Posts Tagged ‘Economy’

By Darcie-Nicole Wicknick
Special to MusicBizAdvice.com

As you’re probably aware, the Recording Industry Association of America (RIAA) has been making news these days. The most recent shocker: A twelve year old has been sued for downloading content online. An 80 year-old grandfather has also been sued for his computer’s activity, despite the fact that his grandchildren were actually doing the file-sharing.

Consumers of music are in an uproar about the lawsuits, and many people believe file-sharing is the wave of the future and their full-on right. The RIAA sees things differently and is taking what some consumers feel are drastic measures to limit piracy.

This article seeks to explain the roles of various agencies and to present different faces of the issue in an unbiased yet informative manner. The views expressed by sources for this article are not necessarily those of the author or of musicbizadvice.com; we just want to bring the topic to the table for discussion.

WHO IS THE RIAA?
Some consumers and reporters refer to the RIAA as “the record companies.” This is not quite correct. The RIAA is the trade association that oversees all the labels, provides rules of the road, and also acts on behalf of the labels and the artists those labels represent in legal matters that affect the recording industry as a whole, such as piracy. So, while it is true that the RIAA is not going to tolerate piracy of any kind, they are also the governing body for the record labels, so they want to be sure the labels are acting in accordance with standard regulations as well. The RIAA is also responsible for tracking album sales (by units shipped) and awarding those Gold and Platinum records you hear so much about. In 1999, they added Diamond awards to artists shipping over ten million units.

A LITTLE HISTORY ON MUSIC PIRACY
The subject of piracy has a long history. In the 1920’s, when radio stations started playing records over the airwaves performance was not tracked. Performance is currently one of the legal entitlements a songwriter is granted in a copyright registration. Then, an artist may have been paid for their live broadcast performance, but the writers were not. And, no one was making money off of the recordings being played, except the radio station via its sponsors. This particular vein of history is not piracy per se, but did impact writers who were losing countless amounts of money from public performance of their works without accountability. Over time, ASCAP and BMI (the performance rights societies) worked with Congress and the FCC to change legislation and to ensure that radio stations acted fairly in tracking airplay and that they paid blanket licenses that were distributed to writers based on airplay. BMI also worked in the 1940’s to prevent relegation of certain music to remote stations, and to make radio a more equal opportunity medium, according to its own historical account.

Now, the sophisticated program BDS tracks airplay, and is used not only to report airplay on behalf of writers, but is used by record companies to ensure that artists are in regular rotation at the stations that accept their singles.

Before the invention of blank tape it was close to impossible to COPY a record. If you wanted the record, you either bought it or played it at your friend’s house till the needle lost its tip. Even after the invention of blank tape in the mid 1960’s copying a record was a clunky process at best, involving a reel-to-reel machine hooked up to your phonograph receiver and pre-amplifier.

Moving ahead to the advent of cassette tape, people began dubbing vinyl-to-cassette and cassette-to-cassette, but chances were low that they were selling them, with the exception of pirates who owned mass duplication systems and graphic machines good enough to fool consumers. But you could still tell it was a dub by listening to it because every time you make a dub, sonic integrity is compromised. Dubbing was mostly kids at home who made mix tapes to give to their girlfriends, “make out” tapes, “party mixes” for that sweet 16 bash next week – that kind of thing. And, for that reason, ASCAP and BMI, at the hand of the FCC, began to collect and disburse a modest dividend from blanket license fees on the sale of blank media. These dividends pay writer and publisher members a portion of the sales license. Most industry insiders felt it was better than nothing.

When CDs surfaced in Europe and Japan in 1982 and here in the United States in 1983, they, like vinyl, were read-only. There was no way to burn to a CD – at first. But technology has advanced so rapidly over the past twenty years that now, in 2003, mp3s and sources like iTunes offer NearBeer quality of recorded music for a fraction of the cost. And you can burn the CD or mix right from your desktop. For those who like album artwork and liner notes, those are online, too. MP3 and iTunes do charge for the licensing (and offer generous duplication allowances.) Although the debate on that issue merits a separate article, it’s worth noting that this is not theft. Many record companies have worked out deals with those particular companies.

So why are people downloading and file-sharing illegally? Are they thrill seekers? Evil thieves? Hardly. Most consumers of downloaded music view it as convenient, and sound quality isn’t an issue to them-especially to those who aren’t serious audiophiles. Others are more conflicted: “I’m kind of divided on this issue, ” writes one respondent we polled for this article. “I download music frequently but the music I download is for one of three reasons (usually): a.) the music/artist is obscure or hard to find, b.) I want to sample the music before I buy the CD or c.) I only want a couple of songs off of the CD. Needless to say I find all three acceptable. However, when someone consistently downloads [an] artists’ whole CD I think both the artist & the record company have a right to be pissed.”

ECONOMIC EFFECTS OF MUSIC DOWNLOADING AND FILESHARING
The recent commercial by respectcopyrights.org about bootlegging movies, which depicts film industry employees in a host of jobs talking about how piracy impacts their job security and financial stability, applies to the music industry, too. Most people understand the economics that one lost sale has a financial ripple effect. But what may not be as apparent is this: Low sales mean fewer new artists get signed. As poll respondent S.W. put it, “The more revenues slump, the less labels are willing to sign new and innovative acts. As CD sales lower, labels are looking for safe bets.” Additionally, established artists may not get their next option picked up–meaning that the record label could drop Mr. or Ms. Superstar today right on the rear end.

Sales from the current album, among a host of other factors, project sales for the next album. If those projections are low, the chances that the artist’s option will be picked up are greatly lessened. And even when an artist’s popularity is way up and the kids are digging him or her, that artist may not get as much tour support money (a risk for the label), so you may not ever get to see them play. In effect, that artist just lost at least a half a years’ salary from the tour that never happened. Non-writing artists who don’t have publishing royalties to fall back on are particularly hard-hit.

Sales of rare and used records are affected as well. J.A.T., an employee at a rare and used record store in Boston, admits that sales have suffered because of downloading. And, while iTunes doesn’t hurt the industry (again those are licensed and paid for downloads) it can hurt stores like his – ones that OFFER the obscure and hard to find music that people are getting for cheaper, and at a lesser quality, online. This year alone, Boston residents have witnessed the closing of no fewer than four old crate-digging sources. An argument can also be made that it can diminish perceived value of an artist whose music trades at $100 but is reissued online-only for $10!

THE MUSIC DOWNLOADERS’ POINT OF VIEW
Recently the RIAA brought suit against many companies, colleges, and individuals for allowing their facilities and phone lines and hosts to be a party to music file-sharing. Verizon, for example, was threatened with legal action if they didn’t divulge specific names of offenders. Verizon buckled.

According to an article on America Online, the RIAA is including a grandfather and his preteen grandchildren in its class action suit. Is it right to sue twelve-year-olds and 80-year-olds who don’t know what the twelve-year-olds are doing? Probably not. One 80-year-old grandparent we spoke with for this article seemed to sum it up best: “I don’t even know how to turn the damned thing on!” Many grandparents innocently bought the computer as a treat for when the “kids” come over. (Thanks, grandma…) Still, a twelve-year-old may know how to USE the technology as well as an MIT grad student but most likely doesn’t understand the legal ramifications of doing so, much less the economics of the recording industry. In such cases, outreach by the RIAA may be more plausible.

A recent article by Andy Sullivan in Washington Times reports that a Washington, D.C. DJ offered to pay one youngster’s legal fees, and another offered to provide the girl with “$2000 worth of Industry-sanctioned downloads.” The article also states that one online provider calls the RIAA “bullies” and challenges,”How can some kid in a housing project come up with the money to pay the suit?”

POSSIBLE COMPROMISES TO THE FILESHARING PROBLEM
One option that might make sense would be for the RIAA, BMI, or ASCAP to send field representatives (or even well-informed Music Business professionals) to schools and colleges to educate them about the impact of file-sharing and copyright infringement. Then if a rebellious kid says, “Whatever. I do as I please,” the RIAA could proceed from there. The RIAA is assuming that people know just how pervasive the problem is. Not necessarily so. Based just on research for this article alone, the lay population and even some of the music community don’t understand all the factors involved…and it’s difficult to hold uninformed people accountable.

A solution popular with many music industry insiders is the notion of collecting blanket license dues or individual song royalties from companies who implement music downloading technology, such as internet service providers (ISPs)–much like fees collected by ASCAP and BMI from venues, radio stations, and TV stations for songs that are performed. Songwriters would get paid, and a small fee added to the consumer’s ISP bill would cover the cost. This, combined with education, could minimize illegal downloading.

Still there is a light at the end of the tunnel, and a wide array of possible compromises that would be fair to everyone. The iTunes deal, though not the favorite of some industry insiders, is one step toward compromise. In addition, Universal Music Group reduced their Suggested Retail List Price (SRLP) to $12.00 on new CD releases. This encourages people to buy a CD at a more reasonable price and may be reflective of what CDs WOULD have cost if illegal downloading had not been so prevalent. Last year, Island-Def Jam artist Bon Jovi introduced new technology on their Bounce CD with American XS, an incentive program with exclusive content, contests, online chats with the band, and special concert seating available to CD purchasers who registered online using a unique code contained in each CD. Island Def Jam is owned by Universal.

According to a Music Business News article by Jon Iverson, BMG and SunnComm Technologies are developing deals to implement advanced copy protection (like the scramble you get on pay TV channels) on CD and DVD media. The article goes on to say that reaction and market of this process is yet unknown.

Iverson also reports that the Electronic Frontier Foundation (EFF) is encouraging file-sharers to challenge copyright laws. EFF director Shari Steele is quoted in the article as saying “Copyright Law is out of step with the views of the American public and the reality of music distribution online.” Steele goes on to say that there needs to be a better way to ensure artists get paid while allowing file-sharing to persist.

The waters will be very choppy until a reasonable medium is reached. And, it may take years. Dubbing tapes and CDs and selling them – or bootlegging – is deemed illegal in all cases. An FBI federal warning is issued at the beginning of every DVD and VHS tape. The same laws of copy and sale or mass distribution apply in music. The RIAA is stepping up to remind people of this. How they are doing so may leave much to be desired. But given the potential ramifications of file-sharing, it pays to be educated and informed, regardless of which side of the issue you stand.

ADDITIONAL RESOURCES

http://www.bmi.com
http://www.ascap.com
http://www.loc.gov/copyright
http://www.riaa.org
http://www.bmi.com/library/brochures/historybook/index.asp

Darcie-Nicole Wicknick is a freelance music business consultant and the founder of AskDarcie Music Business Consulting.  She is also Director of Boston Hip-Hop Alliance and lead vocalist for Velvet Stylus. She can be reached through her website at http://askdarcie.info.

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