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.
Previously: Day One: Panel Schedule