Inside Job: Piracy in the Music Industry (Part 1)

In hearings held before the US Congress, European parliaments and a legion of industry panels over the years, one of the most alarming war stories of the battle against online music pirates is the tale of the track that's leaked before it's official release.

A number of tracks have suffered this fate in recent years. Just last week, Jay-Z announced he was moving forward the release date for The Blueprint 3 after online leaks had supposedly ruined his label's marketing plan (though that link, of course, and this story you're reading now are acting as a form of advanced publicity. Jay-Z himself commented on the leak by saying fans should "enjoy" what he interpreted as a "preview".)

What's rarely stated, however, is how exactly music that theoretically no one but the artist and his label should have are getting leaked to start with. Certainly music fans and The Pirate Bay aren't to blame. Many have pointed a finger at advance copies made available to music reviewers, radio stations, DJs and other industry insiders (about which we'll have more to say shortly).

Without insiders, pre-release leaks wouldn't exist. But it's not often talked about. From private conversations with labels, producers, artists and agents, I know it's every bit as significant to their bottom line as the "ordinary" piracy of tracks legitimately purchased by consumers after their release. But maybe it's not PR-friendly for the industry to point the finger of blame over the issue straight back at the industry itself.

A couple of ongoing legal cases this week, however, have pushed the issue of piracy by the music industry itself to the forefront.

One of the major piracy groups which specialized in pre-release leaks, DV8, was broken up back in June in the UK as members were picked up by City of London Police. On Friday, the p2p news site torrentfreak.com reported that a "label executive" was picked up in conjunction with the case "in late August". Unfortunately, their report relies on unnamed sources, but this paragraph in particular spells out why industry insiders are the indispensible cornerstone of pre-release leaks:

DV8, like many release groups, specialized in pre-release piracy - in this case the publication of music on the Internet before official release dates... In order to put the material on to the Internet in this way, Scene groups and individual uploaders need contacts somewhere in the supply chain, so-called industry insiders who act as suppliers for pre-release material. In the case of the OiNK uploaders, they had simply purchased CDs legitimately from online retailers who shipped products a day or two early, possibly in error. But to have the really juicy leaks, people more deeply involved in the supply chain can prove invaluable. (emphasis added)

And in an unrelated case back in the United States, last Wednesday the Feds swooped down on what they claimed were the ringleaders of Rabid Neurosis, or RNS, a piracy ring relying on "music industry insiders" for their wares - and according to some, the originators of the MP3 file sharing scene back in the late 1990s.

According to the Federal indictment filed September 9, 2009 in the Eastern District of Virginia:

In addition to being a piracy group, RNS was a "pre-release group"; that is, the group was often the original source or "first-provider" of pirated music that was distributed on the Internet. Members of RNS sought to acquire digital copies of songs and albums before their commercial release in the United States. The supply of pre-release music was often provided by music industry insiders, such as employees of compact disc manufacturing plants, radio stations, and retailers, who typically receive advance copies of music prior to its commercial release. (emphasis added)

We're still sorting through indictment, but so far it seems to be a fascinating lil exposé on how a song makes it from the CD pressing plant to the blogs - basically, just like legitimate music industry distribution, from insiders to the public. More to come.