Singing Farewell to the Biz, Retiring RIAA Chairman/CEO Cary Sherman Talks Proudest Moment, Biggest Regret and Future Plans (Q&A)
Thursday night in Washington DC, about 300 lobbyists, legislators and music executives gathered for the retirement party of RIAA Chairman and CEO Cary Sherman, who played a larger role in turning around the U.S. recorded music business than many of the people in it even realize. Outside the music business, the RIAA is often criticized as backward-looking, even hostile to new technology, for its role in pursuing litigation against Napster, Grokster, and even individual uploaders. But legislation that the RIAA pushed -- and Sherman played a key role in lobbying for -- helps secure the rights of the major labels to be paid when Spotify streams their music.
"The last 20 years have been pretty extraordinary," Sherman told Billboard in an interview the week before his party. That's putting it mildly. Sherman began representing the RIAA in 1974, as a young associate at Arnold & Porter, joined the organization in 1997 and became CEO in 2011. The year Sherman joined the RIAA, the organization reported that the U.S. recorded music business took in $12.2 billion in revenue -- which rose to $14.6 billion at its 1999 high point, plummeted to $6.7 billion in 2015, and has been growing fast ever since. Most of that growth is based on on-demand subscription streaming services, which pay labels for the use of their sound recordings. And, as Sherman explains, the fact that they need to do so depends to some extent on laws that the RIAA pushed for in the nineties.
Sherman's soiree, which coincided with an International Federation of the Phonographic Industry (IFPI) board meeting, attracted music lawyers and lobbyists from around the world, including Universal Music Group General Counsel and Executive Vice President of Business & Legal Affairs Jeffrey Harleston, Sony Music Entertainment executive vp, business affairs & general counsel Julie Swidler, Warner Music Group executive vp and general counsel Paul Robinson, IFPI CEO Frances Moore, and NMPA CEO David Israelite. Some legislators came: Reps. Darrell Issa (R-Calif.), Doug Collins (R-Ga.), Jerry Nadler (D-NY), Bob Goodlatte (R-Va.) and Judy Chu (D-Calif.). Executives even showed up from organizations that are normally at odds with the RIAA, including Public Knowledge, Facebook, and the Consumer Technology Association.
Sherman is considered one of the top copyright lawyers of his generation, a master of the details of a notoriously complicated subject, but his retirement party had the energy of a music business bar mitzvah. Top executives from various music associations paid tribute in a video -- one commented that Sherman remembered the 1909 Copyright Act as well as the 1976 Copyright Act; his grandchildren gave a shout out to their "Papa C." After that, Harleston, Swidler, and Robinson each said a few words about Sherman, and Concord Music Group CEO Glen Barros played piano. Then a power trio of music lobbyists -- Sony Music Entertainment vp of industry & government relations Jen Jacobsen, RIAA senior vp, communications and marketing Cara Duckworth, and RIAA chief of West Coast operations and artist & industry relations Joel Flatow performed a version of "My Way" -- "His Way" -- with hilarious lyrics about Sherman's career.
Finally came Sherman himself, a talented amateur pianist who has been known to play funny songs at industry events. He didn't disappoint, performing a song with the chorus "It's time to retire," to the tune of Billy Joel's "We Didn't Start the Fire," backed up "the Shermanettes" -- Jacobsen, Duckworth, and Flatow. He riffed on the technology and politics he's seen over the years -- humorously onstage, more seriously in the interview -- in a business where the only constant as been fast, often destabilizing change.
What's your last day and what are you going to do now?
My last day is December 31, 2018, and I'm going to try retirement and then fill in activities to figure out what I want to do -- whether that's nonprofit work or consulting or other projects -- and how much of it I want to do. But I want to look at that after I experience being able to read a book or go for a bike ride or play golf.
Any specific hobbies you're looking forward to having the time for?
I want to go back to taking piano lessons. I've played the piano since I was six but it's the worst to discover how poorly you play after you were such a wunderkind. If you don't use it, you really do lose it. So I want to expand my scope. I can play by ear pretty easily anything I heard when I was young, but I can't do that now because music is so different from the classic rock I grew up on.
You were a very serious musician at one point, right?
Serious enough to consider a career in music. I got into the High School of Music & Art in New York City, but I went to Bronx [High School of] Science instead, because I realized that I didn't have the drive or the discipline to become a professional musician. It's made me admire even more the musicians who do.
After an incredibly eventful two decades at the RIAA, you're leaving on a high note: The business is growing and the Music Modernization Act just passed.
That was the icing on the cake. This was the right time to leave, partly because it's an appropriate time for a transition -- you have to make way for the next group of leaders, and we have, in Mitch [Glazier, who will become RIAA CEO in January], an extraordinary one. I knew we were on the right path and that subscriptions would continue to grow. And I'm optimistic that streaming services will continue to innovate -- Alexa has transformed my relationship with music, and when you start thinking about things like that in the car, there's a great future there.
There's an argument to be made that the recovery of the music business in the U.S. rests partly on laws you pushed for. Streaming services like Spotify have to pay rights holders partly because there's a public performance right in digital transmissions of sound recordings -- which you worked on when you were at Arnold & Porter, right?
Labels and musicians had been trying to get a public performance right for sound recordings [which exists in most other countries] since the 1940s, but we were never able to overcome the opposition of radio stations. After we couldn't get it in the 1976 Copyright Act, we realized that we should aim to protect the future. So in the 1980s, we began lobbying for a digital transmission right so artists and labels would be paid for the digital transmission of music over cable and satellite radio, but without stirring the opposition of AM/FM stations -- and ultimately got [the Digital Performance Right in Sound Recordings Act] passed in 1995. There were no digital services to kill the legislation, so we got it through. In 1998 we got legislation [the Digital Millennium Copyright Act] that confirmed that this digital transmission right applied online and that we had exclusive rights in on-demand streaming, so on-demand services had to negotiate. Well, that's Spotify, Apple Music, Tidal, Deezer -- the foundation of revenue for the current industry. Getting those laws passed, in 1995 and 1998, was critical.
The importance of those laws surprises most people, since it seems so intuitive that Spotify would have to pay in order to use recordings. Can you unpack that a bit?
The rights we had [aside from the digital transmission right] were reproduction and distribution. So without this you'd have to argue that Spotify makes a copy of each track in order to offer its service and then license them the right to make that copy. That's a tenuous basis for a business model -- we'd have to charge them a lot of money to make that one copy. It would be hard to capture the value of the service that way. There also could have been years of litigation -- there are some legal decisions that say that if you're making an incidental copy to enable an otherwise legal activity, it's not separately licensable. Having that [digital transmission] right enabled the business model to develop in a way that's produced a very healthy ecosystem.
In terms of public debate, there are two ways of looking at the industry's recovery: One is that the major labels finally reduced their hostility to technology so companies like Spotify could save them, and the other is that those companies could only save the business because labels defended the value of copyright. I'm guessing you believe the latter, but tell me why.
I think it's unfair to say that the labels were hostile to technology, although they weren't very good at it. They launched the Madison Project with IBM in 1998 to allow consumers to download albums, and they launched their own subscription services in 2001, MusicNet and PressPlay. That's not hostility! The infrastructure didn't exist -- broadband wasn't as popular in 2000 and you didn't have smartphones. I've always considered it unfair that, because we tried to enforce our rights by preventing people from giving away our music, it was interpreted as hostility. We were protecting our rights so we could embrace technology and still make money.
Some of that perception comes from the RIAA lawsuits against illegal downloaders. How do you see that in retrospect?
You have to look at it in context. We had won a case [in 2000] against Napster, and then another dozen peer-to-peer file sharing services went into operation using decentralized servers instead of centralized ones, like Napster. And we lost [MGM Studios. v. Grokster] in the district court and then again in the court of appeals -- the court said that what the users were doing was clearly direct infringement but that the service itself couldn't be held liable. The only option was to make clear that what individual users were doing was illegal as well as unethical, and the only way to get that message out was to do something bold. We knew how controversial it would be. You have to remember, at that time we thought people might never be willing to pay for music again. It was a desperate situation and it called for desperate measures.
What are you proudest of during your time at the RIAA?
I think we played a significant role in helping to unite the industry, and I think that's made a big difference in the way the industry thinks about itself. All of these relationships can be fraught with conflict, but we've begun to think of ourselves as an interdependent ecosystem, rather than a series of dueling fiefdoms all trying to get a bigger piece of the pie. The Music Modernization Act represents everyone working together so the whole industry can thrive, and I hope that kind of cooperation continues.
What you regret not getting accomplished?
We never secured a broadcast performance right [for recordings] -- that's the most gaping hole in our rights. And that was actually my very first project for the recording business at Arnold & Porter, in 1974.
Ten years ago, the major record labels were the bad guys and it seemed that the technology companies could do no wrong. Now you're recovering and they're on the front page with a new scandal every day. Does that surprise you?
It's vindicating on one hand, because all of the issues that we complained about -- the lack of accountability, the feeling that the Internet was a law-free zone -- are now seen as problems that need to be addressed, not just in copyright but in everything that's happening online. I worry that Congress may have coddled new technologies by enacting safe harbors like Section 230 [of the Communications Decency Act] and those in the DMCA [Digital Millennium Copyright Act] that relieved technology companies of the responsibilities other companies face when creating a new product with a foreseeable risk of harm. These problems really are very challenging -- which is depressing because the Internet is an amazing communications medium that still has great promise -- and how they've solved will dictate whether the Internet is a force for good or evil for a long time.