RIAA Defends Lawsuit Spending... But Reminds Everyone How It Helps Screw Over Musicians

from the who's-rationalizing-now? dept

Fri, Jul 30th 2010 8:31am — Mike Masnick

A few weeks ago, there was a lot of attention paid to the story of how the RIAA had spent $17 million and got back $391,000 in settlements. The RIAA is now defending its legal strategy by claiming that the lawsuits had other benefits, such as injunctions against certain sites and (my favorite) to "foster a respect for the rights of creators." It's difficult to see how that's working, as the legal strategy has not only mobilized many music fans against the RIAA and ridiculous copyright laws, but has even gotten top musicians to speak out against the RIAA and its views on copyright. On top of that, given the continued increase in file sharing usage, the whole claim is a joke.

Separately, though, the RIAA says that the numbers are misleading because "sometimes recoveries go directly to record label plaintiffs."

But that raises a different question. If the labels are getting this money... has any of it been passed on to artists? In the discussion on the original story, we had one commenter, who works as an auditor in the music licensing field, who pointed this out and noted that this money isn't going to artists or songwriters at all. We had pointed this out back in 2006, when part of the Google buyout of YouTube involved paying off the big record labels... and that deal was structured in a way that those labels didn't have to share that money with artists.

We've already seen how record label accounting is used to screw over musicians, but this is an important point as well. The RIAA positions itself as defending artists' rights. It talks about how these lawsuits are carried out to protect musicians and help those musicians earn a living. But it's becoming increasingly clear that of the money that actually comes in from these lawsuits, very little of it ever is seen by the artists the labels claim they're protecting.

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Filed Under: lawsuits, riaa, success
Companies: riaa

23 Comments

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Hephaestus (profile), 30 Jul 2010 @ 8:43am

Since RIAA is an industry representative is it even legal for them to sue on behalf the individual record labels?
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:Lobo Santo (profile), 30 Jul 2010 @ 8:45am

Futurama said it best...
...when a secondary character once said "The internet is all about the free sale and exchange of other peoples' ideas" (likely paraphrased).

; P
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Dark Helmet (profile), 30 Jul 2010 @ 9:07am

The argument...
"But it's becoming increasingly clear that of the money that actually comes in from these lawsuits, very little of it ever is seen by the artists the labels claim they're protecting"

The argument is likely that returns on the lawsuits benefit the labels, which in turn allows them to continue "supporting" the artists. In other words, what's good for the labels is good for the artists.

That said, it's an incredibly weak argument....
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Chucklebutte, 30 Jul 2010 @ 9:27am

My question is
who really are these RIAA people? And on what authority are they doing all these lawsuits? How does this group have its hands in the pot? Why do we even bother to acknowledge the RIAA? Just seems like a group of bullies with no sort of authority.

If it was me or my company I would just ignore these jokers, like the Google/Youtube fiasco, Google is so large they could have walked all over the RIAA and any other group with no power and crush them in the process. People need to start ruffling feathers instead of worrying about one point of one percent of some stocks!

Civil court is a joke, if that is all the RIAA can do is try and sue you, let them! Don't show up to the stupid "trial" let them keep wasting all their money and hopefully go belly up soon!
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Anonymous Coward, 30 Jul 2010 @ 9:30am

Of course the money doesn't go to the artists. The lawsuits haven't recouped yet.
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Grey Ferret, 30 Jul 2010 @ 9:37am

I'm sure the RIAA intends to pass on all money made from lawsuits to the artists. That is, after recouping all expenses of course. So, $17 million in expenses, $391,000 in settlements so far. Shouldn't be long now before they start distributing the gains (after taking their cut of course). Oh, and there's probably a modest fee for service imposed on top of all of that too, but that shouldn't affect it too much. In fact, when all is said and done, the artists will only end up owing a small amount to the RIAA for all of this. Seems like its working just as planned to me.
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Bubba Gump (profile), 30 Jul 2010 @ 9:44am

Re:
I totally agree, I wish the RIAA would bill all the artists for the losses they incurred! Then we'd see artists abandoning the labels represented in RIAA in droves!!!
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Anonymous Coward, 30 Jul 2010 @ 9:47am

Re: The argument...
If that is the argument really I would like to know how the reconcile that with trying to charge radio stations.
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Anonymous Coward, 30 Jul 2010 @ 9:49am

Re: My question is
The RIAA is an umbrella front for record labels and some other people, it is the mosrt recognized one but they do have almost a hundred fronts just for this kind of stuff.
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Anonymous Coward, 30 Jul 2010 @ 9:52am

Re: Re:
I don't think so, the RIAA is kind of a union, unless they screw up real bad I don't see that changing, what will change is what happened to other unions in the U.S., they got aggressive and business just took their business elsewhere.
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SomeGuy (profile), 30 Jul 2010 @ 10:21am

Re: Re: The argument...
The argument is likely that fees from radio would benefit the labels, which in turn allows them to continue "supporting" the artists. In other words, what's good for the labels is good for the artists.
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Mike C. (profile), 30 Jul 2010 @ 10:29am

Re:
For the suits I read, they were always Record Label vs "unlucky target". They were never submitted to the court as RIAA vs target. The RIAA may have been funding and doing all the work, but the lawsuits always came across as the label was the Plaintiff and the RIAA was just the hired gun getting the job (barely) done.

/personal opinion
//don't even have a GED in law... :-)
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jjmsan (profile), 30 Jul 2010 @ 10:31am

Re: Re: Re:
No they are not a union and have nothing to do with unions
"The Recording Industry Association of America (RIAA) is the trade organization that supports and promotes the creative and financial vitality of the major music companies. Its members are the music labels that comprise the most vibrant record industry in the world. RIAA® members create, manufacture and/or distribute approximately 85% of all legitimate recorded music produced and sold in the United States."
Technically, they have do not have a relationship with the artists themselves and so could not bill them.
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abc gum, 30 Jul 2010 @ 10:33am

Re: Re: Re:
prior post by Bubba Gump ->
"I wish the RIAA would bill all the artists for the losses they incurred! Then we'd see artists abandoning the labels represented in RIAA in droves"

AC response to said post ->
"I don't think so, the RIAA is kind of a union, unless they screw up real bad I don't see that changing"

- Bubba was talking about the artists "abandoning the labels", that has nothing to do with the RIAA. The RIAA is a "union" consisting of the labels, not the artists. The RIAA can not see the forest for the trees, does not smell the coffee and is a few fries short of a happy meal. Too bad, because they used to actually serve a useful purpose.
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Tom The Toe, 30 Jul 2010 @ 10:37am

Re: Re:
(From their web site) "The Recording Industry Association of America (RIAA) is the trade organization that supports and promotes the creative and financial vitality of the major music companies. Its members are the music labels." They are located in Washington D.C.. In other words they are a lobbing group for the record companies.
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Hephaestus (profile), 30 Jul 2010 @ 10:40am

Re: My question is
"Google is so large they could have walked all over the RIAA and any other group with no power and crush them in the process. People need to start ruffling feathers instead of worrying about one point of one percent of some stocks!"

You don't need to be as large as google, you don't need a ton of money, you just need to whittle away at them little by little. Make what you are doing public so anyone you contact has to respond and follow through. Allow them to spend a ton of money then crash their plans. Make them look worse than they already do. Remove every source of income they have, either by competing with them, offering a free alternative they can't do anything about, or showing how what they are doing is illegal under the law.

A couple weeks back I wrote ....

"Things like. Pointing out the the "you are a criminal tax", "three strikes", "packet monitoring by ISPs", and some of what the collection societies do seem to be illegal under EU law."

"Helping find all the music record labels have given away as promotional music, this one makes me smile like a cheshire cat, when published the record labels are damned no matter what they do."

"Putting together a creative commons juke box distro of linux for bars, restaraunts, hair dressers, etc."

"Putting a distributed full media (music, video, CGI) editting, sharing, and databasing distro of linux (its a recording and TV studio in a box)."

Its easy to be the little guy that ties the giants shoe laces together.
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Auditrix (profile), 30 Jul 2010 @ 12:10pm

Comments from auditor
I am the auditor to which Mr. Masnick refers in his post.

Mike asked, "Has any of it been passed on to artists?"

You might be surprised that the answer is YES.

That said, the record companies have gone to great lengths to minimize the amount that they have shared with artists, publishers and songwriters. Therefore, many amounts have gone unreported or underreported, even though some of the money has indeed been shared.

Here are two tactics employed by record companies in order to avoid sharing infringement recoveries:

- Misallocation - many recoveries have been allocated 90% or 100% to a music group's record companies instead of its publishers (because a publisher is obliged to share more receipts with songwriters than a record company must share with its artists)

- Reclassification as an "investment" - I have previously posted on this site about this practice. The record companies have been misclassifying their income for years. If it is classified as income from an "investment," it won't be shared with artists.

I will not disclose all the tactics that the record companies have used to avoid sharing recoveries with artists. Unfortunately, it seems the only way for artists and writers to get a share of some of these unreported amounts is to go after it by hiring an audit and legal team, which is expensive. Even if you are lucky enough to find an auditor who knows about this, these are not slam dunk claims, so the client is unlikely to come away with his or her full share of the recoveries. More often, clients come away with a portion of what they are actually due.

One question that Mike didn't ask and I can't answer is whether the RIAA had fairly allocated or directed recoveries to its member labels. For example, did all the RIAA members who footed the bill for the litigation get their fair share of recoveries? If I were a smaller label, I would be asking this question.
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DanVan (profile), 30 Jul 2010 @ 12:45pm

To sum up the lawsuits

- They spent 10x what they will receive back
- People hate them more than ever
- Piracy has not been even slightly hurt

Well, brilliant job
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cc (profile), 30 Jul 2010 @ 2:26pm

Let me point out a different angle.

You mention "Record Label Accounting" in this post, and I wonder how relevant it really is: what if the sole purpose of these lawsuits is to redistribute musician profits to lawyer firms in which the record labels or the RIAA itself somehow have investments?

For instance, can anyone verify if the lawyer firms to which the $17 million has been paid to have had any personal investments from the RIAA's leadership?

(Even regardless of that, I recall reports that the RIAA's CEO "redistributed" $2 million of artist money to himself for a year's work. Not doing too shabbily.)
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nasch (profile), 30 Jul 2010 @ 3:14pm

Re: Re: Re: Re:
RIAA® members create, manufacture and/or distribute approximately 85% of all legitimate recorded music produced and sold in the United States."

Legitimate recorded music??
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Brian Corber, 30 Jul 2010 @ 11:06pm

riaa lawyers
Why did Obama place many RIAA lawyers in key positions at the Dept of Justice? Why are their lawyers sill lawyers? Why haven't they been disbarred. throw the bums out!
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Anonymous Coward, 1 Aug 2010 @ 1:53am

R.I.A.A.
REAL IGNORANT ASSHOLES of AMERICA
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Ben from Baltimore, 2 Aug 2010 @ 11:42am

Dirty Corporate Lawyers
Hollywood accounting and record label accounting-very deceiving.
Definition of Hollywood accounting from en.wikipedia.org-Hollywood accounting (also known as Hollywood bookkeeping) refers to the opaque accounting methods used by Hollywood to budget and record profits for film projects. Expenditures can be inflated to reduce or eliminate the profit of the project thereby reducing the amount which the corporation must pay in royalties or other profit-sharing agreements based on the net profit.

Dirty corporate lawyers are all alike. They always find ways to say things in a manner that makes what they did for their clients look good while trying to make their client's enemies look like a**holes. But, in the internet age, it hardly ever works. It was behavior like this that convinced Trent Reznor and the Nine Inch Nails to break away from Interscope Records and go independent. The RIAA's lawyers will be in a special place in Hell when they die. And I don't mean Hell, Michigan, either. I am also against the Performance Tax. What guarantee is there that the artists would see a single penny of this money if it is passed. There isn't. Plus, my friend Chris, who works part time as a sports reporter on the radio, said that his station's sister station would go under and bring his station down with it if it is passed right now, when local TV and radio stations are barley able to break even due to low ad revenues because of the economy.
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