The Apple of RIAA's Eye

You know you have a lawyer in the family when dinner table discussion often involves digital rights and illegal downloading. Actually, I can't only blame the lawyer (me) in this instance. My husband is a photographer and his profession involves licensing intellectual property rights in his photographs. My son is interested in pursuing a career in a creative field. We have many friends who are artists, writers,musicians and in the film industry. Also, the three of us (me, hubby and teenage son) are avid music fans.

I also worked at a startup that was in the internet radio/streaming music business. We had a direct interest in the RIAA's policies on digital rights and licensing. In 1999 and 2000, my business development team worked out licensing arrangements with several major and independent labels at prices that didn't make a whole lot of sense at the time. Hey, it was 1999 and startups were paying crazy prices for everything just to be the first one to make a deal. The labels liked our model because we didn't offer downloads and we were willing to pay them to play their artists on our internet radio stations. In the traditional radio world, it was often the other way around.

I noted with interest the recent exchange between Apple, EMI and the RIAA regarding digital rights management (DRM). EMI is contemplating a model where music is distributed without DRM and would, therefore, allow the digital music files to be freely transferred. EMI's first offer to online music retailers was an upfront, multi-million dollar "risk-insurance" payment that would not apply against future sales. This proposal didn't fly with the retailers. According to the Wall Street Journal, EMI has requested that the online retailers submit a proposal that indicates the size of advance they would be willing to pay. EMI received the proposals on February 8th. So far, no announcements have been made, but Yahoo Music's General Manager, Dave Goldberg, predicts that by Christmas most of Yahoo's catalog will be DRM free.

Apple's Steve Jobs jumped into the fray on February 6th (two days before the EMI proposal was due) with an essay on DRM entitled "Thoughts on Music". He states that CD's do not have DRM software, so the music industry currently sells 97% of music without DRM. What's all of this fuss about a measly 3% of the market? Isn't it an artifice to require Apple to use DRM when 97% of music sales are not protected? Can't we just all get along in an DRM-free world?

Nice try, Steve. Everyone knows (or assumes) that Apple is seeking complete and utter control over the remaining 97% of the market. And, while digital music sales are increasing, they aren't making up for lost CD sales, which fell by 23% between 2000 and 2006. Total music sales for 2006 fell by 3%.

The RIAA quickly reiterated its position on the necessity of DRM, and shot an arrow at Steve Jobs and Apple. The RIAA suggested that if the constraints of DRM are slowing the growth of digital downloads because files can't be transferred freely between devices, then Apple should remove the portion of their DRM that restricts songs purchased from Apple to playback on the iPod only. Wouldn't that solve the problem? Touché, Apple.

I'm not a big fan of the RIAA and their "sue first, and think outside the box later" strategy. I'm also not a big fan of the argument that record labels deserve it because they are big companies and they've been ripping off artists for years. If they deserve it, then why doesn't everyone loot their local Walmart? It's an extreme example, but one that highlights the fact that Intellectual Property is, just that, property. The number of files that have been traded online is equivalent to looting.

Back to the dinner table discussion. I think my son understands the consequences of illegal downloading. Not the punitive consequences that "you could get sued or go to jail", but the fact that people he knows, like his father and our friends, make a living from Intellectual Property by licensing the right to reproduce their creations. Copying other peoples work and not paying for it may be convenient, but it is still stealing.

A legal, convenient and inexpensive approach is needed. The RIAA's DRM solution is inconvenient. Apple's $0.99/track approach is too expensive. Actually, the solution that makes the most sense to me is the Electronic Frontier Foundation's proposal on a collective licensing arrangement. The artists and labels get paid and consumers get the convenience of file sharing at a reasonable cost.

Unfortunately, don't expect the RIAA or Apple to agree to this approach any time soon. They have too much invested in the current system. There are other alternatives, such as emusic, that are making headway with DRM-free downloads from independent music labels. Personally, I subscribe to two streaming music services, Yahoo Music Unlimited and Rhapsody from Real Networks. Because I don't have a long commute to work, I listen to music at home. With these services and my Kima KS-110 (shameless plug), I'm happy as can be. I have access to millions of songs, without advertising, and I don't have to worry about DRM or my hard drive crashing and losing 1000's of downloaded music files. I listen to more new music now than ever. However, most Americans listen to music primarily in their car where streaming music is just starting to be available. So, for now, a solution to the DRM-wars is still needed and don't expect it from the RIAA or Apple any time soon.