Back to the Future

The Recording Industry Association of America catches the 80s retro vibe with an attack on its arch nemesis: technology. And just like last time, it’s not only a losing fight but also a misguided philosophy. While the RIAA claims that P2P file sharing is to blame for shitty CD sales (not the fact that the 12 year old girls who two years ago bought N*Sync et al are now 14 year old teenagers desperately trying to shake a kiddy image), other reports show just the opposite. Looking for a villain in all of this, downloading has the RIAA’s dander up like Alf in a cat show.

RIAA re-ignites feud with technology to blame for slumping sales.

The record industry blames the rapid decline of album sales on a new technology that allows people to easily copy and transport music. It’s expected to cripple the major record labels. The year was 1979…

—WiredNEWS, Aug. 27, 2002

I keep wondering if we’re in a time warp. I mean, the Republicans are back in the White House, the US is facing a recession, terrorism is on the top of everyone’s minds, and the RIAA is blaming technology for slumping sales. What gives?

According to the RIAA’s Mid-Year Snapshot of [the] Music Industry, “CD shipments dropped 7% in the first six months of 2002, while seizures of counterfeit CDs soared by 69%.” This, says the RIAA, “decisively debunks the theory that stealing music online is somehow good for the music business.” Does it?

The report is based on a May 2002 survey of 860 Internet-connected music consumers age 12 to 54, which stated that, “by a more than two-to-one margin, consumers who say they are downloading more also say they are purchasing less.” Seems simple enough, right? But what does one have to do with the other? I’ll bet nearly 100% of those respondents who answered also eat bread. Is bread to blame for slumping sales? If they eat really expensive bread, it might be.

The report does not take factor in those Internet user’s other spending habits. In the 80s the record industry was competing against the new, madly popular home video game craze (Atari 2600 or Intellivision anyone?), the advent of portable music listening devices (the Walkman), and the dreaded cassette tape. Today’s consumer also has an overload of choices on which they spend their hard-earned disposable income.

But let’s back up a sec. Did you notice the mention of cassettes in that last paragraph? For you youngsters out there it may seem absurd to think that an inferior recording medium coupled with shoddy or non-existent packaging could usurp the power of the mighty record industry. Yes, we all laugh about it now, but in the early 80s it was as threatening as a snakehead fish set loose in a goldfish tank. Mix tapes were the scourges of the industry that CD-Rs are today. But a funny thing happened. Despite the ability to copy your friend’s new copy of Ratt’s Out of the Cellar album for a can of spray paint or a tuna sandwich, record sales increased! How? Mix tapes gave kids a sample of artists and piqued their interest. Also, MTV recreated the power and excitement that FM radio once held and introduced new artists to a massive audience. Suddenly, a new generation of music fanatics was created; kids who had to own everything by their favorite group.

But MTV sucks now. We all know that. They don’t even play music anymore. And radio is a lost cause…well, commercial radio. Consolidation and the advent of legal payola by way of indie-promoters has stifled radio to the point that it literally can cost millions of dollars to get a hit. Along comes Internet radio. The record industry rejoices, right?

Fantastic, you mean people will spend their free time at home uploading their favorite songs, crafting play lists, and cultivating an audience culminating in free exposure for artists!? That’s right, Jimmy, er, at least that’s how it used to be.

In their infinite wisdom, the RIAA attacked the only medium that had the ability to break an artist without the astronomical costs of the indie-promoters who rule corporate radio playlists. Why? Because they saw fractions of a penny slipping away as Internet stations were not bound by the same antiquated royalty system that burdens commercial radio. By requiring Internet radio to pay to play, they effectively shut down hundreds, if not thousands or tens of thousands, of free publicity agents. Again, the industry attacks innovation for pennies.

But the point is, people are stealing and that’s bringing down sales! Not according to a report by Forrest research (an independent research facility) which states in no uncertain terms, “online music downloads are not responsible for the drop in global music sales…” The report then has the gall to say that downloading could actually be the answer to the RIAA’s woes! What? How can this be? Easy, Jane, we’re getting there.

Forrester surveyed 1,000 online consumers and found no evidence of decreased CD buying among frequent digital consumers. The report puts blame squarely on the shoulders of an overall lagging economy and other causes for the slum in CD sales, including, “competition from surging video games and DVD sales.” Sound familiar?

Another report by Jupiter Media Metrix released in May 2002, indicated that Internet file-sharing traffic actually increased music sales. According to the report, 34 percent of all peer-to-peer file sharers said they spent more money for music than before they started swapping tunes online. A full 50 percent said they spend about the same amount of money as they did before using P2P services. The RIAA should instead focus their ire on people who do not file swap of whom, according to the report, a meek 19 percent said they spend more money on music now. A ghastly 71 percent said their spending habits had not changed at all! But the industry needs to account for slumping sales and lagging stock prices. Quick, find an enemy and damn the costs!

Everyday the RIAA spends fighting a technology it doesn’t understand, let alone shut down, is revenue down the drain. In its prime, Napster provided easily searchable catalogs, access to music from countless labels, demos and live performances and drew 13.6 million users in February of 2001 alone. Some 900,000 users launched the now defunct site was as it was heaving its last breath this past June. How many potential customers for a commercial file-sharing site was that? Can any of the current commercial music downloading sites boast numbers like that? Better yet, how many millions were spent fighting what music consumers want?

Research from the Yankee Group indicates that some 5.16 billion audio files were downloaded via free file-sharing services this year in the US alone. The report also notes that efforts by the industry to stomp out free trading have failed. You’ll never stomp out free file sharing as long as there are programmers hell bent on developing the systems. Case in point: Kazaa drew 8.2 million in June 2002. AudioGalaxy was second with 3.2 million. Morpheus came in third with a strong 2.9 million users.

If you can’t beat ’em, join ’em.

It’s complicated though, splitting up $10 billion. Licensing, artist control over demos, whatever. Who knows if it’s even possible to create a commercial version of a P2P file sharing system that was as comprehensive as Napster? But since it’s what the customer wants, wouldn’t you at least try?

As my esteemed colleague, Jeff Sabatini wrote in June of this year that the RIAA should love us, the music fans. While Sabu points out in his article that most of the masses probably don’t care about sound quality or packaging, those of us who do are hardcore music buyers. We buy multiple copies of the works that mean the most to us. I personally have purchased several copies of Wilco’s Being There on vinyl and CD for myself and as a gift for others. Message to RIAA President, Hilary Rosen: Work with me, I am your best customer. And I’m not alone.

In fact, Forrester’s report says that if the music industry could pull their heads out of their asses and stop counting fractions of a penny, they could reap massive rewards, but they’ll have to work with their customers, a philosophy lost on most multi-national conglomerates.

First, the report states, you need to establish a “Music Bill of Rights,” which will give consumers the kind of service so far only available through free P2P file sharing services:

  • The right to find music from any label, not just two or three majors
  • The right to control the music by burning or copying onto a portable device
  • The right to pay by the song, not the album or through a monthly service

A system like this would make content easier to find and more readily available for the users, thus increasing impulse buying (doesn’t it also sound a lot like Napster??). Forrester forecasts soaring revenues by 2005 and generated income of $2.1 billion, or 17 percent of the music business, by 2007. “Big hits will spark traffic as people download music directly to cell phones, portable players and PCs.” But this kind of talk falls on deaf ears.

The record industry focuses on making war with its best customers and shutting down modes of free promotion instead of adapting to emerging technology and rethinking outdated business models. Is it any wonder they’re losing money hand over fist? Imagine if US automotive manufacturers thought like that in the 80s. We’d no longer have the Big Three…oh, wait…

7 thoughts on “Back to the Future”

  1. Excellent writing, Derek. I think your interpretation is right on and so well put that a four-year-old could understand it. Sadly, we’re dealing with the RIAA here, whose collective IQ seems to be somewhere between nil and pi. It amazes me what these guys try to pass off as ‘fact’ and ‘evidence.

    Like those three poor kids at the Grammys last year, people’s buying and listening activities are being twisted and distorted to fit the Industry’s needs and no one – certainly not our friends of the Grand Old Party administration – is willing or able to call them on it.

  2. Well, I made some corrections (thanks to a certain pair of eagle eyes), but thanks. I think it’s asinine how the RIAA fights music lovers over some of these issues. Internet radio is the best case. I mean, these were stations predominantly run by hobbyists who were giving “airtime” to a lot of under-played artists at NO COST to the labels and the RIAA lobbied to collect royalties? Give me a break. I can’t tell you how many CDs I’ve bought (that’s right, BOUGHT) in the last two years from hearing a song on a mix, on an Internet radio station or after downloading a song. Need some real examples?

    1. Clem Snide

    2. Warlocks

    3. Promise Ring

    4. Wilco (Yes, I bought YHF)

    5. Hives

    6. INC

    7. Ugly Casanova

    The list goes on and on and on…

  3. You said:

    “Why? Because they saw fractions of a penny slipping away as Internet stations were not bound by the same antiquated royalty system that burdens commercial radio.”

    Not exactly. You equate pay for play to royalties when you say, “By requiring Internet radio to pay to play,” using the words “pay to play” in a completely different sense than you did in an earlier paragraph. This is misleading. The current pay-to-play “indie” system has nothing to do with royalties — commercial stations don’t pay royalties, or at least, not in America. The Copyright office wanted to set up a system whereby internet stations would pay fees that no other radio station would have to pay.

  4. Additional info from that story for more clarification:

    Webcasters and over-the-air radio stations already pay composers and music publishers royalties for the music they play, based typically on a percentage of their revenues.

    Traditional radio broadcasters have been exempt from paying separate royalties to music labels and musicians after successfully arguing they already were promoting the music.

    But the music industry succeeded in persuading Congress in 1998 to require such fees from webcasters, and the U.S. Copyright Office set the rates after years of hearings.

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