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It must be a good time to be at the helm of the
Recording Industry Association of America.
The RIAA, the primary trade association for the American recording industry with a $27.7 million annual budget, is enjoying a string of recent political and legal victories.
In last year’s Grokster case, the U.S. Supreme Court unanimously overturned a lower court’s ruling that favored file-swapping networks. Federal judges have been upholding stiff fines against individual file swappers, and the online marketplace for music is booming.
Congress has enacted new laws backed by the RIAA that target peer-to-peer pirates with federal felonies, and a Republican administration is talking up the need for even stiffer ones. (Last year’s new felonies have already led to jail time for some).
Yet obstacles remain. A draft proposal in the House of Representatives to tighten copyright law has still not yet been formally announced–possibly because of opposition by technology firms–since CNET
News.com wrote about it more than a month ago. A federal appeals court has effectively blocked a move by the recording industry to ask the Federal Communications Commission to outlaw certain digital radio receivers. And Sen. Ted Stevens, the Republican chairman of an influential committee, has publicly expressed skepticism about an RIAA-backed proposal that he worried would hurt his ability to use his iPod.
“DRM has just gotten a bad rap based on this notion that it’s going to restrict consumer choice.”
–Cary Sherman, president, RIAA
Mitch Bainwol, RIAA’s chairman and CEO, and , RIAA’s president, recently visited News.com’s San Francisco offices to talk about the music industry, Congress, and digital rights management. (The two rank among Washington’s best-paid lobbyists, with a combined salary of $1.85 million in 2003.) Following are excerpts from the conversation.
Q: How is the digital music marketplace looking from your perspective?
Bainwol: Digital sales are rising at a value that is larger than the decline in physical sales. We went through a pretty extraordinary time (recently). What you’re seeing now is proof of that exercise. The promise of the digital marketplace is being realized. There’s new optimism.
Q: How much of that is because of the Supreme Court’s ruling in Grokster and your lawsuits against individual file swappers?
Bainwol: Our view of Grokster is that the court struck the right balance. If you (download music) illegally, there are risks–whether they are legal or viruses.
Sherman: I’m either at risk, or I get out, or I go legit. There are a number of conversations happening about “how do I go legit?” We can’t talk about what’s going on, but there are a lot of conversations. There’s a lot to be said for converting these businesses.
Q: Do your view your lawsuits, even ones where you sued a 12-year-old girl or a Boston grandmother, as a success overall and do you think the process is working?
Sherman: Yes. We’re feeling pretty good. There will be the opportunity for business models that are consistent with P2P networks (such as demo versions or low quality). There have been a lot of conversations recently about ad-supported models.
Bainwol: Now there is additional legal clarity.
Q: Do you have any regrets about filing so many lawsuits?
Sherman: That we had to do it at all. It arrested the growth of a runaway solution that would have grown worse and worse.
Bainwol: You make it clear that there are risks.
Q: How useful has the NET Act, which makes not-for-profit copyright infringement a federal crime, been?
Sherman: Did it have an impact? Sure. Anything that increases risk would have an impact. The only thing that has an impact is: “What does it matter for me?” When we’ve done surveys, the lawsuits are the No. 1 or No. 2 reason for why people have changed their behavior.
Q: What new laws are you lobbying for to help you?
Bainwol: You’ve got this conversation going on in terms of platform and prices. The iPod has dominated. We’re in an MP3 player world. (That’s why we see digital radio receivers that record as a threat.)
Q: I wrote about the RIAA’s appearance before a Senate hearing earlier this year on an “audio broadcast flag” for digital receivers that are able to broadcasts from HD radio and satellite radio. What exactly would you like Congress to do?
Sherman: Legislative parity in the Senate that would harmonize (licensing rates) and content protection requirements. It doesn’t make any sense that Webcasters who are in competition with satellite pay more and have more obligations. They should be harmonized.
They’re basically licensed to do a public performance. They are filling up an iPod equivalent with free music. It stays on your device for as long as you’re a subscriber.
Q: Do you need congressional action on this, or can you work this out through negotiation and contracts?
Bainwol: As a matter of policy you have very broad issues here. The individual question with XM or Sirius can be (addressed) on a private basis.
Q: Do you actually need to make certain receivers illegal to manufacture, which is the path being taken by Sen. Ted Stevens’ proposal or Rep. Mike Ferguson’s bill?
Sherman: It isn’t a matter of making it legal or illegal. The preferred approach would be to make this a licensing matter.
Any kind of traditional copying would be fine. Just don’t create a library like an iTunes library.
Q: How are you going to deal with open-source programmers who release code that simply ignores a broadcast flag? I’m thinking of applications like .
Sherman: We’ve long accepted the notion that you’re not going to have a pirate-proof system. The idea is to leave that to the hacking community. Most people want to get it legitimately.
Q: A few years ago, there were all sorts of proposals (click for PDF) to ban, regulate, or otherwise restrict digital rights management. Now hundreds of millions of people happily use a DRM-equipped iTunes. Is the debate over?
Bainwol: The world at large is not aware of DRM as an issue. Nobody feels any real problem with it.
Sherman: It’s the ideologues who are focused on it. There’s a great article by Jim DeLong that asks how you think there should be rallies outside supermarkets using technology preventing you from taking away shopping carts. (Editors’ note: DeLong is an analyst at the
Progress and Freedom Foundation in Washington, D.C., who supports stronger intellectual property rights.)
Q: Could the DRM debate flare up again because of public missteps like Sony’s rootkit-enabled CDs?
Sherman: DRM has just gotten a bad rap based on this notion that it’s going to restrict consumer choice.
Bainwol: It’s a proxy for an almost ideological fight on fair use.
Sherman: The fight over DRM will almost fade away as business models (become more flexible).
