Recording Industry Association of America

Recording Industry Association of America
Formation	1952
Type	Technical standards, licensing and royalties
Headquarters	Washington, DC
Location	United States
Chairman and Chief Executive Officer	Mitch Bainwol
Website	www.riaa.com

The Recording Industry Association of America (RIAA) is a trust that represents the recording industry distributors in the United States. Its members consist of record labels and distributors, which the RIAA say "create, manufacture and/or distribute approximately 85% of all legitimate sound recordings produced and sold in the United States".

The RIAA was formed in 1952 primarily to administer the RIAA equalization curve, a technical standard of frequency response applied to vinyl records during manufacturing and playback. The RIAA has continued to participate in creating and administering technical standards for later systems of music recording and reproduction, including magnetic tape (including cassette tapes and digital audio tapes), CDs and software-based digital technologies.

The RIAA participates in the collective rights management of sound recording. The association is also responsible for certifying gold and platinum albums and singles in the USA.

The RIAA lists its goals as:

to protect intellectual property rights worldwide and the First Amendment rights of artists;

to perform research about the music industry;

to monitor and review relevant laws, regulations and policies.

Company structure and sales

As of April 2007, the RIAA is led by Mitch Bainwol, who has been Chairman and CEO since 2003. He is assisted by Cary Sherman, the President of the Board of Directors. The board of directors consists of 26 members of the board, drawn mostly from the big four members of the RIAA.

The RIAA represents over 1,600 member labels, which are private corporate entities such as record labels and distributors, and which collectively create and distribute about 90% of recorded music sold in the United States. The largest and most influential of the members are the "Big Four" that include:

EMI

Sony Music Entertainment

Universal Music Group

Warner Music Group

The total retail value of recordings sold by members of the RIAA is reported to be $10.4 billion[4] at the end of 2007, reflecting a decline from a high of $14.6 billion in 1999.

Sales certification

Main article: RIAA certification

The RIAA operates an award program for albums that sell a large number of copies. The program originally began in 1958, with a Gold Award for singles and albums that reach US$1 million sales. The criteria was changed in 1975 to be based on the number of copies sold, with singles and albums selling 500,000 copies awarded the Gold Award. In 1976, a Platinum Award was added for one million sales, and in 1999 a Diamond Award for ten million sales. The awards are open to both RIAA members and non-members.

The RIAA also operates a similar program for Spanish language music sales, called Los Premios Awards.

“Digital” sales certification

In 2004, the RIAA added a branch of certification for what it calls “digital” recordings, meaning roughly “recordings transferred to the recipient over a network” (such as those sold via the iTunes Store), and excluding other obviously-digital media such as those on CD, DAT, or MiniDiscs. In 2006, “digital ringtones” were added to this branch of certification. As of 2007, the certification criteria for these recordings are as follows:

Silver: more than 100,000 copies

Gold: more than 500,000 copies

Platinum: more than 1,000,000 copies

Multi-Platinum: more than 2,000,000 copies

Diamond: more than 10,000,000 copies

Video Longform certification

Along with albums, digital albums, and singles there is another classification of music release called "Video Longform." This release format includes: DVD and VHS releases, and certain live albums and compilation albums. The certification criteria is slightly different from other styles.

Gold: 50,000

Platinum: 100,000

Efforts against infringement of members' copyrights

Efforts against file sharing

Main article: Trade group efforts against file sharing

The RIAA opposes unauthorized sharing of its music. Studies conducted since the association began its campaign against peer-to-peer file-sharing have concluded that losses incurred per download range from negligible to substantial.

The association has commenced high profile lawsuits against file sharing service providers. It has also commenced a series of lawsuits against individuals suspected of file sharing, notably college students and parents of file sharing children. It is accused of employing techniques such as peer-to-peer "decoying" and "spoofing" to combat file sharing.

As of late 2008 they have announced they will stop their lawsuits and instead are attempting to work with ISPs who will use a three strike warning system for file sharing, and upon the third strike will cut off internet service all together. However as of 2009 no major ISPs have announced they are part of the plan, and Verizon has publicly denied any involvement with this plan.

Selection of defendants

The RIAA names defendants based on ISP identification of the subscriber associated with an IP address, and as such do not know any additional information about a person before they sue. After an Internet subscriber's identity is discovered, but before an individual lawsuit is filed, the subscriber is typically offered an opportunity to settle. The standard settlement is a payment to the RIAA and an agreement not to engage in file-sharing of music and is usually on par with statutory damages of $750 per work, with the RIAA choosing the number of works it deems "reasonable". For cases that do not settle at this amount, the RIAA has gone to trial, seeking statutory damages from the jury, written into The Digital Theft Deterrence and Copyright Damages Improvement Act of 1999 as between $750 and $30,000 per work or $750 and $150,000 per work if "willful." In the case RIAA v. Tenenbaum, the jury awarded the RIAA $22,500 per song shared by Joel Tenenbaum resulting in a judgment of $675,000 for the shared 30 tracks (this was later reduced to $67,500 by the judge) and in the case RIAA v. Jammie Thomas-Rasset, the jury awarded $80,000 per song, or $1.92 million for 24 tracks (this award was later reduced by the judge to $54,000, though the final amount of damages has yet to be determined).

The Electronic Frontier Foundation and Public Citizen oppose the ability of the RIAA and other companies to "strip Internet users of anonymity without allowing them to challenge the order in court".

The RIAA's methods of identifying individual users had, in some rare cases, led to the issuing of subpoena to a recently deceased 83-year-old woman, an elderly computer novice, and a family reportedly without any computer at all.

Settlement programs

In February, 2007 the RIAA began sending letters accusing internet users of sharing files and directing them to web site P2PLAWSUITS.COM, where they can make "discount" settlements payable by credit card. The letters go on to say that anyone not settling will have lawsuits brought against them. Typical settlements are between $3,000 and $12,000. This new strategy was formed because the RIAA's legal fees were cutting into the income from settlements. In 2008, RIAA sued nineteen-year-old Ciara Sauro for allegedly sharing ten songs online.

The RIAA also launched an 'early settlement program' directed to ISPs and to colleges and universities, urging them to pass along letters to subscribers and students offering early "settlements", prior to the disclosure of their identities. The settlement letters urged ISPs to preserve evidence for the benefit of the RIAA and invited the students and subscribers to visit an RIAA website for the purpose of entering into a "discount settlement" payable by credit card. By March 2007, the focus had shifted from ISPs to colleges and universities.

[edit]Lawsuits against other recording, distribution, and search technologies

In October 1998, the Recording Industry Association of America filed a lawsuit in the Ninth U.S. Court of Appeals in San Francisco claiming the Diamond Multimedia Rio PMP300 player violated the 1992 Audio Home Recording Act. The Rio PMP300 was significant because it was the second portable consumer MP3 digital audio player released on the market. The three judge panel ruled in favor of Diamond, paving the way for the development of the portable digital player market.

In 2003, the RIAA sued college student developers of LAN search engines Phynd and Flatlan, describing them as "a sophisticated network designed to enable widespread music thievery".

In September 2003, the RIAA filed suit in civil court against several private individuals who had shared large numbers of files with Kazaa. Most of these suits were settled with monetary payments averaging $3,000. Kazaa publisher Sharman Networks responded with a lawsuit against the RIAA, alleging that the terms of use of the network were violated and that unauthorized client software was used in the investigation to track down the individual file sharers (such as Kazaa Lite). An effort to throw out this suit was denied in January 2004, however, that suit was settled in 2006.

RIAA has also filed suit in 2006 to enjoin digital XM Satellite Radio from enabling its subscribers from playing songs it has recorded from its satellite broadcasts. It is also suing several Internet radio stations.

On December 21, 2006, the RIAA filed a lawsuit against Russian owned and operated website AllOfMP3.com in the amount of $1.65 trillion ($1,650,000,000,000). This number was derived from multiplying 11 million songs with statutory damages of $150,000 per song. The Moscow court ruled in favor of AllOfMP3.com.

On October 12, 2007, the RIAA sued Usenet.com seeking a permanent injunction to prevent the company from "aiding, encouraging, enabling, inducing, causing, materially contributing to, or otherwise facilitating [copyright infringement]". This suit, the first that the RIAA has filed against a Usenet provider, has added another branch to the RIAA's rapidly expanding fight to curb the unauthorized distribution of copyrighted materials. Unlike many of the RIAA's previous lawsuits, this suit is filed against the provider of a service who has no direct means of removing infringing content. The RIAA's argument relies heavily on the fact the Usenet.com, the only defendant that has been named currently, promoted their service with slogans and phrases that strongly suggested that the service could be used to obtain free music.

On April 28, 2008, RIAA member labels sued Project Playlist, a web music search site, claiming that the majority of the sound recordings in the site's index of links are infringing. Project Playlist's website denies that any of the music is hosted on Project Playlist's own servers. 

On October 26, 2010, RIAA members won a case against LimeWire, a P2P file sharing network, for illegal distribution of copyrighted works. On October 29, in retaliation, riaa.org was taken offline via denial-of-service attack executed by members of Operation Payback and Anonymous .

The "work made for hire" controversy

In 1999, Mitch Glazier, a Congressional staff attorney, inserted, without public notice or comment, substantive language into the final markup of a "technical corrections" section of copyright legislation, classifying many music recordings as "works made for hire," thereby stripping artists of their copyright interests and transferring those interests to their record labels. Shortly afterwards, Glazier was hired as Senior Vice President of Government Relations and Legislative Counsel for the RIAA, which vigorously defended the change when it came to light. The battle over the disputed provision led to the formation of the Recording Artists' Coalition, which successfully lobbied for repeal of the change.

See also

Federal Communications Commission (FCC)

(source:wikipedia)

Interest rate parity

Interest rate parity facts,

Interest rate parity, or sometimes incorrectly known as International Fisher effect, is an economic concept, expressed as a basic algebraic identity that relates interest rates and exchange rates. The identity is theoretical, and usually follows from assumptions imposed in economic models. There is evidence to support as well as to refute the concept.

Interest rate parity is a non-arbitrage condition which says that the returns from borrowing in one currency, exchanging that currency for another currency and investing in interest-bearing instruments of the second currency, while simultaneously purchasing futures contracts to convert the currency back at the end of the holding period, should be equal to the returns from purchasing and holding similar interest-bearing instruments of the first currency. If the returns are different, an arbitrage transaction could, in theory, produce a risk-free return.

Looked at differently, interest rate parity says that the spot price and the forward, or futures price, of a currency incorporate any interest rate differentials between the two currencies assuming there are no transaction costs or taxes.

Two versions of the identity are commonly presented in academic literature: covered interest rate parity and uncovered interest rate parity.

Covered interest rate parity

The following common approximation is valid when S is not too volatile:

[edit]An example

In short, assume that

.

This would imply that one dollar invested in the US < one dollar converted into a foreign currency and invested abroad. Such an imbalance would give rise to an arbitrage opportunity, where in one could borrow at the lower effective interest rate in US, convert to the foreign currency and invest abroad.

The following rudimentary example demonstrates covered interest rate arbitrage (CIA). Consider the interest rate parity (IRP) equation,

Assume:

the 12-month interest rate in US is 5%, per annum

the 12-month interest rate in UK is 8%, per annum

the current spot exchange rate is 1.5 $/£

the forward exchange rate implied by a forward contract maturing 12 months in the future is 1.5 $/£.

Clearly, the UK has a higher interest rate than the US. Thus the basic idea of covered interest arbitrage is to borrow in the country with lower interest rate and invest in the country with higher interest rate. All else being equal this would help you make money riskless. Thus,

Per the LHS of the interest rate parity equation above, a dollar invested in the US at the end of the 12-month period will be,

$1 · (1 + 5%) = $1.05

Per the RHS of the interest rate parity equation above, a dollar invested in the UK (after conversion into £ and back into $ at the end of 12-months) at the end of the 12-month period will be,

$1 · (1.5/1.5)(1 + 8%) = $1.08

Thus one could carry out a covered interest rate (CIA) arbitrage as follows,

Borrow $1 from the US bank at 5% interest rate.

Convert $ into £ at current spot rate of 1.5$/£ giving 0.67£

Invest the 0.67£ in the UK for the 12 month period

Purchase a forward contract on the 1.5$/£ (i.e. cover your position against exchange rate fluctuations)

At the end of 12-months

0.67£ becomes 0.67£(1 + 8%) = 0.72£

Convert the 0.72£ back to $ at 1.5$/£, giving $1.08

Pay off the initially borrowed amount of $1 to the US bank with 5% interest, i.e $1.05

The resulting arbitrage profit is $1.08 − $1.05 = $0.03 or 3 cents per dollar.

Obviously, arbitrage opportunities of this magnitude would vanish very quickly.

In the above example, some combination of the following would occur to reestablish Covered Interest Parity and extinguish the arbitrage opportunity:

US interest rates will go up

Forward exchange rates will go down

Spot exchange rates will go up

UK interest rates will go down,

Uncovered interest rate parity,

The uncovered interest rate parity postulates that,

The equality assumes that the risk premium is zero, which is the case if investors are risk-neutral. If investors are not risk-neutral then the forward rate (F + 1) can differ from the expected future spot rate (E[S + 1]), and covered and uncovered interest rate parities cannot both hold.

The uncovered parity is not directly testable in the absence of market expectations of future exchange rates. Moreover, the above rather simple demonstration assumes no transaction cost, equal default risk over foreign and domestic currency denominated assets, perfect capital flow and no simultaneity induced by monetary authorities. Note also that it is possible to construct the UIP condition in real terms, which is more plausible,.

Uncovered interest parity example,

An example for the uncovered interest parity condition: Consider an initial situation, where interest rates in the home country (e.g. U.S.) and a foreign country (e.g. Japan) are equal. Except for exchange rate risk, investing in the US or Japan would yield the same return. If the dollar depreciates against the yen, an investment in Japan would become more profitable than a US-investment - in other words, for the same amount of yen, more dollars can be purchased. By investing in Japan and converting back to the dollar at the favorable exchange rate, the return from the investment in Japan, in the dollar terms, is higher than the return from the direct investment in the US. In order to persuade an investor to invest in the US nonetheless, the dollar interest rate would have to be higher than the yen interest rate by an amount equal to the devaluation (a 20% depreciation of the dollar implies a 20% rise in the dollar interest rate).

Technically however, a 20% depreciation in the dollar only results in an approximate rise of 20% in U.S. interest rates. The exact form is as follows: Change in spot rate (Yen/Dollar) equals the dollar interest rate minus the yen interest rate, with this expression being divided by one plus the yen interest rate.

Uncovered vs. covered interest parity example,

Let's assume you wanted to pay for something in Yen in a month's time. There are several ways to do this.

(a) Buy Yen forward 30 days to lock in the exchange rate. Then you may invest in dollars for 30 days until you must convert dollars to Yen in a month. This is called covering because you now have covered yourself and have no exchange rate risk.

(b) Convert spot to Yen today. Invest in a Japanese bond (in Yen) for 30 days (or otherwise loan out Yen for 30 days) then pay your Yen obligation. Under this model, you are sure of the interest you will earn, so you may convert fewer dollars to Yen today, since the Yen will grow via interest. Notice how you have still covered your exchange risk, because you have simply converted to Yen immediately.

(c) You could also invest the money in dollars and change it for Yen in a month.

According to the interest rate parity, you should get the same number of Yen in all methods. Methods (a) and (b) are covered while (c) is uncovered.

In method (a) the higher (lower) interest rate in the US is offset by the forward discount (premium).

In method (b) The higher (lower) interest rate in Japan is offset by the loss (gain) from converting spot instead of using a forward.

Method (c) is uncovered, however, according to interest rate parity, the spot exchange rate in 30 days should become the same as the 30 day forward rate. Obviously there is exchange risk because you must see if this actually happens.

General Rules: If the forward rate is lower than what the interest rate parity indicates, the appropriate strategy would be: borrow Yen, convert to dollars at the spot rate, and lend dollars.

If the forward rate is higher than what interest rate parity indicates, the appropriate strategy would be: borrow dollars, convert to Yen at the spot rate, and lend the Yen.

Cost of carry model,

A slightly more general model, used to find the forward price of any commodity, is called the cost of carry model. Using continuously compounded interest rates, the model is:

where F is the forward price, S is the spot price, e is the base of the natural logarithms, r is the risk free interest rate, s is the storage cost, c is the convenience yield, and t is the time to delivery of the forward contract (expressed as a fraction of 1 year).

For currencies there is no storage cost, and c is interpreted as the foreign interest rate. The currency prices should be quoted as domestic units per foreign units.

If the currencies are freely tradeable and there are minimal transaction costs, then a profitable arbitrage is possible if the equation doesn't hold. If the forward price is too high, the arbitrageur sells the forward currency, buys the spot currency and lends it for time period t, and then uses the loan proceeds to deliver on the forward contract. To complete the arbitrage, the home currency is borrowed in the amount needed to buy the spot foreign currency, and paid off with the home currency proceeds of forward contract.

Similarly, if the forward price is too low, the arbitrageur buys the forward currency, borrows the foreign currency for time period t and sells the foreign currency spot. The proceeds of the forward contract are used to pay off the loan. To complete the arbitrage, the home currency from the spot transaction is lent and the proceeds used to pay for the forward contract.

(source:wikipedia)