Tuesday, January 02, 2007

$1.65 Trillion

As found in Zero Paid, it appears that the RIAA is finally suing AllofMP3.com, the Russian website which has, for a while now, offered MP3 downloads of songs and albums for pennies per track.

The RIAA is citing approximately 11 million songs, and is asking for $150,000 in damages per song, for a total of approximately $1.65 trillion. That's a lot of money.

It's also an absurd damages claim. (I understand that the $150,000 per song is statute-based. It's still crazy.) The claim covers June to October 2006, and cites 11 million downloads. No information is available for the amount of revenue AllofMP3 has earned, but if we imagine that the average song is on the order of 6 megabytes, then at $0.03/megabyte, that is $0.18 per song, or about $1,980,000. Even if you assumed no costs, so that all of that was profits, an unjust enrichment-based claim doesn't quite get you to $1.65 trillion.

Oh, so maybe that $1.65 trillion accounts for lost profits by record labels. Well, of course not. In 2005, the RIAA reports music shipments valuing $10.5 billion (pdf), so if one assumes even distribution throughout the year (not the case, since December has more sales) and no change from 2005 to 2006, then shipments from June to October of 2006 would be about $4.4 billion. So, if $1.65 trillion was a lost-profits based damage claim, then it would be 375 times larger than actual revenues (not profits!) during that time period. Assume a 50% profit margin (from here, another pdf) and that would mean that each downloaded song would have to lead to the loss of 750 albums for the lost-profits angle to work out.

So, it's just really goofy. And it can't possibly put the RIAA in a good light, which is strange, because the RIAA seems to have no claim to stand on, since AllofMP3 is a Russian company that does not operate in the US, and seems to abide by Russian law. So I'm not really sure what the RIAA is shooting at here.



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