The Internet made a lot of things possible that were never possible before, two of the more prominent being the nationwide garage sale and the "sharing" of music. The first trend has come to be dominated by a single company — and is proceeding happily — while the second has been controllable by no one, and has been fraught with tumult and court actions.
Yesterday, eBay, the online auctioneer, announced the continuation of its march into the mainstream by reporting a 57 percent jump in revenue to $648.4 million, and a 78 percent rise in operating income to $203.1 million from a year ago. It has become a force in holiday shopping and has nearly tripled its revenue in two years, even after the Internet stock bubble burst.
Participation in the company's online "community," as it is called, continues to grow as well. The San Jose, Calif.-based company says it had 94.9 million registered users and 41.2 million active users (people who listed, bought or sold an item) in the most recent quarter — figures up by about half from a year earlier. Gross merchandise sales, or the total value of items sold on eBay, jumped 53 percent to a record $7.1 billion.
While others, such as Yahoo! and Amazon.com, have joined the Internet auction game, eBay is perched at the top, the place to be for auctions, its popularity generating more popularity — an example of the network effect so much responsible for the growth of the Internet itself. Meanwhile, the company has expanded into non-auction sales and is home to traditional retailers with online stores on the site and even to big companies selling their surplus product.
"We are more confident than ever with the long-term trajectory of eBay's business," said Meg Whitman, chief executive of the company founded in 1995 and which went public in 1998.
One Internet phenomena arguably even more popular than auctions is online music sharing. But while eBay managed to capture the latter for itself, no one company (or group) to date has harnessed the file "sharing" (or stealing) mania for itself, which has led to continuing legal actions between the record industry and some of its more passionate consumers.
Yesterday, the record industry filed lawsuits "against 532 individual computer users" whose names it does not know but who it says have been illegally distributing copyrighted music on peer-to-peer networks.
While the industry managed to use court actions to shut down Napster, the most popular file-sharing service of its day (though Napster is back in a different form), peer-to-peer sharing of copyrighted files has proved a persistent headache. While each participant is relatively small and lacking in legal resources, there are so many of them and they are hard to find.
In yesterday's court filings, the Recording Industry Association of America (RIAA) employed the so-called John Doe process in which it files suit first against defendants known only by their Internet Protocol or "IP" address and then issues subpoenas to the Internet service providers (ISPs) to find their names.
This technique was made necessary by a court ruling last month that said the record companies could not demand the names of alleged copyright violators from ISPs by issuing a subpoena even before a suit was filed. The RIAA promised to continue suing in compliance with the new process.
The association said the Does were distributing an average of more than 800 songs online. The four lawsuits (albeit with hundreds of potential defendants) were filed in Washington and New York where Verizon Communications' Verizon Internet Services and Time Warner, parent of America Online, and a few other prominent ISPs are based.
While the record companies have not won a single case against an alleged file sharer, some have agreed to desist from their practices and have even paid small damage awards. The companies, though, are clear that their goal is not ultimate victory over the John Does, but intimidation and education.
"Our campaign against illegal file sharers is not missing a beat. The message to illegal file sharers should be as clear as ever — we can and will continue to bring lawsuits on a regular basis against those who illegally distribute copyrighted music." said Cary Sherman, president of the RIAA, in a statement.
The RIAA is also trumpeting the increasing prevalence of for-pay music download services such as RealNetworks' Rhapsody and Apple Computer's iTunes as lawful alternatives for file sharers. Apple recently said it shipped 733,000 iPod music players in its most recent quarter, up 235% from a year ago. Neither Apple nor Real Networks breaks out the revenue or earnings from their music download services. But when they start to show eBay-like results, the record industry will be able to give its lawyers a day off.