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Suing Your Customers: Winning Business Strategy?
Cobarde Anonimo writes "The Knowledge at Wharton has an interesting
text
about the RIAA strategy of suing its customers.
As Wharton legal studies professor G. Richard Shell writes below, this same tactic was tried 100 years ago against Henry Ford. It didn't work then, and it won't work today."
Glad I got that off my chest.
Under capitalism man exploits man. Under communism it's the other way around.
1) Sue our customers so they have no money
2) ???
3) Profit!
I really think the RIAA is screwing themselves on this pretty bad though. People are going to go back underground where it's multitudes more difficult to track. Piracy is not going to go away because of the lawsuits.
The RIAA could have done all this differently and made a TON of money with a good marketing scheme, but instead they went for the throat and screwed themselves. They won't ever be able to 100% protect against it, and it won't fade on it's own. I just see it as bad business planning, and nothing more.
The other side of it is there are alot of good indy artists who provide their music free to download, and don't answer to the RIAA. I have a feeling you'll see more people take this route eventually, and less rap stars turned producers...
Just my $.02
...drives corporations and conglomerates to do morally repugnant things like suing its customers in order to achieve the all-important goal of preventing revenues from dropping from previous years'.
On the other hand, its also the same thing that drives corporations and conglomerates to be penny wise and pound foolish. Dirty money from suing children is a source of income that is necessarily limited. It will end. The individuals in the RIAA aren't stupid: they know it will end, too.
However, the RIAA, the entity itself, will charge ahead anyway.
I'm no psychic, but I think I might understand the "logic" behind the suits. Since the RIAA dominates the popular music market, they probably think it's safe to sue some people without losing too many customers. I mean, where else is little Cindy going to go for that latest Brittney Spears record? It's just a shame that more people don't know, or don't care, about small labels and independent artists. I guess some just find it hard to beleive that there are people out there who love making music more than their love of outright profit.
Theives are not customers. It's plain and simple.
And the men who hold high places must be the ones who start
To mold a new reality... closer to the heart
From the article: "But having a strong legal claim on the merits is only one factor in legal strategy success. Indeed, this factor is often the least important one from a business point of view." Does this explain SCO?
Is it bad karma to mention SCO? Can't resist: the whole time I was reading that article I thought "...and SCO vs. IBM ...and SCO vs. IBM ...and SCO vs. IBM." The parallels are obvious.
Still hoping for Gentle Treatment...
Whoo, boy, this'll invite the "Flamebait" mods, but here goes anyway.
the RIAA strategy of suing its customers.
This is such a blatant spin, I can only shake my head in awe. The RIAA is not "suing its customers" - it is suing illegal filesharers. While I suppose it is remotely possible that a small fraction of those people actually occassionally buy a CD every few months, and would thus technically make them "customers", the logical connection drawn by the inflammatory statement in the story summary is completely backwards.
If Microsoft, acting with the BSA, took action against an illegal OfficeXP piracy ring in Korea, would you say that Microsoft is "attacking its customers?"
Actually, yeah, you probably would, sorry, bad example. I forgot. Microsoft is evil too. Lemmie see if I can come up with a better one.
If a hacker (oops, "cracker," I'm all over the negative mods today, aren't I) broke into Valve and copied the Halflife2 sourcecode, managed to get it to compile, and started giving away binaries from his website, and Valve sued to shut him down and get injunctions against all those who downloaded the binary, would you say Valve is "going after its customers?"
It's ridiculous. Give us a little credit guys, come on.
Like woodworking? Build your own picture frames.
> No legal rule is strong enough to overcome a radical technical innovation.
This one sentense sums up the the fate of the RIAA crusade. Digitalization of property is a reality and has made their business model outdated. No litigation can stop the wave of changes occuring also. People would never stop sharing things they possess, ever. RIAA can either adapt themselves to this (like news paper industry) or get perished (like whip manufacturers). I wish RIAA understand what Victor Heugo had said long back , "you can stop an invading force, but you cant stop an idea whose time has come".
http://www.nasirudheen.blogspot/
This actually sounds much closer to the SCO situation. Form a cabal around some questionable patent (and other intellectual property) claims, then sue everybody who tries to enter the market. Describes the USA's dysfunctional software industry perfectly.
Still, the ill-will the industry is generating (and the resources it is expending on being the bigger bully) do expand the opportunity of independent publishers to band together and take the high road. Let's hope we get some Ford-scale contenders in the mix soon.
It Is the Nature of Information to Transgress Artificial Boundaries
Did you read the article? I guess not. The whole point is not about suing RIAA or anything, the article state quite simply that suing customers is a bad business practice. And that over time, peoples take side with David and not Goliath.
Colosse.
The RIAA is suing people that are 'sharing' a huge amounts of their CD's with everyone else around the globe. Some people on slashdot think "that's dumb, they are suing their customers!"
What if a person bought all of a company's commercial software, software that is licensed to you to run on only a handful of machines (example: Apple's home license for MacOS X).
Now that person shares all the software they've purchased with everyone around the globe for free. Company X finds out and sues that person.
They are also suing their customer. Would you agree this is also stupid? If so, why? How is it different from buying music and giving it away to everyone?
It's one thing to make a copy of your CD's for your friends. I consider that fair use even if it isn't REALLY legal. But sharing your music with thousands of strangers is just plain WRONG.
Here are some scenarios...
1. You can't afford as many CD's as you really want to have. Tough shit. Work more, earn more, buy more. Borrow CD's from the library and make copies for yourself.
2. The record companies are bastards that are screwing the artists. OK... and stealing their CD helps them how? Save up your money, don't buy their CD's, and go to their concerts instead. Bring a recording device and capture that memory. Write to your favorite bands and tell them you would like to support them, but cannot stand helping the labels.
3. Music should be free. Correct! CD's, however, are not free. You must pay for them. Get used to it and stop whining.
I used to download music off napster, but never shared it. Not much, maybe downloaded 5-10 albums worth of music the entire time. Now I buy songs and albums off of iTunes, or borrow them from my brother and make a copy for myself. I support my favorite artists by watching them live when I can afford it. And when I can't afford it -- I listen to the CD's I already own. I listen to the radio.
Except that the litigation required to overturn the patent took 8 years... or 1/2 of the length of the patent. In that time, the motor car companies made large amounts of money on their ill-gotten gains, and the endless march towards suburban sprawl was pushed back another 10 years.
In short, a real patent lasts 20 years, a fake patent lasts 10. This is "not much?"
The ______ Agenda
Did you RTFA? The association DID have patent law on their side.
However, the whoile point of article was that suing the entire population will not win you any favors in Congress. Already there are rumblings about turning back some of the DMCA as a direct result of the outrage of RIAA's subpoena-a-thon. If the RIAA makes themselves less popular than telemarketers, no amount of money will be able to keep laws like the DMCA on the books.
Not that we should be telling them this. I see the RIAA's actions the best chance we have to get the DMCA rolled back and I would encourage them to sue more 12 year old girls.
-- Don't Tase me, bro!
Even with broadband, it is time-consuming to download a CD image. Not everybody wants song-at-a-time poor quality mp3s. Some want high quality, good packaging, and easy storage and cataloguing.
For these uses, CDs provide a high-quality high-bandwidth solution (recall the old saying that there's no higher bandwidth than a station wagon full of tapes). But at $20, CDs are not a cost-effective solution. At 1/10 the price it certainly would be. Perhaps even at 1/5 the price.
I, for one, would fill my bookcases with music CDs at that price. You can bet I'd have a 'complete works' of every artist that I love. But at $20 I can count on zero hands the number of CDs I've purchased in the last year.
I believe that book publishers have set their price-points more in line with the value of the medium. Some people still photocopy entire books, but enough find that the convenience and quality of a bound book is worth the purchase price.
Could distribution companies make money at a few bucks a CD? I don't see why not.
Would you want to employ a lawyer that sued a 12 year-old for downloading music?
Absolutely.
If I'm in a situation where I have no choice but to retain counsel, I sure as hell want an attorney who is going to win on my behalf, not fight fair. Once a matter ends up in the courts, the gloves are off.
'I ain't a liar, baby, and I ain't proud I just want what I'm not allowed.' -- Violent Femmes, 36-24-36
No, file sharing is not illegal. Maybe sharing copywrited material is (depending on where you live and how it is done) - I won't argue that point. If file sharing in itself were illegal then I suppose all computer networks should be scrapped.
We need to be careful not to demonize a tool or technology simply because some may choose to use it to facilitate illegal activities.
The RIAA should consider trying an auction strategy for selling music.
Someone might be willing to pay $10US for the newest Sarah Brightman album and $1 for the four Simon & Garfunkel albums released between 1965 and 1970. Another person would be willing to pay the reverse.
The RIAA would offer to make available to your local record store certain albums. You would offer a bid for a selection of songs or albums. The RIAA would delay the release of certain titles to you depending upon their popularity.
For example, if you bid $10 for the latest Sarah Brightman then you could have it burned onto a CD-ROM at your local record store today. But you bid only $1, then you would have to wait thirty days. The ratio of the length of time that you would have to wait vs. your bid price would change according to the overall demand for a particular title. A $0.50 bid for the latest Backside Boys release would have a wait period of three months while bidding $0.50 for Sam The Sham's Greatest Hits would have no waiting period at all.
Since there very little marginal cost for reproducing and distributing the music on the internet, the industry should consider that they could maximize their profit on each album through a flexible pricing structure that reflects the demand curve (i.e. the musical preference and budget) of each different customer.
You shouldn't have to go through the hassle of downloading music through the internet (and it is a real hassle for those of us with dial-up access). You should be able to just go to a local record store and have a blank CD-R burned with your selections, then and there. The record store would download from the RIAA your auction 'winnings', take your payment, and deliver up your CD.
So many new marketing stategies...So many new ways to make money and make their customers happy...So little willingness to try new things...too many lawyers and sleezeballs...too much historical baggage. That's the whole MP3 vs. RIAA conflict in a nutshell.
The RIAA is a wholesaler of legal muscle for intellectual property rightsholders, not a musical-recording retailer.
The listening public is not its customer. The artists, record producers, and catalog owners are its customers. Music is not its product, lawsuits protecting copyright are its products.
It is suing those who procured, copied, and distributed music without legal entitlement, because that is what it ultimately was formed to do.
If it were only an intellectual property issue. I could take my collection of albums, walk into a music store, hand over the old-media copies of the music and buy a new-media copy discounted by the "license" cost of the content.
Yeah, that'll happen...
But it's not an intellectual property issue. I've got 1 CD (Queen's "A night at the Opera" - showing my age) that I've bought 4 times - 8-track for the car, album for the house, cassette for the car, and now CD. And if I put an MP3 of it on my home desktop and then access it from my notebook I could be sued???
If I steal a car I've got it and the original owner doesn't. If I steal "Intellectual Property" I've got it, but so does the original owner. Moreover the production cost of intellectual property drops dramatically with digital copying. The margins increase with every copy. I'm not advocating theft, but it's awful hard to feel any sympathy for the RIAA's position.
The author's analogy between Henry Ford and Shawn Fanning doesn't quite hold.
Ford legitimately used the assembly line idea to provide a commodity. He didn't
create a skeleton key to the "Big Business"'s warehouses full of automobiles.
For a proper analogy between Ford and Fanning, Fanning would have had to create
his own music production company, get artists to sign with him, and sell his CDs
for $5. That would be the legitimate way to do it. Instead, he chose to give
consumers the skeleton key.
Other big differences:
People rallied to Ford's side against the bullies. Editorials weighed in against the industry's heavy-handed lawsuits.
Today, people rally around what the TV tells them to rally around. And all the TV stations and newspapers are owned by the same people who own the music companies. If the automakers had owned all the newspapers, the outcome might have been very different.
For Ford, it was either exit the industry or fight the Selden Patent in court. The litigation lasted from 1903 until 1911.
Or about 1/2 the lifespan of the patent at the time (17 years IIRC). This meant that Ford could drag the legal fight out until the patent expired if necessary. Unfortunately, today copyright lasts forever (thanks, Sonny!).
Unlike the automobile cartel that tried to stop Henry Ford, the recording industry's copyrights are perfectly valid.
The article tries to minimize this point, but it is important. There's no legal battle to win, here. Congress might change the law. Or they might not. If they do, it will take a long time for the constitutionality of the new law to be litigated (c.f. "do-not-call").I could go on, but I'm tired. My point is that the US is a lot different place than it was in 1911, and the analogy, while interesting, doesn't seem too promising to me. YMMV.
Being born in 1957, I watched the industry switch from vinyl (45's, 33's and 78's), to reel-to-reel, to eight-tracks (argghh), to cassettes, and now CD's and DVD's. They resisted every one of these changes to varying degrees. But they all happened anyway. 'Why?', you ask. Well, I would say that sound quality, durability and portability got better and even though the price remained relatively stable, you were getting more bang-per-buck.
So I think that the point of the article is that times and technologies are changing. Is the RIAA going to wake up and or not? They need to offer services such as these. If it's affordable and easy to use it will make money.
Unlike in the past, there now exists a near-zero cost distribution medium; namely the internet/WWWW. Napster showed that the distribution was doable and iTunes shows that it can be profitable (even with a miniscule user base that excludes all Windows and *nix users).
If this attitude wasn't pervasive ("win at all costs!"), we wouldn't have scummy lawyers. The scummy lawyers are just providing the services we want.
There are some things more important then "winning". In fact, there's a lot of things more important then winning.
Well, not to split hairs but you wouldn't be advocating theft anyway. Unauthorized distribution of copyrighted material is not theft, it's copyright violation and has to do with the perceived dilution of value of an activity the rights-holder has exclusive license to do.
And I have NO sympathy for the RIAA's position or more specifically that of the businesses they represent. What I do have is a belief that the basic architecture of copyright is going to stick around. It will be illegal to distribute unauthorized copies of copyrighted works. And this fundamental flaw will continue to interfere with anyone trying to make a go of alternative distribution of THEIR product. Dance our way or go to hell. Do it your own way, get sued.
But what you point out is that as the conventional industry is REDUCING the value of their product (don't use it this way, don't use it that way, oh look now it breaks your computer, sure you can have a compressed file but only this bundled Windows Media version! What you're an online store and you want to stream our product so potential buyers can browse the catalog? Heavens no, what if they capture it off the sound card, it'll be like they've got a cassette tape made off the radio, horror! You're welcome to start an internet radio station to stream our product - here's all your paperwork and here's your fat bill for royalties, and no you may not serve on demand and no you may not say what will be playing next! Thank you for sharing our music with thousands of potential customers. You're sued.) In this atmosphere, independents can RAISE the value of their product simply by doing NOTHING - just producing regular old CDs and not suing anyone - or even doing NEXT TO NOTHING - releasing under a license that specifically sanctions certain types of redistribution, like open source licenses do. That's a pretty cool opportunity the indies have and I'd like to see it used more and more, is all I'm saying.
It Is the Nature of Information to Transgress Artificial Boundaries
Someone who provides a thousands songs for download is not a customer, it's a competitor. The RIAA rightly recognizes that the only way to compete against someone who gives their own product away for free is to sue them, since it is illegal. This is nothing like the Ford case, in which, competitors sued Ford's customers for buying Ford's cars instead of theirs. If Ford stole the competitors cars and gave htem away, and then Ford got sued, then the analogy would be better. If SCO starts suing Linux users, that would be analogous to the Ford case.
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