Hilary Rosen heads the organization some MP3 aficionados love to hate. But she says she's not anti-MP3 and -- get this -- she's friends with label-basher Chuck D.
Rosen, 40, is the chief executive of the RIAA, the music industry trade group whose members make or distribute 90 percent of all sound recordings in the United States. The organization represents 250 companies, including the five major record labels: BMG Entertainment, EMI, Sony Music, Universal, and Warner.
She's a Washington lobbyist whose only previous music industry experience was a high school job at Sam Goody.
Yet she has helped the RIAA to push the Digital Millennium Copyright Act through Congress, to she's filed a federal lawsuit against Diamond Multimedia for its portable MP3 player, and she has led the association's fight against music censorship.
Currently, the RIAA is spearheading the Secure Digital Music Initiative, the industry's call for technology companies to help develop a new, open specification for selling music online. RIAA says the initiative will help artists realize the royalties they deserve from music distributed on the Net.
But RIAA has been attacked by advocates of the MP3 audio format, who say SDMI is an attempt by the record labels to control music distribution mechanisms on the Net, and that the labels aren't needed anymore. A lot of people purchase MP3 files or trade legitimately. Others use the format to pirate music.
Rosen talked to Wired News about online music.
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Wired News: What's your vision of the future? Will MP3 just be this thing for unsigned artists?
Hilary Rosen: MP3 is just a compression technology. It's a question of which compression technology you end up using to deliver music, and MP3 could well be one of them. Bandwidth will expand and we can do better. I'm sure that MP3 fans hope that bandwidth expands and you don't have to compress as much. Some people are just religious, because they perceive that this represents something more meaningful than just compression. Which is a weird thing. I can't quite get into that.
WN: Do you think the labels waited too long to come online? Or that the market's not there yet?
HR: I think the jury's still out. There have been lots of promotions the majors have done. There hasn't been wholesale free availability [online]. Was that a mistake? I don't think so.
WN: Do you ever see the CD going away?
HR: No.
WN: How do you predict music files will be transferred from device to device?
HR: I think that's the key thing. MP3 is really popular with a certain user, but it's still a hassle for the average music fan. The experience of opening up a CD jewel box and sticking it in your player while you're cooking your stew and expecting your company in three seconds -- that's how people want their music. I think that when we can collectively achieve this online, that's when business will really happen. WN: You say that the RIAA isn't at war with MP3.
HR: No. My problem with MP3 is not when it's given away, but when it's stolen. To me, there's a big difference between artists being on a site like MP3.com or GoodNoise wanting promotion, making the decision to give it away. There's a big difference between that and an FTP site that has 1,000 stolen songs on it.
WN: You're not afraid of losing out to these upstarts?
HR: I think those guys are going to have the same problem. How is GoodNoise or MP3.com going to create a star, unless they invest in promoting that artist? Then they'll be the middleman. It's going to cost them money and they'll need some return.
... How are the entrepreneurs who say they are in the MP3 business going to make money? I've seen [Wired News] ask that question a lot. But you never get a good answer.
I think that the problem with the Yahoo model [for MP3 sites, where ads, not product, are the revenue source] is that you're saying, "OK, let's take the creative work to attract Ford Motor Co., and let's sell cars using Bonnie Raitt's music. And whatever Ford pays us, we'll give Bonnie Raitt a percentage."
The only value in attracting eyeballs is in advertising. You do the artist a disservice that way. Consumers don't want to buy a car, they want to buy the music.
WN: [Sites like MP3.com and GoodNoise] say they'll give artists a bigger cut. Do you think that's possible?
HR: I think it's possible, until that artist then wants their discs manufactured and distributed and sold in Wal-Mart, and they want to be on TV with a commercial, or a video on MTV, or they want a video on BET [Black Entertainment Television], or they want to go on tour and need tour support. It's easy to say.
I think the Net will be wonderful for a lot of artists out there who both don't care about a huge audience but want to make more money selling to a targeted audience and are happy to do that online. Todd [Rundgren] has a very clever model. He has a very devoted fan base. He gives them -- for $40 a year -- a new song every month. I think the amount of artists that will be able to do that will be limited, but that's important to be able to do that. WN: What's your experience with buying music on the Internet? Have you bought a CD?
HR: Oh yeah. I buy music all the time online. I experiment with everything that's out there. I've bought MP3 downloads, I've done Liquid Audio downloads.
WN: Is the price of music online going to come down?
HR: The smallest percentages are the actual cost of the plastic. I think it will depend. The thing the Web allows for is multiple revenue streams. You could have streaming jukeboxes, you could have singles downloads, you could have albums, you could have in-store sales. Because you have the opportunity to recoup investments over a broader spectrum of places, you can play with the economics a little more.
But the value is in the music. And I don't think anyone can argue with the statistics that music is the best value dollar-for-dollar of any consumer product. It's had the lowest inflation of any consumer product -- movies, computer software, tickets on the horse and buggy around Central Park.
WN: A lot of the press coverage portrays RIAA and the labels as worried about becoming irrelevant.... And that the Secure Digital Music Initiative is an attempt to control the distribution mechanism for digital music.
HR: Building traffic and enthusiasm for a product or an idea requires money. There's always going to be a middleman. It doesn't matter whether it's MP3.com or Sony Music. I don't think the record labels themselves ever worry about being obsolete. The marketing, promotion, and artist development that goes about in taking an unknown but talented person [is necessary].
People projecting fear on the record companies is good emotional hype, but I don't see it in the day-to-day world.
The artists and the record companies have invested a lot of their own money, time, and effort in developing a product for some return. Sending it out unsecured or vulnerable to piracy is a significant concern. People have taken very legitimate fears and turned them into, "The record companies are afraid of the Internet and afraid they'll be left behind."
Even in five years people perceive that 80 percent of all record sales are still going to be physical product. In 10 years, you're still talking about 60 percent.
WN: Will the SDMI specification be submitted to some sort of official standards body?
HR: The jury's still out on whether it's necessary to submit it as a standard. Because whether it's a standard or an open specification, it's obviously voluntary.
It's in Technics' interest to sell CD players that work for consumers, the same way it's in Sony Music's interest or MCA Music's interest to make their disks to fit those specifications. Because everyone wants the consumer to have an easy experience. WN: Will it be free to use this technology? Or would companies pay a licensing fee?
HR: The hope is the architecture itself will be open and royalty-free. So that lots of different companies can build products to it.
There are many different ways to achieve those parameters so that individual codes can be proprietary, but the bigger architecture will be compatible. We're trying to have this working with nonproprietary technologies. Or, if they are proprietary, then they are open and easily licensable. MP3 is a proprietary technology, it's just that it's available for free.
They're still in the process of deciding. If the person with the best idea wants money for it, it might be worth it. But I don't think that's the plan.
WN: Some people I've talked to are upset about the [US$10,000] fee to join SDMI.
HR: Fees are very common in standard-setting processes like this. It's a very results-oriented process, and there are costs associated with managing it. It's not a profit center. It was a deliberate way to make sure that people were at the table because they're serious about it.
WN: What do you think of Chuck D? He's constantly trashing his label.
__ HR:__ He and I are good personal friends. We both serve on the Rock the Vote board. He had a very bad experience with his record company and an unhappy parting. I think that a new model for Public Enemy is a good idea. It doesn't mean that it will work for everybody.
... He's trashing the record companies, he doesn't trash me. Don't you have friends you have differences of opinion with? He's passionate and energetic. We always agree on censorship, and we agree that if artists are willing to take the financial risks for their own work, then they should be entitled to greater financial gain.
I think part of [Public Enemy's] problem was they were in a contract several years ago that paid them advances, and they gave up more rights than they wanted to.
It's very common for artists to want large advances. And often in order to do that companies want some guarantees. The opportunities for a better deal exist.
On some level Chuck is the kind of person that has to be in control of his own life. I think he's a brilliant activist and he's never afraid. He's sometimes a convenient fact-forgetter. He rewrites history to fit his rap. He says things for effect that sometimes I think he even questions.
