Does the Recording Industry need a new model to exploit copyright?

November 2003

Record Labels, Internet, Artists, Film & Television

I remember the first VHS tape I ever brought in 1985. The cassette cost £29.99, a lot in 1985, and far more than I would pay for a film on video or even DVD now. This was at the time of the 1984 Sony Betamax case and the film industry was still coming to terms with the ramifications of the US Supreme Court’s split decision that the Betamax machine was legal. But unlike the current situation with legal actions being filed around the world by the recording industry against the likes of Napster, Verizon, KazaA and even individuals who download files, the film industry made efforts to widen the consumption of their ‘product’ – films – through television, video rental, pay-per-view, sell-thru video and video on demand. Could this approach perhaps have been a useful lesson or basic blueprint for the recording industry? The film industry seems historically to have adapted to changes in consumer habits alongside and embraced changes in technology – cinemas were improved, multiplexes built, new price structures launched and the film companies adapted to and explored the new media. This Law Update it written just two months after the RIAA issued 261 lawsuits against individuals for downloading an/or sharing files over the internet and the IFPI in Israel announcing ‘zero tolerance’ against file-swapping, filing a copyright infringement lawsuit in New York in late September against the Tel Aviv-based file-sharing network iMesh (which is registered in the U.S. state of Delaware) seeking damages and an injunction. iMesh is the third most used file swapping network worldwide after Kazaa and Morpheus.

An interesting article on this topic was written by Bob Cherry and published on The following is an edited extract from that article. A link to the full article can be found below this Update.

“The RIAA has said that “most albums lose money after you factor in artist royalties and marketing.” USA Today said, “What’s more, a study it recently commissioned found that if CD prices had grown as much as inflation since they rolled out in 1983, they’d now be $38.23.” But what about the costs of production? Manufacturing of CDs costs only a small fraction of what it did 15 years ago. Blank CD’s used to cost $15 each when they came out. Now you can purchase them in bulk for less than 1.5 cents each. And, Artist Royalties?!?!? Over 85 percent of artists NEVER see any royalties so this isn’t part of the problem. What the Record Industry actually pays out in real royalties is an insignificant percentage of the gross dollar amount. Music artists make their money on the road doing actual performances. Why doesn’t the Motion Picture Association of America (MPAA) suffer from the same problems? Maybe it’s their management style.”

Here is where it gets interesting. The cost to go to a movie is around $8 today. IMAX productions only cost about $12 for prime seating. By the time you add the cost of your popcorn, candy and drink, you’re spending about $20. The cost to purchase the DVD of the movie at discount centers may be around $10 to $15.

Now, compare that to the cost to go to a concert. Tickets can run $35 to $100. Refreshments can easily add $5 to $15 more per person. The cost to purchase a 40 minute average length CD is $15 to $24. The movie DVD offers multiple languages, director commentary, special out-takes, multiple cinema promos, multiple video and audio features, multiple audio encodings and a wide variety of features like music videos or how they produced the movie. The books and cases for the DVD are a big improvement over the common VHS cassette tape packaging too. The DVD offers true digital audio and video and on a high-resolution big-screen television are great.

Now another interesting factor: According to the industry studies, the average cost to produce a motion picture is around $75 million dollars. Many run well over $200 million dollars to produce. Contrast that to the cost to produce a top-talent CD today. Maybe, if there is a music video also, the cost could approach $1 million dollars. On the average, the costs to produce a CD for a popular artists is about half that or $500,000. Both the record and movie industry produce flops that don’t sell but the fact is that the movie industry has a lower failure percentage than the music industry. If the music side has too high a failure rate then the music industry should get better management.

Let’s take a look at the recording industry and movie industry management differences. Once the MPAA had a strong fear of Video Recorders (VCR) but after the US Supreme Court found them to be legal, the MPAA embraced the technology. By providing a great value to the consumer, they can still keep audiences at the big screen and sell tapes and DVDs of their prime movies. People who purchase DVDs of movies don’t feel like they’re getting ripped off and the movie industry isn’t complaining about declining sales of 20% per year.

You would think that after 30 years the RIAA members could learn something. People today still love the motion picture industry. The MPAA gives their consumer base greater value, low costs, improved theatre comforts, improved sound and realization systems. The RIAA gives its consumers lawsuits, threats, impossible licensing arrangements and an unsatisfactory mediocre product at escalating prices. And, the RIAA wonders why their customers don’t like them. The RIAA should look at the motion picture industry. Nobody watches a movie over and over and over again yet they do listen to their music repeatedly. And the movie is a better value all the way around. When DirecTV, DishNetwork, Cable and other subscription television technologies were being developed to offer wide distribution of current movie titles, the MPAA quickly embraced that technology and offered reasonable licensing to these companies. When TiVo digital recorders and others hit the market, the MPAA didn’t go out and sue every company out of existence.

We have the movie industry driving the technology and leading the consumer down a path to greater value and actually increasing their profits along the way. The consumer told the MPAA what they want and that industry provided it. It looks like it was the best decision they could have made. The RIAA has consumers screaming at them what they want, but, the RIAA only has deaf ears for the consumer. The RIAA lawyers want money and they don’t want to invest in technology … and that technology may very well be their only hope to avoid extinction. And yet, for better than a decade, the RIAA has refused to read the play book written by the MPAA’s success stories.

The above is printed (as edited) with permission of the copyright owner © 2003 Bob Cherry
first published September 2003 at
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The full article can be seen at:

For another article on this topic, see:,0,567122.story?coll=bal-perspective-headlines
‘Internet file-sharing and song-buying could be the latest in a century of technological advances opposed, then embraced, by those anxious to protect their profits’.

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