Variety is reporting that EMI, the smallest of the four major record labels, has taken the first step toward exiting the International Federation of the Phonographic Industry (IFPI), the London-based music trade group that represents the interests of the international recording industry. The IFPI, which receives most of its funding from the major labels, has recently begun an internal review of operations that will examine the “structure and operation of the organisation and its relationship with the national groups [like the RIAA] with a view to finding greater efficiencies and cutting costs,” according to comments from an IFPI spokesman. (Ars Technica)
According to the article in Variety, a source close to the IFPI has disclosed that all four majors are are in talks with the IFPI regarding changes in the structure and priorities of all major trade organizations, including the RIAA. “This is not about cost-cutting. Functions and structure need to make sense to all major labels. Right now, funding them doesn’t make sense.” EMI has threatened to pull its funding from the IFPI and RIAA if “the structure and aims of the IFPI are not aligned with the interests of EMI.” (Variety)
Both Ars Technica and Variety speculate that EMI will not actually pull out of either the IFPI or RIAA. The RIAA participates in the collection of licenses and royalties in the United States, as well as certifying gold and platinum albums. EMI can’t afford to do without either service. However, it has been widely speculated that the RIAA’s policy of suing individuals accused of copyright violation has been wildly expensive, while generating very little revenue for the group. There is no evidence that the policy has deterred file-sharers or increased CD sales. The policy has also generated a huge amount of bad press for the group and the music industry in general. If EMI is looking to have the trade organizations cut costs and align with their own interests, they may be pressuring the groups to stop the lawsuits.
I find all of this backroom maneuvering interesting because EMI has demonstrated its power to be a force for change in the music industry’s recent past. EMI was the first major label to sell music DRM free, following it’s purchase by Guy Hands and the Terra Firma fund, a private equity fund. Terra Firma is currently looking to reinvigorate the label and cut expenses, and seems perfectly willing to do so by ignoring the rules that have governed the industry for years.
Since EMI’s move to DRM free sales, the other three major labels have begun or announced plans to sell music DRM free in Amazon’s MP3 store. If this move follows the pattern set by the DRM wars, we can expect to see Warner, Universal, and Sony begin to put pressure on the trade organizations to find new ways to represent industry interests, hopefully ways that reflect the changes that the labels will need to continue to make to stay relevant.
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