THE LEFSETZ LETTER: RIAA Lawsuits

"It's a little too little
It's a little too late"

"Little Too Late"
Pat Benatar

Am I scared of ISPs becoming rogue enforcers of the law… OF COURSE! But, it appears for now that the RIAA agreements with ISPs are all bluster. And Cary Sherman admitted that issues of "due process" have not yet been worked out. Yup, that's the record business for you, they don't want to fight in the marketplace, they want to go all the way to the Supreme Court, they want to argue issues of constitutional law!

Press scuttlebutt says that only 19% of the public is downloading. If this is true, and one accepts Michael Eisner's theory that ten percent of the audience will NEVER pay, we're fighting here over nine percent of the population. When really, we should be focusing on the other eighty one percent! Most people will pay for music, if a reasonable offer is made.


Bob Lefsetz, Santa Monica-based industry legend, is the author of the e-mail newsletter, "The Lefsetz Letter". Famous for being beholden to no one, and speaking the truth, Lefsetz addresses the issues that are at the core of the music business: downloading, copy protection, pricing and the music itself.

His intense brilliance captivates readers from Steven Tyler to Rick Nielsen to Bryan Adams to Quincy Jones to music business honchos like Michael Rapino, Randy Phillips, Don Ienner, Cliff Burnstein, Irving Azoff and Tom Freston.

Never boring, always entertaining, Mr. Lefsetz's insights are fueled by his stint as an entertainment business attorney, majordomo of Sanctuary Music's American division and consultancies to major labels.

Bob has been a weekly contributor to CelebrityAccess and Encore since 2001, and we plan many more years of partnership with him. While we here at CelebrityAccess and Encore do not necessarily agree with all of Bob's opinions, we are proud to help share them with you.

Today's news that the RIAA is dropping their lawsuits just shows that the labels have no strategy, that they're so busy playing catch-up that they've squandered their business. ANYBODY could have told them that the lawsuits wouldn't have worked five years ago. But these jerks had to prove something. That they owned the music and you'd better consume it their way. Obviously didn't work, their revenues have tanked. You don't fight the consumer, you FOLLOW the consumer.
Instead of charging a buck a track at the iTunes Store, you realize that iPods have thousands of songs on them and you figure out how you can get paid for the installation of each and every one. You don't fight consumer behavior, you
embrace it. And if you're truly intelligent, you're one step AHEAD of the consumer. Pundits said that the original iPod was too expensive, 5 gigs for $400, most people didn't even know they wanted one. But now, the iPod is the de facto music player. The magic connection slot is even installed in clock radios, there are hookups in cars, how come the major labels can't stop driving us back to overpriced albums sold on physical discs and give us what we didn't even know we wanted?

What people don't know they want is instant access to the history of recorded music. It's thrilling when you experience it, via today's Sonos/Rhapsody world, however imperfect that system might be. Let people own tracks now, because believe me, they won't want to in the future, convenience dictates that.

So, sell buckets of tracks to people today. They want a deal. Entice the people not downloading P2P, not buying at the iTunes Store or buying very little there. Have the equivalent of a fire sale. Maybe a going out of business sale. Because that's what the labels are doing. Generate some excitement. You know people will end up buying the same music over again in a higher quality format, and that they'll want new music, but don't even tell them this. Just give them the greatest hits today, for a cheap price.

We've come to an era where the major labels have been marginalized.

No one goes to the concert for free, but people acquire music for nothing. Superstars don't even bother with labels, they go directly
to retail. They make much more money. What is the major label for?
To combine with its brethren to sue people? To hold back monetization for indies? To represent the past, like the DAR (Daughters of the American Revolution)?


If the majors want to have relevance in the future, they must focus on what they do best. Which is producing music and getting people to pay for it. Suing people was a sideshow. Refusing to license tracks is like refusing to sell your product to Macy's. This go slow strategy has not worked. Suddenly, the business is falling off a cliff, there won't be any place to buy a CD, and the majors will be relics selling catalog, at best.

Acts need money. Great creators tend to be lousy businessmen.
Instead of seeing themselves as big kahunas, who the artists should worship, record executives should see themselves as servants, as expediters, as the link between artist and fan. The conduit should be opened wide. Deals and prices must be fair. Accounting must be transparent. There must be trust.

Remember when the RIAA was the most hated organization in America?

Most kids today have no idea what the RIAA is. The organization squandered its capital. Actually, people shouldn't know what the RIAA
is, but they should love record labels, just like they love artists.
But it's hard to love these pompous jerks who get their music for
free, or are so rich that music prices are irrelevant to them.
Somehow today's surviving execs think they're royalty. That they are entitled to supreme rule over the land, forever. But this is patently untrue. At heart, they're businessmen. Lousy ones. History will see them as out of touch despots whose power was stolen by the proletariat in a revolution that they weren't even aware was happening while their assistants printed out their e-mail.

You can live in the present, or be destined to the past.


Arista just had a reunion. At some point in the future, the other labels will too. Kind of like a summer camp get together, these convocations represent a lost era, when everything looked better. But times change, people move on, and those who are locked in the past end up staying there.

The customer is absolutely living in the present. He's not watching commercials on TV, he's TiVo'ing his shows. Better yet, he's watching prime time fare on Hulu. People want a lot of music. If you don't sell it to them in a way they want, they won't buy. As for cutting off their service for stealing via their ISP… As my mother always says, what a way to make friends and influence people. And if you think you can willy-nilly cut off someone's Internet service without a hearing, without due process, then you probably think that General Motors can suspend a person's right to drive. Internet service is a utility which all depend upon. If you think the government is going to let the RIAA cut off this lifeline in order to save its decrepit business, you don't understand the legal system.

That's the problem with the RIAA… They just didn't realize how small they were. Silicon Valley was bigger. The government moved slowly. You don't fight the system, you join it. Which the RIAA seems to be doing a little bit by forgoing lawsuits, but it appears the system they want to join expired years ago. Come on, can't anybody with any power live in the present?

http://online.wsj.com/article/SB122966038836021137.html?mod=testMod

http://news.cnet.com/8301-1023_3-10127313-93.html?tag=newsLeadStoriesArea.1

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