Rob Reid: The $8 Billion iPod and the RIAA's 'Depressing' Fines

Years ago, I founded the company that built the Rhapsody music service. I recently gave a brief talk about certain music and movie industry claims that really bug me (see video, below). Some say that I might have come off as being ... a bit sarcastic? And they may have a point. But the numbers behind my talk all came from actual research, performed by an actual Copyright Mathematician (me, that is). Check out my talk, and if you'd like to know where my numbers came from, read on (I'll also explain the part about the aliens. There's quite a story behind that).

The Motion Picture Association's claims of $58 billion in actual US economic losses and 373,000 lost jobs came from this press release. These numbers originated at a think tank called the "Institute for Policy Innovation" -- an organization that Businessweek once profiled in an article called "Op-Eds for Sale." In it, an IPI analyst freely admitted to taking payoffs from disgraced lobbyist Jack Abramoff in exchange for writing "op-ed pieces boosting the lobbyist's clients." The IPI's president supported this behavior, saying it was neither wrong nor unethical, and dismissing those who apply "a naïve purity standard" to the business of writing op-eds.


This doesn't necessarily mean that MPAA lobbyists paid the IPI to conjure up these numbers. But good luck finding evidence of $58 billion actually vanishing from the economy. Credible data provided by the Recording Industry Association of America, indicate that American music sales have dropped by about $8 billion since Napster's debut. If we assume that every penny of that drop is wholly attributable to piracy (an aggressive assumption), we're still looking for $50 billion. And it just can't be found.

Total movie revenues across theaters, DVDs, online and so forth are up substantially (the numbers in my presentation came from BMO Capital Markets, but dozens of groups have estimates out there, and all point to growth). The much larger TV, satellite and cable markets are up even more dramatically. I didn't have time to discuss them during my talk, but numbers from local media analysts BIA/Kelsey showed robust growth in radio in the post-Napster's era, apart from a contraction during the recession.

As for the MPAA's employment numbers, I compared them to 2011 data from US Bureau of Labor Statistics, which put the motion picture and video industry's total employment at 361,900 jobs -- as opposed to 270,000 in 1998. My estimate of music industry employment was based on a mix of RIAA data, numbers from the earnings reports of large media companies, and other sources.

To me, the most depressing number in the presentation is the $150,000 maximum fine that Congress designates for "willfully" pirating a single copy of a single song under the Digital Theft Deterrence and Copyright Damages Improvement Act of 1999. There's absolutely no connection between this and the actual damages or harm caused by a single instance of piracy. But the music industry has sued more than 30,000 US citizens under this law.

As for the $8 billion iPod, this assumes that we're encoding at 128 kilobits/second. This is where AAC audio achieves "transparency," which is to say it becomes indistinguishable from CD quality (your friends who claim to hear the difference between 128 and 256 also probably say they can identify vodka brands by taste). This rounds very closely to 1 megabyte of data per minute of music. Today's iPod Classic, with its 160GB capacity, can hold 53,333 three-minute songs, which at $150,000 a pop is precisely $8 billion (incidentally, Apple markets the iPod classic as having room for just 40,000 songs, but by my math, that's selling it short).

Finally, the 75,000 jobs figure was a joke. But you knew that.

And as for alien music liabilities ... well, that happens to be major area of interest for me. Random House is publishing my first novel in July (it's called Year Zero). It's about a vast alien civilization that's so into American pop music that it inadvertently commits the biggest copyright infringement since the Big Bang. Every smidgen of wealth throughout universe is suddenly owed to our record labels ... and we humans don't know it yet. Hilarity ensues.

Rob Reid is the founder of Listen.com and Rhapsody, and is the author of three books, including the upcoming novel Year Zero. You can contact him on Twitter at @rob_reid.