Record Industry Plays Both Sides

With Napster a shell of its former self and services like 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.

With Napster a shell of its former self and services like 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 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’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 songwriters.

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 industry.

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, 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 happening.”

That doesn’t mean the recent foes are on friendly terms, however. Although has settled lawsuits with publishers and the recording industry, Pitts said both organizations are still making things tough by not providing the information 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.

Author: Jeffrey Benner

News Service: Wired News


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