litigation as a business model

The issue at hand is whether the RIAA's investigator SafeNet (the company that acquired MediaSentry) now needs to disclose its digital files, validation methodology, testing procedures, failure rates, software manuals, protocols, packet logs, source code, and other materials, so that the validity of its methods can be evaluated by the defense. SafeNet and the RIAA say no, claiming that the information is 'proprietary and confidential'. Ms. Lindor says yes, if you're going to testify in federal court the other side has a right to test your evidence. A list of what is being sought (pdf) is available online. MediaSentry has produced 'none of the above'. 'Put up or shut up' says one commentator to SafeNet.

A contingent of prominent artist managers claims that little to none of that money has trickled down to their clients. They are now considering legal action.

"Artist managers and lawyers have been wondering for months when their artists will see money from the copyright settlements and how it will be accounted for," said lawyer John Branca, who has represented Korn, Don Henley, and The Rolling Stones, among others.

"Some of them are even talking about filing lawsuits if they don't get paid soon."

Record label sources said corporate bosses are still deciding on how best to split the money. In determining the payout, they said not every artist is owed money and it must be calculated with regard to the level of copyright infringement for each artist.

What's more, these sources said that after the labels recouped their legal expenses, there wasn't much left to pass along to the artists.

But a source on the artists' side said that is an argument heard all too often in the music business.

Getting money out of the major labels is never easy, but given the industry's downward financial spiral it is exponentially more difficult now, the source said.

"The record labels are experts at transferring money around and putting the onus on artists managers to find it."

Hmmm, looks like litigation isn't a valid business model. Be funny if the artists did actually sue the RIAA.

As I've said before, a good sign of a dying industry that investors might want to avoid is when it would rather litigate than innovate, signaling a potential destroyer of value. If it starts to pursue paying customers -- which doesn't seem that outlandish at this point -- then I guess we'll all know the extent of the desperation. Investor, beware.