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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.
The lawyer profession is still alive and well, isn't it? ;)
"Old man yells at systemd"
The judge wasn't constrained by laws such as the DMCA and other nonsense that favors business over innovation. The same scenario today would probably have swung against Ford, despite public support.
The Blaster Master Fighting for Truth, Justice, and Evil Pie since 1979
I think this is more commonly known as an "exit strategy" in the business world.
I Am My Own Worst Enemy
They best thing about the RIAA's strategy is that their heavy-handed tactics have brought them to the mainstream press and now has A LOT of people pissed at them. Before, it was just rumbling amongst the geeks and a few other industry players. But suing 12-year olds, suing thousands of people, going after anyone and everyone with reckless abandon, has forced even the most average news-reading Joe to go "man...what a bunch of sleezeballs". Had the RIAA kept this an underground fight and sued more discriminately, they may have succeeded in their scare campaign. Luckily they didn't and now that it's in the mainstream press maybe something will be done to halt their actions.
"He uses statistics as a drunken man uses lampposts...for support rather than illumination." - Andrew Lang
Under capitalism man exploits man. Under communism it's the other way around.
1. Upon clearance of your check by the bank, we will sue you.
2. You agree to settle out of court for whatever amount we ask.
3. Failure to follow the terms of this agreement are grounds for lawsuit.
...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.
It didn't work then, and it won't work today.
Think again, this is scaring everyone around me into going out and buying CD's or purchasing rights to the music (mp3's) online. I think it is worthwhile for the RIAA to bring on these lawsuits. I only think they were too late in the game that it may not have near the effect it would have had had it been a few years back and with slightly different tactics.
[[ the only 15 letter word that is spelled without repeating a letter is uncopyrightable: it may soon be, however. ]]
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...
A Slashdot favorite, you can read about it here, here, here and a synopsis here and another one here.
Basically, suing the customers backfired horribly and Mr Novak ended up being countersued and lost. A cautionary tale!
Never email donotemail@WeAreSpammers.com
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.
A customer is someone who buys something from you
Fine, instead of calling them customers, call them "the market" or "potential customers" or even "previous customers." Either way, they represent the people with whom the RIAA have the greatest potential to do business.
They are music lovers. The RIAA members sell music. Ergo, it is *not* in the RIAA's best interest to piss off these people. Pretty straight-forward, if you ask me.
QUOTED:
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.
RESPONSE:
The "suing it's customers" deal isn't as inaccurate a claim as you think. Illegal filesharers typically buy MORE music than non-filesharing customers. Why? Because they are exposed to more and more kinds of music.
How else are you going to tell if that new album is any good unless you get a chance to listen to it? And yes, Borders and other places have very recently installed listening booths. But back when everyone got into Napster, back in 1998 or so, that wasn't even an option. (In fact, it could be said that Napster provided the impeteus for the listening booths, no?)
As for Microsoft attacking an illegal OfficeXP piracy ring in Korea, yeah, I don't think anyone would complain about that - just as no one complains about the RIAA hitting "the real pirates" in Hong Kong. Whether legal or not, there's a large ethical difference (for most people) between someone downloading to hear the music, and someone ripping off CDs to sell bootlegs.
If someone offered litigation insurance, I think I would gladly pay. Join a P2P network for a small fee, and have that money go for insurance. If the RIAA decides to sue individuals en mass, this money would be used to fight them. I would rather flush my money down the toilet than give it to the RIAA.
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
These sued people ain't RIAA customers but potential customers of it's member.
That's a dangerous assumption.
Though I'm not one of the sued, I'll give you an example. A friend of mine had a KMFDM CD and let me listen to it. I liked it, and bought myself a copy, but I wanted to see if I'd like their other albums before I went and purchased them. I went online, downloaded some mp3s from their other albums.
At that point I was a customer of theirs, even though I was getting mp3s of other albums online. (Turns out I liked those mp3s too, so I picked up the other albums.)
In fact with increased file sharing these people won't be customers.
This is also a dangerous assumption. It assumes that everyone, everywhere, will eventually be using file sharing to get files instead of buying the CDs in stores. This is impossible under our capitalist system, because *someone* has to buy the CDs.
But the sueing will convert them into customers.
???
File sharing is illegal.
I do not believe there is any law that prevents me from lending a CD I've purchased to a friend. If there is, could you please point me in that direction?
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.
the RIAA is going to lose no matter what happens to its consituent recording companies. it knows this.
when distribution becomes primarily eletronic, then if the RIAA doesn't wholly control the distributor (if that distributor gives a fair deal to any recording company) their monopoly falls apart, their income will evaporate and the RIAA itself will be redundant and removed.
the recording companies will once again have to compete (because startups and independents can make money even if they're not in Best Buy and Media Play) and the association will dramatically lose funding. whether the individual record companies compete well enough to remain doesn't matter. odds are that they will, but they won't need to donate money to the RIAA to protect their distribution monopoly.
keep in mind, it's the RIAA doing the suing. Not sony, not bmg, not time warner - not even in joint litigation. the same RIAA who are mainly comprised of organizational management and lawyers who exist to perpetuate the monopoly. The same RIAA that operates as a nonprofit, and would be required to donate any existing capital should they go bankrupt.
So they are doing what only makes sense. Invent litigation and lobbying efforts to stall the end of the monopoly (to make more on wages) and to drum up extra legal fees (drain the coffers before the end), and brush up the resume.
The RIAA itself has no other option. It can't adapt, it can't compete. Once the distribution monopoly is gone, the record companies will at the least dramatically scale back their contributions, and the party will be over.
illegal p2p file sharing will lose ground to legit music download services. most people -will- pay to get the right song at the right bit rate at the best download speeds the first time. many already do, and there isn't even much competition. the fact that illegal p2p transfers -are- illegal is important and will contribute to the adoption of legal alternatives, but only slightly for most of the people downloading.
// "Can't clowns and pirates just -try- to get along?"
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.
If you think that people who download MP3s don't also buy CD, then you're grossly uninformed. During the 2 years that Napster was fully operational, dollar sales for CDs grew 15% each year. After Napster's shutdown, CD sales have fallen 10% per year.
For most people, file sharing of MP3s is like flipping through the magazines at Barnes and Noble for an hour, and then just buying one book (if anything). Imagine if B&N randomly sued every 10000th customer $5000 for each magazine they looked at, and then offered to settle for $50 apiece. Guess what would happen to sales at B&N. Also think about what would happen to periodical sales at B&N if they started to shrink wrap every item in the store so that customers couldn't browse through.
First, you will never win your market by suing your customers
SCO is not suing its main customers. SCO knows it doesn't really have a viable Unix business. It knows its Unix customers will go away, whatever it does.
Its real customers are Microsoft and Sun. They have paid (and Microsoft will continue to pay) millions of dollars to SCO. They are buying a service, the service of generating FUD around Linux. Selling this service looks like being a viable business, until the IBM lawsuit comes to court in 2005, when SCO will presumably cease to exist.
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 National Cash Register Company, under John Patterson, sued customers who bought competing cash registers, and forced most of the competing manufacturers out of business. NCR became the largest cash register company and maintained that position for most of a century. This was contemporary with Ford's litigation with the Association of Licensed Vehicle Manufacturers, around 1900. Details can be found in biographies of Patterson or of T.J. Watson, the founder of IBM and once Patterson's top salesman.
Patent lawsuits are hard enough to win that sueing customers is not particularly productive, so this is rare. Copyright lawsuits are much easier to win, especially after the DMCA, so sueing customers is a workable strategy.
Why do people have such a problem understanding the difference between copyright infringement and theft? They are NOT the same thing. With theft, you actually deprive someone of something they have, and its associated value. In your example you deprive Walmart of its case of Coke, and the money they spent to get it. With copyright infringement, you deprive the owner of nothing, since you simply make your own copy.
Here's the other thing: Most people that download songs, also buy CDs. Often the more they download, the more they buy. I've known more than one person who loved to play with P2P software and owned literally over a thousand CDs. That would not only make them a customer, that would make them a big customer. You do not want to piss these people off.
Also there are plenty of people that were customers but are now no longer buying CDs because of the tactics, though not targeted at them. I know more than a few people that never used P2P software (yes, luddites exist) but as so enraged by the tactics that they are boycotting (or claiming to at least).
So this is not at all like going after a theif. this is going after people who sample your msuic, at no cost to you, and then buy it. Making them, and others who hear about it, angry is a BAD IDEA. Music is a pure luxury good. People like buying music but it is not in any way required for survival. Hence, if you piss them off, they can very successfully boycott you.
What's more, it is leading to the strengthening of indie labels. People decide they are sick of this shit, but still want music, they look for alternative sources. They will happen across indie labels. Now those labels might not have just what they want, it may turn out to be sub par to what they are used to. But they buy it anyhow since they want music and are pissed at the RIAA. This strengthens the indie market.
Really, their strategy is stupid. When MILLIONS of customers do something like P2P, you find a way to exploit it, not try to stand in its way. There are plenty of ways they could turn an Internet distribution to their advantage, but they stubbornly refuse those and just go on trying to stop a tsunami with a sandbag.
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.
- The record company is not a member of the RIAA, and that it is not affiliated with any company that is
- The CD record itself does not employ any DRM technology that aims to restrict the rights of the purchaser
The word mark could be accompanied by some eye-catching logo and put on the CDs, to make it easy for customers who are fed up with the RIAA members' attitude towards them, but would still like to spend some money on music, simply because they enjoy listening to it.
What is a "certification trademark"? It's basically like a normal trademark, except that anybody who fulfills the criteria that are specified for that particular mark can use it. One example of a certification mark is the OSI mark for Open Source software.
Christian Engström, Former Member of the European Parliament 2009-2014 for The Pirate Party, Sweden
1. Sue Customers
2. GO TO 4
3. Profit!
4. Bankruptcy
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
It's not like that at all. Here's the analogy you should have given:
If Wal-Mart suddenly started charging 5 times what everything was worth to the average consumer, but most consumers had no real stores to shop at that weren't Wal-Marts, and in addition if the quality of most products unpredictably shot below even Wal-Mart standards...
Some shoppers might start going into the store and think, gee, that bag of chips costs $25, but I have little confidence that it doesn't suck. I think I'll eat some right here in the store before I take a chance of wasting that much money. Once a few people started doing it, lots of people might start doing it. When Wal-Mart executives found out this was going on, they might call the police and have thousands of people arrested for shoplifting. But even though shoplifting is wrong, and can be enforced, putting many of the people who might shop in your stores in jail (or in the RIAA's case, the poorhouse) won't do anything to fix this hypothetical Wal-Mart's flawed business model. It would eventually make people scared to "sample" the products, but it would also represent the last straw for most of them, who aren't about to sit back quietly and pay $25 for a bag of chips of dubious quality. Even though in this analogy they didn't have a nearby competitor, that wouldn't protect them forever. The shoppers will eventually seek out a competitor and take their business there. The competitor in the RIAA's case is independent music. Customers will eventually quit buying RIAA music altogether and shift to listening to excellent bands from smaller, independent labels like Vagrant or Kung Fu Records. Labels like these just give away MP3's on their websites. No, not WMA's or some RealPlayer format. They give the fans lots of free music to sample and they know that one way or another, the fans will support the bands they love. And they do.
Either all RIAA music has to suddenly become undeniably friggin' amazing, or the fscking prices have to come down. The way it stands people won't pay that much for music that's that mediocre. They'll listen to it for free, sure, but I for one would not have paid much of anything for most of the MP3s and AAC's I downloaded from Napster, KL, and Gnutella.
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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