Who’s Destroying the Music Industry? IRS Documents Reveal RIAA Executives Are Rewarded for Failure

Next time you hear the Recording Industry Association of America cry poor or make dire proclamations about the death of the music industry, keep this news article in mind. TorrentFreak has obtained copies of the RIAA’s IRS filing for 2011 — the most recent filing that has been released, as far as we know — and they make for very interesting reading indeed. You can read the entire document here, but we’ve pulled out some key points: read on for private investigators, fascinatingly elusive lobbying expenditure and whopping great executive bonuses.

The first thing you notice about the 2011 document, and the thing that’s been most widely reported, is that the RIAA’s revenues are dropping dramatically. This is because it’s receiving a whole lot less in membership dues than it used to — in 2008, it received over $50m, but by 2011 that figure had halved to $24.8m. It’s also shedding staff like crazy; per Digital Music News, it employed 109 people in 2009, but by 2011 that figure had been reduced to just 60. In other words, it’s cutting costs by cutting people.

Elsewhere, however, its expenses remains significant. There’s $761k spent on travel, which averages out at about $12.6k per employee, and $1.3m on occupancy expenses (“the use of office space or other facilities, including rent; heat, light, power, and other utilities expenses; property insurance; real estate taxes; mortgage interest; and similar occupancy-related expenses”) — relating, presumably, to the RIAA’s swanky Washington, DC, offices.

The tax filing itemizes the five highest compensated individual contractors receiving money from the RIAA in 2011 — the top three are law firms, which isn’t surprising given that the RIAA spent $1.2m on legal representation during that year, with the three firms in question receiving $354k, $323k and $288k respectively. More intriguingly, $202k was paid to Investigative Resource Management, a company that is apparently run by a former RIAA employee and seems to be some sort of private investigator. (The Texas Association of Licensed Investigators lists one of the company’s specialties as “surveillance,” although reassuringly, they don’t have armed guard or guard dog insurance.)

There’s also $250k a year for a “copyright alert system” from the Center for Copyright Information. This doesn’t exactly seem to be paying off — the figure listed as income from “antipiracy restitution” is a pretty measly $190k, or about 10% of what the RIAA is paying out to its top lawyers and investigators. It doesn’t even cover the cost of the copyright alert system. (The RIAA’s Anti-Piracy EVP Brad Buckles, by the way, pocketed $485k in 2011, including a $50k bonus.)

An even more significant expense is lobbying. In 2011, the RIAA apparently spent $1.9m on this, although it’s unclear where any of this money went — the only itemized expenses are some $35k in relatively piecemeal donations to a curious assortment of causes ($4k to “Gansler Attorney General”, $1k to “Campaign to Re-Elect Jim Hood,” $1k to “Citizens for Mara Candelaria Reardon,” and so on.) There’s also apparently an RIAA Political Action Committee, which was funded to the tune of $20k. The rest? Who knows. We’d certainly be intrigued to find out.

But wait, because we’re saving the best for last: in news that will surprise absolutely no-one, the RIAA’s executives are receiving more money than ever. Cary Sherman, who was the RIAA’s president from 2001 until 2011, when he became CEO, earned nearly $1.5m in 2011, including a base salary of $882k and a bonus of $496k. His predecessor as CEO, Mitch Bainwol — who was CEO between 2003 and 2011 — earned a similar amount, including two separate bonus payments totalling nearly $600k.

You’ll also be happy to know that at least one of the company’s executives — it’s not specified who — received “first-class or charter travel” and “travel for companions,” and that both Sherman and Bainwol “received gross-up payments [basically, when a company pays the tax you’d normally pay on your income, and also the tax you’d normally have to pay on that income] for some benefits that are taxable and reimbursable to them, including club dues.”

This means that the RIAA paid over 11% of its revenues to just two men in 2011. These two men happen to be the same two men who presided over a decade in which the RIAA failed dismally to understand the realities of a changing music industry, filed egregious lawsuits against children, beat out Halliburton for the coveted worst company in America award, and became perhaps the single most loathed industry body in the world. In most jobs, this’d get you fired. At the RIAA, it gets you a hefty bonus. Nice work, as they say, if you can get it.