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RIAA Yields to Reality as Record Companies Stop Lawsuits

By Michael Donaldson

As anyone who is reading this article knows, the Recording Industry Association of America launched a scorched-earth policy of suing anyone and everyone who downloaded music from the Internet and shared it with friends through one or another file-sharing schemes. To many of us, this seemed like the most absurd strategy that any industry anywhere ever adopted. In fact, in the first edition of Clearance and Copyright, I predicted that the record companies would never be so foolish as to launch such a program.

Well, launch it they did. Beyond anything I ever imagined possible. The program went beyond shooting yourself in the foot, which is usually pictured as an accidental pistol shot. Instead, they took out a howitzer and intentionally demolished both of their own feet and the feet of the latest batch of their potential customers who where entering the marketplace. And it did not do a bit of good, or at least did not do enough good (for the record companies) to make it worthwhile to continue, even from the record companies’ distorted perspective.

Five years and some 35,000 lawsuits later, it is over. They think it worked. And on some levels it might have. This crazy litigation put my chosen field of law into the public consciousness like no other. Sales of my book were boosted by the awareness that was piqued by the record companies. The reality is that the sales of records and CDs continued to decline, peer-to-peer file sharing continued to rise, and the entire world was thinking that the record companies were foolish, short-sighted, and backward looking. But sales of digital music tracks soared past the one-billion mark in 2008 and RIAA gives credit for that rise to their lawsuit program. Some of us think that would have happened anyway if the big record labels had woken up a bit sooner to the inevitability of the changes brought to the industry by the Internet.

Record companies need to embrace the future. They thought they were doing just that when they went online to sell their records. But records, even CDs, are soon to be a thing of the past. “Record Companies”? “Labels”? Those words will be as quaint as the phrase “horse and buggy” in the not-too-distant future. When the horseless carriage arrived, folks who made buggies either went out of business or started making horseless carriages. The record companies moved more slowly, which is understandable given their size (four companies sold 95 percent of the records in America.) Large organizations always react more slowly than agile individuals.

So the record companies thought they were modern and sleek and “with it” when they used the Internet for advertising and promotion and even sales of their old-fashioned CDs. They didn’t realize that the Internet completely changed the way the commercial world would operate in the future. A band could develop its own following online. It could create music, distribute it far and wide, and enjoy a growing group of fans without ever leaving their garage. Amazing.

The new music companies will never manufacture a record or a CD. There won’t be anything to put a label on. Control of the music business will move to talented marketing and management companies that know how to bring music to the masses – over the Internet, in person, over the airwaves. They will make money from all the streams of income available. And the splits will be fair to artists because the artists themselves could do all of this if they didn’t spend much time creating their music. And that is the good news. It no longer takes a pile of capital and personal connections with radio stations and venues to create success for a talented group of kids with a great new sound. It takes the Internet and Internet marketing savvy. And that is why performing artists in the future will be in an even more competitive world, but the playing field will be flatter. Artists will participate more fully. And music will be more universally available at prices we can all afford.

Entertainment attorney Michael C. Donaldson, Esq. (Donaldson & Hart), is a former IDA Board President and served on the Legal Advisory Board for the Documentary Filmmakers' Statement of Best Practices in Fair Use.