Cary Sherman, who has served as chairman and CEO of the Recording Industry Association of America (RIAA) for seven years, after a 20-year tenure at the trade association, is retiring at the end of 2018 to be succeeded by Mitch Glazer. But before exiting his post, Sherman, a veteran lawyer, took a moment to address a crowd of music professionals at the MIDEM Conference in Cannes on the seismic shifts he’s seen in the last two decades and reflect on the lessons he’s learned.
Read Sherman’s speech in its entirety below:
Over the past fifty years, the music business has gone from vinyl records to cassettes to 8-tracks to CDs to downloads to streams, and somehow back again to vinyl. Go figure.
Throughout that time, I have had the privilege of representing the U.S. recording industry in the struggle for smart, fair music policy from our government.
Just what IS music policy? It’s when government decides that broadcasters don’t have to pay for the recordings they play on their radio stations. It’s when government decides that songwriter royalty rates will be decided by a court instead of negotiated in the marketplace. It’s when government decides that tech platforms don’t have to pay royalties for music uploaded to their platforms, as long as they take the music down upon request.
So if you hadn’t already realized it, music policy touches each and every one of you in the music business, from songwriters to publishers to artists to labels to managers to producers, and yes, digital music services, too. And if it wasn’t obvious from the examples I gave, there will always be people and companies pushing lawmakers to reduce the amount of money they have to pay to music creators. They fight hard, and they often fight dirty. A big part of my job is to maximize the money paid to music creators, and thwart those seeking to cut it.
But for most of my time in this business, my colleagues in the music community never thought much about music policy, or that it affected them at all. And who could blame them? For most of the last century, it was all pretty simple: Songwriters wrote songs, artists recorded them, and then we sold the recordings on discs of some kind. Whether it was a wax cylinder or a cassette single, it didn’t matter, the business model was the same…
But the transition to digital – and streaming in particular – changed all that. It exposed the huge gaps in our rights that made it challenging for the industry to build a sustainable business model applicable to all the new technology platforms.
And that’s why the last 20 years have been the challenge of a lifetime – working with our companies to move forward into the digital age. And working to build a new legal framework that enables commerce and respects creators in the new listening economy.
The struggle’s not over – the Music Modernization Act is close to but not over the finish line in the U.S.; legislation is still pending in the European Union to close the Value Gap; and there is work still to be done on many other fronts. But music’s ship of state has turned, and in a direction we can all be pretty proud of.
And one thing is for sure – in the music business today, everyone should understand the need to pay attention to public policy.
So, in the interests of not making anyone re-invent the wheel, I thought I would offer some reflections, some lessons learned, for those just tuning in.
Know Your Business
I know that our business is ridiculously complicated. And I know that musicians are artists, not business people. In fact, some years ago, I spoke to an incredibly august group of songwriters – probably the most successful in the industry. And I quickly realized, they knew as little about the music business as I do about pickup trucks on country roads.
It’s always been this way. But it can’t be that way any longer. You end up with artists insisting their music be removed from Spotify but demanding it appear on YouTube – when Spotify is paying them seven times more than YouTube.
In our new world, creators must have some sense of how they make money. Managers – that means you!
Today’s Foe Could Be Tomorrow’s Friend
In 2003, we were in litigation with Verizon, one of the largest ISPs in the United States, because they were refusing to comply with subpoenas giving us the names of illegal downloaders on their networks.
Just five years later, we were working with Verizon on creating a voluntary program where they would help us educate, and even penalize, their customers for illegal downloading.
Why the dramatic turnaround? Maybe it was because they recognized they had allowed their customers to steal from creators and that, as a responsible company, they had an obligation to do something about it. But there’s another possible explanation:
In 2003, piracy was the killer app that made broadband very attractive to consumers. For $40 a month, you could get all the music and movies you wanted, for free. Around 2008, broadband penetration had stalled, and piracy was becoming a cost, not a benefit. ISPs were faced with spiraling demand for more bandwidth to handle the growing use of the Internet, especially for video. The last thing ISPs needed was pirates on their networks consuming huge amounts of their precious bandwidth to illegally download music and movies.
Business models change, and shifts in policy positions follow. Be alert for changes in business, and then look for the opportunity to find common ground, even with, in fact especially with, those who once were adversaries.
Here’s another example:
Back in 1998, thousands of internet radio stations suddenly appeared online, streaming our music, some for fun, some for profit. They didn’t ask our permission, and none of them paid us a dime. We knew we’d have to sue them to establish our rights. But how as a practical matter would we be able to enforce our rights against so many?
As it happens, the DMCA legislation was moving through Congress at the time, giving us the opportunity to negotiate a resolution. The deal?
The legislation confirmed that we had an exclusive right for streaming online, but Internet radio stations got a statutory license to use our music. Overnight, they became legal, we didn’t have to sue them, and we would get paid. Moreover, the statutory license applied only to the radio-style stations with whom we negotiated.
For on-demand listening, we had full exclusive rights.
That’s a perfect example of turning a lose-lose situation into a win-win, for us and for them. Instead of war, a deal worked better.
Timing Matters – Look Ahead and Secure Rights Before You Need Them
From the very first radios all the way to the world wide web – music has always been central to innovation.
What made the iPod so successful, and with it, revived the fortunes of Apple? Music. What’s the most popular use for Alexa? It’s “play me a song.” And the purveyors of the supposed “next big thing” know it will never really be “next” or “big” if it lacks the draw of something like music, which is so fundamental to the human spirit. But if the makers of these innovative devices and platforms see a gap in our rights which gives them the option of getting the music for free, or for less, they’ll choose that option every time. Which means we’ve got to fix that gap before it becomes obvious. We have to get our rights established before opportunists can take advantage of gaps in the law to avoid paying creators.
In the United States, we’ve been unable to get Congress to require AM/FM radio stations to pay for the recordings they broadcast. But we imagined the possibility that someday, somebody might figure out how to beam music to a home for listening. We thought it might come from a satellite or something. A veritable celestial jukebox.
And so, beginning in the 1980s, we lobbied Congress to extend our limited copyright for sound recordings to cover digital transmissions of music. It took a long time, but in 1995, and then again in 1998, we were able to get legislation establishing the right to be paid for what is now online streaming. And we also established the right to negotiate marketplace deals with services that streamed on demand. That’s Spotify, Apple Music, Amazon Unlimited, Google Play, Tidal and Deezer and more – the subscription streaming services that are producing the bulk of our revenues today.
It is the basis on which the recording industry is returning to growth. And it’s only because we imagined a possibility and secured the rights we needed before powerful technology companies emerged that would oppose the legislation.
Fixing the Problem Yourself Beats Whatever the Government Has in Mind
In the mid-80’s the wife of a U.S. Senator, Tipper Gore, overheard her 11-year old daughter listening to Prince’s “Darling Nikki” from the legendary “Purple Rain” album. She was appalled.
In fairness to Tipper Gore, it is one of Prince’s raunchiest songs.
In fairness to Prince, it is also one of his funkiest.
So began the Parents Music Resource Center. And using their close connections to powerful government officials, we and our artists were called before Congress with demands that we label our music.
Early proposals were modeled after the movie rating system. We thought this was intrusive and unworkable – unlike movies, songs are allegorical and are far more open to interpretation. We still can’t agree what “Puff the Magic Dragon” was really about.
Ultimately, we avoided the risk of such a destructive law by agreeing to a simple, completely voluntary “parental advisory” – — a label advising parents that a recording might have explicit content.
That ended the risk of what would have been disastrous government intervention. And by the way, the system has worked reasonably well, too.
Here’s another example:
Back around 2000, record companies were trying to launch two completely new subscription services, MusicNet and Pressplay. But they couldn’t get licenses for the publishing, because there was a dispute about whether a mechanical license was required, and if it was, what would be the royalty rate? No mechanical royalty rate had ever been set for streaming.
So we did a workaround. In a Memorandum of Understanding between RIAA and the National Music Publishers Association, we agreed that publishers had a right to be paid a mechanical – the precise amount of which would be determined in the future. We further agreed that the mechanical compulsory license provisions of copyright law applied to every copy of a musical work that might be made in the course of streaming.
That agreed interpretation of copyright law allowed subscription streaming services to legally launch in the U.S., ushering in an entirely new business model, not to mention a new way for music fans to consume all the music they wanted. Instead of waiting for government to tell us what to do, we did it and then simply asked government to bless it. That’s the better way.
Big Tech Likes to “Move Fast and Break Things.” Government Doesn’t Move Fast.
In the late 1990’s and early 2000’s, tech companies were all the rage and governments wanted to propel them forward. So, the U.S. Congress gave us Section 230 of the Communications Decency Act, and the DMCA safe harbors; and in the EU, the e-commerce directive. Result? A free pass for tech platforms, who had government permission to willfully ignore their role in sex trafficking, opioid sales, terrorist propaganda, Russian election meddling, counterfeiting and piracy, and an epidemic of weaponized fake news that led to . . . . well, you know.
Compare that to common law in the U.S.: which imposes an obligation on companies producing a new product with a foreseeable risk of harm to take reasonable steps to mitigate that risk. That’s the law that might have applied in the absence of government intervention to give tech platforms a free pass.
That free pass has caused incalculable harm, because not only did it absolve tech companies of any responsibility to prevent harm, it actually incentivized them to be willfully blind to the harm (because if they were aware of it they might have some obligation to do something about it).
Those incentives must be changed. Our experience with Section 230 and the DMCA show us that legislating in a one-off, reactive way will not stand the test of time, particularly in a period of rapid change. Laws need to be built around longstanding, tested principles.
Hang together . . . or Hang Together?
Historically, we’ve lobbied for ourselves, not each other. But nowadays you have to wonder, who is us, and who is them?
I represent labels, but a lot of our artists are songwriters. And producers. Some are even label heads. And everyone’s an engineer these days.
Just as we have broken down creative barriers when it comes to making music, we need to do that when it comes to making policy.
Only a unified music community can be effective with government. Lawmakers are not equipped to pick one side of the industry over another. And we shouldn’t be asking them to. Particularly when our opponents are literally the richest and most powerful companies in the world.
Build music industry relationships if you want to get anything done. Build trust. And allow plenty of time to do it. All of us need to acknowledge that other players in the industry have perspectives that matter. Even the lawyers.
Music has always been a part of my life, since the time I started piano at 6. I even considered becoming a professional musician.
But I declined an invitation to attend the High School of Music & Art in NYC because I knew, if I achieved my true potential as a musician, I’d spend the rest of my life in a bar mitzvah band.
But I deeply love music and hope I’ve contributed in other ways. Of all the things I hope I am leaving behind and hope I can claim some small credit for, it is this: The music community working together in good faith towards shared objectives to make the music economy work for all and to create a better world for the shared cultural treasure that is music.
Lesson 7: no one wants to hear a speech from a music industry lawyer that lasts longer than 15 minutes.