'All Shook Up' got all shook up!
On April 21st, 2001, Harvard Law School hosted, "All Shook Up," a Journal of Law and Technology Symposium. This day-long session of panels put reps from the RIAA side-by-side with artist advocates, consumer electronics representatives, copyright experts and economists. It was an effort to discover and understand the online world in a post-Napster era.
On a NEMO panel just the day before, I listened while Nashville indie music consultant and founder of IndieBiz.com, David R. Hooper, told bands that they should be working together in their regions rather than struggling against each other. "It doesnít make sense for two bands to compete for fans when they could play together and have twice as many people at the show."
I couldnít help thinking of this as the panel started and discussions commenced about consumer demand for online music and speculation of future music delivery models. As speakers speculated on what would come next, it was impossible to entirely avoid the subject of Napster.
Someone repeated the familiar phrase, "You canít compete with FREE." Strangely, I donít see this as the strongest barrier. It only takes a quick glance at the bottled water industry to deflect that argument. I believe that itís the convenience of one-stop-shopping thatís a bigger hurdle to overcome. Itís pretty clear that the major content providers arenít going to be "gigging" together anytime soon. I have to say that Iím curious myself to see what the future holds.
This article will explore and recap the third panel of the day, which was simply titled, The Online World. It was expertly moderated by Constance Bagley, Associate Professor, Harvard Business School. She kept control of a very heated exchange that proved to be most fascinating.
The Future of Music Coalition is an artists advocate group that stands firm for the rights of artists in a system openly acknowledged as abusive and unfair. Something tells me that if Walter McDonough, General Counsel - FMC, ran the world, half of every penny you spent on music would go directly to the artist. That would be just fine with me, but if nothing else, this panel provided everyone with a firm grip of reality.
Things were heated from the get go when Walter started talking about non-interactive online performance royalties as established by the DMCA. He felt strongly that these royalties should be paid directly to the artists, just one step towards equalizing the current payment system. Matt Oppenheim, Sr. VP Legal and Business Affairs - RIAA, countered with an example of an artist who is given a 20 million dollar advance. He felt it was unreasonable for a label to pay that amount of upfront cash and then, additionally, give up half of the revenue that it can recoup against. In frustration at not being able to interject, Jenny Toomey, Executive Director - FMC, and a panelist earlier in the day, whispered, "How many artists get 20 million dollar advances?" As if reading her mind, the moderator quickly diverted the conversation away from the mega platinum stars to the current major label business structure.
Constance asked, if the major labels are such dinosaurs, why hasnít someone else come in and done it better? Amidst some grumbling, an outline of the basic cost/revenue structure of a CD was presented. The figures were based on a $14 retail price. It allowed $1.25 royalty to be paid to the artist and ended at a sum of $2.20 going to the label.
There was a discussion about various barriers to entry, which included the major label control of airplay and videoplay as well as the excessive cost of entry as compared to the risk. Ninety percent of major label artists do not recoup against their expenses. Yet another barrier is the cost of fighting piracy and the obvious cost of technology development. Want my opinion on another barrier that wasnít discussedÖ the prerequisite for a lack of morality as evident by the tactics routinely taken to increase the aforementioned $2.20 bottom line.
Mike Edwards, CEO - Copyright Systems Technology, said that he was the first to notify the RIAA of Napster and that a lawsuit against the company was necessary. He felt that a solution needed to be found that would protect label interests as well as the artist interests. A common ground is that it's the only way to continue to inspire continued music creation. A nice sentiment indeed.
Gary Klein, VP of Government and Legal Affairs - Consumer Electronics Association, probably had the best perspective on the consumer. As you would expect, he felt strongly that consumers had the right to play shift and time shift their music collection for personal use and that they should be allowed to make their own music compilations. However, according to the RIAA, any of these things make you a music pirate and a criminal. We were reminded of the lawsuit filed by the RIAA against the Diamond Rio, a portable MP3 player.
As the panel turned to audience questions, someone asked, "Why is the RIAA threatening legal action against Professor Edward W. Felton." Matt Oppenheim quickly and firmly retorted that that was not the case.
However, "according to the New York Times, the threat of legal action was made in an April 9 letter to Dr. Edward W. Felton by Matthew Oppenheim, the head of the litigation department for the Recording Industry Association of America and secretary of the Secure Digital Music Initiative, a copyright-protection group sponsored by the music industry." (full story)
For the sake of the majority in the room, the story was explained. Professor Felton had participated in an SDMI sponsored contest to try and crack their copyright protection technology. He claimed that he had cracked their code and had planned to present and publish his findings. The RIAA said that Professor Felton only took part in half of the study, and the participation agreement that he had signed expressly forbid sharing of his finding with anyone outside a specified group. Additionally, they felt strongly that disclosure of the findings could undermine the industryís efforts to prevent future music piracy and violate anti-circumvention laws.
Jenny Toomey coolly posed the unobvious question. If the point of the study was to expose weakness in the system, why are they now fighting the exposure? Isnít it better that we know this now?
Matt responded by saying that he felt that academic freedom that undermines the industry is bad.
I have to side with Jenny on this one.
As discussions came to a close, Constance queried, "Donít you think that the RIAA is hurting itself by being so heavy handed?" I wondered the same thing.
Ric Dube, Webnoize, commented after the panel that Nicholas Butterworth, MTVi President and CEO who gave the day's Keynote address, had said that reaction to change is a four-step process. 1) Ignore 2) Kill 3) Control 4) Accept. The labels first ignored the Internet and its new technology and delivery systems. Their lawsuits are an attempt to kill it, and weíve definitely seen evidence that they are now trying to control it. Iíll be curious to see when stage four arrives.
The last question was more of a statement. Someone stood up and remarked on how unhappy a family the music industry seems to be. It was a total tension reliever as everyoneís faces cracked a smile. I donít think itís an unhappy family, just one that is going through some changes. Debate and discussion bring a greater understanding of the issues. I really felt fortunate to be sitting in the hallowed halls of Harvard Law School for this hour and a half.
All Shook Up - http://jolt.law.harvard.edu/symposium.html
CEA - www.ce.org
FMC - www.futureofmusic.org
IndieBiz.com - www.indiebiz.com
MTVi - www.mtvi.com
NEMO - www.nemoboston.com
RIAA - www.riaa.com
SDMI - www.sdmi.org
Webnoize - www.webnoize.com