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Does the RIAA Even Want A Recording Industry?

By Sean W. On Oct 12, 2012 0

The Recording Industry of America (RIAA) has been very active in the pursuit to eliminate piracy from essentially killing Napster to suing individuals for hundreds of thousands of dollars for pirating music.  Services like iTunes have given users more opportunities to purchase music legally but the type of services that seems to curb piracy more effectively are streaming services like Pandora.  Any program or service that lowers privacy seems like something the RIAA would support, but instead, it looks as if the RIAA is purposely sabotaging their own industry for the greater good of greed.

The RIAA is a trade group made up of industry executives from labels including EMI, Sony, Warner, Universal, Tommy Boy, Island, the Atlantic Group and more.  These individuals carry titles like Senior VP, Chief Operating Officers, CEOs and label founders.  Piracy should be a big concern of theirs as it effects the RIAA’s 18 board members companies directly.

The first major attempt to stop piracy was to take down the service Napster which was a real easy way to pirate music.  For those who are too young to remember the original Napster, it was a basic interface that allowed one to just type in the song name and with a few clicks the song was downloading.  Single songs were easy to acquire this way and with CD burners starting to become a norm on computers at the time, there were some serious concerns with people taking advantage of it.  People did take advantage.  The service was shut down but that gave way to other means to piracy music including Kazaa and Bittorret.  At this time, the only reliably outlet for music was through CDs that needed to be purchased at a record store or electronics store.

Then came Apple.

Apple, with a lot of resistance and pressure from the RIAA, managed to open the iTunes store giving Napster users and the whole world the feature that many of them really wanted; an legal easy inexpensive way to instantly buy music and download it.  The RIAA, concerned with piracy, made it mandatory that the songs could only be downloaded once and carry DRM.  There were still many RIAA individuals and artists alike that said that iTunes is destroying their profits which lead to some artists blocking content from the services.  Years later, the iTunes store has become the biggest music retailer in the U.S. and now artists like the Beatles can be found on the service.

RIAA Bully

Fast forward some years and the dedicated music streaming services like Rhapsody and Pandora make an appearance to give users the ability to listen to music more a-la-carte.  These services were great for those who couldn’t buy every song they liked for $.99 or for those who wanted just a self made radio station they could control, something not available for traditional radio or satellite radio.  This seems like a bad idea for the RIAA to loose albums sales but streaming services had another effect on the music industry, they seemed to reduce piracy.  As reported in Sweden in 2009, a location that had significant piracy problems, Spotify has reduced piracy 25% in a short time.  The following year, another 9% dropped off those numbers.  Reported in 2012, the numbers of piracy are still dropping and subscribers to these services increasing.

With this information on the reduction of piracy, one would figure the RIAA would do whatever is possible to keep these services alive.  The move the RIAA has decided to do, instead, is to demand more money from the services while they are already struggling to make a profit, and extend these rules to traditional over the air radio.

Pandora has 150 million users and reported a revenue of over $100 million this past quarter.  With those profits, it can be surprising to learn that over half of that revenue goes back to the royalties for the artists.  Spotify posted over $250,000,000 this past quarter but, as it sits right now, 70 percent of their revenue goes back to the industry.  The revenue here doesn’t take in consideration any server costs, employee costs, taxes, fees or other moneies these companies need to pay to say in business, making success in this business very difficult.

To alleviate this pain for streaming services which do, in fact, lower piracy, Pandora is lobbying for Congress to pass a new act called the Radio Fairness Act, which will lower the rates these companies will pay for the music.  The rates streaming companies pay is more than current rate paid by satellite radio or traditional radio.  The RIAA is fighting this act and is also supporting another bill called the Interim First Act, that will up the rates for traditional radio and satellite radio to match the rates the streaming services are paying.  This could kill many radio stations in the U.S. if passes.

With companies like Pandora and Spotify already struggling to make a profit, one can wonder why the RIAA would not support them, especially when there are studies that say these services reduce piracy.  Piracy is such a big deal to the RIAA that they have an entire page dedicated to it and what their definition of piracy listed before the “Gold and Platinum” information.  They even give six bullet points showing how serious the company is about this situation.

If they win and proceed to raise the rates of the traditional radio to the level the streaming services, then there’s a good chance that traditional radio stations will start to struggle and either pull content giving listeners less variety or they’ll pull the plug on the station entirely.  It’s hard to imagine how this Interim First Act will benefit anyone besides the RIAA, and only for a short time.  A company that is against piracy and is, supposedly, fighting the good fight for their artists, are seemingly pushing for the death of the recording industry right as it grows and adjusts to the times.  It almost seems like the Recording Industry of America doesn’t want a Recording Industry of America.

Tell me what you think, do you think the RIAA is justified in their decisions or are they making huge mistakes?