RIAA Case Analysis

7/27/2019 RIAA Case Analysis

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Executive Summary

This case analysis revolves around the ethics of downloading music from the internet.

The case began with Andy Decker who was problematic about what gift to give his sister. After a

short and quick brainstorming, he ended up planning to buy a compilation of songs his sister

likes. His dilemma began when he had to choose between purchasing an original CD from a

music store or to simply get free copies from the internet. He came across a message on the

internet while he was in pursuit for the perfect gift forhis sister. The message said, Distributing

or downloading copyrighted music on the Internet without permission from the copyright owner

is ILLEGAL.

This study focuses on the RIAA or also known as the Recording Industry Association of

America. RIAA is a trade association which represented common interests with different U.S

recording companies. This study also discusses when the problem of the RIAA started and the

different internal and external factors that affected its operations. It elaborates the significant

incidents that followed the growth of the problem and how the company dealt with the seemingly

insurmountable challenges that came before them. In addition, this analysis also contains

scanning of the companys environment which includes the internal and external environment

that could affect the business operation of the company.

Moreover, this study also explains the people responsible for solving the problems, the

companys objectives and possible alternative courses of actions. This analysis also covers the

groups recommendations to solve the challenges faced by the company.


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Case Background

RIAA (Recording Industry Association of America) is a trade organization that embodies

the interests of the different U.S. recording companies. Its members include EMI Group

Bertelsmanns BMG unit, Sony Music Entertainment, AOL Time Warners Warner Music

Group, and Vivendis Universal Music Group. The sudden technological advancement led to the

growth of interest in the free reproduction and distribution of music. The invention of CD

manufacturing made a better and improved sound in recordings, made an easy to use and

durable format. Moreover, computers became the source of multimedia creations including CD

burning software and stereo sound systems.

The emergence of the internet as part of the technological advancement gave birth to

modern applications which included P2P FileSharing software. 2002, CD sales plummeted

by 11% according to Nielsen Soundscan and on the same time, the consumer electronics

association believed that the sales of blank CDs would rise by more than 40%. 2003, the

downloading of music from the internet became a prominent leisure activity. This was

commonly done by students in their dorm rooms and even made copies and shared downloaded

files with one another. A survey by the Pew Internet and American Life Project showed that 60%

of college students uses had downloaded music files compared to 28% of the overall populations


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Case Proper

I. Time ContextOn May 1999, a P2P file-sharing service named Napster allowed users to

exchange music for free and on December of the same year, Napster was accused

of copyright infringement and encouraging of illegal copying and distribution of

music. The Recording Industry Association of America (RIAA) filed a lawsuit

against the said P2P file-sharing service.

Since the growth of P2P file-sharing services, recording companies

suffered a massive decline in worldwide CD sales. At the end of 2001, CD sales

dropped by 5% and at the end of 2002, there was an 11% decline in sales of CDs.

In 2003, a number of P2P file-sharing services announced upgrades to

their software that would make it more difficult to uncover the identities of its

users.

II. ViewpointAccording to the RIAA, there were an increasing and significant number of

students using the networks of the university to participate in online piracy of

copyrighted materials. Because of that, the College administrators, including the

General Counsel/Chief Legal Officer, Director of Information Technology, and

the Chief Financial Officer were asked substantial support by the RIAA to help

bring the piracy under control.

The RIAA, being the embodiment of different recording companies is also

responsible in the continuous effort of putting a profound value in the meaning of

ethical music downloading.


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III. Statement Of The Objectives Must Objective

-To bring piracy under control

-To educate online downloaders about how they could violate the Federal

copyright law by simply uploading and downloading copyrighted works

-To increase the sales of recording companies

Want Objective- To specify what practices are and are not acceptable on the schools

network

- To impose effective remedies against violators

-To improve security in university networks by monitoring student

compliance

IV. Statement of The Problem (CAUSE & EFFECT)o Cause

Music Piracyo Effect

According to RIAA (Recording Industry Association of America), Users whoupload and download infringing copyrighted works without permission of the

owners are violating Federal copyrighted law.


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Common Examples of Online Copyright Infringement:

You make an MP3 copy of a song because the CD you bought expressly permitsyou to do so. But then you put your MP3 copy on the Internet, using a file-sharing

network, so that millions of other people can download it.

Even if you dont illegally offer recordings to others, you join a file-sharingnetwork and download unauthorized copies of all the copyrighted music you want

for free from the computers of other network members.

In order to gain access to copyrighted music on the computers of other network

members, you pay a fee to join a file-sharing network that isnt authorized to

distribute or make copies of copyrighted music. Then you download unauthorized

copies of all the music you want.

You transfer copyrighted music using an instant messaging service. You have a computer with a CD burner, which you use to burn copies of music

you have downloaded onto writable CDs for all of your friends.

Somebody you dont even know e-mails you a copy of a copyrighted song andthen you turn around and e-mail copies to all of your friends.

o Cause Consumers do not buy original CDs and they download music from the internet

instead.

o Effect Recording companies experienced declining of sales.


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o Cause Security and Privacy Risk from P2P (Peer to Peer) file sharing

o Effect There are instances that files to be shared were susceptible to worms and viruses. Many users are not aware that their personal documents may be available for many

of computer users to download

Music piracy was not viewed as an ethical issue and because of this perception; a lot of

people continue to patronize downloading of music for free without the authorization of the

artists or composers who wrote the song. According to the national survey conducted by Edison

Media Research, 74% of teenagers (12-17 years old) did not see anything wrong with

downloading music for free.

The RIAA is exerting too much effort on combating piracy instead of finding ways to

change their business models and profit from digital music. Moreover, efforts being provided by

different recording companies were not enough in order to catch the pace of digital music.


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V. Environmental ScanningA. I nternal Environment

Area Strengths Weaknesses

Marketing Product

Legal products(music)there are still existing P2P file sharing

services nowadays that the RIAA

pursues to abolish because of their illegal

distribution, copying or recording of

files. However, there are a number of

legitimate subscription services such as

ITunes and Emusic that sell music

legally.

Flexible payment options because of the advancement of

technology, online stores was able to

develop ways in providing different

payment options for their customers in

order to pave way for easy and

convenient transactions.

Price

Expensive cost of CDs andonline copies

-The costs of newly

released albums are very

expensive whether

customers buy from music

stores or online.


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Place:

Options to buy online or from stores P2P-file sharing networks are only

available online but businesses offering

legal music can be found in physical

stores and online stores.

Promotions

Strong product advertisements- Music that customers are looking for

are marketed or advertised in many

different ways such as television, radio,

newsprints, magazines, posters and

online advertisements.

-In the fight for the abolishment of

illegal copying, recording, or distributing

of copyrighted music or files, recording

companies have the support of artists or

celebrities who also support the same

advocacy. In fact, prominent

songwriters, singers, and musicians got

together and formed a group called

Music United for Strong Internet

Copyright or MUSIC. This is to ask their


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B. External Environment (Industry Environment)

fans not to download copyrighted music.

Area Opportunities Threats

Degree of

Competition

Legality of transactions as their advantage

- The legality of their transactions can beused as their advantage to keep people

from illegally downloading files.

According to a research made by a

Princeton University student for her

thesis in Economics, she found out that

46 percent of students who took the

survey said that they would be willing to

pay for a legal online music service

while only 27 percent said they would

not.

Advocacy to stop music piracy

- Other than partnering with prominentsongwriters, singers, and musicians, the

RIAA has also sent letters to University

Presidents to build a bridge between the

understanding of ethical principles of

Limited support from the

public to fight music piracy

- A national surveyconducted by Edison

Media Research found

that 74 percent of

teenagers (12 17 years

old) did not see anything

wrong with downloading

music for free.

High-costs of legal and clean

file copies

- People view recordingcompanies as greedy

charging $20 per CD

when the costs of

duplication were minimal.


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downloading of music and the students.

Clean files

- Almost all of the legal online musicservices dont have viruses, adware or

spyware hidden behind the files they

provide for their customers as compared

to P2P-file sharing networks that have

less socially redeeming features.

- According to an Ipsos-Reid survey, 19percent of Americans 12 years and older

said that they had downloaded an audio

file from a file-sharing network; more

than half of people between 12 and 17

years old said they had done so. Because

of this, its possible that young people

were being exposed to age-inappropriate

materials.

P2P-File sharing networks

excuse

- Kazaa, Morpheus, andGrokster did not distribute

music; they merely

provided the software that

enabled the exchange of

files among members. A

federal court judge ruled

that the users, and not the

networks offering the

software, were

responsible for copyright

infringement.

- As a result of a federaljudges decision,

networks were able to

stay in business and were

able to attract additional

investors and advertisers

now that the viability of


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c. General EnvironmentArea Opportunities Threats

POLITICO-

LEGAL

- As stated by the courts of law, anyonewho digitally transfers files of

copyright-protected songs and keep

them on the hard drives of their

computers or laptops were breaking the

law.

- When the RIAA found out about theentire business operation of Napster, it

filed a lawsuit against Napster on

December 1999. Napster was accused of

illegal distribution and copying of

- A federal court judgeruled that the P2P File-sharing

services were not responsible for

copyright infringement, its the

users. Since then, these kinds of

services continued to flourish and

in fact, were able to persuade

more investors and advertisers to

invest on their services.

their businesses models

was more certain.

Continuous

growth of P2P-

File sharing

networks

The continuous growth of P2P-

File sharing networks provide

alternatives for people who are

looking for an easy and free

access to music or any other

kind of files.


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music.

- According to the Ninth U.S CircuitCourt of Appeals, Napster was fully

well-aware of their users illegally traded

music.

- A group of P2P File-sharing servicesreceive their own lawsuits coming from

a group of recording and movie picture

companies for financially benefiting

from the infringing of copyright works.

- A restraining order was issued toMadster, was also known as Aimster.

Another P2P File-sharing service

established by Johnny Deep. Due to the

restraining order, its operations were

forcefully shutdown on December 2002.

- A federal appeals court in Chicagoupheld an injunction that forced Aimster

to shut down.(July 2003)

-To further combat music piracy, the

RIAA settled more than 900 subpoenas

with university administrators and

Internet service providers asking for the


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names and addresses of people sharing

music files. The RIAA stated that they

would file lawsuits against these

individuals by the end of August.

- School administrators value theirstudents right to privacy but they also

felt obliges to follow the Digital

Millenium Copyright Act (DMCA)

ECONOMIC - Recording Companies

experienced an 11% decline in

worldwide sales of CDs,

Approximately 1.7 billion

blanks CDs were sold in 2002,

up to 40% from 2001.(end of

2002)

SOCIO

CULTURAL

- Despite the culture of people whenit comes to their perception of music

piracy, there are students who are

willing enough to pay for legal music.

Based on the study conducted by a

Princeton University student, 46% of

- Most people did not seemusic piracy as an ethical issue.

According to a national survey

held by Edison Media Research,

74% of teenagers from 12 to 17

years believed that theres


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the students who participated in the

survey said that theyre will to buy a

legal copy of online music and only

27% said that they would not.

- There were less socially redeemingfeatures being catered by P2P File-

sharing services. An Ipsos-Reid survey

clearly showed the negative impact of

files being exchanged online and the

advertising strategies used by the P2P

File-sharing services on their primary

users, teenagers. According to the

survey by Ipsos-Reid, 19% of

Americans 12 years and older confessed

that they had downloaded an audio file

from a P2P File-sharing network and

more than half of people between 12

and 17 years old also said that they had

done so. Based on this study, there was

a good possibility that the youth was

being exposed to inappropriate

materials. Downloading files from a

file-sharing network could expose

nothing wrong with

downloading music for free.

Most students couldnt accept

the analogy that downloading

music can be viewed similar to

stealing a CD from a store.


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TECHNOLOGICAL

teenagers to pornographic images and

advertisements luring them to visit an

online gambling site.

- Administrators of the differentcolleges and universities found the

habitual downloading of movies,

games, and songs would overload

the computer network of the campus

making it difficult for the professors

to make use of the internet for

teaching and researching purposes.

- Screening software thathinders pornography

materials from regular

websites did not work

on file-sharing

programs.

- The flourishing of theinternet opened a door

of opportunities for new

applications to be made

that includes P2P File-

sharing services.

- Technological advancesmade the downloading

of music from the

internet a prominent

leisure-time activity in

2003.

- Because of the


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subsequent

technological

advancements, a

tremendous amount of

interest in the free

reproduction and

distribution of music

grew.

Some university students would

set up search engines on their

campus computer networks in

order to keep files such as

photographs, term papers and

MP3 music files. Since these

files are located in the campuss

network, all of the students who

study within the vicinity of the

school can have access to any

files available on the network.


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VI. SWOT AnalysisSWOT MATRIX STRENGTHS

1. Legal products2. Flexible payment option3. Options to buy online or

from stores

4. Strong productadvertisements

WEAKNESSES

1. Expensive cost of CDsand online copies

2. Public perceptions of theRIAA

OPPORTUNITIES

1. Preference of the majority2. Advocacy to stop music

piracy

3. Clean files

S1, O1, O2: Educate the

people about the illegal

transactions of P2P file

sharing services.

W1, O1, O3: Offer lower

costs of CDs and clean online

copies.

THREATS

1. Limited support from thepublic to fight music

piracy

2. P2P-file sharing networksexcuse

3. The continuous growth ofP2P-File sharing

networks provide

alternatives for people

T1, T3, S4: Strengthen

advocacy about music piracy.

Educate consumers about the

possible viruses and malicious

materials that could be

harmful to people between 12

and 17 years old.

T1, W2: Fix their accounting

errors which will help them

gain public support in order

to regulate music piracy.


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who are looking for an

easy and free access to

music or any other kind

of files

VII. Alternative Course of Action - Solution of the ProblemThose who participate in the sharing and distribution of music without the permission of

the original artist or composer are violating the Federal copyright law.

Education about Music Piracy

ACA 1: To strongly educate the people, especially the students of different colleges and

universities regarding Music piracy and how they are violating the Federal copyright law by

simply uploading and downloading infringing copyrighted works without permission.

ADVANTAGES DISADVANTAGES

- This course of action will teach thepeople about the fundamental part of

educating them about ethics, personal

responsibility, and respect for the rule

of law.

- Moreover, this will also make themunderstand that if they pirate

copyrighted works, they are subject to

- It takes a lot of time and effort foreducation about music piracy to

completely spread.

- Theres no assurance that people willabide to the advocacy the company is

trying to send across.


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legal liability.

- Education about music piracy couldlead to a possible decline in the

percentage of people illegally sharing

and distributing music.

ACA 2: To change their business models that will help them earn profit from digital music.

ADVANTAGES DISADVANTAGES

- This course of action will allow them tocompete against other P2P file-sharing

services by providing a myriad of legal

digital music.

- This will give options to the consumersthat will result to them convenience.

- Changing business models and keepingpace with the advancement of

technology will require them a huge

amount of investment


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Recommendation

They should modify their promotion and change it that will help them gain morecustomers. For example, they could offer a bundled music with a lower price.

Offer lower prices that will not compromise their profit. Ensure the accuracy and correctness of their accounting papers in order to gain the trust

of recording artist and the public.

Detailed Plan of Action

Activity People Involved Time

Scheme

Desired Results Priority

-Education of

people especially

students

- School administrators

(General Counsel,

Director of Information

Technology, Dean of

Student Affairs)

-Hilary Rosen (Chairman

and CEO of Recording

Industry Association of

America), Edward P.

Murphy (President and

CEO of National Music

Publishers Association),

Q1Q2 -To see students

encouraged to stop

downloading music

without permission

from the original

author or composer.

-To see colleges

and universities

apply stricter rules

when it comes to

the students access

to the internet and

High


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- Modification of

business model

and Rick Carnes

(President of the

Songwriters Guild of

America)

CEO and the board Entire

year

impose appropriate

warnings and

penalties to those

who violate the

rule.

-To see more

people informed

about what music

piracy is and what

penalties can be

given upon them

when its violated.

-Letters sent to

different colleges

and universities.

-Additional option

for customers to

buy music.

High


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-Additional

department that

will handle digital

music

Documents

RIAA Case Analysis