RIAA Sequentially Repeating
Edison's Mistakes
by George Ziemann (Oct.
8, 2003)
There is something that I find
incredibly mystifying about the entire chain of events from Napster
to the present. This entire scenario has played out before.
Which makes it all the more
curious why the RIAA is following it step by step. In
today's news, we learn that the RIAA has now advanced to
using strongarm, mob-style tactics by conducting warrantless
search-and-seize missions against independent music stores who
dare to sell music that the RIAA doesn't own.
On September 23, Berry's Music
in Indianapolis, Indiana, was raided:
"According to proprietor
Alan Berry, police confiscated $10,000 worth of mix discs by
the likes of DJ World and DJ Paul Bunyan. 'The record labels
want the independent record stores out of the business,' Berry
says. 'They'd rather deal with Target, Best Buy, Circuit City
-- it's consolidation, just like any other industry. The RIAA
knows that mixes are an integral part of urban stores' culture
and profit margin. By eliminating them, they can eliminate a
lot of indie stores'."
City Music, also in Indianapolis,
was raided on October 1, with manager Jerome Avery quoted as
saying, "They came in and took anything that was on a recordable
CD. The only DJ mixes I had were behind the counter for personal
listening, and they confiscated them. How can it be illegal if
the artist is making them for the street? They came without a
notice - no warrant, no nothing. They're making up their own
laws, if you ask me."
The City Music raid happened
the day Universal's new prices went into effect - "more
bad news for small, independent record stores. Universal's widely
publicized $9.09 wholesale prices only apply to the largest retail
chains, and only to stores that are willing to buy 30 copies
of a disc at one time. Most smaller stores, though, deal with
'one-stop' sub-distributors that can fill orders for a disc or
two quickly, and take a markup of their own. And many retailers
are frustrated that customers have been coming in for weeks,
asking where their $9 CDs are.
Eric Haight of Record World
in Petoskey, Michigan, notes that a new Sting album before the
price drop cost the store $12.69, with a suggested retail price
of $18.98. Now it costs them $10.79, with a retail price of $12.98
- the profit margin has been slashed by almost two-thirds, and
Universal will no longer help them out with advertising costs.
After watching the RIAA's public
Dance of Death closely for only about a year, everything they
do is so predictable that I'm beginning to wonder if they even
have any control over their own destiny. For some inexplicable
reason, they seem compelled to follow through until the final
scene, perhaps unaware that there's been a rewrite in the ending
over the last 90 years.
While suggested reading is
the series I did earlier on Thomas
Edison, here is a synopsis of how Edison's approach to running
an entertainment industry so closely parallels what the RIAA
is trying to do. After all, the goal is the same -- to maintain
a monopoly.
Step 1 -- Acquire the rights. All
of them.
In Edison's case, patents were
the prize possession. His realm was the movie industry. Edison,
or those who worked for him, had basically invented the entire
movie industry, along with all the pieces and parts that made
it happen. The RIAA uses copyrights in the same manner by gathering
all the industry's top players, thus creating a collective ownership
base to wield the same power.
Step 2 -- Define the standards
Once you own all of the rights,
you have to find a way to make competing prohibitively expensive.
This requires defining the standard to include some proprietary
part, method, equipment, etc. Edison's means of achieving this
goal was with the film size and even the spacing of the little
holes along the edges, still Kodak's standard.
For decades, the vinyl record
served this purpose for the music industry. It was a capability
that required special equipment, preventing your average person
on the street from being able to replicate the product or compete
with it. For this very reason, the electronics industry owns
a great deal of the recording industry today. Sony is the best
example.
Step 3 -- Dominate the market
The easiest way to dominate
the market is by being the only game in town. The second easiest
way is to get together with the top competitors and come up with
a market strategy that everyone can play by. Both methods carry
the likelihood of being looked at as anti-competitive, depending
how the parties involved act. The public and the government will
actually tolerate a benevolent monopoly for quite some time if
no one complains about it. Major league baseball is a perfect
example -- there's no such thing as an independent major league
baseball team, at least not that I've ever heard of. Even if
there are, they're certainly not going to make it into the World
Series. The public doesn't complain because all the teams are
apparently subject to the same rules. No team "wins"
just because they have the richest owner.
And we know the players get
paid.
So it has been with radio airplay,
the preferred method of choice for selling music for decades.
The hypothesis is that a person must hear a song several times
in order to entice them to buy the record. Pretty simple. Very
effective. The barrier to entry is very high, basically keeping
competition limited to the major labels.
We now know that the players
in this game are not being paid.
Step 4 -- Assume the creative community
is expendable
Edison's mistake was that he
felt that it did not matter who the performers were. It was the
movie, the finished product, that was important, not the people
in it. The general public was unfortunately not aware of this
importance, preferring to follow their favorite stars. Edison
underestimated the value of his performers and they abandoned
him.
The recording industry has
always been a bit more blatant in their cold-hearted willingness
to discard performers. Edison simply was wrong in his assessment;
the music industry is intentionally bent to minimize an artist's
financial benefit, while constantly portraying themselves as
acting in the best interests of the artists.
At least Edison was honest.
Step 5 -- Eliminate independent competition
In both cases, had Step Four
not taken place, there would be no Step 5. As in the case of
baseball, benevolent market domination can be tolerated by the
public for extended periods of time.
The recording industry had
a lock on the business until the advent of the CD, followed by
the recordable CD. Expensive at first, but now significantly
dwindled in price, the recordable CD and computerized audio mastering
tools like Sonar, ProTools and Cakewalk have put professional
audio capability into the hands of almost anyone. The kid down
the street now has the capability of making a CD that sounds
as good as one from Warner Music. Whether he succeeds or not
is another issue. The fact is that he's got the capability.
If he puts a few mp3 files
on the Internet, it's entirely possible that he can sell some
CDs of his own music at a reasonable price. So, to make this
scenario as difficult as possible to achieve, the industry has
systematically painted recordable media, the Internet and mp3
files as contraband, its users as thieves and any artist not
signed with a major label as illegitimate.
Add to this the strong-arm
tactics now raised by the Village Voice, and the pattern of systematically
elimination independent competition is almost identical to those
methods used by the Motion
Picture Patents Company 95 years ago.
Step 6 -- Alienate the public
Edison did his best to squash
his competitors, but he never stooped so low as to try suing
moviegoers for attending "unlicensed" movies. Step
6 is an RIAA original, I believe. (ERROR
-- This already happened too!) For the life of me, I cannot
comprehend why anyone ever thought this was a good idea on any
level.
Now we see that they had intended
to combat falling sales by a $4 price hike.
Step 7 -- Government intervention
The government allowed the
Motion Picture Patents Company, which had been formed in December,
1908, to get away with their anti-competitive control over the
industry for less than four years. The U.S. government brought
an antitrust suit against the MPPC in 1912 and declared it illegal
in 1915.
Considering that the government
has a) been trying to diffuse
the voice of the music industry for a half century, if not
silence it altogether and b) four of the five major labels are
foreign-owned, sooner or later someone at the top end of government
is going to possess the lucidity to wonder why the government
should even care what happens to the record industry.
The only real issue is how
long we have to wait. Step 8 should be worth waiting for -- the
same independent renaissance that filmmakers enjoyed in the 1920s
and 30s when Edison's movie empire fell apart. But the indie
filmmakers didn't even wait for the government. They simply walked
away and started over.
Kind of like what's happening
now.
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