Will the majors drop the RIAA?

When Private equity firm Terra Firma bought EMI earlier in the year for $4.7 billion the general consensus was this this was a phenomenally stupid purchase. If you had billions of dollars to invest would you pick the music business as a promising growth industry?

As it turns out Guy Hands, Terra Firma's chief, is not entirely stupid if a recent Financial Times story is to be believed: while going over the balance sheet Hands has supposedly pegged the $25 million dollars of annual fees EMI pays to the RIAA and it's British counterpart the IFPI as potentially wasteful spending.

Who could argue? The economics of the RIAA's anti-Piracy campaign have long been understood to be terrible (as the RIAA itself has conceded) and basically amount to a scare campaign to drum up press for rare victories in the courtroom such as the recent $220,000 reward against a single mom for file sharing. Business people care about numbers and it doesn't take an astute financial acumen to come to the conclusion that perhaps the $132 million that the major labels send to the RIAA annually might get a better return if spent elsewhere.

Perhaps EMI has finally learned a few things from Radiohead, one of its former bands, in regards to the record industry's obsolescence. But don't think that EMI is going all soft... It was only a few weeks ago the the label chose to punish the band for it's pay-whatever-you-want release for "In Rainbows" by releasing the entire radiohead back catalog drm-free. As noted on boing boing:

"When the band put out the digital version of the album themselves, EMI threatened them with re-releasing their entire catalog on the same day the discbox of IN RAINBOWS was being sent out, Dec 10, unless the band gave EMI the standard physical release of the album. Of course the band/managers told EMI to piss off and were appalled that at such an important point in the band's career that their former partners would do this to them."

It's as good time as any to trot out the old Hunter S. Thompson chesnut: "The music business is a cruel and shallow money trench, a long plastic hallway where thieves and pimps run free, and good men die like dogs. There's also a negative side."
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Update: SAI just posted a summary of a call Warner Music Group had with investors this morning. When asked if they would follow EMI's lead in dropping cash to the RIAA they answered with: no comment. This probably means nothing but it doesnt exactly sound like a vote of confidence either.

Comments

[Holland_Oats]

how great would that be to see the riaa go down in flames. a hateful, hateful bunch.

[jenjen]

Doesn't seem likely to me that a $25 million potential savings in RIAA fees would have been the only thing behind a 4.7 B-B-Billion dollar purchase. The fact that most of Terra Firma's other businesses are about leasing of various kinds (property, aircraft, even pubs) makes me think there's a strategy at work here that might make the music "buying" public less than happy.

[Eric]

That was kind of an obnoxious thing for EMI to do to Radiohead, but aside from the fact that I'd sooner just go out and buy a physical album in the first place for the album packaging and the [negligible] higher audio quality, personally, I'd rather buy digital music downloads as DRM-free MP3s - I don't want music that I purchased to ever be unavailable due to a glitch or compatibility or such. So in my book, both Radiohead and EMI are doing things to make me more likely to buy music in digital download form.

Course, I'm still going to wait for the TBD Records release of "In Rainbows" on CD, so whaddaya gonna do.

[Jaak]

Wait for the vinyl edition!