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Perspective, pings and other things relevant to our world

So What Exactly Is A Shipment?

July 23, 2009

Like many other trade associations, the RIAA strives to provide accurate and comprehensive data about the state of the industry it represents.  Historically we’ve posted this info on our website or issued news releases, giving a static snapshot of the most recent data.  But just as the marketplace has become increasingly dynamic, we’re making our reporting more dynamic, too.  Starting today, we’re introducing a new tool that will let subscribers see industry trends in a more comprehensive, flexible, and usable manner.  Our new shipments database allows users to see the data in a more useful way, with charting tools and data output across the major music formats.  Plus, expanded access to volume and value data all the way back to 1973 is now available.  We think this tool will be very useful for industry analysts, journalists, and anyone else with an interest in the macro trends of the music industry. 

It’s probably worth taking a moment now to explain what we mean by ‘shipments’.  We collect data directly from the record companies, rather than from the stores that sell recorded music to the final consumer.  Hence, the term “shipments” as in “shipments from the record labels to the stores they supply.”  Since stores can return unsold merchandise, we subtract returns so the final data you see is a net figure (keep in mind sales and shipments are virtually the same thing for digital products).  Overall, “shipments” and “sales” are very similar, but we use the term shipments for accuracy.  A frequent question we get is whether our data represents the whole US market, or just the RIAA member companies?  Our aim is to describe the whole market, and we use independent estimates to account for the parts that are not created or distributed by the major record labels.  
 
Historically, these reports have focused on sales of physical goods like records, tapes, and CDs.  As we moved into the digital era, the reports expanded to include digital downloads, mobile sales, and subscription services.  Now we’re seeing an explosion in new platforms for music listening like Internet and satellite radio, and social networks, where fans can listen to streams of music instead of buying them directly.  Traditional metrics of album sales and downloads no longer tell the whole story.

Last year we started reporting a new category – digital performance royalties – to better capture the activity on these new music platforms.  It is a small but quickly growing part of the music landscape, one that we think will grow significantly in importance and scale for both fans and the industry.  Most of the value in this category so far comes from satellite and Internet radio.  It’s one slice of an ever-diversifying pie, and we’re constantly working to include as much reliable data as possible in our reports from the many emerging platforms.

Joshua P. Friedlander     
Vice President, Research and Strategic Analysis, Recording Industry Association of America


Michael and the Power of Music

July 23, 2009

OK, admittedly, talking about the musical contributions of Michael Jackson is a challenge, when so much has already been so brilliantly articulated and expressed.

Yet, there’s something going on in all of this mourning, celebration, remembrance and hunger for more (MTV: Michael Jackson's Thriller Set To Become Top-Selling Album Of All Time) that has to do, specifically, with his supreme talent and category-defying music, and yet more generally with music itself.

What else would cause this sort of outpouring? Or, for that matter the desire to so connect?  Throughout the world, people have sought this connection both locally in their communities, towns and cities, to connect in their personal relation to the artist and the music, as well as globally, spectacularly, across continents and to the tune of millions upon millions of viewers, bloggers and participants

We can look at the absolutely unique nature of Michael’s musical talent, skill, accomplishment and impact.  For those of us (ahem) over 30 (and beyond), “The Wall,’ “Thriller,” etc. were the soundtrack to our proms and basement dances, weddings and bar mitzvahs, first music video-viewing and dance-move-emulating.

But there’s something profound here occurring with Michael but is beyond Michael which is . . . how all of us relate to music.  How it defines our lives.  That song at that moment, that album when we needed it, that love forever associated. That other person or group of friends who get that artist that you worship that makes you smile inside and determines that you are, well . . . friends!

And now more than ever, when has music connected us more?  From discovering that band online directly, newly, to being part of a throng at a concert, to voting for that Idol, to finding out about an after-show from a social networking post to never being without the life soundtrack – car, gym, home, shower.

Music moves us.  And, what is also part of Michael’s legacy – brilliantly as shown through “We Are the World,” “Camp Ronald McDonald,” or Ryan White (countless examples) – is the way . . . music moves us.

In what other art form, through what other medium are we as moved and motivated to get involved.  What other sector, what other range of human beings truly hear the call, heed the call and sound the call.  Through this (and forgive me any hyperbole) . . .  human history has truly been changed.  Through Live AID and Live Earth, Post -9/11 and Post-Katrina, from musical instruments in schools to cancer research for children, from third world debt to hunger in our towns (again, countless examples), musicians have rallied and lent their voices and moved us to do the same.

But, in the end, it’s simpler than global.  It’s your kid’s school recital.  It’s the song sung at the funeral that defines the moment.  It’s the first dance as a couple. It’s the song or the album that will always transport you to that specific place, good or bad, that experience or that person.

That is music.  And that is eternal.  Thanks, Michael, for reminding us of that.

Joel Flatow

General Manager, West Coast Operations/Senior Vice President, Artist & Industry Relations, RIAA


It's Licensing. Stupid

July 08, 2009

It’s Licensing, Stupid

The news that the music industry has sealed agreements with leading Internet radio sites is a great development for fans, webcasters and labels and artists.  It is further evidence of our continuing commitment to help make this marketplace work for fans and the industry, along with an eagerness to innovate and experiment with business models and licensing structures.  After all, this agreement provides a flexibile alternative to the Copyright Royalty Board (CRB) rate structure that recognizes not all webcasters are alike.

We’re sometimes asked “why do you ask for particular royalty rates for Internet radio sites”?   For starters, labels and artists deserve fair market rates for the product that is the foundation of a webcaster’s business.  Just like a webcaster pays market rates for computer bandwidth, electricity, equipment, and everything else that goes into making an Internet radio business, music should be no different.  

Additionally, because Internet radio services are a great way to enjoy and discover (or re-discover) music, they are increasingly substituting for other ways artists and labels get paid for the music they create.  Research tells us that (http://news.cnet.com/whats-the-real-cost-of-free-music/?tag=mncol) fans who listen to multiple sources of music (satellite radio, online radio, streaming services, etc) are buying LESS as music becomes ubiquitous.  According to analyses conducted for us by Taylor Research & Consulting, music purchases by people who listen to three or fewer such sources fell 44 percent from the first quarter of 2005 to the first quarter 2009.  Over the same period, purchases made by people who listened to four or more sources declined at a significantly greater rate (53%).   


This past week, we crossed the mid-year threshold of the year, and there was a fair amount of news reporting comparing album sales mid-year 2009 vs. the same time period for 2008.   That sort of analysis, while useful, does not tell the whole story.  The music marketplace is diversifying, and access/performance-based models are increasingly how fans enjoy and listen to music (online videos, digital radio services, streaming services, social networking sites, etc.).  And there’s real revenue growth in many of these business models.  For example, the royalties from digital performances (not just Internet radio sites but satellite radio services too), while still small, (http://www.riaa.com/keystatistics.php) are growing significantly year-over-year with more growth projected in the coming years.  That’s also good news for the music industry and gives us hope for the future, but it means that artists and labels must be compensated fairly by these new services as the market shifts from buying shiny discs to other models so that great music can continue to flow.    

In the meantime, keep on enjoying your favorite Internet radio station!

Steven Marks

Executive Vice President & General Counsel, RIAA


Legal musings on the Usenet.com verdict

July 01, 2009

The record companies achieved a significant victory on Tuesday when a federal judge in N.Y. soundly ruled in our favor in the lawsuit against Usenet.com.  Judge Harold Baer agreed with all of our claims of copyright infringement liability.  Below we’ll highlight three important implications this verdict has for all content communities.

Before we get to why this decision matters, let’s review what Usenet.com is and how it has premised its business model on theft:

Usenet.com is a subscription service that provides users access to online bulletin boards (or “newsgroups”) that it selects and hosts.  The messages, or “articles,” on many of these bulletin boards include numerous unauthorized copies of the record companies’ sound recordings.  To give one a snapshot of the quantity of unauthorized files on the service, our expert conducted a statistical analysis and determined that more than 94 percent of all content files in certain music-related newsgroups were infringing (ILLEGAL) or highly likely to be infringing. The defendants took advantage of this fact by marketing the service as an alternative to peer-to-peer file sharing programs that were “getting shut down” due to copyright infringement (the site went so far as to boast it was the “hottest way of sharing mp3 files over the Internet”). Even the defendants’ own consumer survey indicated that downloading free music was a big reason why many subscribers paid for the service.           

Now on to the importance of Judge Baer’s decision to not just music but all content communities:

First, the court found direct infringement of the distribution right.  Translation: In order to find direct liability he had to rule that the “volitional conduct” standard set by the Second Circuit in the recent Cablevision case was satisfied.  (In Cablevision, the Second Circuit held that Cablevision was not liable for direct copyright infringement because it lacked the volitional conduct necessary to establish liability and merely acted as a “passive conduit” for delivery of copyrighted works to its users.)  Judge Baer found that this test was satisfied because Usenet.com took active steps and routinely exercised control over its servers to facilitate users’ ability to obtain copyrighted music files.  Notably, this decision will substantially limit the ability of services who attempt to shield themselves under the guise of being a “passive conduit” to profit from the unauthorized distribution of copyrighted content.

Additionally Judge Baer found Usenet.com liable for secondary copyright infringement (contributory and vicarious liability), holding that the Sony Betamax case didn’t apply where the defendant has an ongoing relationship with the user of the service.  This too will substantially aid in our ability to enforce our rights against services engaged in copyright theft.

Finally, Judge Baer ruled that Usenet.com could not make use of the safe harbor afforded by the DMCA because it had willfully destroyed relevant evidence.  This clearly reaffirms the fact that courts do not take kindly to defendants destroying incriminating materials in an attempt to cover up the facts and shield themselves from liability.

The decision reinforces two basic points: If you mindfully operate an illegal service without compensating the artists and creators whose content you advertise, the law is not on your side. Further, given the abundance of reasonably-priced legal download services, why go to an illegal one?

A copy of the decision can be found here.

Jennifer Pariser, Senior Vice President, Litigation and Legal Affairs, RIAA