When the Supreme Court handed down a decision in the MGM vs. Grokster case, the news wires immediately heralded it as a "sweeping victory" for our industry. Then, of all people, former Recording Indus
Fred Goldring is a founding partner of Goldring, Hertz & Lichtenstein, a Beverly Hills, Calif.-based entertainment law firm.
When the Supreme Court handed down a decision in the MGM vs. Grokster case, the news wires immediately heralded it as a "sweeping victory" for our industry. Then, of all people, former Recording Industry Assn. of America head Hilary Rosen spoiled the party, pointing out that while the ruling "maybe [sic] important psychologically, it just won't really matter in the marketplace." She clarified that "knowing we were right legally really still isn't the same thing as being right in the real world."
Then The New York Times piled on, insisting that "[h]owever valid the industry's desire to protect its products, trying to stop file sharing has become a Sisyphean exercise." Rosen got the last word in that story, too, calling the Grokster decision "meaningless."
Next, a Los Angeles Times piece suggested that the recording industry might try making MP3 music legitimately available rather than trying to sell files "that restrict copying, deter sharing and limit portability." People in our industry found this last suggestion "outrageous." It reminded me that I made a similarly outrageous suggestion -- nearly two years ago -- in a piece I wrote for Billboard, "Abandon the 'Shock and Awe' Tactics: An Eight-Step Recovery Program for a Healthier Music Industry."
At the time, the recording industry had initiated the first few hundred of what would become a monthly round of John Doe lawsuits filed against accused music uploaders. I posited that the strategy of suing customers (thieves) and building ever-better locks for CDs and digital singles simply was not working, and that everything we had done thus far had in fact made the problem much worse.
Sales were down. File swapping was up. Alarmed by our strategic direction, I wrote as someone who earns his living working with musicians, record companies and publishing companies (and as a musician myself) that an industry intervention was needed, to offer "tough love" as one would to "a good friend or family member who is not thinking clearly, hell-bent on a collision course of self-destruction."
In 2003, I suggested a few immediate steps that would put us on the path to recovery, specifically:
- Admit you're powerless. File sharing is not going away. Downloading is already more popular than the CD.
- Give up on anti-piracy technologies -- they don't work.
- Stop attacking your own customers. (Bad PR, worse business.)
- Focus less on finger-pointing and more on immediate, practical, fair solutions.
- Give the people what they want, even if it requires that laws be changed.
- Support initiatives that will allow unlimited access to every piece of music in the MP3 format whenever and wherever someone wants it, with no conditions or restrictions, in an easy-to-use interface. People will pay for this.
Glancing over my tough-love recommendations of two years ago, I have to point out the obvious: 2005 sure looks a helluva lot like 2003. The cynic in me would almost think that the industry had read my suggestions and decided to do the exact opposite.
So now, we are far worse off, even perhaps to the point of no return. And we are busy celebrating the "mother of all Pyrrhic victories" when file sharing is at an all-time high.
This is not just the latest in a long history of missed opportunities for our business. It is truly a defining moment.
It is no accident that The New York Times, Los Angeles Times, Newsweek and Reuters are reporting that the music industry emperor is not wearing any clothes. Business is down another 8% this year, and we have pinned our hopes again on the deus ex machina. The industry has received its long-awaited vindication on paper by the U.S. Supreme Court, and yet the pundits -- even Rosen (who ironically originally led this charge) -- insist we are tilting at windmills. We are finally out of practical options, because there is no higher authority to appeal to.
Two years ago, I ended with this simple recommendation: "Stop your futile efforts to change the behavior of millions of music fans. Spend all your efforts on designing a system that gets everyone paid around the overwhelming behavior that exists."
Today, I'm asking the hard questions: Will the recording industry save itself? Or are we too far gone? Is there a realistic scenario for withdrawal, a retreat from the "lawsuits and locksmiths" mentality and a swift about-face? Can we swallow our pride and prevail over hubris long enough to embrace the real world and the real market opportunity? Or is The Motley Fool correct in predicting a not-so-distant future when "the major labels won't be the same batch of old-school vinyl-pushers . . . the real power brokers in the music industry will be Google, Yahoo and Microsoft"?
Wall Street analysts and the mainstream press do not like our prospects, and so more than ever I fear we are living in a bubble and kidding ourselves about this war and the definition of winning.
Two years ago I advocated change, and two years later I see status quo. So now I can only envision a frustratingly bleak future where we publicly celebrate shutting down a few peer-to-peer businesses like Grokster, though like shuttering Napster, doing so will be a useless exercise. I envision us marking 500 million songs sold in the course of a couple of years at Apple Computer's iTunes Music Store, remaining blind to the reality that (even the RIAA admits) nearly 3 billion free MP3s are swapped every month. I envision us continuing to hold out hope for a turning of the tide, an improvement in our position and a validation of our strategy that, like a desert oasis shimmering on the horizon, is always just two years away.
It turns out I was right in 2003. Going forward, I hope I am wrong. Because we don't have another two years.