Why the RIAA Likes the Per-Song Model by George Ziemann (Feb 3, 2004) As I wait patiently for the RIAA's top-notch accounting and fiction writing team to serve up the year-end statistics for our amusement and derisive comments, I'm giving this compulsory licensing thing a lot of thought. After reading the analysis of Prof. Fisher's compulsory licensing plan, I really don't understand the RIAA's reluctance to be pushing that route. It's like guaranteed income for them, just by virtue of the fact that they own most of the music out there. Fisher cut them into a $1.68 billion piece of pie that many of us think they don't deserve in the first place. Remember, they turned Napster's 5 cents per song offer down. At today's Kazaa file-swapping levels (4 billion songs a month, last I heard), which works out to 133 million songs a day, times a nickle, which gives us $6.7 million a day in royalty income. For a full year, that's a tidy sum running in the neighborhood of $2.5 billion. So Fisher's $1.67 billion is a lot less than they could have taken from Kazaa. In fact, over the four years they've been fighting about p2p, the RIAA's members have effectively passed up on almost $10 billion in income that wasn't good enough for them. While Forrester Research claims that unauthorized downloading costs the recording industry a mere $700 million a year, the RIAA likes to pretend that it's in the billions. Reality, of course, is probably (but not necessarily) somewhere in the middle. It is all a guess though. There is simply no way the RIAA can reasonably or accurately estimate how many downloads would have actually turned into a sale had they not been available or, conversely, how many downloaded songs prompted consumers to go out and actually buy a CD. But we can see how much they've lost by being arrogant, greedy bastards. It's easy, just add a nickle for every Kazaa download that goes by. $10 billion and counting. Personally, I would be glad to have a mere nickle for every time my songs were downloaded. For most of last year, that would have produced two or three hundred dollars in income every month. Not just for myself, but for several of the artists on my sites. And Kazaa tried to negotiate with them to end the stupidity. Again, the copyright cartel refused to budge from their platform - "We own everything ever recorded." So what is the RIAA actually after? It must not be the money because they have passed up so much of it. To make the puzzle even more conflicted, consider the down side of the iTunes Music Store, Napster, etc. With CDs priced at $18.98 and averaging 12 songs each, you're looking at $1.58 per song. At CD quality, if anyone cares. 99 cents would be less, thus devaluing the physical CD, at the same time the RIAA is consistently trying to raise prices. Of course, the RIAA is ALWAYS trying to raise prices, so that's an easy jab. So while they're still pretending to try and sell CDs in real record stores (okay, in Walmart), they're letting the online services shave about 33% percent off of the going retail price for a song, all the while screaming about fewer sales dollars. So why Napster 2? Why iTunes? What makes these pay-per-song models so attractive to the industry? Demographics and targeted marketing. To buy music you have to pay for it, and until we figure out how to feed cash directly into the Net, that means a credit card. It also means you have been identified. They can study your habits, to the point of offering you selections based on your prior listening preferences. This also gives them access to the wide-scale demographics -- who's buying what, where are they from, how old are they and what is their credit rating? The RIAA will not get that valuable information from a $5 fee on your cable bill. Or even from traditional record stores, where they still accept that ancient anonymous payment mode known as cash. But spend $5 at iTunes, and they've got your number. In return, you get digital rights management.

©2003 George Ziemann All material on azoz.com is protected by copyright law and by international treaties, but it all seems rather pointless. You may reprint any article on this site in whole, in part, in effigy or in ridicule. I really don't care.