Harnessing Intellectual Property in a Connected World

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Music star Kid Rock appears, smiling, on a screen hung on the wall of a University of Miami School of Business auditorium. He has a message for the kids illegally downloading songs: Why not steal everything you want? “If you need an MP3 player or a computer, go in there, get a lap top, grab it and run,” he says with a laugh and a shrug in the prerecorded video. “Bill Gates and Steve Jobs? They’re billionaires! They’re not going to miss a couple of iPods or lap tops!” The rocker then applies the same logic to automotive acquisitions, suggesting kids simply hotwire vehicles and drive off. And considering that oil companies are swimming in cash, those heeding his message should simply fill up their tanks and race away, he says. Need new clothes? Head to a favorite department store, grab a sweatshirt and run. “It’s Kid Rock, saying ‘It’s okay to illegally download music and it’s okay to steal anything else you need, too.’”

Is he serious? Ironic? No matter — one of his points, at least, is well taken. While the Internet has done wonders to efficiently deliver the music industry’s product to its customers, it lacks a fail proof mechanism to ensure payment for merchandise that costs a lot to create. That was the consensus among the panelists in “Harnessing Intellectual Property in a Connected World,” presented at the University of Miami Global Business Forum Jan. 15 - 16, 2009. Moderated by Serona Elton, assistant professor in UM’s Music Business and Entertainment Industries program and a consultant to Sony Music Entertainment, the conversation among industry executives focused on both the opportunities that digital forms of distribution have created and the global piracy issue, which has begun crippling the creation of new music as well as industry job growth. Without a solution, the panelists agreed, it’s artists and listeners who will be left with fewer options. 

“Things cannot be for free,” said John Kennedy, CEO of the International Federation of the Phonographic Industry, which represents 1,400 record companies worldwide. “It just does not work.”

Kennedy — a former chairman of Polygram and Universal Music, UK, who was recognized by the Queen of England for his work with philanthropic groups The Band Aid Trust and Live Aid — pointed out that music is the most popular product in the consumer world. Piped into elevators, heard over headphones, in cars, bars, and nightclubs, it’s one of the few products that can be bought and still used ten years later. “There is more music being consumed now than ever before,” he said.

Yet while customers — indeed, entire cultures — value recorded notes and lyrics, piracy rates are soaring. “More music is being stolen than is being paid for,” said Kennedy, and that theft is robbing the industry of much-needed investment money. This is particularly true in Europe, where the production of music in France and Spain has dropped dramatically in response to diminished funding sources. It’s a blow to local communities that are both entertained and showcased by artists representing their cultures.

Consumers, said Kennedy, know very well that what they’re doing is wrong. “When we ask why they keep doing it,” he said, “they respond, ‘Because you don’t stop us.’”

The first steps in curbing theft of intellectual property involve implementing already-available filtering technologies that identify copyrighted material, said Eric Baptiste of the International Confederation of Societies of Authors and Composers, an international organization representing 2.5 million creators and publishers. Those systems exist, he said, but the music industry can’t act alone. In order to install the technology and penalize offenders, it needs the support of Internet service providers and national authorities—all of whom have been slow to help act.

In some parts of the world, that’s because more basic priorities have taken center stage.  “If you go to a poor country and ask the police to stop the people selling illegal music on the corner,” Baptiste explained, “They’ll point to another corner and say ‘there’s someone selling dope over there.’” Of greater concern, he said, is that leaders in large, industrialized countries have yet to pay attention.

In China, for instance, where the economy has been thriving over the past decade, the copyright offenses are enormous, said John Echevarria of Universal Music Group International. There, he explained, officials consider works of intellectual property, particularly songs, to be government owned; as a result, they’re distributed freely at no cost. “It’s shocking,” he said, noting that “the Chinese are hurt the most. Yes, the singers and songwriters, but also the six billion citizens,” who may find the pipeline of new talent running dry as music industry investments disappear. “They love music. They enjoy music. And our job is to make sure that 20 years from today, there’s new talent that’s properly marketed.”

Even in the United States, said Echevarria, hired lobbyists have succeeded in influencing politicians to vote against protecting intellectual property. “They’re being played,” he said. “When industries say they’re lobbying on behalf of ‘the people,’ they’re actually lobbying on behalf of the industries making a lot of money by letting the music go through their pipes.”

Those companies are profiting at the expense of millions of employees, added Jorge Mejia of Sony/ATV Music Publishing. In the past few years, as music consumption has increased — an indication that profits should be rising — the industry has continued to downsize. “A lot of people suffer,” he said. “I’ve seen record companies decimate, going from 100 employees to 30.” But Mejia is optimistic. “If we look back, glacial ages ago, to 2003 to 2004,” he joked, “There were only two ways to get music — CD and radio.” Now, the range of sources is enormous, including cell phones.

Mejia likened the evolution of law enforcement in the intellectual property realm to that of the Wild West, where people started off shooting each other for horses and land. Eventually, laws were crafted and police forces were formed to enforce them. “I believe firmly,” he said, “that in a couple of years we will have the biggest music industry ever.”

By Brett Graff