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RIAA Legal Fees: The Facts

July 30, 2010

There have been various bizarre reports about our legal bills and recoupments, with some estimates saying we spent upwards of $54 million to pay outside lawyers involved in our end-user litigation campaign, only to recover somewhere around $300,000. If you’re as confused as we are by the mischaracterization of these numbers and what they represent, we recently set the record straight with the ABA Journal who wrote a clarified story here.

Here’s the real story.

First, the numbers various reports have cited are from our 990 tax documents for 2008 and prior years, documents that have been publicly available for months or years which all similar organizations must file.

There is indeed a category for “litigation costs and recoveries,” but contrary to the assumption that all of these costs were related to our end-user litigations, that category includes costs for a whole variety of legal efforts:  major copyright infringement litigations against Usenet and LimeWire (and many other illegal operators in prior years), online investigations and DMCA notices, a multi-year rate proceeding for mechanical royalties (what record labels pay publishers), legal advice in connection with pending legislation, and numerous other matters beyond the end-user litigations.

Many of these litigations resulted in significant victories that are beneficial to the entire music industry and everyone who works in it, such as the Usenet and LimeWire multi-year litigations. In previous years, the music industry also secured major recoveries against numerous p2p services, including a $115 million settlement with KaZaA. In that instance, the settlement revenues went directly to the label plaintiffs which share the proceeds of such recoveries with their artists in accordance with their artist contracts. In other cases, where the recoveries are modest, the funds are offset against the legal fees expended in the litigation. There are also many instances where we secure an injunction or voluntary shutdown against an illegal site, the copyright infringement facilitated by site is stopped – which is always our primary goal –but we don’t necessarily recover money. Napster, Grokster, Aimster and Mp3Board are all examples of this.

What does this all mean? Attempting to draw some larger conclusion about the effectiveness of our anti-piracy efforts based just on that one line in our tax document is simply inaccurate and highly misleading. First of all, not only does it include litigation work that has nothing to do with anti-piracy efforts, but also it does not fully reflect the scope of the many different anti-piracy efforts undertaken, the nature of multi-year litigations, and the scope of revenues generated from settlement proceedings where monies may go directly to the label plaintiffs in the case.   

It’s still worth noting that we have said all along our anti-piracy efforts are primarily designed to foster a respect for the rights of creators – creating a level playing field for legal services, raising awareness and implementing enough deterrence so that fans will steer towards the abundance of legitimate platforms and services in the music marketplace today. That’s the real barometer. And on that count, we think our efforts have made a real difference (see here for more details). The truth is that the happiness that music brings, and the close connection that people feel to it, will never be measured by a price tag. Fortunately for the hundreds of label-supported free and affordable options fans have for accessing their favorite music today, it doesn’t have to be.