An Open Letter from RIAA President Hillary Rosen to Music Pirates Everywhere


I'm writing this piece not only to answer misguided critics who repeatedly put forth the uninformed claims that music CDs are overpriced and that music downloading hurts no one, but also to concerned parents, teachers, and members of Congress. This piece is partly an answer to critics, partly an attempt to foster open dialog on the issues facing music today, but mostly the intended purpose of this piece is to dispel the myths that surround music sales, music downloading and music licensing.

Myth #1 - CDs are overpriced at $16.99.
People have come to the conclusion that because they can buy 100 blank CDs for 20 cents apiece at Wal-Mart, the sale of a professionally rendered music CD yields a record label $16.79 in pure profit. This couldn't be more untrue. Record labels have many additional costs that need to be recouped in the price of a CD. 

First and foremost, the distribution factor must be considered. A CD produced in a factory in Los Angeles has to be physically shipped to a Wal-Mart in Illinois. It doesn't just appear there through magic. People who are used to downloading music off the internet forget that distribution costs are a major factor in CD price, and they don't realize there is no way for our industry to escape this cost. The cost of physical distribution must be passed onto the purchaser. If anyone reading this can come up with some magical way to distribute music from California to Illinois for free, I'd like to hear it. Maybe this is possible in fantasyland, but definitely not here in reality. 

Secondly, consumers need to realize that for every CD that is a hit, there are 99 others that lose money for the label. Studio time, promotion costs, professional sound mixers, carbonated beverages in the break room, these all cost REAL MONEY. This is real money that must come out of a label's pocket. Every record produced is a gamble. There is no guarantee that a band that is produced and promoted will sell. If a label ends up losing $20 million promoting a band that doesn't sell, it is the responsibility of the consumer to reimburse the label for that $20 million. Note, it was the CONSUMER who refused to buy the CD that the label spent money promoting, therefore the burden rests squarely with the CONSUMER to make up that lost money for the label. It's basic economic principles like these that are missed by many of the uninformed downloaders out there.

Thirdly, many consumers don't realize that a big part of music promotion is radio play. No song gets onto a Clear Channel or CBS owned top 40 station these days that isn't paid for. Since it is illegal for a record label to pay a radio station to play a song, the label must pay upwards of $300,000 to an independent music promoter who in turn pays the radio station to play the song. Yes, you read that right: It costs more than $300,000 for one song to be added to the playlist of one top 40 station for three months. You do the math. Since a label paying a radio station to play a song is considered illegal payola, a middleman must be involved who raises the label's costs. If you listen to a song on the radio, you the consumer are morally obligated to pay the label back for the radio play that song received. If consumers don't pay the label for the top 40 songs they listen to, then the label can't pay the independent music promoters, who can't pay the top 40 radio stations to play that label's songs, and therefore that label's songs will never become top 40 hits. The result of this chain of events, if it ever were to become widespread, would be dead air, or worse, a return to independently owned radio stations with local DJs deciding what to play. In short, chaos. You wouldn't be hearing the same playlist in Atlanta that you heard in Oklahoma City. A cross-country drive would become a confusing nightmare as a barrage of different DJs, unrecognized songs and unclassifiable genres spews from your speakers. It's a terrifying vision that I have often lost sleep over. Most car radios only have 5 buttons, which these days is more than most people need. If the kind of chaos I described comes to pass, drivers will have to revert to turning a dial or pressing the scan button dozens of times to wade through their myriad choices, and the result would be more car accidents. Refusing to buy CDs will COST LIVES in the end, plain and simple.

Myth #2 - The Recording Industry Cheats Artists

I hear this myth from generation X and Y a lot, and every time I do it pains me deeply. It seems that due to programs such as VH1's Behind the Music, where past-their-prime musicians gripe about not owning or profiting from their catalog of work or still being in debt to the studio after going multi-platinum four times, people think it's OK to rip off the music industry as we're all nothing but greedy, heartless bastards. What these programs fail to make clear is that when a band signs a contract with a record label and that label in return gives them studio time, buys them radio promotion, produces a music video for their good song, pays MTV to play the video for that song, and then pays a songwriter to produce 15 more tracks of filler for the CD, a band finds themselves in debt for tens of millions of dollars to the label. The money for all of this must be recuperated from the band's percentage of the profit from CD sales, and then again from the consumers, and then again from the royalties as the song is used in commercials, television shows and movies for the next 70 years until the copyright expires. It takes most bands five sequential hit albums just to break even after all of this. If a band can't cut it, should the studio have to take a loss on all the money they pumped into that band? That doesn't seem fair.

When you download a Jimmy K song for free, you are in effect stealing money from that artist's pocket. If Jimmy K doesn't make any money from his good song, then how is he supposed to pay the record label back for investing in and digitally enhancing his talent? He can't. The record label must then place a lien on his home and all of his other assets to recoup some of the money it lost, which usually doesn't come anywhere close. And so it must also raise the CD prices of the bands that do sell. A Brittney Spears CD is carrying the weight of 99 others that failed to reach its level of cultural influence and popularity. It is also carrying the price tag of the litigation costs the RIAA must incur when it sues the services through which the Jimmy K song was downloaded. Is this fair to Brittney Spears? It may not seem so at first, but remember that if the studio goes bankrupt because of Jimmy K, it won't be able to produce follow-up CDs and remixes of Brittney's work, and then not only will she lose out as she falls short of paying back the studio for her success, but America loses as well. If this were to happen to lots of labels, all that would be left for music fans to listen to would be unpolished, unenhanced, self-written works by independent artists who play their own instruments and sing with their own voices. Do we really want to take a step back into those dark ages? Self-written music tends to be introspective and depressing. 

Many people don't realize that it is actually modern computers running high-powered software that devises the lyrics to hits like "Shake Baby Jump". This software is not cheap, and again, that cost must be passed onto you, and to the artist, and to anyone who wants to use "Shake Baby Jump" for the next 70 years. If you can think of a way to get high priced, high-powered software for free, I'd like to hear it. Maybe in fantasyland, but definitely not here in reality.

Myth #3 - The Recording Industry Can't Stop Free Downloading

I think we proved with our lawsuit against Napster that we can stop MP3 trading on the Internet. Our subsequent lawsuits against Kazaa, Morpheus, and Aimster also proved this. Our most recent successful lawsuit against Audiogalaxy proved this yet again. Our upcoming lawsuits against Grokster, Limewire and Bearshare will also prove this. Once we think of a way to sue Blubster we'll sue them too. All of this litigation is expensive and is just making the prices of CDs higher. Downloaders, you are just making it worse for yourselves. Once the RIAA has stomped out file trading on the Internet and a CD costs $35, it'll be a well-deserved hangover from your free music binge, and you better believe you're going to regret it. Music isn't some excess luxury people can do without; it's as essential to human existence as water and toilet paper. 

As part of our newly announced War On Consumers, we are also introducing progressive legislation into Congress which would allow us to prosecute individuals for music downloading.  It will also allow us to disrupt peer-to-peer networks and damage computer hard drives that contain MP3 files. All this hacking is going to be expensive, and as always we're going to have to recuperate the cost from you. There is hardly a group in the world today with more tech savvy than the RIAA, as file swappers are about to learn. Our bill, when passed, will also declare the RIAA as part of the nation's infrastructure, and as such it will be entitled to a portion of revenue received from federal income tax. This way we can guarantee that our member labels receive at least some royalties from unauthorized singing and humming of copyrighted works by individuals. This practice is more widespread than you think, and is nothing short of intellectual property theft. Our bill will also make it a crime for individuals to sell used CDs. National used music chains such as Cheapo are leaches that profit off the works of others, and as such they are just as evil as Napster and its ilk. Under our new act, a CD will not be "bought" but instead "licensed" just like a copy of Microsoft Windows, and as such our labels will be able to use their CDs as a much-needed leash on consumer behavior. Consumers will not be paying for the CD, but for the right to listen to it, and that right may be modified or revoked at any time for any reason without notice.

Now that several congressmen are on our payroll, we can sit back and watch the illegal music market wither and dry up just like the illegal drug market did in the 1980s.

Myth #4 - The RIAA Refuses to Adapt to New Technology

If when all said and done, our market research shows that kids don't want CDs anymore, we can compromise on that. The music industry is all about change. We changed from 45s to 78s to 33s, to 8-track to cassettes to CDs. We're nothing if not adaptable. If public sentiment is absolutely set on an alternative to CDs, I suggest the minidisk format. They are smaller, they hold just as much music as a traditional CD, and they cost about the same. Plus they have the added benefits of digital watermarks and copy protection, and the minidisk specification is completely owned by Sony, an RIAA member. I said in 1997 that the future of the music industry was in minidisk, and I am still receiving money to say it today.

RIAA-supported digital music efforts may also take off in the future. Currently an RIAA-backed online service known as Pressplay allows users to subscribe for $18.95 a month to a small library of popular works and listen to them via half-quality audio streams if they have broadband connections. Users may download 10 songs a month to burn to CDs if they wish. Pressplay exclusively supports the Windows Media Audio format, and therefore each song benefits from active scripting support, expiration dates, copy protection and proven Microsoft security. With embedded scripts, each song can also enhance the user experience by opening web pages featuring more music they might like to buy. After only 8 months online and a strategic partnership with AOL, Pressplay currently boasts more than 100 subscribers and is growing every day.

We in the RIAA know that the future isn't coming, it's here already. We have already taken steps to quietly introduce copy protection into music CDs. Protected CDs have a broken track on the outer edge, and therefore cannot be read by computer CD-ROM drives, and can even crash a Macintosh computer upon insertion. Technically these are not CDs as they do not conform to the Phillips Compact Disk specification, they are Enhanced Music Disks. These Enhanced Music Disks can only be played in audio CD players, and thankfully it is impossible to copy music from a stereo system to a computer hard drive. Drawing a line with a magic marker over the broken track to circumvent the protection and allow the CD to be played in computer CD drives would be a clear violation of the Digital Millennium Copyright Act and would be prosecuted to the fullest extent of the law, if anyone were ever brazen enough to attempt it. We know that someday a hacker or terrorist group will figure out a way to rip copyrighted songs into the MP3 format and distribute them for free, but we'll already be one step ahead of them as Congress and Microsoft both work to mandate hardware copyright protection built into all computers and portable devices. Once in place, no computer will be able to play or distribute any content that is not approved by the Content Bureau, currently being formed by key members of the Bush Administration, Microsoft, myself, and the Concerned Christian Parents United (CCPU). 

Indeed, present times may be bleak, but the future is looking brighter every day. The War On Consumers is just beginning, and when it's over, artists will be able to breathe a sigh of relief and bask in the kind of freedom that can only be realized through complete corporate control of the distribution of their works, backed up by the power and influence of the US government. Tight, centralized control of ideas and art has never been attempted before in human history, but from where I stand it is long overdue. Consumers have grown fat with their greed, sitting on piles of money that rightfully belong to the recording industry. It's time to redistribute the wealth. The revolution is nigh. 

Hillary Rosen
President, Recording Industry Association of America

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