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03.22.2007 (previous | next)
Why the RIAA lawsuits are good for the big guys and the little guys of the music industry

A Wall Street Journal article this week chronicled the continuing decline in sales of CDs, which dropped 20 percent in the first quarter of 2007 relative to a year ago. A big part of this recent decline is certainly due to the closing of about 800 music stores, including 89 former Tower Records stores, over the course of 2006. There’s also little doubt that the root cause of both those closings and the overall decline in music sales is illegal music downloading; for more on the details of just how much of an effect downloading has on music sales, see Stan Liebowitz’s page.

Whenever a product is being illegally distributed, no one should be surprised if those harmed by that distribution take legal steps to try to stop it. The Recording Industry Association of America has done so several times over the past several years, and though no one really knows how effective those lawsuits have been in thwarting illegal downloading, they certainly don’t seem to have resulted in increased sales of CD’s. As long as millions of RIAA songs are being distributed without any form of compensation to the owners, we can expect these suits to continue.

Due to the nature of the crime and the nature of the media, these lawsuits are unlikely to create a positive image of the RIAA in the public mind. Piracy is so rampant that there’s no way even one percent of the perpetrators of the crime will ever be sued, so to compensate for that the RIAA will have to seek damages that will strike most of us as enormous. And the anonymity with which the crime can be committed means that mistakes will be made in determining who can be sued. Of the hundreds of suits made by the RIAA, there are bound to be cases where a low-income grandmother or ignorant child is fined hundreds of thousands of dollars for something they probably didn’t do. And we can be certain that those cases will be the ones that gain the media’s attention.

After reading a typical report of these RIAA lawsuits, most people will find the whole situation bizarre, and it’s not difficult to cast the RIAA as a villain. Ironically though, what the RIAA does actually helps out small, independent music makers just as much as it does the Christina Aguileras of the world. Illegal downloading affects the bottom line of every single album that’s been made in the past few years. Even though most of the sales dollars lost come from a handful of top name artists, there are thousands of albums that sell less than 2,000 copies who are harmed as well.

It’s hard for many to feel sympathetic about protecting intellectual property rights when those rights belong to a large corporation or a wealthy pop songstress. Although the RIAA does protect their interests, it also protects the interests of countless music makers who aren’t making lots of money from their music- musicians who aren’t on major labels, who don’t tour constantly, and who don’t have the resources to make sure their music isn’t being shared without their permission. They are victims of piracy as well, and though you probably won’t hear their side in the debate too often, they represent a growing (“Long Tail”) portion of the losses that result from illegal downloading.

posted by Dan Britton @ 11:13 AM | Internet: P2P, Search Engines...

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Comments

Nice post.

Enforcement underlies all aspects of copyright policy. Its funny that copyright skeptics criticize the enforcement efforts of the RIAA, when such efforts would be even more important without the DMCA and DRM. At best, the viability of copyright skeptics' policy views comes into question. At worst, these skeptics come off as simply parasites with no plan other than attacking creative and productive industries.

Posted by: Noel Le at March 22, 2007 11:46 AM

When are people going to go to prison under the No Electronic Theft Act? Getting a few hundred people busted under that and sent to prison for a few years might be a lot more effective than thousands of lawsuits.

The industry for its part doesn't seem to really be adjusting to the reality of the Internet, though. I walked into a FYE in Tyson's 1 the other day and bought a tribute CD to one of my favorite bands, Lacuna Coil. Damn thing cost me $19 when it was all said and done!

I don't condone file sharing like this, but how can the industry expect to fight it if their prices are that high? That is a ridiculous profit margin.

You know, the thing about product quality that gets missed here is that the record labels are generally clueless about what is good and what isn't. I'm about as big of a fan of heavy metal as James DeLong is of classical, and most of what passes for "RIAA-approved metal" is trash. Pure. Trash. It is the exact same style, limited technique, etc. They are literally dumping tons of "rough" all over their diamonds, such that finding the real gems is hard because they no longer know their markets.

Take some of the stars of Century Media, which is not a member of the RIAA, and compare the heavy metal bands there to the ones at many major labels. You'll be amazed at how much better some of the Century Media ones are across the board. They actually know how to make music rather than recycle riffs and grunt into the microphone (some of CM's bigger names have some serious vocal range).

Posted by: MikeT at March 22, 2007 2:02 PM

RIAA is the Recording Industry Association of America, not the Recording Industry Artists Association. RIAA represents the major labels, whose interests often diverge from those of artists.

Posted by: John Gordon at March 23, 2007 12:25 PM

More to the point, most artists see absolutely no royalties from CD sales - for all but the top 5% or so the CD is nothing more than marketing for the concerts, memorabilia, etc. Do you have any evidence that downloading harms smaller artists? Numbers, not testimonials.

Posted by: John Gordon at March 23, 2007 12:29 PM

I have been in two bands that each made a CD. The only substantial revenues either group got were from CD sales, which generally were about enough to cover recording and duplication expenses. There are dozens of other bands I knew of that depended mostly on internet-driven CD sales to cover their expenses. Data on bands like these are hard to come by because they are all well outside of the major labels, and sales are usually less than 2000 units. There are some smaller labels that I know of whose sales figures are a little more, but rarely more than 5000 or so, though this is just information I've gleaned from conversations with various people over the years. The point is that CD sales do matter to small bands (not just the top 5 percent), and that they're not just marketing for concerts and memorabilia. For bands with sales that small, it's not going to be easy to make money by selling T-Shirts or concert tickets- in fact it's unlikely they'll get paid more than a few dollars for any event they play.

I am aware of numerous people who downloaded or got someone to make CD-R copies of one of the two albums I was involved with. I can't say for sure they would have bought the album otherwise though- and that's why it's essentially impossible to know for sure how much financial losses illegal downloading causes, and estimates vary widely.

But it's not unreasonable to say that many people are less likely to spend $10-15 on a CD they can download for free. For independent bands, that's a loss of around $5-10 per unsold CD. When your total revenues are $2000-5000 (as opposed to $10,000-$100,000 or more for each major label release), those downloaded copies matter.

Posted by: Dan Britton at March 23, 2007 3:01 PM

The ability to copy and share files has dramatically reduced the perceived value of recorded music.

A part of that decrease in value is the related (but separate) phenomena of illegal file sharing.

However, the music industry has been very reluctant to adapt to these new realities, which however much they wail and gnash their teeth, they are realities.

So, then they want to fight illegal file sharing, and that is fine with me, except that in doing so, the recorded music industry showed that it did not care about the First Amendement or long-established legal principles such as probable cause being required BEFORE a search.

Additionally, it is clear that the fines which were written into the copyright laws anticipated large scale commercial pirate rings which would copy thousands of movies. The assertion that the same fine should apply because someone burns a cd for a friend is ludicrious.

So, because the recorded music industry has taken such an unreasonable and foot dragging approach to these new realities, I will never buy a cd until the recorded music industry stops suing filesharers.

That is my boycott.

Posted by: enigma_foundry at March 24, 2007 4:51 PM

John asked: Do you have any evidence that downloading harms smaller artists? Numbers, not testimonials.

Well, actions do sometimes speak louder than words, although certainly not all actors are the fully informed autonomous agents that some economic theories require, so there actions may not be entirely rational.

I would poiint to such actions as the Brazilian group CSS, which included a blank CD with their first CD, so you could burn a copy for your friends. Such an action obviously encouraged copying.

Recall that most smaller bands get their money from performances, not recorded music, and if CSS was well known, they would be more requested. Also, if their CD's were effectively self-replicating, it may have squeezed some of their competitor's music out of the market place.

I like very much your point that "RIAA stands for Recording Industry Association of America, not the Recording Industry Artists Association. RIAA represents the major labels, whose interests often diverge from those of artists." because that is exactly the type of conflation and mis-information that this site is al about.

There goal here is to maintain a corporate controled oligopoly, not to work for free markets and the rights of the individual, which thay are clearly out to destroy.

Posted by: enigma_foundry at March 24, 2007 5:03 PM

Enigma Foundry writes: "Recall that most smaller bands get their money from performances, not recorded music."

Do you have any real data on this? I've seen a lot of people say this, but I really doubt its accuracy.

Posted by: Dan Britton at March 29, 2007 11:18 AM








 
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