20 Biggest Record Company Screw-Ups of All Time
Whoa, Mama#5 The RIAA sues a struggling single mom for digital piracy
n In the court of public opinion, it’s hard to find a more sympathetic defendant than a single mother of two, earning $36,000 a year. So what in the name of common decency was the Recording Industry Association of America thinking when it went after 30-year-old Jammie Thomas from Brainerd, Minnesota? The RIAA accused Thomas of using the P2P service Kazaa to illegally share mp3 files of 24 songs, including Journey’s “Don’t Stop Believin’,” the Goo Goo Dolls’ “Iris” and Destiny’s Child’s “Bills, Bills, Bills.” Thomas pleaded not guilty, blaming the shared files on mistaken identity, but last October a jury disagreed and fined her $222,000. That breaks down to a whopping $9,250 per song—more than six times her annual salary. At press time, Thomas was planning an appeal.
Unintended consequence The nation’s toddlers and fluffy kittens rush to erase their hard drives.
Pay (Somebody Else) To Play
#4 Indie promoters take the major labels to the cleaners
After the payola scandals of the ’50s, the government barred record labels from paying radio stations to play records. The solution: set up middlemen to do the dirty work! “Independent promoters” represented the labels’ interests to radio programmers, creating a massive cash flow of corruption. Even a mid-size hit could cost $700,000 in promo expenses—cash, vacations, drugs and other illicit rewards for mustachioed DJs—and labels ended up paying to get airplay for huge artists the stations would have spun anyway. A lot of coked-up DJs got nice tans, while the labels spent unnecessary millions and covered their balance sheets in bloody red.
Unintended consequence Colombian GDP spikes each time Mariah Carey releases a single.
Detroit At a Discount
#3 Motown sells for a pittance
In 1988 Berry Gordy Jr., reportedly losing millions of dollars on the label he had founded decades earlier, sold Motown and its incomparable back catalogue to MCA and investment company Boston Ventures for $60 million. How bad was that price? The next year, Herb Alpert and Jerry Moss sold their A&M Records to PolyGram for roughly $500 million. In 1990, David Geffen got about $700 million for Geffen Records and in ’92, Richard Branson unloaded Virgin Records to EMI for $960 million. And five years after buying Motown, Boston Ventures cashed out, selling the label to PolyGram for $325 million—a return of more than 500 percent.
Unintended consequence The Motown Atlantic airline, and Berry’s career as a trans-global balloonist, have yet to materialize.
Tomorrow Never Knows
#2 Decca Records A&R exec tells Fab Four, “No, thanks”
Dick Rowe was not the only record-label executive who passed on the Beatles in the early ’60s, but he was the only one who brushed off their manager, Brian Epstein, with the astute prediction that: “Groups with guitars are on their way out.” Epstein begged Rowe to reconsider, so Rowe hopped a train to Liverpool to check out the band live. When he arrived at the Cavern, he found a mob of kids trying to force their way into the club in the pouring rain. Annoyed, he smoked a cigarette, went home and signed Brian Poole and the Tremeloes instead.
Unintended consequence The Monkees
THE BIGGEST RECORD-COMPANY SCREWUP OF ALL TIME#1 Major labels squash Napster
Shawn Fanning’s file-sharing service attracted tens of millions of users, but instead of trying to find a way to capitalize on it, the Recording Industry Association of America rejected Napster’s billion-dollar settlement offer and sued it out of existence in 2001. Napster’s users didn’t just disappear. They scattered to hundreds of alternative systems—and new technology has stayed three steps ahead of the music business ever since. The labels’ campaign to stop their music from being acquired for free across the Internet has been like trying to cork a hurricane—upward of a billion files are swapped every month on peer-to-peer networks. Since Napster closed, “there’s been no decline in the rate of online piracy,” says Eric Garland of media analysts BigChampagne, who logged users of son-of-Napster peer-to-peer networks more than doubling between 2002 and 2007. And that figure doubles again if you count BitTorrent.
Unintended consequence Your grandmother deciding to trade up from that dial-up connection
