Music Notes Blog

Ben Bernanke and "To RIAA or Not"

February 12, 2010

It’s not often that we can invoke the Federal Reserve Chairman to help make a point about music and copyrights, but a recent New York Times op-ed by Alan Blinder, former Vice Chairman of the Federal Reserve, raised an interesting and noteworthy parallel to one of the challenges we face.
 
In making the case for a second term for the now-confirmed Mr. Bernanke, Blinder argued:

This rapid improvement [in the economy] came faster than almost anyone expected. The plain truth is that,as  bad as the recession was, it turned out to be less horrific than expected, and Ben Bernanke is one of the reasons. Unfortunately, “it could have been much worse” doesn’t buy you much in politics.

It’s an interesting point, and it reminded me of the definitional challenge we often confront – how best to explain that one’s efforts couldn’t really solve the problem, but that they made a serious impact on a problem that “could have been much worse”?
 
This question was again prompted by commentary from the Author’s Guild, which recently explained in its blog that it chose to settle its book publishing lawsuit against Google, in part, because the aggressive anti-piracy efforts of the music industry over the past decade “didn’t work.”  But the question isn’t whether our antipiracy efforts “worked,” because everyone acknowledges that there is no magic bullet solution to piracy.  The better question is “Did it help?”  And the answer to that one is (to borrow a quote from Sarah Palin), “you betcha.”

Let me explain why.  

First, let’s start with the obvious point that is sometimes lost in the public conversation:  the most effective and most important anti-piracy strategy is a thriving legal marketplace.  Every legal and educational strategy deployed is complementary.  Innovative business models and technology partnerships are the priority of the music business.  It all starts there.  And the music business, to a greater extent than most other media and entertainment industries, has embraced its digital future and now derives some 40 percent of revenues from digital formats.  On the question of efficacy of legal strategies, think about it – had the music industry sat idly by and refused to enforce its rights against the sites that profited from facilitating theft, would the legal music marketplace be better off?  Would the interests of artists, songwriters, labels and others be better served if illegal sites like Audiogalaxy, Aimster, Bearshare, Kazaa, Grokster, Morpheus, and countless others were still thriving?  Or if a fog of misunderstanding about the relevant copyright laws persisted amongst consumers and fans kept illegally downloading with little awareness that they were breaking the law or that there were great legal alternatives available?  
 
Simply because a strategy did not “solve” a hemorrhaging crisis doesn’t mean it was not necessary or appropriate at the relevant moment, and ultimately helpful for the long term.  Prior to the lawsuits, only 35 percent of people knew filesharing was illegal, but after the initiation of the end-user legal campaign, that number quickly rocketed to more than 70 percent.  In 2003 and 2004, we saw double digit growth in the numbers of people using peer-to-peer to download music illegally.  If awareness of the copyright laws and an appreciation of the consequences of getting caught for breaking the law had not had an effect, p2p growth rates would likely have continued unabated, and would have seriously undermined the potential for a legal digital marketplace.
 
Instead, according to the market research firm NPD, between 2006 and 2009, the percent of Internet users downloading music illegally declined from 19 to 14 percent, while the percentage engaging in legal music downloading grew from 16 to 20 percent.  Where there was virtually no legal digital market in 2003, today the legal digital market approaches $3 billion annually.  

Illegal file sharing rates have now stabilized.  The share of users who download legally has surpassed the share of users who download illegally.  The “lines” have crossed and that’s an important marker in the development of a legal marketplace.  Because that’s what this is ultimately all about – helping provide the framework for a dynamic, exciting, content-rich marketplace that is rewarding for both fans as well as  the music community.  The good news – it’s here (http://www.riaa.com/toolsforparents.php?content_selector=legal_music_sites)

Absent determined action by the music industry, the problem could have been far worse – the music business’ efforts to innovate and license new models, educate fans about the laws and enforce rights made a difference.  We’re realistic and by no means declaring victory.  There continues to be job-and-culture-killing levels of illegal downloading that require a variety of approaches and the help of partners like Internet Service Providers (ISPs).  But, clearly, the steps undertaken helped.  
 
So, to our friends at the Author’s Guild:  taking strong, aggressive legal action is important to protecting rights.  Why else would you have taken the step of suing Google?  And how else would you have scored the settlement that you believe will now both protect and reward authors?
 
And to former Federal Reserve Vice Chairman Alan Blinder – thanks for helping us make this point. 

Jonathan Lamy, Senior Vice President, Communications, RIAA