RIAA: Feeling Burn of Ripped CDs
By Brad King
2:00 a.m. Aug. 27, 2002 PDT
The recording industry blames the rapid decline of album sales on a new technology that allows people to easily copy and transport music. It's expected to cripple the major record labels.
The year was 1979. Audio cassettes and the Sony Walkman were the feared technologies. Twenty-two years later, the industry is making similar claims, but today's culprit is MP3 files and file-trading services.
The hit-driven recording industry has long been at the mercy of popular tastes, but executives still view emerging technology as dangerous.
Shipments of CDs dropped 7 percent in the first six months of this year, a fact attributed to an increase in music downloads through file-trading services, according to a report issued Monday by the Recording Industry Association of America (RIAA).
It's the same argument the organization made two years ago during its legal scrape with Napster. Back then, however, record sales were still climbing.
Today, the decline in sales appears to bolster the RIAA's case.
"There are numerous red flags and warning bells that illustrate conclusively the harmful impact of illegal downloading on today's music industry," said RIAA President Cary Sherman.
But the industry weathered similar downturns when the disco era came to an end -- portable music devices like the Sony Walkman were introduced, and video arcades were competing for teenagers' limited cash reserves.
Three year of tumbling sales hit bottom when CBS Records, then one of the largest labels, was forced to fire 300 employees and close nine distribution centers on one bloody Friday in 1982, an event chronicled in the book Hit Men, which follows the ups and downs of the music industry.
By the mid-1980s, the labels' economic fortunes had turned around. MTV had re-created the rock star. The video game market had disintegrated, and compact discs had supplanted tapes, forcing consumers to replace their antiquated tapes and LPs with digital music.
Congress, too, has repeatedly stepped in to ensure that new technologies wouldn't swallow old business models. In 1992, it created a tax that added a few dollars to the price of digital audio tapes and digital recorders. That money was then distributed among labels.
"Each of these gradations of change can be shocking at first, in the sense that you can digitally send a perfect duplication of a sound recording," said Jim Griffin, CEO of Cherry Lane Digital. "We respond with a fair, but not perfect, way of splitting it up. It's how we responded to webcasting and the audio tape."
While the RIAA works hard to protect its business model, consumers continue to adopt new forms of music media.
The RIAA's most recent study bears this out. People are downloading more files and burning more CDs, according to "Music and the Internet," a study by the Peter D. Hart Research Firm.
Internet users also say they are more likely to download a song -- not buy the album -- after they first hear it.
However, the study is delivered in broad terms and doesn't probe the reasons for consumers' actions. For example, it found that consumers have acquired more burned CDs -- 11.3 this year compared to 5.8 last year -- but there was no indication whether those CDs were personal compilations, which is considered fair use, or mixed CDs made by friends, which isn't.
The study also ignores the effects that online subscription services Pressplay and MusicNet, initiatives backed by the five major music labels, may have had on retail CD sales.
Some analysts believe this is because the labels have not made any effort to provide consumers with choices online, leaving them to fend for themselves.
"Consumers are beginning to understand what digital means," said P.J. McNealy, an analyst with technology research firm GartnerG2. "That goes hand and hand with the PC manufacturers and the ISPs wanting to become entertainment providers. Music is the first introduction of that (thinking), but it takes time to change consumer behaviors.
"The music industry is going through another disruptive technology period like it did 30 years ago, and it will take some time to reverse revenues back in the right direction."
AI
