Friday, December 21, 2007

Patry: What Do People Actually Think Copyright Is?

My favorite copyright scholar, William Patry, wrote this morning about an experiment by Karl Fogel, in which Fogel interviews folks on the streets of Chicago about their thoughts on copyright.

I thought this particularly valuable to share in light of my depressing post yesterday about how badly artists are getting screwed in their record contracts as a direct result of file sharing. Based on Fogel's findings, if the general public really knew the consequences of their actions, maybe they wouldn't do it - those feelings of guilt should be greatly amplified because, regardless of whether file sharing really hurts the bottom line of the majors, it has done irreparable harm to artists.

Stewart, Colbert to return Jan. 7

Sweet! :)

Thursday, December 20, 2007

NAB Calls It an "Anti-Performance-Tax Resolution"

Legislators long ago realized that swaying public opinion on a matter is oftentimes accomplished with a name. The perfect example is the so-called "Death Tax." People hate death, and hate taxes even more. The idea of a tax on dying is truly offensive. While not an entirely inaccurate name, it is more appropriately called the "estate tax." However, the word "estate" conjures images of wealth, which is a closer representation of what is described, since it is a levy imposed on those with substantial assets and is designed to prevent the mass accumulation of wealth by way of inheritance.

The National Association of Broadcasters has taken its cue and refers to the newly proposed performance royalty for radio as a "performance tax." Nice try, NAB. (Note that NAB also refers to the FCC's relaxing of consolidation rules as "localism rules," suggesting that somehow allowing further corporate consolidation of media supports localism.)

NAB, along with NPR and other broadcast associations, has formed the Free Radio Alliance, aptly named to conjure warm fuzzy feelings. Its sole purpose is to fight against sound recording performance royalties for terrestrial radio, which it calls a "transfer tax on local communities."

Yesterday, Radio Ink reported the introduction of House Concurrent Resolution 224, in opposition to the performance royalty bill. The clever name employed here? The Local Radio Freedom Act. And we thought stuffy big business types weren't creative. The resolution reads:

Congress should not impose any new performance fee, tax, royalty, or other charge relating to the public performance of sound recordings on a local radio station for broadcasting sound recordings over-the-air, or on any business for such public performance of sound recordings.
It will come as no surprise that this resolution, trumpeting loyalty to and defense of local radio, was introduced by two Representatives from Texas, home of Clear Channel. No logical gymnastics are required to conclude that Clear Channel might have had some influence in the introduction of this legislation.

Clear Channel's impact on radio is no mystery - it singlehandedly destroyed local radio in the late '90s. This is perhaps why they had to get so creative with both the title of the resolution and its contents. After all, "Congress should not require major corporations who own radio stations all over the country to pay for using the recordings responsible for making them billions of dollars," just doesn't evoke the same warm fuzzies. (You know, on second thought, maybe we should back the Resolution exactly as it reads and not impose a performance royalty on local radio - only big media companies should pay it.)

The True Impact of Piracy

I was once again reminded this week of the dreadful impact of piracy on the music industry. The most common justification given by most who steal music online via Pirate Bay, et al, is that doing so is a sort of rebellion, sticking it to the man, if you will. Let's face it, screwing the majors out of a few bucks is quite empowering and with it comes a sense of righteousness.

But the bitter truth is that the majors are still in control and are the ones who are calling the shots. They are trying their best to let others (read: artists) absorb the losses from file sharing. Almost no artist has true bargaining power with a major and once the labels start incorporating certain terms into their recording contracts, it becomes almost impossible to remove those terms.

This week I was reviewing a contract for a fairly successful producer and songwriter, who was offered a record deal. My first pass was striking a mountain of language. The calculations on master royalties were atrocious (for those who know, they were basically using retail calculations on a wholesale basis, which effectively cuts the royalty in half, if not worse). However, they were also asking to reduce mechanical royalties (for his songwriting work) in the same manner as the master royalties. In this particular deal, it meant that his mechanical rate, already a 3/4 rate (75% of the statutory minimum) would be reduced even further for so-called "mid-line" and "budget" records, those sold at prices lower than the highest retail price. Other reductions/deductions would push the mechanical even lower.

Then there was what the attorney described as their "standard 360 language." First, 360 deals are only a recent creation and NOBODY has a "standard" yet. Second, 360 clauses should be the exception, not the rule. These provisions basically give the label a share of touring, merchandise, and name-and-likeness rights.

There are a plethora of issues to address when 360 language is incorporated, perhaps most importantly is that revenues from these other activities should not be cross-collateralized, i.e., the label should not be allowed to recoup recording costs, etc, from this money. The label should also be required to earn its share and its share should be commensurate to the label's role.

Despite my and other artist advocates' protest, these terms are becoming increasingly common. The more common they become, the more "standard" they become. The more standard they become, the more impossible it will be to have them removed.

Just like "new media deductions" became standard 20-25 years ago with CDs in order to offset the cost of developing the new medium and packaging, 360 clauses will start off as well intentioned but will become a new home for labels to chisel away artists' rights and income.

And it is all happening because people who obviously enjoy music have opted to get it for free from illegitimate sources. They think they are getting "the man" but the man is too powerful and too greedy to be cheated so easily. For every penny lost by a major due piracy, they take three more from the artists.

Artists were already squeezed dry on the recording side (my producer-client's manager, who represents some of the biggest names in the industry, told me that it's been years since he's seen a royalty check from a label). Therefore, mechanicals and other song royalties were a great way to earn a living for recording artists who wrote their own music. So the labels are sliding in creative language to greatly diminish these income streams. Now they are also grabbing for all of the artists other income, from areas that were once very far from the label's grasp. While many of the deals may look harmless now, the labels will no doubt find ways to reduce the artists' share in these arenas as well.

I know that it will be impossible to change the general public's view, to cause them to rethink the impact of their actions. It just saddens me to no end.

Wednesday, December 19, 2007

The Good, The Bad

Two significant issues were brought to the forefront yesterday, the first regarding the FCC's plan to allow greater media consolidation and the second regarding a bill that would finally require terrestrial radio pay a performance royalty for sound recordings.

FCC Passes New Rule

I have yet to read the new FCC rule but word on the street is that Chairman Martin's plan passed. His proposal is discussed in more detail in previous posts but it will allow a single company to own both a newspaper and TV station in a top-20 market, so long as there are 8 other media holdings remaining after the merger and that the station is not one of the top-4 stations in the market.

I sincerely hope that lawmakers stop the enforcement of the new rule and I suspect that they will. It is a ridiculous rule as it uses fluid benchmarks to make long-term decisions. What if a company wants to consolidate TV and print in the #20 market and that market slips to #21? What happens if the TV station purchased is #5 but, due to the significant ad budget of the parent corporation, the station moves to #4? Will the FCC force an immediate breakup as soon as the conglomerate no longer meets the market requirements?

That is hardly likely. Instead, the FCC will probably grant waivers, just as it has granted waivers to Tribune and others when they sought to consolidate, rules be damned. The FCC will no doubt argue that it would be "unfair" to force divestiture of the media outlet if market conditions change and the owner no longer meets the requirements.

Perhaps the FCC has addressed this question and I am not yet aware of it (as I say, I have not seen the rule yet) but if not, media conglomerates will be able to drive Mack trucks through this loophole.

Congress Proposes Terrestrial Radio Sound Recording Performance Royalty

Finally!!! The only ones who can complain about the Performance Rights Act are Cumulus, Clear Channel, and other major radio outlets. I found it shockingly peculiar that Congress saw the justification for creating a sound recording performance royalty for online radio but did not see the necessity of doing the same for terrestrial radio.

The argument from the stations has always been, We promote the records so people will buy them. The labels response is, of course, But you're making money by playing our music! For me, that's what it should always come down to. While the fundamental purpose of copyright is NOT financial but is to support creative expressions, I certainly think that if someone is profiting from copyrighted works, they should compensate the creator. Radio, instead, snubs its nose at recording artists and says it's doing them a favor - they should be happy that radio is even playing their music! (Yeah, OK.)

Lawmakers have finally stepped up - this is the first time in history (at least that I'm aware of) that a law has even been considered to give a performance royalty. It's about time that the U.S. joins the rest of the civilized world and honors the performance right of recording artists, regardless of the means used to deliver that performance.

Tuesday, December 11, 2007

Newspaper Association Wants to Block Sentate Bill to Delay FCC Vote

According to Multichannel News, the Newspaper Association of America has asked the Senate to "derail any legislative attempts to derail the FCC's Dec. 18 vote."

The FCC is scheduled to decide next week whether to relax cross-ownership restrictions on TV and newspaper in the top 20 markets. The bi-partisan Senate bill would require the FCC to delay its vote for at least 90 days, which would give Congress a chance to investigate the methods used by Chairman Martin to bring the rule to vote and his stewardship of the FCC in general.

Monday, December 10, 2007

FCC Chairman Criticized

What can I say, I'm on a roll with finding articles about Chairman Kevin Martin.

Thursday, December 06, 2007

SoundExchange Comment on New Satellite Royalty Rates

Radio Ink reports that SoundExchange is not happy with the new rates set for satellite music providers. The royalty will be 6% of gross revenues for 2007 and 2008, and will rise to 8% in 2012, while SoundExchange wanted the rates to start at 8% and increase to at least 13%.

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More Tribune & FCC News

I have to dig more into this one but Broadcasting & Cable is reporting that Tribune filed suit against the FCC challenging the waiver it received last week, the pending cross-ownership rule proposed by Chairman Martin, as well as the existing rule against cross-ownership. It appears that the contingency in Tribune's two-year waiver, which allows the waiver to be extended indefinitely while the rule is being litigated, was designed specifically to give Tribune a means to control its own destiny. The contingency gave Tribune legal grounds for filing the lawsuit, which not only means that Tribune's lawsuit will extend its waiver, it also opened up an opportunity for Tribune to challenge cross-ownership rules as a whole. B&C, quoting Commissioner Michael Copps:

"If the majority simply granted a two-year waiver to Tribune -- which would have been the straightforward thing to do -- Tribune would have been unable to go to court because a party cannot file an appeal if their waiver request is granted," Copps pointed out in his dissenting statement. "So what does this order do? It denies the waiver request but offers an automatic (and unprecedented) waiver extension as soon as Tribune runs to the courthouse door. Presto! Tribune gets at least a two-year waiver plus the ability to go to court immediately and see if they can get the entire rule thrown out."

Copps also opined that Tribune would be able to appeal to the "more sympathetic" D.C. Circuit, bypassing the Third Circuit, which remanded the general ban back to the commission, although even that court indicated that the FCC could make a case for modifying or lifting the ban.
What a mess - It's going to take me some time to sort through everything and figure out what might come of all the various factors at work. You have the waiver just passed, a Congressional investigation into Martin and his stewardship at the FCC, a rule proposed by Martin that is supposed to be voted on very soon, a lawsuit against the FCC by the beneficiary of the waiver . . . and the relatively strong possibility that Congress will try to alter the rulemaking process in some fashion, perhaps not even waiting to review the results of its investigation of Martin.

Wednesday, December 05, 2007

FCC Chairman Martin To Be Investigated

There is hope! Variety reports that Rep. John Dingell (D-Mich.), head of the House Commerce Committee, plans to initiate an investigation of Chairman Martin's stewardship of the FCC. Rep. Dingell is questioning whether Martin is using questionable practices in order to push through his (and presumably, the administration's) agenda. I've been none-too-happy about the waiver that Martin sought (and received) for the Tribune, and question his policy in general on cross-ownership. Now it appears that Martin will have to answer for his conduct.

I am curious to see what will result from this investigation. The last time Congress got involved in an FCC matter, it was when Chairman Powell tried to push through new cross-ownership rules when the public at-large expressed strong opposition to the change. He originally tried to pass the new rules without public comment but was forced to change course in the face of public outrage; then, despite an overwhelming number of comments opposing the measure, he passed a measure to relax cross-ownership restrictions. Public opposition was so great, Congress had to step in and reverse the Chairman's new rules.

It seems unlikely that Congress would "undue" Martin's waiver for Tribune, mainly because the Tribune sale is supposed to close before the end of the year. Since Congress could not address the issue before then, it is unlikely that it would require Tribune to divest itself of media properties in order to comply with the law. However, Congress is sending a strong signal to Martin and could help reinstate some since of order in the agency.

Monday, December 03, 2007

Martin One Step Closer to Dismantling Cross-Ownership Rules

As expected, the FCC voted to approve a waiver that will allow the Tribune sale to move forward. See the story from Washington Post.

Look at Chairman Martin's comments from a few weeks ago, justifying the elimination of cross-ownership restrictions in the top 20 markets, then compare them to the Tribune circumstances. Martin's comments sound as though they are meant to protect the poor mom-and-pop local daily papers, the ones without sufficient resources to collect and report on local news. In Martin's logic, allowing newspapers and local TV stations will enable them to combine their news rooms and better serve their communities.

Does anyone - a single person - believe that the Tribune sale represents the plight of local news coverage and is a means to safeguard local interests and reporting? Well, even if our current Republican administration has lost sight of traditional conservative values like small federal governments and reduced spending, at least the 3-2 party line vote shows that the FCC Republicans are unashamedly still supportive of big business, even if it is at the expense of the public at large.

Friday, November 30, 2007

RIAA Taking It One Step Too Far

OK, perhaps that's an understatement. Check out this article from the Tennessean. The University of Oregon is challenging the investigative techniques used by the RIAA to gather information on illegal file sharers. I'll try to grab a copy of the motion but it appears that the University is basing its claim on Oregon law, which requires a license in order to engage in data mining.

I think it's very interesting to see how so many universities are taking such a bold stance against the RIAA, spending considerable sums of money in order to protect their students.

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FCC Chairman Kevin Martin Looks to Give a Free Pass on Tribune Sale

The AP reported yesterday that FCC Chairman Kevin Martin has circulated a plan to grant Tribune a waiver that would allow it to own both a newspaper and broadcast property in the same market. The company is the subject of an $8.2 billion buyout deal to take it private.

Martin's plan would allow Tribune to operate both types of properties in a market while the FCC considers lifting a ban on cross-ownership for the top 20 markets in the U.S. According to the AP, the waivers will last six months after any potential litigation is concluded, or two years, whichever is later.

Tribune already owns both a newspaper and broadcast station in five markets, including New York City, Chicago, Miami, Los Angeles and Hartford, Conn, which violates the current rule against cross-ownership. As stated in the AP article, the company has operated in other markets under temporary waivers "in anticipation that the FCC would lift the ban."

It is mind-blowing to me that a federal agency can so blatantly disregard its duties to the public. Here we have the FCC providing get-out-of-jail-free cards to businesses, which allow them to break the law "in anticipation" of the law changing. The Commissioner has the audacity to say that, "We should give people an opportunity to see how that all shakes out," adding, "I would anticipate that would take quite some time."

I didn't sleep a whole lot last night and perhaps a I'm bit loopy but, shouldn't the idea be that the FCC continue enforcing the rules as they are today and only allow cross-ownership once it all "shakes out?" Wouldn't Martin's prediction that it could take a long time to settle the issue make it even more important to stay in-step with the law?

The logic supporting the new waiver should be the very reason why the waiver should not be allowed. Martin says that it wouldn't be fair to force The Tribune to divest itself of properties in order to come into compliance with the law while the FCC considers the a final rule (which would open up cross-ownership in the top 20 markets, and 4 of the 5 Tribune cross-controlled markets would qualify). However, Tribune is only allowed to own those properties today because of waivers granted in anticipation of the FCC lifting the ban. If the FCC hadn't granted the first waivers then it wouldn't feel compelled to grant these new waivers. What about the fairness to the public, the people to whom the FCC is supposed to answer? Was it fair to us to deprive us of a protection that the law says we should have? If the FCC had not allowed Tribune to break the rules before, it would have even less justification for doing so now.

Even if the ban is never lifted, Tribune and other major media conglomerates will have enjoyed years of profits by breaking the law with the blessing of the FCC. More importantly, however, the public good will have been sacrificed by reducing the number of voices providing it with news and information, something that the public has already overwhelmingly disapproved.

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Tuesday, November 13, 2007

FCC Looking to Support Consolidation Yet Again

If I had a rotten tomato for every FCC Chairman who stumped in support of further media consolidation, I'd wish I had a dozen more. Chairman Kevin Martin is taking up where Powell left off. Boo.

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Tuesday, November 06, 2007

The Future of Vinyl and the Indie Record Store

Last week, I attended the Americana Music Conference, which is a relatively new (8 years) event that is a little like a small and focused SXSW. It was fantastic! The Americana Music Association presents an awards show (6th annual), 3 days of conference activities, and 4 days of music showcases at some of Nashville's best venues. A great time had by all.

Other than the music (Avett Brothers, Uncle Earl, Ron Sexsmith, and Tift Merritt were among my fav's), the best part of the conference was a small panel on the future of the brick-and-mortar record store. Panelists included Bob Goldstone of Thirty Tigers records, Jim Donio of the National Association of Recording Merchandisers, Jim Fahy of the Coalition of Independent Music Stores, Doyle Davis from Grimey's New and Preloved Music, and the panel was moderated by Sylvia Giannitrapani from Ryko.

Grimey's is no doubt one of the finest record stores out there and it was a thrill to have Doyle on the panel. Jim Fahy, with a great deal of experience with indie stores across the country, was equally enlightening.

Basically, these two (with the rest collaborating) painted a picture quite different than what we repeatedly hear reported on the news. The recording industry is not imploding. The indie stores are continuing to see an increase in sales, anywhere from 30-70%. Doyle also said that his sales of vinyl are also on the rise.

I have thought for some time that sluggish record sales might be attributable more to the big pop stars, whose audience is the otherwise undefinable "masses." This group is made up of average consumers with bland musical palates and tastes controlled more by the Top 40 than their own senses. These are not serious music fans; arguably, they are not music fans at all. And now that they can get the handful popular songs free without committing to an album or even a purchase, they do so.

Those who appreciate music and appreciate artists are the ones still buying recorded music, which is why I think the trend in digital music is counter-intuitive. If your core audience really loves music and loves the listening experience, why serve up inferior-sounding digital files? The convenience and simplicity of the MP3 format appeals only to the supremely uninclined consumer, the very ones who are most likely to run towards a free download if ever one is available.

Frankly, if the masses stop buying music made by commercial pop stars, good riddance to both. As long as there is a sufficient market to sustain indie artists, and I think there always will, these artists will continue to thrive. The inability to make money on major artists might encourage the majors to divest themselves of their recorded music holdings and cease (or slow) the creation of over-produced and under-evocative albums. There will certainly be a reduction in the number of units sold but a portion of the slack will be taken up by the indies. A departure of the big box retailers from selling music will force consumers on the edge of being engaged to try out their local record store, and if their store is anything like Grimey's in Nashville (or Ear X-tacy in Louisville), they will be a convert forever.

For the initiated (recent converts or long-time die-hards), vinyl represents the highest quality listening experience. (See this recent Wired article, which I found in trying to do some additional research on the market size for vinyl). Many records now come with a free MP3 download coupon (the most recent releases from Bright Eyes and Spoon that I bought included them). However, even for those that don't, it is not at all difficult to hook up a turntable to a computer these days and "rip" the tracks to digital files. For instance, I have RCA inputs on my sound card so I just plug it up, play and record off the sound card. A buddy uses a turntable with a USB cable. Yes, it is a somewhat complicated process to record, encode, equalize, and cut the sides into tracks. However, the power to encode into the highest quality digital formats and the best sample rates beats the tar out of any downloaded MP3; converting to Apple Lossless means I can then play them on my iPod with no loss in quality from the original digital file.

Given that music fans now have options to make their music "portable" (the free accompanying download or ripping it themselves from vinyl), I have no doubt that (a) the CD will ultimately die or at least go away in significant form, and (b) vinyl is poised to make a significant comeback.

Now, I'm going to take it a step further. Analog playback technology will experience a boom over the next 5-7 years. Better record players; more advanced technology for playback and home theater integration; better recorded mediums (5.1 or 7.1 on vinyl?); longer playing "sides" or perhaps a regression to the original Edison "tube" record.

You heard it here first, boys and girls. The handwriting is on the wall. Analog playback, as ironic as it may seem, is the future of recorded music industry.

Thursday, October 25, 2007

Thursday, October 18, 2007

A Comment on Performances of Copyright

William Patry is my favorite commentator on copyright issues. No one can doubt the man's brilliance in and mastery of the subject, which is probably why I delight in responding to his occasional rhetorical questions. Patry is far more educated and has many years' more experience, but I enjoy the exercise of challenging some of his positions.

This time: Is there a violation of the exclusive public performance right when an otherwise authorized television broadcast in a public business environment (e.g., a gym or truck stop) is altered by a technology employed by the business owner to substitute its own ads in place of those aired by the networks?

Patry points to two cases, one of which is ABC, Inc. et al v. Flying J, Inc., 2007 WL 583176 (S.D.N.Y. Feb. 22, 2007). Flying J used a devise called the segOne, which monitors television broadcasts and when a commercial comes on, the device switches over to play commercials selected by Flying J. Patry questions the merit behind the case because ABC and company brought the suit based on an infringement of their exclusive performance right.

It is true that Flying J properly licensed the broadcasts it airs and it argues that substituting its own ads in place of the original ones is the equivalent of changing the channel during commercial breaks. Patry agrees with Flying J, or at least does not see how not performing part of a broadcast (the commercials) is tantamount to a violation of the performance right. However, I disagree.

The fundamental purpose of copyright is to encourage the arts by protecting the creative integrity of the artist. ABC and its broadcasting brethren create television programs, which are protected by copyright. The programs are financed with advertisements (also copyrighted), which in turn become as much a part of the program as the show itself. Just as the show is a reflection of its creators as an artistic expression, the commercials are equally reflective on the broadcasters. This presumption was confirmed when some broadcasters and local affiliates recently decided not to air a Trojan condom commercial featuring several "pigs" in a bar, hitting on women. In their opinion, this ad would reflect poorly on the network.

If it is accepted that a commercial becomes a part of the program and those commercials are replaced with unauthorized programs, the performance is transformed into something other than what the original author created. It is, to an extent, the legal opposite of sampling: Rather than taking parts of an existing work and incorporating them into a new one, this performance involves taking parts of new works and incorporating them into an existing one. On the other hand, it could simply be called a derivative work.

The end result is the same. By using the segOne, Flying J is performing the work in a manner not authorized by the copyright owner, which is grounds for an infringement action based on the exclusive performance right. Alternatively, a contract claim might exist based on a violation of the license. It does not matter that Flying J was authorized to broadcast the shows because Flying J did not broadcast the shows in the manner consistent with its license.

Flying J's conduct could be analogized to a company obtaining a sync license to use a song in a car commercial, then rerecording a vocal track to substitute the original lyrics with a catchy jingle. Sure, a valid license exists, but did the intervening modification of the song not step outside the scope of that license? Does the performance of the modified song in commercials constitute an infringement?

The argument that using a segOne is the technological equivalent of channel surfing also fails. First, Flying J is broadcasting a totally different program and ceasing the first broadcast entirely. Flying J is actually altering the performance of a single broadcast itself. Second, perhaps more of an equitable argument, viewers know when someone is changing the channel. However, when new commercials are automatically inserted in place of the old ones, the viewer has no reason to think that (a) those commercials were not a part of the original broadcast, or (b) the customized broadcast was authorized by the network.

As might be expected, I also side with the networks on this issue because Flying J and others are making money based on the creative works of others. I'm certainly no fan of major media conglomerates but that is primarily because they tend to be motivated by their profit margin rather than the quality of their artistic output. Where creative expressions are concerned (bearing in mind the very loose definition of "creative expressions" when dealing with copyrights), I find it difficult to support one business entity who is profiting from someone else's creation at the expense of the creator.

Wednesday, October 10, 2007

AIM Tunes - Good for AOL, Bad for Artists

I am the last one to advocate utilizing protectionist technologies (DRM sucks) or reining in innovation (bit torrent is cool) for fear of demonetizing recorded music. However, my anti-control, free-technology loyalties wane when the initiative is spearheaded by a major conglomerate. Fundamentally, my belief is that ingenuity and creativity are the king of queen of progress, while profit motive is the jester.

It is with this perspective that I give a big, "What?!?!" to AIM Tunes. As Paul Reskinoff observes, people have always been able to share files using IM clients. In my eyes, that's no big deal. It's a one-for-one and basically makes it easier for users to share music with their friends, in much the same way (albeit a bit more conveniently) we used to do with making tapes and burning CDs. Plus, there are a million-and-one other ways to use the file sharing capabilities of IM. It's a fundamentally good utility.

What's concerning about AIM Tunes is that it's designed specifically for streaming music from another person's computer. While it remains true to the idea of a one-to-one relationship between people, it blows away the notion of that one person gaining access to one or a limited number of files. AIM Tunes allows a user to stream their friends' entire collection at any time, so long as they are both connected, which also means it eliminates the, "hey, have you heard the new Bees record?" sort of promotion that goes with the old school model.

Perhaps most importantly for AOL is the legal questions surrounding AIM Tunes. Interactive streaming requires a special license and even if AOL gets permission from all of the majors for all of their artists, it will be impossible to guarantee that AOL has licensed every single song in every individual's music collection (A.M. Flavor or Green Genes, for example, are certainly not among the licensors). Therefore, AIM Tunes necessarily will infringe on the rights of those bands.

The other big problem is, how do the rights holders (more importantly, the bands) get paid? If they do have licenses with the majors - and I certainly hope they at least took this measure of precaution - then does AOL have a system in place to account for each track streamed? Does it know the artist/song? Reskinoff makes mention of Amazon's tie-in to offer purchases of streamed music, so there must be some fingerprinting going on, though I can see how any technology used to do so could be highly unreliable.

Even if AOL is paying a royalty per stream and accounting to labels on such a basis, will content owners also get a pro rata share of advertising income?

My thought is that bands and songwriters are going to get the very short end of this stick:

(1) AOL may or may not have licensed content from the majors but even if it has, there is no way to account for every single artist whose music is in a digital file on an AIM user's computer;

(2) Even if AOL is licensing content, it is most likely not paying per stream as the accounting would be a nightmare and inherently unreliable since AOL does not control the source files, thus meaning that artists will not get paid a dime since the labels cannot say how much of the license fee it earns is attributable to each artist and each song and thus, does not trigger the royalty requirement in virtually every recording contract (if income cannot be attributed to a single work, the label doesn't have to pay);

(3) It is highly doubtful that AOL is sharing in ad revenue, and even if it is, this income will also go 100% to the label and none to the artist, since once again the royalty provision will not be triggered.

My problem isn't so much with the technology, as I am not convinced that just because someone can stream music from their friend's computer, they won't go buy the record. What troubles me is that this technology has been unveiled by a major conglomerate who is going to profit handsomely from other people's music. Even if AOL acts as nobly as it can under the circumstances, artists are sure to get short-changed.

Tuesday, October 02, 2007

The Yak Sak is No Barf Bag

This is why I love trademark practice.

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Wednesday, September 12, 2007

Is the Album Really Dead?

I have always been a huge fan of the album, and even bigger fan of the double-disc unitary theme of such classics like Pink Floyd's "The Wall." The album tells a story; if not literally, historically. It serves as a point of reference for the collection of influences impacting an artist's work at a particular time. With an album, you get to here a many songs that could range in styles and tempos and moods. You get a snapshot in time.

With a single, you get one song. It may be typical (though finding a song that typifies any band is about as easy as defining them to a genre) or a complete departure. If a listener has never heard an artist's prior work, they are going to be no closer to understanding that artist by listening to a single song. They could love or hate the rest of the music; they could fall in love with the band and want to recommend them to all of their friends; they could want to go on tour with them forever. With a single, who knows?

My point is that most people who appreciate music know this concept very well and shutter at the thought of buying a single. So why, then, does every commentator and the industry in general seem convinced that the consumer doesn't want albums anymore and only want singles? Honestly, has there been any true consumer research on this point?

From what I can tell, virtually everyone that references the demise of the album will first point to the popularity of file sharing networks and how that distribution is fundamentally singles-based. However, this conclusion ignores three principal considerations: (1) just because one file = one song does not necessarily mean that one song is desirable, it's just a technical requirement that an entire album not be bound up in a single file; (2) can we say for certain that the average downloader is not trying to acquire the entire album and does so when it's available?; (3) despite the prevalence of file sharing, does anyone believe that those sharing represent true music fans who would have purchased any music if they hadn't gotten it for free?

I believe that the prevalence of the single in file sharing is initially a result of technical issues - files have to be broken down by song and offering a collection of songs by album is more difficult due to issues with keeping files grouped (the causes vary among platforms but basically, it's easier to share one thing than a bundle of things).

To the extent albums are available, I have yet to see evidence or think of logic that would compel someone to opt for a single over an entire album in the file sharing realm. After all, it's free! Where storage and bandwidth are virtually non-issues, why would I choose to get one song when I could have 12 for the same price?

Third, do the majority of file sharers represent the target music audience? I fully appreciate the fact that physical sales have declined (though I have thoughts on that as well) but question whether any significant number of file sharers are largely the same people to whom labels want to sell a record. To a large extent labels admit that every music file shared does not represent a lost sale - a great number of file sharers would have never acquired the song but for file sharing. So, to the extent file sharers are hooked on the single, do they really represent a shift in preference for the target audience?

The other major indicator for those citing the death of the album is the number of single sales in digital stores. However, I question how much consumer tastes have to do with this conclusion. First, there are a limited number of digital retail outlets and while accounting for sales at most, the commentators use purchasing trends at iTunes as the benchmark. However, iTunes has always marketed the 99 cent download and the entire iTunes experience heavily encourages a-la-cart purchases. Moreover, can we say that iTunes consumers really represent the target music buying market?

We know that iTunes sales, while substantial, are still relatively small. A great number of its customers are probably encouraged to buy singles due to the marketing and experience. Another large lot of them are probably the types who would have bought singles in the store if it were easier and more feasible. My guess is that most iTunes a-la-carte sales are not made to the people record companies should be interested in. The share of people who buy singles because they want to buy singles are those who like whatever is popular in the moment; they have no allegiance to an artist or band and will listen to a song for a few weeks or months and move on to the next big thing.

I think this position is supported by the utter lack of sound quality in lossy digital formats. If I really care about music then I want it to sound good. Casual listeners don't care if they get a sub-par digital file. The serious music fans want full, rich sound.

I count myself among those who have an allegiance to bands. There are a lot of them, more now than ever. If I hear one song, I might be interested. If I hear a couple, or if I read a glowing review from a respected writer, then I'll buy the album. If I like the album, I will buy every other album that band has put out and will go see shows.

The vast majority of people I still see in record shops are just like me in this respect. They are loyal to artists and would never dream of buying by the single. Which brings me to the main point - these people are still buying physical records; these people don't like lossy formats; these people wouldn't steal music because of their loyalty to bands and desire to support them.

I believe that there has been a great deal of misdirection in the debate over digital music and the changes in the industry. I believe what we are seeing is a correction of sorts - the market for physical product is being whittled down to its core audience and that core audience will not go away in the natural course of things. However, it can be destroyed if industry powers start chasing after wrongheaded strategies.

If the industry believes that singles are the way of the future and stop funding album projects, it will alienate its core audience. If the industry starts moving away from looking to record sales as a primary revenue stream (as it is doing - the evidence is in every new major recording contract I've seen in the last 6 months) and focus on merchandise, it is definitely headed down the wrong path. Music is music. If music is used only as a means to sell merchandise . . . well, that's just ridiculous.

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Digital Music News Article: Judge Disapproves of RIAA Form Complaint

Digital Music News reports that a US District Judge for Southern California disapproved the RIAA's use of a form complaint against defendants accused of illegally sharing music. The court did not dismiss the complaint but refused to grant the RIAA summary judgment, meaning the case must move forward.

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Wednesday, August 29, 2007

Sometimes You Can't Help But Laugh

Patry, a very intelligent and always a witty fellow, provides brilliant commentary on a recent decision concerning 50 Cent and his masterpiece, "In Da Club."

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Tuesday, August 21, 2007

New TTAB Rules Announced

A list of revisions to the Trademark Trial and Appeal Board rules have been provided by the TTAB. Here is a direct link to a PDF copy of the table summarizing all the rules.

Thursday, August 09, 2007

AT&T Censors Pearl Jam

It appears that AT&T censored its webcast of Pearl Jam's performance at Lollapalooza on Sunday:

During the performance of "Daughter" the following lyrics were sung to the tune of Pink Floyd's "Another Brick in the Wall" but were cut from the webcast:

- "George Bush, leave this world alone." (the second time it was sung); and

- "George Bush find yourself another home."
PJ expresses concern over this action, both because of the censorship but also because it highlights yet another problem with media consolidation. AT&T claims that it was a mistake by a content monitor but inadvertent or not, the censorship still happened. That it was political speech (the most protected of all under our Constitution) is most troubling. Surely the content gatekeeper hired by AT&T to filter the broadcast of an extremely popular musical event knows the difference between blatant obscenities and a couple of lyrics involving the president. If this person bleeped an F-bomb it would be more understandable. However, I find it hard to believe that an individual would be so oblivious to think political speech should be censored. Common folks know this - shouldn't the person whose job depends on this awareness be as enlightened?

This is just a hunch, admittedly rooted in a mistrust of the close relationship between our current chief executive and big corporations, but I am inclined to think that this snafu was less a mistake by an individual monitor than a directive from higher powers. Even if this person had never monitored a single program, I'm sure the first question asked when sat down to begin his/her duties was, "So what gets in and what gets out?"

There's been no shortage of debate over censorship since the Janet fiasco a few years ago. Networks have been very acutely aware of their limits and exercised great control over what gets broadcast, knowing that huge fines could ensue for their failure to be so diligent. It stands to reason that just as conscious decisions are made to allow content to be broadcast, an equal amount (if not more) consideration goes into what is deleted.

The good news, as I see it, is that PJ's concern over net neutrality is greatly mitigated by this situation - for one major reason. PJ has been able to make noise over the issue, the issue has been picked up by several media outlets and people have been talking about it. PJ was able to post the omitted lyrics and, without censorship or pass-through any major media conglomerate, the entire world has become aware of not only the censorship itself but the underlying concerns surrounding it. AT&T might have done PJ a favor; not only have those lyrics gotten far more attention as a result, it has also given PJ a living example from which to express its opposition to media consolidation.

Wednesday, August 08, 2007

EFF Defense of Selling Promotional CDs

The Electronic Frontier Foundation is an organization that consistently confirms my self-image as one who does not blindly follow the views of any single entity, political or otherwise. While it frequently take righteous positions regarding the true fair use of copyrights and the frequent unjustified, overreaching for control by major media, I respectfully part ways with them on one most recent issue.

The EFF is defending Troy Augusto in an action brought by Universal Music Group. Augusto was selling promo CDs on an eBay auction.

I understand the spirit of the EFF argument - the first sale doctrine enables anyone to sell a CD that he or she has purchased. However, the EFF is arguing that Universal's position could jeopardize the business of libraries, used CD stores, and rental houses. If Universal were challenging the sanctity of the first sale doctrine then the EFF argument would be valid, but this is not the case.

Promotional CDs are just that - they are given away to radio stations and other taste makers in order to promote the band. They are *given away* for this purpose. The person receiving the promo copy has tendered no monetary consideration in exchange for the CD. The only consideration on behalf of the recipient is to agree not to resell it.

The crux of the argument is not based on copyright law but is instead a contract claim, and nothing is more troubling than when otherwise forward-thinkers try to hinge every deed that concerns copyrights on copyright law. The relief sought by Universal does not require dismantling the first sale doctrine, nor does it threaten any of the legitimate uses identified by EFF. Rather, it merely states that a promotional copy is not sold and thus any distribution of a promotional copy does not qualify under the first sale doctrine.

Generally, we always look at issues in copyright through a prism of fairness, which is why the EFF so frequently sounds a sympathetic alarm. However, it is hard to defend those who sell promotional copies. These people are vastly increasing their profit margins by selling products they did not pay for. The artist isn't getting paid, the label isn't getting paid, and the consumer is still (generally) paying full price. Even if the consumer is getting a discount, it is never going to be as deep as the one gotten by the seller, i.e., it will never be free.

The consequence if EFF wins is, of course, that promo copies will be free to sell (despite a contractual, not copyright, commitment to the contrary). The result is that no promotional copies will be distributed. Music writers, DJs, concert promoters, clubs, and all other people who used to get free copies of music will have to pay for them.

So then, what exactly is EFF defending? The right of some individuals to make a lot of extra money off of someone else's work? What's fair about that? The label gets screwed, but more importantly, the artist and consumer also get screwed.