Financial genius: US record industry turns $16M in legal spending into $391K cash

The title of this Recording Industry vs The People post says it all, really: "Ha ha ha ha ha. RIAA paid its lawyers more than $16,000,000 in 2008 to recover only $391,000!!!":

If the average settlement were $3,900, that would mean 100 settlements for the entire year.
As bad as it was, I guess it was better than the numbers for 2007, in which more than $21 million was spent on legal fees, and $3.5 million on "investigative operations" ... presumably MediaSentry. And the amount recovered was $515,929.
And 2006 was similar: they spent more than $19,000,000 in legal fees and more than $3,600,000 in "investigative operations" expenses to recover $455,000.
So all in all, for a 3 year period, they spent around $64,000,000 in legal and investigative expenses to recover around $1,361,000.

Ha ha ha ha ha. RIAA paid its lawyers more than $16,000,000 in 2008 to recover only $391,000!!!

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LX

They don’t sue for profit. Otherwise they would have already stopped, because nobody is that learning resistant. They sue because they want people to know that sharing music has dire legal consequences. That’s not 16M in legal fees, it’s 16M in bad marketing.
AirPillo

Piracy is a theoretical cost to creators. It definitely costs something but nobody can really agree what it costs… and the cost it does have is in money they do not collect in the first place.

This kind of mismanagement is different.

This is people taking money that creators had already earned and generating massive overhead by squandering and mismanaging its’ use.

It’s the difference between poor sales of DeLoreans, and DeLorean spending the company’s money on a cocaine habit. Which is worse for the health of the business in the long run, you think? Especially if one is a kneejerk reaction to the other, so they both happen at the same time?
- Anonymous
  
  Airpillow, I think you hit the nail on the head right there…Pirating is an unquantifiable number. They usually start pulling out numbers, but, as everyone knows, 68% of all statistics are made up on the spot.
  
  Stupid RIAA. We’re not making money out of what we download. Hell, most of it’s not even kept. It’s used for a little while, then deleted.
  
  I just have a real issue with broadcasting laws. Once it’s in the public realm, ie radio, tv etc, then you can’t control it any longer. You have basically thrown it out into the air, and anyone with a radio can listen in on what you’re throwing out there, into the atmosphere. You’ve throw it into the public domain and have forgone any rights as to how the material is reproduced. They’re saying we may not reproduce their music, but, technically, this is what every single radio does. It’s reproducing it every time the radio station plays the damn song.
  
  So why is the internet any different? Why, once it hits the public domain, can’t I then play the song on my mobile? Why can’t I then reproduce the song on my computer, based on what was broadcast out into the public domain? I’m not taking anything away from the artist. I haven’t stolen a damn thing. Technically, I’ve actually added to, rather than taking away, because I’ve created another song. A duplicate of the first song, so I haven’t taken anything off anyone. I’ve copied it. Which infers, ergo, that I am adding to the world. I’ve added another copy of said offending piece of material.
  
  This whole thing is just money grubbing people who can’t get over the fact that they thought they were gonna be permanent billionaires with the advent of cd’s, til someone created MP3′s. God bless your soul whoever you were.
  
  I’d rather pay more to watch a concert live than buy music off the net, or the record companies that is.
  - teapot
    
    They’re saying we may not reproduce their music, but, technically, this is what every single radio does. It’s reproducing it every time the radio station plays the damn song.
    
    ..Except radio stations pay a licencing fee.
    http://entertainment.howstuffworks.com/music-royalties7.htm
    
    I love your passionate rant, my friend, but there are a few holes in your logic. Everytime a song is played on radio the artists are attributed a tiny royalty credit. This is the weakest argument for music duplication because what is claimed to be (“hey, we’re just doing what the radio is doing”) is not the case at all.
    
    http://entertainment.howstuffworks.com/music-royalties7.htm
    
    As for the inventor of the mp3? Thank the Krauts.
    
    # 1987 – The Fraunhofer Institut in Germany began research code-named EUREKA project EU147, Digital Audio Broadcasting (DAB).
    
    # April 1989 – Fraunhofer received a German patent for MP3.
arikol

The threat of lawsuits does not seem to affect the people around me in their downloading habits.
Good, easy access to legal services HAS changed downloading habits.

Spotify (streaming music), iTunes store, and other services have transformed younger peoples usage patterns. Everyone I know uses Spotify AND iTunes.

One problem with these massive legal fees is the question of who foots the bill.
Artists.
This just gets marked as operating costs, with lower profits coming from music sales.
Anonymous

The artists who are “represented” by RIAA should SUE in class-action for RIAA’s obvious mismanagement!
professor

These legal raptors have certainly had a deterring effect on me… I’m now completely deterred from buying any music from RIAA or any other industry association. Independent stuff only (and to be honest, it’s better music anyway!)
Anonymous

One point people seem to be missing …

Its not the RIAA who are paying out that $16,000,000 in legal fees.

Its the people who put down their hard earned cash for the CDs and DVDs.
webmonkees

It always fascinates me with these even numbers. “Sorry, Joe, we’re going to have to lay you off. we’re at $999,980.12 and we need to go get lunch.”
Anonymous

Their tactics have worked. I haven’t downloaded a pirated song in about a decade. Instead I only listen to the music I already have and I only download from artists who “get it” and allow the masses to freely share their work, like the greatest and best band in the world: Phish.
Mr_Voodoo

They could save money if they just bought one lawyer and copied him.
ill lich

What do they think this is, the War on Drugs?
hungryjoe

These lawsuits are certainly a deterrent to me. Since the RIAA started suing, I’ve been stealing CDs straight from my local record shop.
teapot

This is what sinks their argument that I should pay $20-$30 for plastic/data because of ‘struggling artists’. If they weren’t so hell bent on screwing people in every oriface simeltaneously, they would have a lot more of my money. I’m not gonna support a machine that is working to destroy our freedoms, human rights (the whole 3 strikes thing) and rights to fair use – and neither should you.
Anonymous

It’s nice to see the RIAA take the “War on Drugs” approach to bankrupting itself.
bbbaldie

I have an idea! Eliminate the corporate tax deductions for paying lawyers to sue! That should dry up this cesspool!
- Anonymous
  
  We’ll be delivering a horse’s head to your bedroom tonight.
  
  Thank you for you contribution,
  –Corporate America
Anonymous

I wonder if the record companies will then charge the artists for these legal fees, and further lower their payments to artists, in the name of protecting the artists’ rights.
Pixel

And here I thought it was piracy costing the recording industry millions. Apparently it’s lawsuits that are what is killing music today.
Anonymous

They probably consider benefits other than cash in. The biggest one would be scaring people out of piracy. Cost benefit analyses need to consider more than the most rudimentary of transactions.
- wgmleslie
  
  Yes, the chilling effect is what they are after. I’m sure $16M is cheap at twice the price.
  
  Barratry
RevEng

Really, how much of a deterrence are these lawsuits? I don’t know a single person that ever said, “Oh, I’m afraid of getting sued, so I’ll just buy the CD.” I know plenty of people who bought the CD because they wanted to support the artists, and others who refused to download anything on moral grounds, but never anybody who was afraid of getting sued.

Of the people I know who even realize there are lawsuits on going, most ask me if there has ever been a case won. That doesn’t sound like much of a deterrence to me. Keep in mind, most of that money recovered came from a) one or two high-profile convictions, and b) people paying up in small quantities to avoid a legal battle.

People have a funny view on life. They think, “It will never happen to me,” or, “How could they possibly know what I’m doing?” To some extent, they are right. But in the end, people will do things even if there could be legal consequences, as long as they can convince themselves that it won’t happen to them.

Myself, I continue to download music and movies. For free. I also buy songs online (thanks Jonathon Coulton!), buy CDs and DVDs in stores, go to concerts and movie theaters, and otherwise “support the artists” who I am supposedly stealing from. In the mean time, the RIAA and MPAA insist on convincing artists that I am a thief instead of a customer, lobbying to ban any rights I might still have, blackmailing everyday people into paying hush money, and wasting the money that I paid to the artist to support their work.

And I’m the thief.
Cicada

I doubt the point of the lawsuits is to recover money, eh?
peterbruells

Well, you may laugh, but the lawyers certainly laugh louder.

I’d laugh too, if I had such a nice racket going – even more profitable than religion.
Anonymous

The comparison of numbers is misleading – it doesn’t take into account the money you gain when people see the lawsuits and decide to buy music from iTunes/CDs instead.
hockeybrad

I, for one, get really sad when I think about $64 million spent on a pursuit that did nothing but ruin a previously untarnished name (RIAA).

Can you imagine how much good could be done with $64 million dollars?
boyhowdy

Someone’s missing the point here, and I’m afraid it’s you, Cory.

Surely the vast majority of music consumers aren’t savvy like us. Instead, they have some anecdotal and vague awareness that lawsuits exist as a real but vague threat – which in turn causes more of them to pay for their music, to the tune of many millions.

Were it not for these lawyers, there would be no such vague threat, and I think it’s safe to assume that much less music would be paid for.

There’s your profitability – not in winning cash, but in keeping the masses uneasy enough to pay.
- Itsumishi
  
  I think it’s safe to assume that law suits have done virtually nothing to change piracy levels anywhere.
  
  Sure some individuals might have been turned off the idea of downloading music but plenty of others actively avoid paying for music from RIAA labels whilst still supporting artists that are independent or on labels that don’t treat fans like shit.
  - Bryan
    
    Do you think that boycotts against the RIAA are that widespread that they offset their scaremongering tactics? I doubt it. I’d be surprised if boycotts were even close to 1% of the total illegal file sharing volume.
    - Itsumishi
      
      I think the number of people that are turned off file sharing because of fear of litigation is next to negligible.
      
      As others have said above, there are plenty of people who don’t download music because of moral reasons or because they’re fans.
      
      There is also a huge number of people globally that simply hate the RIAA and the labels they represent; and will avoid paying for anything they believe the majors will make a dime off. This won’t necessarily stop these people from seeing the same artists they represent live, or downloading entire discographies.
collisionbend

They must need the tax write-off…
loraksus

And you can be damn sure that all those legal fees came from money that would have otherwise gone to the artists.
Just more “Hollywood accounting”

Anyone surprised?
Xenu

And of that $391k, how much of it went to the artists?
- David Carroll
  
  How much do the artists get?
  
  The answer of course is -$15,609,000
tim

I’d laugh too, if I had such a nice racket going – even more profitable than religion.

Don’t be daft – religion gets the marks working for you, fighting to send in money. No need to mess around with expensive lawyers. Plus people claim you’re a wonderful person even after you’ve been caught renting an age/gender inappropriate sexworker to serve you the illegal drug of your choice in a disgusting manner.
berco

The RIAA’s return on litigation is of no consequence. The measure of success is return on deterrence. However, reliably isolating profit or loss due to the presence or absence of deterrence is difficult, if not impossible. I am very curious what numbers they are working from.

Unless of course the train has no brakes.
Anonymous

So this is where piracy is hurting the music industry. If there weren’t any pirates then the RIAA wouldn’t be forced into spending so much to sue them! /sarcasm

To anyone that thinks that the threat of litigation really stops the bulk of people they’re wrong, they’ll just spend their money on anonymizing services like VPNs. Sure, it will deter some people, but the growth of people that download is more than those that only buy it, which is fine in my eyes because a good deal of those people that “steal” from them will buy it if it’s actually worth something. That’s the whole reason the RIAA/MPAA complain about pirates, cause they aren’t able to rip off as many people with blind buys.
Anonymous

kind of kills the argument that they’re a bunch of extortionists suing you because they want your money. if they really wanted money, they’d just fire their lawyers.

regardless of the effect these lawsuits are having, the MAFIAA must actually believe that they are an effective deterrent to be spending that much money on them.
Rick.

I guess the deterrence tactic worked since file sharing is completely gone from the intertubes. Oh, wait–
KeithIrwin

It’s not really clear that deterrence has, in fact, occurred. It’s just as likely the pirates have simply used different means of sharing which are harder to the RIAA to detect. From what I understand, for example, sharing via network shares on college campuses is way up.

The larger point here, I think is that these numbers actually prove what the RIAA has been arguing: that current laws make it financially infeasible to use the courts as a redress for non-commercial file sharing. This is why they keep trying to make the legal environment more friendly to them: because even when they’re winning, they’re losing.

I think that an interesting question is: is it possible to create a legal climate in which non-commercial copyright infringement could effectively be addressed using the legal system but which would also be acceptable to civil libertarians (not every single one, of course, but perhaps acceptable to a majority). Thus far the legal discussion has mostly consisted of the RIAA making proposals which would severely limit or do away with most of what we think of as due process in copyright violation cases and civil libertarians, understandable fighting these proposals.

So, the question is whether or not this is inevitable or whether there exists a set of laws which would be acceptable to both parties. I tend to suspect that there is not, but it would be interesting to see an in-depth exploration of what could actually be done.
- Tynam
  
  One problem with the legal system, from the RIAA’s point of view (and from mine), is that it’s _expensive_.
  
  Sure, the RIAA is happy to use that fact as an intimidation weapon – it’s an imbalance of justice they rely on to scare people who don’t have their own legal departments into paying up – but it’s also the reason it just doesn’t make sense to make small copyright claims.
  
  My point is: as with so many things, the existing laws actually work OK except that it’s so expensive to get access to them. The problem can’t be solved with different laws, because that’s not where it lies. It would need a different legal system.
Anonymous

Personally I don’t think lawsuits will scare off a lot of people, quite the opposite. Most of my friends started buying music again because it is after all, the right thing to do.
Yet after the Music industry declared war on their customers all that was dropped. I guess there is a new philosophy on both side now: You f**k with us and we’ll f**k you up.
Personally I hope the Music Industry as it currently exists, dies. They are nothing but Banks with investments. Music on the other hand will, as long as there are humans, never die.
And it has never been easier to record and self produce your own music. Time to reinvent.