Last night on SBS, Insight brought together Artists, record labels, P2P users (who were promised not to be prosecuted for talking about illegal download) and ISPs to discuss music downloads.

Thousands of Australians download their music from the Internet, and don't pay for it. Some say it’s stealing, others say sharing. But who's making money from these downloads?

You can view the episode online (MiTunes) if you missed it. Unfortunately the discussion was light and only one person came across as having a well informed overall understanding of the issue (Kate Crawford, Media Research Centre, UNSW). So I feel compelled to give a bit of a commentary.

STEPHEN PEACH, AUST. RECORDING INDUSTRY ASSOC: OK, well we have, as I was saying before, we have a billion songs a year illegally downloaded. The research that we've done suggests that about somewhere 1 in 5, 1 in 4 of those would have been bought, but for the fact that they could be obtained illegally. We're talking about there conservatively 200 million tracks maybe - in wholesale terms that's $200 million, about half the size of the industry at the moment.

This is kinda difficult to digest. The P2P guests certainly gave weight to Stephen Peach's claims, as they stated they had 2000 to 3000 illegally acquired songs on their iPod. But free music is a no risk purchase. How many of those tracks would they say they listen to enough to purchase it? 1 in 4? I don't think so. And these P2P users were a sample of high-school kids living at home with their parents.

Another claim was that 60% of traffic on the Internet is music and video downloads. Good grief piracy is out of control! Run to the hills!!! But really, 60% is rather small if the other 40% is web pages. A single MP3 is 200 [err... I don't know how I got the number 200] 50 times larger than the total download of a single web page. And an hour long video is 100 times larger than an MP3 (or 20,000 5,000 times larger than a web page). 60% of downloads traffic does not mean 60% of user activity is illegal. Nope, the amount of illegal activity (measured on a per request basis) would likely be a fraction of percent of what they suggest, based on these numbers assumptions.

But ARIA has proposed a plan to the ISP's to reduce illegal music downloading. And of course it involves punishing the consumer, taking away their Internet access if they fail to heed three warnings. I was really disappointed with Peter Coroneos (Internet Industry Association) response to this. He was un-accepting of the idea (and rightly so) but failed to address why. An entity such as ARIA needs to be kept as far away from controlling internet access as possible. Give them and inch and they'll cripple the system for their own gains. Not only will they cripple it, but every other business who feels they are being hurt by the Internet will demand the same privileges. China's politically censored Internet will become the envy of Australians.

Some of the artists (Phrase and Mahalia Barnes) suggested that ISP's were profiting at their expense. Peter Coroneos seemed to squirm guiltily in his chair at this accusation, but really, ISP's seem fiercely competitive with their prices to attract customers. It's hard to believe that illegal use of the services is increasing their profit margins.  Even without piracy most homes will still need Internet access.

The artists went so far as to suggest ISP's should be paying royalties just like TV and Radio. Again, this shows a real lack of understanding on the Artists behalf. Will software and game developers be able to demand royalties as well? Their stuff is being stolen also. And if users aren't stealing music then why should they pay ARIA royalties to look up porn?

Artists came off even less knowledgeable:

JOHN BUTLER, MUSICIAN: We sell about 40% less albums as we did three or four years ago because of downloading. So this album is done better than SOS, 'Sunrise Over Sea', as far as everything's concerned, but it's almost sold less because of all the downloading. So it is different, it's a different time.

REPORTER: So you reckon that 40%, you can attribute to people just downloading it?

JOHN BUTLER: Yeah, or just not liking me anymore.

That's right, John. Maybe it's not piracy. The very idea that two different albums should sell the exact same number just because your name is on both is stupid. If you used to get high for a living the signs are still showing.

Overall the Artists clearly didn't want to upset their fans (even those who stole their music), but they seem to lack any true understanding of the situation. Worse is that their lack of understanding seem to influence their opinion. They have no idea if they would be more successful or not if there was no P2P. ARIA throw out numbers like 60% and 1 billion and they now have a reason for the lack of success.

I thought it was interesting that ARIA has a typical record industry attitude. In terms of ideas on how to use the internet for their benefit Stephen Peach had nothing, zip, zilch. Cutting off offenders Internet was the only fix to preserve their industry. I wish the host, Jenny Brockie, asked what the Artists thought of this and the lack of any other strategy to support their artists.

I'll leave you with a quote from Kate Crawford:

There's definitely - there's definitely a future for the music industry but it's a radically different terrain and unfortunately there's two ways that the industry can respond to this terrain. It can either go down the 'let's have a war' and find ways to punitively attack consumers, or 'let's find collaborative new ways to embrace these new technologies'. Now unfortunately what we've seen over the 8-10 years is a war, essentially, prosecuted against their best customers - their fan base - and in actual fact what we see is that there are so many different ways they could have embraced these technologies to have really straight-forward, easy-to-use, very cheap download services, but the industry has really resisted those sorts of options and instead gone for very expensive litigation and also things like Digital Rights Management which has introduced things like malware and spyware onto people's computers. So unfortunately I think the industry has been behind the eight-ball but it's got a long way to go to really catch up with where everybody in this room is already sitting.