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March 14, 2002
Day Two: Notes from the Hilary Rosen Interview
Jumbled notes from the interview with Hilary Rosen, CEO of the Recording Industry Association of American (RIAA), now infamous for opposing Napster and free music file-sharing.
RIAA: a trade association serving record companies, dealing with issues such as piracy, copy protection, facilitation of standards.
Why did the recording industry do so poorly last year?
- no blockbuster albums.
- poor economy. 9/11.
- radio consolidation (more on this below)
Reasons music-buying public is not buying, according to intermittent RIAA surveys:
1. I can find it for free on the ‘net (%43)
2. I can’t find what I want (%24)
(me: wish I had asked if the majority of numbers came from online surveys; that could skew the results greatly)
On Napster
Napster is buying time by throwing the kitchen sink at the courts in defense (i.e., antitrust suits against the 5 majors)
PressPlay is failing: too little, too late.
Rosen: Record companies are not taking enough risks with their business models, but fresh ideas for distributing music online don’t deserve free content. Record companies have tried to “serve too many masters” (retailers, independent promoters, artists, distributors); there are “too many loud voices” that want attention.
Are CD prices really too high? RIAA surveys don’t indicate a lot of complaining.
Rosen: The industry initially believed it could sell singles online (50 cents for download, etc.) but Napster upped the ante with its all-you-can-eat model. How can you limit the voracity? (me: how do you enforce scarcity?)
On Copy Protection
Record companies can’t agree on model for copy protection, as it comes from many private vendors. Expensive to develop and implement, and is simply not good enough.
On The 7-Year Rule
7-Year Rule: 1987 California law that enables artists to exit record contracts after seven years, even if they owe albums to labels.
Rosen: Three truths:
1) a compromise will be reached
2) artists shouldn’t be enslaved to record companies
3) yet no one should be allowed to simply walk away without examination
Record companies should have the right to plead a case in court, not guaranteed money to compensate for lost options. This often becomes a tool for contract renegotiation.
Risk is always involved when you sign a record deal. Newer models include shorter obligations (one or two album committments, instead of six or more).
On Radio and Airplay
Recent radio consolidation is hurting labels big time. Radio signs exclusive deals with independent promoters, which limit the amount of options labels have for getting songs on the air.
Music has become too expensive to promote. Too much money spent on the middleman, instead of on consumer outreach.
Current model cannot scale. Too expensive to promote one song.
Q: Why not spend money to help and partner with Internet radio, rather than slap a high royalty rate on the Web? Rosen: Web radio was reticent. RIAA wanted to offer a percentage deal, but arbitration problems led to flat rate.
Summary: overall, Rosen didn’t come across as quite the dragon lady I thought she was. I feel she’s basically written off the Internet until technology (Napster, PressPlay, etc.) is at a point where compromise can be reached without leaving labels in the dust. I get the impression she, like many, see the Web as a channel for product and not a place where people gather and share ideas as well as files, which I think is a concept labels will absolutely have to grasp if subscription models are to work. I also have issues with the results of the RIAA surveys, which seem to indicate that Internet piracy was the leading factor in the loss of label revenue last year, DESPITE that A) computer sales are slowing; B) most users are not “power users” and won’t even upgrade from Netscape 4 much less install Napster or Morpheus; and C) broadband isn’t that far reaching. Fat pipes are needed. A 2MB download of a crappy quality MP3 over a dialup can take forever; users won’t wait. Somehow I doubt that the Slashdot crowd (which represents a fraction of online users) is responsible for the millions lost last year.
The following email exchange took place between music historian Dave Marsh and Hilary Rosen in the fall of 1999 after college student Jeffrey Levy had been declared a criminal by the RIAA for hosting MP3 files on the university computer. Marsh felt the RIAA’s actions were misdirected:
Marsh: I applaud you for standing up against people taking things from musical creators. When are you going to go after the thieves you work for?
Rosen: Good question, Dave! I have never defended abusive recording contracts from the past.”
Marsh: I think you could something about it and you don’t.
Marsh referred to Rosen’s response as the Eichmann defense. That was giving her too much credit. Apparently Marsh was taking her at her word that she “doesn’t condone” industry rip-offs. The only time you should ever believe Rosen is if she is admitting to a lie.
List of accomplishments:
The RIAA is a music industry trade organization that includes no musicians among its membership. Its primary funding comes from 5 multi-national corporations.
What the RIAA is doing for creators:
The RIAA has opposed all international intellectual property rights treaties which contain language giving artists and creators moral rights.
Now that the digital future with direct licensing, downloading and automated accounting is quickly becoming reality, the HFA (The Harry Fox Agency) senses their days might be numbered. In a desperate play to shoot life into their beleaguered coffers they have penned a deal with the RIAA for a blanket license: a one time fee for all royalties that will become due from the major label’s “interactive music services” such as PressPlay and MusicNet. In this agreement the National Music Publishers’ Association (NMPA) and it’s collection arm (the HFA) has disregarded the untold millions that might come from interactive sales and accepted instead an “advance” of $1,000,000 from the RIAA and, for the next two years, then only, an additional $65,200 per month thereafter will be paid by all major labels for ALL digital downloads. After the HFA deducts some administrative fees, the division of the money will be based on what the HFA is calling “market share.” This term should ring a bell with those involved with ASCAP and BMI. It means you get paid ONLY if they think your music was a significant player in the game that month. A system that has met with much controversy over the years for both societies. In this case the data used to determine if you qualify for “market share” will be generated EXCLUSIVELY by SoundExchange– an RIAA owned affiliate.
According to Neil Strauss’ Feb. 18, 2002 story in the New York Times, artists will receive substantially less than 1 percent of the revenue from Pressplay and MusicNet, which are the download “services” owned by the cartel. What has managers and attorneys scared is that if they are forced to participate in this scam, by the time someone sets up a download system that can accurately be described as providing service, these royalty rates will be enshrined as “standard business practice.”
The RIAA supports the musicians exclusion from California service contracts which limits contracts to 7 years in all other professions.
What the RIAA is doing for fans:
The RIAA supports “parallel import” laws which help keep the prices of CDs artificially high by treating copyrights as territorial.
The 5 major funders of the RIAA have been labeled a “cartel” by the U.S. Justice Department for their practice of MAP pricing, a practice whereby advertising subsidies are withheld from any retailer who advertises below a set minimum price. In a settlement with the Justice Department, the MAP pricing policies were abolished. However, the cartel then raised suggested reatil prices and increased prices at the wholesale level, essentially maintaining artificially high prices. Allowing prices to seek an acceptable level is thwarted by the parallel import laws mentioned above.
The RIAA lobbied hard and successfully for the New Millennium Copyright Act, a piece of legislation that essentially does away with the concept of Fair Use, a major component of previous copyright law.
The RIAA has utilized this law and the 1997 NET Act to bully institutes of learning and college students from utilizing university computers to store copyrighted material (See Jeffrey Levy case).
Hillary Rosen and the RIAA brought suits this past year against LAUNCH, SonicNet, ClickRadio and Echo (among others) for being “too interactive” despite the fact that ALL on-line music services have interactive elements. (It has not escaped the eyes of their critics that the RIAA’s suits seem to be selectively targeting companies that are NOT affiliated with RIAA members).
The RIAA supports the development of copy-protected discs. Record companies and their corporate ilk are protected with multiple legal shields from their outrageous practices against consumers. Rep. Rick Boucher (Virginia) tried to use the Audio Home Recording Act of 1992, which provides a limited right to copy, against the labels. But as Harvard law professor Jon Zittrain pointed out on the Politech mailing list, that law “just says that the record companies can’t sue over people making certain kinds of copies, not that they have to allow those copies to be made. The New Millennium Copyright Act prohibits consumers from attempting to “de-code” copy-protection language.
In another dead-of-night deal, RIAA lobbyist Mitch Glazier tried to sneak one of the cartel’s “anti-piracy” clauses into the already hideous anti-terrorism bill. This change actually just confirmed what the cartel believes is its right to steal; it would leave you defenseless if record companies decided to invade your home computer and wreak havoc because your hard drive contained material it *considered* illegal.
Info accumulated from the following sources:
Ask Moses website at http://64.225.86.211/index2.htm
Rock ‘N’ Rap Confidential at http://www.rockrap.com
Dave Marsh’s “American Granstand column on Starpolish at http://www.starpolish.com
Counterpunch at http://www.counterpunch.org
Mondo Gordo at http://www.mondogordo.com
BigO magazine at http://www.bigo.com.sg
I applaud Bill Glahn for the excellent education he has given me on the creepy ways of the RIAA. And that song, “Freedom Pirates” kicks ass. Who are those guys?
Rock on,
Dan Bergstrom
Oh yeah, it IS creepy alright. Just to be clear: just because I thought Rosen was all well-behaved and all doesn’t mean I bought into what she’s selling. I should mention there wasn’t a lot of Q and A during the interview at all.
Bottom line: the RIAA MO is to save the recording industry’s butt on all fronts (that includes radio [both airwaves and internet], the 7-year-rule, etc.). The problem is that as the industry spends more and more money trying to hopelessly litigate against the future, their profits will continue to erode to nothing.
I’m glad to see that Dan Bergstrom is reading my emails! Dan, of course, is the bass player on the “Freeedom Pirates” single that was passed out prior to Rosen’s appearance at SXSW and is being facetious when he asks “Who are these guys?”. Dan is giving me a little too much credit though. In the words of an excellent (though unreleased) Dan Bern Bern song, I’m just the “pizza delivery guy”. A large part of the text of my reader’s rant actually includes the writings of Dave Marsh, Moses Avalon, Lee Ballinger, Michael Cheah, and others who are doing great work in bringing these issues to the public’s attention. More of their writings can be found at the websites listed at the bottom of my rant. Credit should also go to The Walkingbirds for being artists who care enough to host these discussions on their website. Muchos gracious to all. (Bill Glahn)