[rumori] Record Industry Plays Both Sides (fwd)

From: { brad brace } (bbraceATeskimo.com)
Date: Wed Mar 21 2001 - 04:30:25 PST


Record Industry Plays Both Sides
by Jeffrey Benner, wired.com

2:00 a.m. Mar. 16, 2001 PST
With Napster a shell of its former self and services like MP3.com paying
hefty tribute, record labels are poised to conquer cyberspace with their own
streaming and downloading services.

Ironically, only one thing stands in the way: copyright.

Record companies aren't the only ones that hold copyright on music
recordings. Music publishers, who represent lyricists and composers, do too
-- owning the rights to the piece of music itself. For every copy a record
company distributes, the publisher gets a small cut. That's how the people
who write the songs get paid.

When it comes to fighting alleged music pirates, the recording industry and
the National Music Publishers Association (NMPA) have always stood shoulder
to shoulder, united by a common interest in protecting copyright.

But despite the united front against Napster, behind closed doors the
relationship appears to have chilled. The argument is over what the
recording industry should pay publishers for the right to stream MP3 files.

Suddenly, the industry finds itself on the other side of a copyright fight.

Last November, it was big news when MP3.com settled the last outstanding
suit against it, agreeing to pay Universal Music Group $53 million for the
privilege of making Universal's library available for streaming.

What didn't make the headlines was when, just three weeks later, the Rodgers
and Hammerstein Organization and the Songwriters Guild of America, along
with other artists and publishers, sued Universal's new website, called the
Farmclub Online, for letting users download music without paying royalties
to the people who wrote and published the songs.

The very first line of the suit makes clear that the irony of the situation
had not slipped away unnoticed. "UMG Recordings has decided to engage in the
very same infringing activities that UMG itself -- in a recent and highly
publicized lawsuit -- successfully challenged in this court."

Around the time of that suit, negotiations broke down over how the spoils
would be split once the industry finally figured out how to turn MP3 files
into cash. The NMPA and the Recording Industry Association of America (RIAA)
filed separate petitions to the U.S. Copyright office, asking the government
to help settle the matter.

On March 9, the copyright office responded to the petitions by opening a
public comment period on the question of what kind of licensing digital
streaming and downloading of music files should require. Once the office
settles the dispute over whether a digital stream is really the same thing
as selling someone a CD, then it may arbitrate what the royalty on a digital
file delivery should be.

In its petition to the copyright office, the RIAA made some arguments that
could have come straight out of MP3.com's defense playbook.

"To be compelling to consumers ... a service must offer tens or hundreds of
thousands of songs, in which rights may be owned by hundreds or thousands of
publishers," the petition said. "No service provider is eager to embark on
individual negotiations with all those publishers unless it is necessary."

In short, the industry is arguing that present copyright law makes it
difficult to launch an online music service. It has asked the copyright
office to interpret the law to permit it to sell streams under a compulsory
license from publishers. This would be in the best interests of all parties,
the RIAA said, by allowing "legitimate" online music services to thrive.

The industry's stunning turnaround -- of not stifling the online music
industry by demanding strict compliance with copyright -- hasn't gone
unnoticed. Smelling vindication, its adversaries have stopped licking their
wounds and started licking their chops.

"We find it exquisitely ironic that the recording industry tries to define
the sound recording license (the one it owns) as narrowly as they can for
webcasters, but the publisher's license (the one it pays royalties on) as
broadly as possible," said Jonathan Potter, executive director of the
Digital Media Association (DiMA).

"They want to take as much as they can to build their own business, but
don't want anyone else to build theirs."

Bill Goldsmith, Web director of KPIG radio -- the very first radio station
to simulcast on the Net -- was less restrained in his criticism. "I think
the RIAA is a bunch of greedy, shortsighted idiots," he said.

The RIAA has battled hard to collect royalties from webcasters, successfully
lobbying Congress to pass a law in 1995 requiring royalties for a "digital
performance" of music. The industry recently won a battle to have Web
simulcasters like KPIG pay too, even though analog radio broadcasters don't
have to pay record companies anything. That money goes to the performers and

Webcasters do have the kind of "compulsory" license the RIAA wants from
publishers (you don't need permission to play a song, but you do have to pay
a royalty), but only with severe restrictions lobbied for by the recording

For example, webcasters can't play more than three songs in a row from a
single album, and can never publish playlists in advance. What has always
been out of the question for webcasters is getting a compulsory license for
the kind of interactivity (letting listeners choose songs) that the
recording industry now wants for its own "on-demand streaming" business.

Goldsmith thinks the industry's take-no-prisoners strategy may backfire.
"They're pissing off the artists," he said. "If they piss off online radio
too, what's to prevent a system that doesn't involve the recording industry
at all? They're encouraging the development of an alternative relationship
between producers and radio stations."

Billy Pitts, an executive at MP3.com, knows how hard it can be to run an
online music business under current copyright law, and he wants to see a
change, too. "Congress has to tell everyone what you can do online with your
music," he said. "We are very close to the RIAA with respect to what's
That doesn't mean the recent foes are on friendly terms, however. Although
MP3.com has settled lawsuits with publishers and the recording industry,
Pitts said both organizations are still making things tough by not providing
the information MP3.com needs to properly license its music library.

"Even though we're several months after the deal, we haven't been able to
unlock a lot of the songs," Pitts said. "Do they not want us up running? Or
is it that they don't have the information? You tell me.

"We want to get this resolved," he added. "We're tired of fighting."

Despite repeated attempts, neither the RIAA nor the NMPA could be reached
for comment on this story.

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