Battling Customers: A Recipe for Badwill

Aram

July 12, 2012

¶ 1 Leave a comment on paragraph 1 0 Unfortunately, the music industry did not view digitization as a sign that its historically anticompetitive business practices needed revamping, or that its bully image required rehabilitation. Instead, the major labels and their allies tacked in the opposite direction. With the physical mechanism of cartelization quickly evaporating, the industry redoubled its focus on its legal mechanism – namely, copyright. Now, instead of erecting toll booths outside of retailers and broadcasters, and excluding or overcharging potential competitors seeking admission, the major labels and publishers wielded the threat of crippling and sustained litigation as a club to prevent upstarts and innovators from gaining market share and industry influence. The strategy appears to have worked, at least to a degree; as an unidentified industry insider recently told Rutgers law professor Michael Carrier, “from 2000 to 2010, even to this day, there really hasn’t been new innovation in digital music other than iTunes.”[1]

¶ 2 Leave a comment on paragraph 2 0 With the renewed focus on copyright as the legacy music cartels’ saving grace came an amplification in the rhetoric and propaganda surrounding unlicensed uses of music online. Innovative sites and services were branded as “rogues” and their millions of users were classified as “pirates.” These changes were neither coincidental nor reflexive, but rather the result of what the IFPI called an “intense global information campaign [beginning] in 2003, with the aim of explaining the illegality of unauthorised online music distribution.” By the industry’s own account, the campaigns had an immediate and “decisive impact in raising public awareness on the issue internationally.”[2] Available data appear to bear this out; a search of international news sources on research archive Westlaw[3] shows the use of the term “illegal downloading” escalating from 80 stories in 2002 to 315 in 2003; similarly, uses of the term “music piracy” grew from 363 to 908 during the same year (see Figure 9). Yet despite these apparent successes, the campaigns also brought some negative consequences, namely a groundswell of “badwill” (the opposite of goodwill, in business jargon) among the industry’s consumer base. While such consequences may have been unintended, or even under-evaluated by the industry, they were hardly unforeseen; as an article in Businessweek  warned in January, 2003, at the outset of the campaign, “Branding too many customers [as] criminals could incur the wrath of the larger music community.”[4]

¶ 3 Leave a comment on paragraph 3 0
Figure 9: News Incidence of Terms Promoted by IFPI Campaigns, 1999-2011

¶ 4 Leave a comment on paragraph 4 0  Vitriolic and effective though it may have been, the “piracy” rhetoric was only half of the industry’s “awareness” effort. As the IFPI described it, the campaign was “coupled with the launch of extensively publicised lawsuits against major copyright offenders in the US,” which were conceived of not as a means to recoup lost revenues or even to punish wrongdoers, but rather as “a crucial public deterrent” against copyright infringement. In other words, these “major copyright offenders,” who by the IFPI’s own definition were those who had shared “hundreds” of song files via P2P, were targeted for litigation primarily as a media stunt. Again, by the IFPI’s own accounts, the policy was immediately effective; according to their tally, “awareness of the illegality of unauthorised file-swapping in the US rose from 37% before the lawsuits to 64% in December 2003.”[5]

¶ 5 Leave a comment on paragraph 5 0 As with the awareness campaign, the litigation initiative’s measurable successes were easily matched by long-term strategic failures. If calling its own customers criminals had spurred some negative backlash, suing them by the thousands, after explicitly pledging not to do so,[6] officially put the music industry at war with the population at large. And like some actual military interventions, this quickly became a classic “quagmire”; even as the evident costs to goodwill mounted, the industry remained far too invested to cease operations and withdraw. The initiative began with a splash, with 261 lawsuits filed against alleged P2P users in September, 2003, and the promise that “thousands more” suits would follow if need be.[7] The RIAA lived up to its word; five years later, the industry had sued over 35,000 Americans.[8]

¶ 6 Leave a comment on paragraph 6 0 The badwill associated with the RIAA lawsuits wasn’t simply a matter of freeloaders grousing at the consequences of their own wrongdoing. An unprecedented wave of mass litigation by an industry against its own customers was a pretty ugly story to begin with. Forcing these tens of thousands of defendants to settle for thousands of dollars apiece or face mounting legal costs and the threat of millions of dollars in damages was worse; it was widely (and accurately, in my opinion) perceived as bullying. Failing to compensate musicians for the revenues collected from these suits[9] cemented this perception, and undermined the labels’ claims that they were motivated primarily by the desire to “support” their artists. But the greatest blow to the music industry’s reputation was in its seemingly callous disregard for the lives of its defendants, many of whom were either so clearly innocent, or so severely challenged by circumstance, as to warrant leniency – a consideration they received belatedly, or not at all.

¶ 7 Leave a comment on paragraph 7 0 Several publications have examined these cases in far greater detail[10] than I have room for here, so I will simply mention a few notable examples. One of the initial 261 “major offenders” to be sued was Brianna LaHara, a 12-year-old honors student living in a New York City housing project. Despite her parents’ financial straits, and the fact that her mother had actually paid $29.99 to use the KaZaA P2P service, the RIAA demanded (and received, in less than a day) a $2,000 settlement and a public apology.[11] In addition to targeting minors, the industry has also sued the elderly, and even the deceased. In 2005, the RIAA sued an 83-year-old, technologically illiterate woman named Gertrude Walton for allegedly sharing over 700 songs via P2P – a week after they had received a copy of her death certificate from her daughter in response to a warning letter.[12] This case was wisely dropped once the press caught wind of it. Similarly, after a P2P defendant named Larry Scantlebury died in the midst of litigation, the RIAA requested that the case be stayed for 60 days “to allow the family additional time to grieve,” then resumed the suit by deposing his children.[13] The RIAA has also sued apparently innocent people without even alerting them to the situation. When The Rockmart Journal, a local paper in Georgia, called nearby resident James Walls to ask for comment on his being named as a defendant, he seemed taken by surprise. “I don’t understand this,” he reportedly responded. “How can they sue us when we don’t even have a computer?”[14]

¶ 8 Leave a comment on paragraph 8 0 While college students are a natural target for the RIAA, sometimes its choice of students, and methods of addressing them, have seemed almost calculated to produce badwill. In November, 2002, as the “war on terror” was gearing up in Afghanistan and elsewhere, the organization goaded the US Naval Academy into raiding 100 of its own midshipmen, confiscating their computers in the middle of class and threatening to court martial those found guilty of infringing copyright.[15] In 2006, an MIT student named Cassi Hunt, who had been sued for file sharing, called the RIAA’s “settlement negotiation hotline” and tried to explain that she couldn’t afford either a sustained legal defense or the $3,750 settlement they’d requested. As she reported in an article in campus paper The Tech, the negotiator told her that “the RIAA has been known to suggest that students drop out of college or go to community college in order to be able to afford settlements.” Hunt’s analysis of the situation aptly summarized the message communicated by the litigation campaign:

¶ 9 Leave a comment on paragraph 9 0 The Recording Industry of America would rather see America’s youth deprived of higher education, forever marring their ability to contribute personally and financially to society — including the arts — so that they may crucify us as examples to our peers. To say nothing of wrecking our lives in the process.[16]

¶ 10 Leave a comment on paragraph 10 0 Finally, the RIAA has on several occasions targeted severely ill or disabled people for litigation. According to the Electronic Frontier Foundation (EFF; a nonprofit group that advocates for civil liberties in cyberspace), one defendant, a “fully disabled widow and veteran,” was sued for downloading 500 songs she already had copies of on CD. In her case, P2P was used purely as a boon to accessibility; she wanted to listen to her music collection in the room where she spent most of her time. The RIAA offered a $2,000 settlement, on the condition that she share  “a wealth of private information regarding her disability and her finances.”[17] In 2007, the labels sued John Paladuk, a former railroad worker who had recently suffered a stroke that paralyzed the left side of his body, and whose sole source of income was his disability check. The alleged infringements had taken place in Michigan, and Mr. Paladuk had lived in Florida at the time they took place.[18] After nearly two months of litigation (and negative coverage in publications including BoingBoing, The Consumerist, and The New York Times), the RIAA agreed to dismiss the case, leaving “each party to bear his its/his own fees and costs.”  In another case, the recording industry aggressively pursued Rae J. Schwartz, a Queens, NY mother suffering from multiple sclerosis who could only travel aboard a motorized scooter, and who maintained that she had never downloaded anything illegally. Her lawyer requested that the case be dropped, the plaintiffs declined, and the suit went forward, with the court assigning a legal guardian to stand for Ms. Schwartz. After more than two years of harrowing and expensive litigation, the parties settled out of court for undisclosed terms.[19]

¶ 11 Leave a comment on paragraph 11 0 It’s perfectly reasonable to assume that the cases I’ve outlined above are the exceptions, rather than the rule; most P2P defendants aren’t quite so unfortunate, and it’s possible that the majority of them are, in fact, guilty (though defense attorney Ray Beckerman, who knows more about these suits than anyone else outside of the RIAA, holds otherwise[20]). Yet, from the standpoint of goodwill and public relations, these questions are irrelevant. The recording industry inaugurated this policy as part of a “public awareness” campaign, and by the end of its five-year run,[21] the public was painfully aware that the industry seemed hell-bent on protecting its assets at any cost. In the words of a 2009 article in the Minnesota Journal of Law, Science & Technology, the industry’s strategy to counter “digital music piracy” has “embittered or calloused a substantial portion of the public. In particular, the lawsuit component of the industry’s approach, besides being ineffective, has proven highly repugnant.”[22]

¶ 12 Leave a comment on paragraph 12 0 Towards the end, even some record industry executives and organizations publicly acknowledged that the strategy had backfired. For instance, EMI threatened to leave the IFPI over the “bad public image” engendered by the suits,[23] and Sony Music attorney Jennifer Pariser admitted under oath that the lawsuits represented a “money pit” for the labels.[24] Yet when RIAA president Cary Sherman – the definitive industry spokesman – was interviewed by CNET’s Declan McCullagh, he showed neither remorse nor trepidation about the litigation tactics or their ruinous effects on defendants. In response to the question “Do you view your lawsuits, even ones where you sued a 12-year-old girl or a Boston grandmother, as a success overall and do you think the process is working?”, Sherman responded “Yes. We’re feeling pretty good.”[25]