The RIAA Embraces Change: Pay Absolution Or Lose Your Net

It’s a new year, a new President, even a dramatically redesigned whitehouse.gov complete with a blog. And while Larry Lesig’s Obama endorsement may have given some hope of a shift to a a better prioritized policy on IP theft, think again.

The RIAA got one of their pitbulls high in the revamped Justice Department; Tom Perrelli is the new Deputy Attorney General. Perrelli has represented the RIAA in more than a handful of high profile cases over the years including suing Verizon to force them to cough up some names behind some IP addresses. He eventually lost that one.

But the RIAA isn’t crowing over its administration victory. Instead it’s embracing  Obama fever by adopting the Change mantra. Media Sentry, the quasi-legal company employed by the RIAA to sit on P2P networks all day long and capture infringing users, has reportedly been fired. And the RIAA is backing away from suing alleged copyright infringers in their John Doe suits. A kindler, gentler RIAA? Not a chance. Just a shift in tactics.

Similar to the IP Rights Act where the RIAA tried to get the DOJ to do its dirty work for it — those provisions were stripped out prior to passage — the new game plan involves incentivizing ISPs with cash to go after alleged infringers. Here’s how it works:

The way the new enforcement system will work is that the RIAA will alert an ISP that a customer appears to be file sharing. The ISP will then notify the person that he or she appears to be file sharing. If the behavior by the customer doesn’t change, then more e-mails will be sent. If the customer ignores these e-mails, then the ISP may choose to suspend the person’s service. If all else fails, they can choose to discontinue service.

There’s even this snazzy new website smugly titled “Get Amensty” that allows those served with the threatening letters to pony up a credit card number and purchase absolution. No courts, no lawsuits, just pay a small fee to ensure your place in Heaven.

Similar to Choruss, the new plan is at a minimum an admission that the past seven years of filing lawsuits has done nothing. It’s an attempt to find a business plan behind the madness. Unfortunately, like Choruss, it’s an extortion plan. It delays the long necessary and difficult inward view that must be embraced.

The tangle of rights and payments per download and per stream is a rat’s nest that should be streamlined. The IFPI 2009 Digital Music Report indicates that music consumption continues to rise and digital revenue did increase last year. Would cheaper access to more DRM-free music increase revenues? It’s impossible to tell right now as the nest of payments makes it impossible to try except illegally — see the former and once very popular allofmp3.com which sold music by the megabyte with prices around $3 per album.

So 2009 will see more artists leave the major labels.

Metallica, Beck, 50 Cent, and Ryan Adams have or will satisfy their current major label deals and could become free agents this year joining Paul McCartney, Radiohead, NiN, and The Eagles on the new road of independence. The majors will further see their erosion of control as Live Nation continues its march to its make-over complete with an in-house ticketing system.

It’s almost impressive how many ways the RIAA can find to try and squeeze the same stone. Whether it sues the labels’ own customers, gets the DoJ to do it, or gets ISPs to make them an offer they can’t refuse, it’s still all the same thing: punish bad behavior but do nothing to make music cheaper or easier to access.

With an ally in the DoJ and desperation in the halls of the major labels, the RIAA is putting a new dress on an old scarecrow. It won’t work. And in a year there will be another new try. Without actually bringing the mechanical owners, the publishers, the labels, and the artists together to alter and simplify the payments behind the rights, the RIAA will be saddled with a product locked into an inflexible pricing system.

The key is unlocking that system. Flexibility in pricing — and I don’t mean charging more on iTunes for new releases — is the only possibility for salvation. And artists are finding that out for themselves with self-releases that capture different points along the demand curve. Bringing that same concept to the catalogs is key. But the RIAA is ignoring the trend and instead selling absolution at the end of an ISP gun.

Do you know why you bang your head against the wall? Because it feels so good when you stop.

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