On the Recording Industry Association of America and Digital Rights Management.

2007-03-13T12:53:00.000-07:00

The RIAA has made quite a name for itself recently. With hundreds of lawsuits aimed at preventing further piracy and a refusal to give up it's precious rights management systems, this association has earned a reputation of being an evil organization matched only by the monoliths of modern industry such as Microsoft. I intend to take a closer look at the organizational structure of the industry, and comment on it's history and future.

Let me start with a brief history of DRM and the intellectual property it aims to protect. In 1984, the United States passed the Trade and Tariff Act (of 1984). One of the provisions of this act was an authorization for the President to negotiate international agreements on intellectual properties (IP) . Since then, many industries centered around IP have struggled to find ways of managing the rights of the properties holder while simultaneously allowing unobstructed use by consumers. This has proven difficult in each circumstance. The software industry, for example, has only recently renewed it's search for unobstuctive copy protection after abandoning it for years due to the amount of restraint such protection put on consumers.

The outcry against DRM on digital music formats is currently faint, as this new form of content delivery is still in it's infancy. Apple Inc. has done a good job of creating transparency within it's products by creating an integrated system for delivering music to a single type of media player. The problem, however, will continue to grow as consumer groups push for competitiveness in this new market. In a public letter posted at the company's website, Steve Jobs, CEO of Apple has challenged the recording industry to move away from DRM before it becomes a larger issue. I will move now, to an explanation of this industry.

The RIAA (Recording Industry Association of America) is a trade group representing the various American record producing companies. Until recently, the RIAA protected only the companies known as the "Big 4", which include Universal, Sony BMG, EMI and the Warner Music Group. In what it explains only as defending the rights of it's property holders, the RIAA has recently opened itself for criticism by blanketing the country with a slew unsubstantiated lawsuits. Previously left unexamined, these lawsuits have led me to look closer at the marketplace in which the recording industry operates.

As you know, the recording industry isn't the only Big 4 in the land. The American automobile industry also has precious few competitors that keep the country supplied with means of transportation. These industries, which are considered oligopolies, share many key characteristics. The market form oligopoly is not rare. Key characteristics include high barriers to entry, and tendencies of collusion. These characteristics have benefited the recording industry for some time, as until this point they haven't done much to be put under the lens of scrutiny.

Until recently, the Big 4 have been able to maintain high compact disc prices even though the price of manufacturing such discs has become much cheaper through time. They have been able to block competition through deals with distributors, and have done everything they can to control the music industry in America. With the advent of digital music sales however, their grasp has begun to slip. Independent labels have started selling their music on iTunes and third party sites such as emusic.com. The more aggressive tactics taken by the independent labels has culminated in the creation of a virtual 5th record label, known as Merlin. This association has given the independent labels much more leverage over their share of the recording industry, and has begun to shake the dust off of the recording industry.

While some argue that this is the beginning of the end for the Big 4, I disagree. Merlin does not seem to be looking to destroy the previous rulers of the industry. In fact, the RIAA now protects this new association as well. Although the independent labels are more open to DRM free music, the rights of the copyright owners still stand, and the RIAA is now actively protecting the artists from piracy.

When the arguments over DRM become more heated, it will be in the best interests of all the labels to do away with copy protection all together. Studies of the sales figures are beginning to emerge, and have shown that digital distribution is here to stay, and if the Big 4 hope to combat piracy their only option will be to offer something as unrestricted as pirated music - not to add further measures which restrict consumers to playing music on certain devices. Although the Big 4 has been notoriously against this as well as many other changes within their industry (compact discs, fair use, etc.), they will be lead by the growing success of Merlin, as well as ideas such a subscription based distribution which will continue to bring revenue for years to come.

Open MBA

On the Recording Industry Association of America and Digital Rights Management.