around illegal file sharing.

Even Rupert Murdoch weighed in, tweeting that Google was the "piracy leader" which "streams movies free and sells adverts around them." It was, "no wonder [Google was] pouring millions into lobbying." Murdoch may have had a point. But when copyright's loudest advocate is a beleaguered media mogul with ethical problems in his own back yard it is - as they say - not a good look.

The flag-wavers for Free have certainly wounded one of their enemies, the major record companies. But have they just exchanged The Man for another, bigger, richer, less scrupulous version? In the digital era Google tracks your every keystroke to target you with ads; broadband and mobile companies lock you into expensive contracts; Facebook chops up your social media life to sell to marketing companies... and none of these million-to-billion dollar businesses will finance anyone's creativity unless it's occurring at
a happening tech start-up.

In the new Free economy, huge sums of money are being made. Google has revenues of $10.6bn in the final quarter of 2011. Facebook could make $5bn this year. Apple, which arguably benefitted most from the hardware boom that accompanied the explosion in Free, became the world's most valuable company in March this year when its stock value topped $500bn. And then there are the multiple Kim Dotcoms out there - Lil' Kims? - investing only in technology and seizing other people's music, movies, games to feed traffic and make their money.

Robert Levine, the author of Free Ride: How The Internet Is Destroying The Culture Business, argues that Free should be a choice, but the "help yourself" culture that has mushroomed because of the web means the choice is no choice at all. "I get nervous about the word 'free'," he says. "It means a lot of different things to a lot of different people. You have to make a distinction between 'free' in that you decide to give your stuff away, and 'free' in that someone else decides to give your stuff away." But that is a minor detail to people who have decided that Free is a point of principle. "They have taken this weird temporary anomaly [file sharing] and turned it into a human rights cause," says Andrew Orlowski of tech website The Register. "Either that or they have a swollen sense of entitlement and think that it will be like this forever. It's a very negative view of the world that is very selfish and self-serving."

But it allows supporters of sites like Megaupload to ignore the fact that the majority of its traffic was found without question to infringe copyright laws. They simply zoned in on the fact that some files - work documents, personal photos - were there legally. Does a microscopic minority of legitimate uses trump an overwhelmingly illegal majority?
Surprisingly, Mike Masnick of Techdirt argues that the Megaupload case could actually help the music industry. "There is an argument that if he [Kim Dotcom] was so successful and able to profit off other people's copyright, that strikes me as
a business opportunity for the copyright holders."

Yes, but Kim Dotcom didn't have to go through all that tiresome business of paying to make the music, movies and games he profited from, did he? "Well, he did have to invest heavily in the physical and network infrastructures in order to make that happen," says Masnick. "If this is so profitable, that's an opportunity for the business to at least learn something from it."

Indeed, artists including Swizz Beatz have argued that musicians could have made more via Megaupload than from a standard record deal. The site offered paid accounts where the more people downloaded from you, the more you were paid out of Megaupload's ad-swollen coffers. A self-releasing artist could fill their account with their own music for others to take for free, and get paid too. But you'd have to be well-known in the first place. Not much of an issue for Swizz Beatz whose albums have already benefitted from the marketing muscle of Universal, the biggest record label in the world.

Ultimately the question is: how do you compete with Free? Marketeers and common sense suggest that a premium product and a premium experience can command a premium price. But that already exists. It's called iTunes. And Spotify. And Deezer. And 7digital. And any of the other hundreds of licensed legal music services in the market. To suggest there are no legal alternatives is nonsense. The iTunes Store arrived in 2003 and users can now listen, legally, to music for free online in many different places (we7, Vevo, official YouTube channels, the lite version of Spotify and so on).
How free is ruining everything continues in Part 2

Eamonn Forde @Eamonn_Forde Illustrations Tilly

2:00 PM | 17/07/2012