RIAA 2008 Litigation – Spends $17 Million, Recoups $391,000

In what shape is the litigation campaign for the RIAA? Evidently, it’s far worse then we thought if the RIAAs IRS forms are anything to go by.

Note: This is an article I wrote that was published elsewhere first. It has been republished here for archival purposes

If you were wondering why the RIAA wants to contest the fine reduction in the Tenenbaum case, well, the theory about money isn’t too far off base. In fact, it paints a pretty clear picture as to why the RIAA is behaving the way they are regarding the cases in question – though it should be noted that the legal fees aren’t exclusive to the Tenenbaum or even the Thomas case for that matter.

According to IRS papers (Page 8 specifically), the RIAA has paid Holmes Roberts & Owen $9,364,901 in expenses. Jenner & Block received a nice sizable $7,077,184. Cravath Swain & Moore, in the mean time, received $1,254,827. Going to page 9, the total revenue in “anti-piracy restitution” totals to a grand total of $391,348.

It goes along very nicely with what a lot of people have figured all along, the only winners in the anti-piracy campaign are lawyers. Even the labels lose out – as it turns out, by quite a lot.

Ray Beckerman notes that these kinds of numbers aren’t an isolated incident, noting, “2006 was similar: they spent more than $19,000,000 in legal fees and more than $3,600,000 in “investigative operations” expenses to recover $455,000.”

It almost sounds like the RIAA really gambled on the success of the litigation of file-sharers in the US. If they could make the hundreds of thousand dollar fines stick and make that the precedent, there is a hope to recoup all of these legal fees – sue 10 people for a million each, then you’re talking about coming close to recouping the cost of legal expenses through fines alone. Unfortunately, if the precedent dictates $50,000 each, suing ten people isn’t going to cut it in terms of recouping the cost of legal expenses. It really shows how bad the news really is for the RIAA if the constitution ruling sticks because then there’s no way to recoup the cost after suing a dozen individuals. It’s almost like poker, the RIAA is pot committed, but they are now staring down a possible king high straight with nothing but pocket 5’s.

If I was a shareholder of the RIAA right about now and I saw this, I would argue that, combined with the damages being awarded in court, at the very least, it’s really time to get the spending under control and rethink the strategy here – maybe even say that the labels should focus on promotion rather than enforcement because enforcement is really looking like a lost cause at this point. There’s no money in enforcement here – that is increasingly obvious. The only thing the labels are doing is handing over huge sums of money to a bunch of legal firms. If there was ever a part of the RIAA that is really losing money, it’s in litigation. This isn’t a philosophical point, it’s a point blank financial point.

The only good news out of this, if there ever was any good news to make of this, is that there are a few very happy legal firms out of all of this. Even the RIAA is losing out in a very big way in all of this financially speaking. It’s obvious that this is a PR-losing proposition, but it’s now obvious that they are equally hurting in the wallet as well.

Drew Wilson on Twitter: @icecube85 and Google+.

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