According to Wired, today marks the 10th anniversary of the music industry’s lawsuit against file-sharing site Napster.
You may remember that Napster’s defense in the suit, before laying down and playing dead, was that it did not give away copyrighted music — rather it provided a platform for users to share their own files with each other. The RIAA’s argument was that Napster was a bunch of fire demons with cloven feet who were sure to turn the nation’s children into gay communist ax murderers.
The lawsuits accused Bertelsmann of copyright infringement for propping up Napster financially with loans totaling $85 million. The lawsuits claimed the firm wanted “to preserve Napster’s user base for Bertelsmann’s own commercial advantage.”
At the time of the loans, Bertelsmann’s chairman, Thomas Middelhoff, explained that “Napster has pointed the way for a new direction for music distribution, and we believe it will form the basis of important and exciting new business models for the future of the music industry.”
Bertelsmann paid millions of dollars to settle the claims. The media concern agreed in 2006 to pay the world’s largest label, Universal Music Group, $60 million to settle the allegations. EMI got an undisclosed amount in 2007, and Warner Music Group settled that same year for $110 million.
The music industry has come a long way since the original Napster lawsuit. Not only has it recognized the promotional value of easily-copied digital music files, but it has engineered a successful shift in its core business model to compensate for the corresponding decline in CD sales.
Hahahaha, just kidding — they’ve been suing the shit out of college students and stay-at-home moms.
Oh, and stiffing the talent.
Witness the saga of Tim Quirk, bassist for Too Much Joy. Recently Warner Music sent Quirk a royalty statement that allegedly accounted for digital sales of the band’s music. The statement showed that Quirk’s band had earned a grand total of $62.47 over the prior five years (which was simply subtracted from the band’s “unrecouped” advances*). This is where Quirk’s day job helped him get to work:
Here’s the thing: I work at Rhapsody. I know what we pay Warner Bros. for every stream and download, and I can look up exactly how many plays and downloads we’ve paid them for each TMJ tune that Warner controls. Moreover, Warner Bros. knows this, as my gig at Rhapsody is the only reason I was able to get them to add my digital royalties to my statement in the first place. For years I’d been pestering the label, but I hadn’t gotten anywhere till I was on a panel with a reasonably big wig in Warner Music Group’s business affairs team about a year ago.
I knew that each online service was reporting every download, and every play, for every track, to thousands of labels (more labels, I’m guessing, than Warner has artists to report to). And I also knew that IODA was able to tell me exactly how much money my band earned the previous month from Amazon ($11.05), Verizon (74 cents), Nokia (11 cents), MySpace (4 sad cents) and many more. I didn’t understand why Warner wasn’t reporting similar information back to my band – and if they weren’t doing it for Too Much Joy, I assumed they weren’t doing it for other artists.
So a major player in the industry that spent years and millions attacking its own best customers has yet to build a reliable system for reporting to the artists how much they’re selling or not selling. Then when someone pesters them for real numbers, they sit on the request for a year and send him a half-assed statement that is clearly, indisputably wrong. And they know he’s a music industry insider, so they can’t possibly think they’ll get away with it.
In conclusion, the music industry is so hopelessly stupid it makes the newspaper industry look like Google. Oops. Bad choice of words?
Dec. 7, 1999: RIAA Sues Napster [Wired]
* Here is Quirk’s explanation of how advances and the concept of recouping works:
A word here about that unrecouped balance, for those uninitiated in the complex mechanics of major label accounting. While our royalty statement shows Too Much Joy in the red with Warner Bros. (now by only $395,214.71 after that $62.47 digital windfall), this doesn’t mean Warner “lost” nearly $400,000 on the band. That’s how much they spent on us, and we don’t see any royalty checks until it’s paid back, but it doesn’t get paid back out of the full price of every album sold. It gets paid back out of the band’s share of every album sold, which is roughly 10% of the retail price. So, using round numbers to make the math as easy as possible to understand, let’s say Warner Bros. spent something like $450,000 total on TMJ. If Warner sold 15,000 copies of each of the three TMJ records they released at a wholesale price of $10 each, they would have earned back the $450,000. But if those records were retailing for $15, TMJ would have only paid back $67,500, and our statement would show an unrecouped balance of $382,500.