Original URL: http://www.theregister.co.uk/2007/01/21/riaa_reg_interview/

RIAA talks flat fees, and how they turned the French

It's a rap

By Andrew Orlowski

Posted in Media, 21st January 2007 13:01 GMT

MidemNet The chairman and CEO of the Recording Industry Ass. of America Mitch Bainwol, and his equivalent at its global partner the IPFI John Kennedy took some time out to answer some questions from El Reg at a press conference in Cannes today.

Yesterday we reported on the contrast between the progressive stance taken by UMG's Larry Kenswil (an RIAA board member) and Bainwol himself. Kenswil said record labels had to stop thinking of counting units and concentrate on licensing their rights. By contrast, Bainwol had castigated Consumer Electronics Association boss Gary Shapiro's anti-DRM stance for "denying us the only way we have of making a living".

Kenswil was on the right track, Bainwol told us.

"When I came to the RIAA there was only one revenue stream. There was no radio performance right [in the US - there still isn't - ed ] but now there's webcasting, Zune, and lots of other revenue sources and a lot of diversity. It's not one versus the other, but there's no question we're moving to licensing," said Bainwol.

"When I came in it was before the first lawsuits, and we were in a tailspin downwards. There was confusion in society, confusion in the law, and we've gone from zero digital revenue to $2bn digital downloads revenue."

Um, yes, we wondered. But wasn't that $2bn entirely due to an initiative from outside the RIAA's membership - from a computer company, Apple?

Apart from exceptions such as Jac Holzman, who's experiment with new digital packages, where was the innovation for finding new containers for rights coming from within the industry?

Bainwol didn't name one specifically, but pointed to "four or five hundreds" deals going on.

"There's lots of energy and commitment and focus on experimentation," he said. "To me the subscription model has enormous potential. I have three kids aged between eight and 14 and they're not growing up with a perception of music as a physical product. For them though the 'all you can eat' model is irresistible."

We also got a glimpse into where the RIAA expects revenue to come in the coming years. It's pushing for a public performance license for radio in the US, where by a historical fluke it doesn't exist (radio stations in most countries pay the performers for playing their music). John Kennedy of the IPFI said performance from karaoke machines in China offered potential revenue.

"It's going to be a combination of the three: physical product, digital product, and licensing".

The growth would come from licensing, the pair said, while the best Kennedy said he could hope for in 2007 was the same revenue as 2006. It's that bad.

Shaking down the ISPs

Bainwol and Kennedy also outlined the next stage of their legal strategy, which involved in their words "making the ISPs act responsibly" - and actively police their networks for infringing material.

Well, we asked. Since you're going into licensing, why not shake the ISPs down for cash while you're at it?

"Shake down the ISPs?" asked Kennedy, perhaps a bit startled.

Sure.

We have our methods, but the former lawyer for The Stone Roses and George Michael could see exactly where this was going.

"If ISPs want to come to us for a blanket license on a monthly basis..."

... "on a voluntary commercial basis," chipped in Bainwol...

"... then that's great," continued Kennedy. "But if I go to them then it looks like bullying.

Now you may think that suing poor families and dead people for copyright infringement looks like bullying too. So maybe this is a kinder gentler RIAA, or maybe it's only bullying when the RIAA says it is.

"Well maybe, er ... [ squints at your reporter's name badge ] The Register can have a seminar and everyone comes together for a blanket license and you have a scoop," said Kennedy.

He was being sarcastic, but it's a thought. However we don't expect the ISPs to see the light until after most of them go out of business or become commoditised bit-pipes, by which time it's probably too late.

Now here's the interesting bit - as Kennedy revealed how he saved the music industry from a fiendish French plot.

Turning the French

Another questioner asked about the same subject - the French parliament's pursuit of legalising P2P and setting up a blanket license for ISPs to compensate artists. This would have provided the industry a new revenue source, and compensated artists for trades where they don't currently receive a cent.

After a first vote year ago approving the plan, debate raged for three months, largely under the radar of the Anglo-Saxon press, before finally being rejected.

If you were thinking someone had got to the French between the first vote and the second, you'd be correct.

"On the 21st of December 2005, at 2am, the whole world got out of control," said Kennedy.

"Global licensing was going to be imposed on us, and our first thought was this wasn't thought through. We didn't even know if it was going to be compulsory or voluntary.

Kennedy sought out the French weak spot.

"Now the French music market is unique in that it is not so influenced by US or English, as most markets are. So we went to the French and asked them, 'What's the most important thing about your music market?', and they thought, and then gave the right answer. That was when the penny dropped."

"We asked, 'Who's going to invest in French music?' With an ISPs and a flat fee, you're going to have more US companies and American music dominating the French market."

Now the funny thing about the nationalist argument is that I've also heard the exact opposite advanced as a reason against a digital flat fee.

According to this argument, national markets go decidedly off-track. They start rewarding their own, and developing their own talent, and the global reach of American corporations is permanently damaged.

Which one is more likely? It depends on how music flows in the future. If you only get music through the web, then this may favour American corporations: the web is decidedly flavoured by Californian brands such as Google, eBay and Yahoo!, not to mention MSN.

But if your iPod fills itself from a ubiquitous wireless connection, it's going to reflect what's playing in your neighbourhood. So if you walk past a Bistrot, you'll be hearing French pop. If you get drunk in a German Bierkeller, you'll be able to download some thigh-slapping drinking music (or German pop). And if you're in English boozer, the chances are it'll be the Arctic Monkeys.

Because rights holders are rewarded by totting up the digital exchanges between devices, a blanket license will naturally favour local cultures - provided they make that music available to their citizens (as any small shop can).

Only cultures which don't promote their own music lose out - and you could argue that they deserve to.

That's something the French hadn't thought through, either, as they were being mugged by the RIAA.

But expect to hear both contradictory cases advanced at the same time. ®