Jam Session With Music Exec Hilary Rosen

SAN FRANCISCO (05/02/2000) - Friday brought the bombshell that the Recording Industry Association of America had won a lawsuit charging MP3.com, based in San Diego, with copyright infringement for its My.MP3.com and "Beam-it" services, which allow consumers to access a database of tens of thousands of recordings and play them for free, so long as they can prove they own the CD in question.

The damages that could be levied against MP3.com could reach into billions of dollars and shut the company down, a scenario that was not lost on nervous MP3.com stockholders, who sent the stock plunging 40 percent the day of the ruling. It rallied a bit to close at $8.41 on the Nasdaq on Monday. RIAA CEO Hilary Rosen spoke with The Industry Standard today about the organization's goals, and talked a bit - but just a bit - about the legal proceedings leveled against MP3.com.

The Industry Standard: For those unfamiliar with the case, what's the crux of the MP3.com lawsuit?

Hilary Rosen: The issue was that they created a new business service essentially without licensing the products that they were offering to their customers.

IS: Did they ever attempt to get permission to distribute this music online?

HR: No.

IS: Were you in the courtroom when the decision came down?

HR: No. It was actually a phone call with the judge on Friday.

IS: What was your reaction?

HR: I was pleased.

IS: You didn't jump up out of your chair and yell, "Hooray"?

HR: No. This has obviously been a very public issue. There's certainly no glee for me in winning cases like this. MP3.com has pushed the envelope too far in terms of doing a business that was unlicensed. But I think that, actually, the idea of finding new alternative ways to promote sales and promote music is exactly where everybody is heading. I expect this now to be resolved amiably.

IS: So there's truth to reports that settlement talks are under way right now?

HR: There are settlement talks under way. MP3.com is talking individually to the record companies about licensing. Any licensing decisions are made individually by the record companies, whereas we are really only collectively discussing the settlement of the case.

IS: To move on to the Napster case, what's the crux of the lawsuit and what's due to happen next with that?

HR: Overall, the focus of all of RIAA's enforcement activities is really constantly and solely geared toward facilitating the legitimate music market.

So the level of antipiracy work that we do - in terms of shutting down unauthorized FTP sites or other kinds of places, to making sure that significant players have licenses, to encouraging alternative-business scenarios like Napster to consider the creative implications - it's all really geared toward not stopping the progress, but fostering a legitimate business and allowing those entrepreneurs that are doing it in a legitimate marketplace to have a shot. So Napster is just one of those cases, and it's obviously a highly customer-service-oriented, free-music distribution system. We and many other people think that they are knowingly and deliberately engaging in willful infringement.

IS: What do you think about the "music is free" movement?

HR: Everything should be free in a perfect world. We've done a lot of focus groups, and there's no question in my mind that although everyone wants music to be free, no one really expects that it was free to make. Or that it should be free over the long term. I think that people understand the consequences of that statement.

IS: I've read articles that have said that the music industry can't win the war against illegally distributed music. Do you even see it as a war?

HR: I don't think it's a war. I never lose sight of the fact that the people who are the most aggressive downloaders of free or unauthorized music are the biggest music fans. Those are the people who support the legitimate-music market, who buy the records, buy the concert tickets, buy the T-shirts. That's very important to the artists and to the record companies. So we have to do two things: We have to be aggressive about enforcing our rights, but we also have to get out there with the music that they like in an easy-to-use, customer-friendly way, with value added above and beyond what they can find on an FTP site. I think that there are a lot of sites that are doing that, and I think you'll see a lot more, especially when the majors come in and do that in a more significant way.

IS: What music do you listen to?

HR: I listen to everything from Prince to Melissa Etheridge to funk and country. I go all over the map.

IS: What do you wish that people would ask you about? I imagine you've been doing a lot of interviews lately.

HR: People have asked me if I feel like I'm always under attack. I guess the answer is that I don't. I don't really take it personally. We're in the midst of a very exciting revolution that has energized people, both from a business-model standpoint and a music standpoint, that haven't been energized before. I feel really lucky to be here at this place at this time.

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