LimeWire wins legal consolation prize but remains screwed

File-sharing site LimeWire is currently at the frontlines of the battle over online media distribution. LimeWire already lost the suit brought against it by thirteen record companies; the site is boarded up; and now it's negotiating damages. This is where things get interesting for the casual observer, because we're getting at least one concrete suggestion from as authoritative a voice as any as to how much a song is worth, stripped of its packaging.

To catch you up: Most of the major labels jointly sued LimeWire for copyright infringement, and last May, a federal judge ruled the site guilty of wrongfully assisting users in pirating digital recordings. A hearing on damages is set for May 2.

The record companies were demanding damages for each illegal upload and download of a song, an amount that could have totaled trillions of dollars. The judge's recent rejection of that proposal came down to common sense -- the labels were asking for more than has been made in the history of the record industry. Instead, she ruled that LimeWire would be liable based on the number of recordings infringed (as opposed to number of users). LimeWire will still owe between $7.5 million and $1.5 billion.

There are two larger issues here. The first, whether or not this will have a real impact on the infinite ways you can still readily pirate music online, seems obvious: No. One lawsuit, no matter how huge the settlement, will not change a culture of music sharing.

The second, the matter of how to value a digital file being copied and pasted all over the world, is an interesting matter. iTunes charges prices comprable to the physical CDs, which seems strange given how much lower their production and distribution overhead is (the cost of bandwidth, and that's about it).

Obviously the files are worth more than LimeWire was charging (nothing) in the eyes of the law. But in a capitalistic society, value is determined by the market, and right now, music can be had for free. Only a very slight learning curve for illegally downloading music and an arbitrary moral command keeps the value of a song from bottoming out completely.

LimeWire is done, obviously; the labels have won this round handily. But will they always? If it doesn't want to have to rely on the courts to get paid, the recording industry will have to find a new model, whether it's lower prices or new outlets of revenue.

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