The following is the unabridged interview between DailyTech and Rich Bengloff, President of the American Association of Independent Music, in which he discusses piracy, taxation of online downloads, internet radio royalties and more.
DailyTech: Tell our readers a little bit about your organization and what you do.
Rich Bengloff, President of A2IM: A2IM (American Association of Independent Music; www.a2im.org) is a non-profit trade organization representing a diverse community of independent music labels seeking fairness, equitable treatment, and improved business conditions in the marketplace where Independently owned music labels account for 30% of recorded music sales. Our members support and receive the benefits of our services: lobbying, commerce opportunities, and member services which include networking events, general business advice, education about issues facing indie labels, and special offers and discounts to many important music industry conferences.
DailyTech: What are some of the independent labels you represent?
Mr. Bengloff: We currently include as members over 200 Independent labels from very large companies such as Curb Records, Razor & Tie, Roadrunner Records and Wind-up to cutting edge smaller companies such as Bloodshot, Saddle Creek and Stones Throw, to name just a few. To see a full list of our members please click http://a2im.org/members.aspx" rel="nofollow. Collectively our members represent nearly an 11% market share of U.S. sales making them larger than EMI. Independent labels are the growth sector within the music industry and represent over 80% of annual new releases in the U.S. making them a vital partner/customer for any service provider, licensor of music or anyone using music in their own business.
DailyTech: How detrimental do you see piracy as being to the smaller labels in the music industry?
Mr. Bengloff: Piracy is a problem for all music creators, large or small. Music resonates with people as much as it ever has as the accessibility to music has expanded. The business ten years ago consisted of buying CD's and listening to traditional AM/FM radio with a 168 hours in a week limitation and a limit in the number of radio channels. Now there are many more options to access music. As a result music has moved from a model where consumers wanted to own their music to a new model where consumers are content to just listen to the music without necessarily having ownership. The non-terrestrial forms of listening via webcasters, satellite radio, cable & direct TV, MySpace, etc. give consumers unlimited options. The goal for creators of music has to be to drive people to these legal sources of music and to make sure that these sources of music for consumers properly compensate artists and labels for the use of their music. Unless these entities and the social networking sites, as well as the sellers of music, physical and digital as well as mobile carriers and subscription oriented models properly compensate creators the creation process will decline. In addition, the traditional AM/FM broadcasters need to start to pay for using performers’ music.
DailyTech: Does piracy affect smaller labels less or more than major labels, would you say?
Mr. Bengloff: As per the above we are all, big and small, experiencing the effects of piracy.
DailyTech: Do you support highly punitive punishments, i.e. the RIAA's recent $220,000 victory against single mom Jamie Thomas? Or do you prefer smaller fines?
Mr. Bengloff: A2IM has no official position on the RIAA's piracy lawsuits; our members have a wide range of views. That said, most of our members believe that there needs to be some deterrents to piracy in place and publicized.
DailyTech: Your official stance on DRM is that you are neutral on the issue. Nonetheless, which way do you see the industry leaning?
Mr. Bengloff: Each of our members has their own policy as it relates to DRM. The key issue is interoperability so that consumers can enjoy their music where and when they want to and any form of DRM in the marketplace needs to allow this usage or DRM will drive consumers toward greater piracy.
DailyTech: The latest rate increases (from 8/100 of a cent per song per listener to 19/100 of a cent under the same conditions in 2010) by SoundExchange have basically sealed the demise of the online radio industry, according to most online radio stations, including Pandora. If the increases go into effect, they say they will be forced to close in order to avoid bankruptcy. Do you see a solution to this?
Mr. Bengloff: Like many we were troubled to hear Pandora recently refer to the current situation as a possible 'Last Stand For Webcasting.' As the primary advocacy group for the independent music label community we support a fair and equitable resolution to the webcasting rate negotiations -- a solution that fairly compensates artists and labels for their creativity and investment but still allows the pure play webcasting community to continue to grow. These webcasters need to be supported, as they give independently produced music the opportunity to be heard and discovered, which is all too often not the case at traditional AM/FM radio. The current CRB set rates for thru 2010 are problematic for the pure play webcasters, that said we are hopeful that all parties can get on track towards a constructive solution.
DailyTech: States are recently passing laws to tax digital downloads. How might this affect your labels?
Mr. Bengloff: As noted earlier in this interview recorded music industry sales continue to decline. At the same time all the participants in the industry, the retailers, music labels, publishers, performing artists, etc. are all aggressively trying to get a larger percentage of the shrinking revenue streams. It's unlikely that the digital retailers will be able to pass these sales taxes along to consumers or absorb them within their costs. Do you think consumers will start paying $1.08 instead of $.99 for a track download? The music industry needs to unite to make sure that third parties, whether governmental or for-profit entities, don't go into the music industry space during this period, when we need more economic support for creators, and instead work to extract value we cannot afford to share with third parties for whom music is not their primary business.
DailyTech: Is your organization considering lobbying against such measures?
Mr. Bengloff: It would depend on the form of the lobbying related to our limited resources but we are concerned about these additional costs.
DailyTech: What's one other legal issue or technical issue you see as a major problem facing the music business today, aside from those mentioned?
Mr. Bengloff: The proposed Orphan Works legislation (S.2913 in the Senate and H.R.5889 in the House of Representatives) is aimed at changing a portion of U.S. copyright law that deals with musical tracks, writings, images, videos or other content whose owners cannot be easily located. If passed, Orphan Works will allow for anyone to use music that they have not acquired the rights to use. All they'll need to do is show that they made "best efforts" to locate the copyright owner (the bill does not define what would define "best efforts" and it also specifically eliminates the ability for a copyright owner who feels infringed upon from recovering legal fees from the infringer).
A number of A2IM members are concerned that this bill, if enacted, would make it very difficult to stop parties from using our music in ways we don't want or haven't consented to and, further, it puts the burden of finding uses on the copyright owner rather than putting the burden on the user who wants to use our music. This certainly would hurt smaller independent labels who are more likely to be harder to find than the majors. Independent labels also have less resources to do searches to find infringements and then, after finding infringements, getting compensation.
DailyTech: What are your hopes for the future of the music business?
Mr. Bengloff: All industries go through periods of transformation. We remain optimistic that as the transformation of music consumption occurs new forms of monetization will arise that will be shared with the artists that have created the music and the music labels that have invested in that creation. We just need to navigate as an industry, with all participants supporting each other, thru this process of change
DailyTech: Thank you on behalf of DailyTech for your time and insight. It was great talking with you.
quote: As a result music has moved from a model where consumers wanted to own their music to a new model where consumers are content to just listen to the music without necessarily having ownership.