Tuesday, September 16, 2008

History Repeats Itself in Recording Contracts

I'm reviewing a long history of agreements for a client who had a stellar career that spanned some sixty years. It's been very interesting to see how recording agreements evolved from the forties. This artist spent a significant amount of time with one label and I'm tempted to write a long article on the history of the recording contract - when and how royalty calculations evolved and how far many modern provisions have departed from their original intent.

However, another interesting thing I just noticed is how certain language dropped out for decades, only to reappear in our modern landscape. One particular agreement, dated from 1976, includes the following provision (I've substituted the label name with "Label"):
If, during the Term hereof, Label shall become entitled by law to receive royalties (or the like) on account of the public performance in the United States of records made from master recording recorded hereunder, then (unless such law shall provide for the direct payment to you, from a third party source, of any related royalties (or the like); or unless such law shall provide for Label to allocate such royalties as between Label and you in any specified manner, in which latter event, of course, Label shall comply therewith) one-half (1/2) of all such royalties received by Label with respect to (or attributable to) such records shall be retained by Label for its own account, and the remaining one-half (1/2) thereof shall be added to (and deemed to be) royalties accruing to you by Label hereunder.
In 1976, there was a hope that labels might get a performance royalty for sound recordings. It took nearly 30 years to get a performance royalty in digital performances, and the fight continues for terrestrial radio performances. However, it's interesting how this language from over three decades ago is once again relevant.

Thursday, August 21, 2008

Content Owners Must Consider Fair Use Prior to Issuing Takedown Notices

I haven't posted here in several months but this case warrants mention. Yesterday, the District Court for the Northern District of California issued a ruling in Lenz v. Universal that would require content owners to consider whether a particular use is a fair use before issuing a takedown notice under the Digital Millennium Copyright Act ("DMCA").

The case originates from a home video posted on YouTube that features a baby dancing to the Prince tune, "Let's Go Crazy." Universal sent a takedown to YouTube, which complied and sent notice of the removal to the poster, Stephanie Lenz. Lenz responded by requesting that the video be reposted because it constituted a fair use and therefore did not infringe Universal's copyright. The video was later reposted and remains there today.

Lenz filed suit, alleging misrepresentation pursuant to 17 U.S.C. Section 512(f). Among the requirements for filing a takedown notice, the content owner is required to affirm that it has a "good faith belief that use of the material in the manner complained of is not authorized by the copyright owner, its agent, or the law." It is Lenz's contention that Universal did not have such a good faith belief because it did not consider whether her use was authorized by the law as a fair use.

Universal moved to dismiss the case for failure to state a claim. Universal's position is that fair use is not a matter it must consider before issuing a takedown notice because fair use is merely an excused infringement of copyright rather than an authorized use.

This issue touches on one of the odd paradoxes of copyright law in the U.S. Fair use is almost universally spoken of as a "defense" to copyright infringement, rather than a permitted use. However, as pointed out by Bill Patry (in an earlier post that I cannot currently find), this dichotomy is frequently overstated.

The court looks to the language of the statute, wherein Section 107 provides that "[n]otwithstanding the provisions of sections 106 and 106A, the fair use of a copyrighted work . . . is not an infringement of copyright." Because fair use is not an infringement of copyright, it is not contrary to the law, and if it is not contrary to the law then it necessarily must be permitted. Therefore, one can only conclude that an act which is "not contrary to the law" is one that is "authorized by law." The court continues:
Accordingly, in order for a copyright owner to proceed under the DMCA with “a good faith belief that use of the material in the manner complained of is not authorized by the copyright owner, its agent, or the law,” the owner must evaluate whether the material makes fair use of the copyright. 17 U.S.C. § 512(c)(3)(A)(v). An allegation that a copyright owner acted in bad faith by issuing a takedown notice without proper consideration of the fair use doctrine thus is sufficient to state a misrepresentation claim pursuant to Section 512(f) of the DMCA. Such an interpretation of the DMCA furthers both the purposes of the DMCA itself and copyright law in general. In enacting the DMCA, Congress noted that the “provisions in the bill balance the need for rapid response to potential infringement with the end-users [sic] legitimate interests in not having material removed without recourse.” Sen. Rep. No. 105-190 at 21 (1998).
This is a very interesting holding because it places the fair use analysis on the front-end and seems to entirely eliminate the notion that "fair use" is only a defense to copyright infringement. It seems to make perfect sense and perhaps sheds some clarity on the role fair use will play in our industry in the future.

Of course, at the same time it places a far greater burden on the content owners. Prior to this ruling, content owners were issuing takedown notices for any use that was not licensed by them. Certain fair uses are clear - news-reporting, for instance. However, now the content owners must review all of the personal videos posted and determine whether or not such use is fair. The courts have had a bearish time making this determination on their own and I imagine it will be even more challenging for the content owners to get it right. And, if they fail, they risk being on the hook for a bad faith finding. Then again, it could be that if the content owner can show it made a good faith effort to determine whether the use was fair, but was wrong, then the court could not find that the takedown was issued in bad faith.

It should be remembered that the court is not saying Lenz's use is a fair use, but only that Universal had the burden to evaluate whether or not it was a fair use prior to issuing the notice. Hopefully, the parties do not settle and the case is allowed to proceed on the merits, so that both users and content owners will have a decision to rely on to help all of us figure out what is and is not a fair use in our current media environment.

Thursday, March 27, 2008


Just a quick one here, but Gerd Leonhard, self-proclaimed "media futurist" and shameless self-promoter, has released a new book, Music2.0. I admittedly have not looked too deeply into a lot of Leonhard's positions because so many of them sound foolish and ignorant on their face. From what I gather, his main vision is that recorded music as a commodity is a thing of the past, and he seems to be a huge proponent of using recorded music only as a means to get eyeballs for advertisements.

So I really find it funny that Leonhard, who thinks that copyrighted material should be subject to blanket licenses and distributed rather freely, and should depend on whatever means other than traditional sales to generate revenue, has a book for sale . . . for sale, through eBay. The "buy it now" price? $45!!! Sure, he let's you bid on it, starting at the modest reserve price of $12.99, though that's barely less than a CD at retail.

Why doesn't he just post it on his MySpace page, let people read it there for free, and hope he gets a few ad clicks in the process? If he can beat Billy Bragg over the head for speaking out against Bebo and other social networks' for their use of music, why is he releasing his book in such a traditional manner?

He's obviously a smart guy and I'm sure he has a brilliant answer to this question; I'd just love to know what it is.

OneRepublic Makes Forbes List

Thanks to hypebot for pointing to Forbes' article, The Year's Hottest New Music Stars. As Bruce points out, no one will care about most of these artists in 6 months, though I hope one artists who's not included in that forgettable "most" is #10 on Forbes' list, OneRepublic, which also happens to be a client. ;) It's cool that they are mentioned here because Forbes took so many things into account, including digital track downloads and album sales, ringtones, press mentions, and activity on peer-to-peer networks, though I obviously have some mixed feelings about that last category.

Tuesday, March 25, 2008

Vinyl + Free Downloads = Way to Go

I read this morning on Digital Music News that Elvis Costello will release his upcoming album, Momofuku, on vinyl and digital download only. DMN points out, apparently with some surprise, that a free download code comes with each album.

To anyone who's bought vinyl over the last couple of years, getting a free download of the album is nothing new and, in my opinion, is a brilliant idea. It provides the best of both worlds - highest-possible quality plus portability. I get the vinyl for my home and the free download for my iPod.

I've always been a proponent of highest quality audio, which is why I still loathe the MP3 format, and all "lossy" formats generally. However, if I'm only listening to it in my car or with earbuds then sometimes I'm willing to accept lesser quality. If it's a particularly special album, one that might highlight the imperfections in digital compression, then I'll rip the album to digital on my own, using my own settings and file formats.

The label's strategy for vinyl + download, however, satisfies the wants and needs of 99.99% of the population. As I've written on several other occasions, vinyl is the wise and relevant answer to the music industry's woes - it gives consumers a physical product with better sound quality than any download, and it even comes with artwork, liner notes, and sometimes even lyrics. Best of all, it is valuable and it cannot be duplicated.

CDs succeeded over vinyl not because of sound quality but because of convenience (portability, durability, ability to easily jump to tracks). Virtually all popular digital formats are successful over CDs because of even greater convenience (even more portable, even more durable, even greater flexibility in song selection). However, most MP3s sound considerably worse than CDs and CDs, while nice, still do not sound as good as vinyl.

Vinyl is not nostalgia. Vinyl is simply a better medium for delivering music. The only thing it lacks is convenience, a problem easily solved with free digital downloads.

Since a download is virtually free to distribute (bandwidth notwithstanding), and since a downloaded track provides all the things that vinyl lacks, it makes complete sense to offer downloads together with vinyl. As I pointed out before, cutting CDs out of the distribution picture is all but inevitable because the fidelity is gotten from the record and the convenience from the download; the CD offers nothing over these two formats and is likely to go the way of the 8-track.

Way to go, Elvis Costello.

Wednesday, March 19, 2008

hypebot Commentary on Pre-loaded iPod

Check out this article from Bruce @ hypebot - basically pointing out the negative impact on artists that could result from Apple's plan to preload iPods with music. Bruce also shames the majors for continuing to cede more power to device makers, and self-inducing a continued devaluation in recorded music.

Tuesday, March 18, 2008

Fraud in Trademark Filings: It's Closer Than You Think

John Welch at the TTABlog is a great resource for keeping up with the current state of affairs in trademark law. He recently pointed to a case where a trademark registration was invalidated because the Board found that the registrant had committed a fraud on the office. The fraud was committed when the registrant alleged in a statement of use that all the goods and services identified in a class were in use, when in fact only some of those goods/services were being used.

TTABlog now provides a very well-written article on the current state of affairs in fraud matters at the PTO. The article is by Carrie Webb Olson and is a must-read for all trademark owners and their attorneys.

Friday, March 14, 2008

Will Recording Artist Performance Royalty Open Payola Loophole?

You should check of Bruce Houghton's article from Hypebot on potential payola problems with requiring a performance royalty for recording artists, as well as the original Hear 2.0 interview ("It’s time for Radio to charge labels for airplay – legally") on which the article is based.

As an initial matter, it should be pointed out that the interview was conducted with David Oxenford, a broadcast attorney. My guess is that David spends most of his time working on behalf of radio stations, and one might conclude that his allegiances are with them. I don't mean that to be a jab, just that we as practitioners tend to work with a class of clients and even in our off time will advocate for their position. It just so happens that my clients are artists, and I wholeheartedly admit my bias.

David argues that radio has always served as a form of "free promotion" for labels; if radio has to pay a performance royalty then stations should start charging labels to play their songs.

This is ridiculous on several levels. First, how arrogant is radio to think that it could one day flip the switch and never play a song unless it got paid by the label? Advertising only exists on radio because of the music; so radio thinks it can charge one company a fee for the opportunity to be advertised in connection with another paid advertisement? And does radio really think that a playlist dictated solely by who paid the most will be anywhere near the quality required to maintain listeners? Are late-night informertials captivating for any reason other than their comedic value? It would be impossible for a 100% paid-for playlist to even be consistent, much less entertaining or relevant, meaning listeners will stop tuning in, thus reducing commercial rates, which will in turn reduce revenue.

Second, why would any label be willing (or able) to pay for play when they just got done fighting for the right to receive money from those plays? It applies a pre-royalty mentality to a post-royalty situation. Even if labels were willing to pay (as they have in the past), why would payola regulations suddenly cease to apply? There is no causal connection between a performance royalty and pay-for-play; publishers get a performance royalty but you don't see them lining radio's pockets for spins.

The short answer is, payola would still be illegal. However, it appears as though radio would like to change that (or at least tweak it a little).

David discusses how current payola regulations don't apply a wholesale ban on pay-for-play, only that stations have to disclose the fact that they were compensated for playing the particular song. In his view, this regulation is unique to the radio industry. He illustrates by pointing to grocery store displays for products (the stack of Cokes at the end of the isle), which are paid for but require no special disclosure. He also mentions lunches and favors given to doctors by drug manufacturers. In both of these situations, the "provider" is receiving a benefit and is in turn promoting a product to you (the chips at the end of the isle, or the new blood pressure drug).

In David's view, radio should be treated just like grocery stores and drug companies: They should not be required to disclose the fact that they were paid to play a song. If radio had no disclosure requirements then it would be free to charge all artists to get their spins, thereby reversing the performance royalty while also creating a new revenue stream. The problem with David's analogy, and the wholesale pay-for-play concept in general, is that music and radio are nothing like grocery stores or drug companies.

Nobody is foolish enough to think that the display in the grocery is there by chance, and whether its Coke or Pepsi is of little consequence to the richness of our culture. Music, on the other hand, is art. From our nation's founding we have sought to protect and encourage the arts (for instance, copyright law was intended to protect creative expressions, not for financial reasons, but to give creators an incentive to create). There is no similar sense of national interest in which soda pop we drink.

Another key distinction is that your local Publix is a private business operating in a private building on private land. Radio, however, is made up of mostly private businesses operating on public airwaves. Not only does the government have an interest in promoting the arts, it has an interest in regulating the use of the airwaves, which are supposed to be used for the public good, namely, providing news, information and, yes, music, to the public. Payola runs contrary to our collective interests in both the arts and the airwaves because it prevents any creative decision-making or musical knowledge from going into the music selection, and only music that is paid for gets played, thus turning the entire broadcast into one long series of commercials and eliminating any modicum of public service. A music director picking music he/she thinks is good = public good. Corporate head selects music for fat check = public bad.

With respect to David's analogy to drug companies taking doctors out to lunch, while I'm no expert, several of my friends are drug reps; if David thinks radio has it bad, he should try looking into pharmaceutical sales. True, doctors don't have to disclose to patients that a drug rep took them out to lunch. However, this is only because the government so strictly regulates what and how much doctors may receive in the form of freebies. What would David say if the fed told Clear Channel that its station manager couldn't be on the guest list for concerts anymore?

Just how untenability of radio's opposition to a master performance royalty is evident in the nature of their arguments. For years they have relied on statements like, "Radio is free promotion - we help the artist sell records;" "This is how it's always been," and "Major labels are just greedy." While all are true, radio has never been able to dismiss the far stronger responses: "It may be free promotion, but you're still making billions on it so it must be worth something," "We've only dealt with it because your lobbying group has been stronger than ours," and "At least with a performance royalty artists can bypass the labels and actually get paid."

David Oxenford's interview presents radio's new tactic: If you can't win with logic, try scaring the crap out of them. Tell artists that if radio has to pay a royalty then radio will make artists pay to get heard. Funny that they should try this now, when consumers have alternatives to terrestrial radio. Oh yeah, and those alternatives already pay a master performance royalty, and don't charge the artists to get played!

You know, sometimes I think terrestrial radio wants to become extent.

Tuesday, March 11, 2008

More on Spitzer Political Hit Job

The more I read, the more convinced I am that this was a blatant hit job, directed solely and precisely at Spitzer. Two observations:

1. The investigation is reported by BBC to have commenced against Spitzer in 2007 when banks notified the IRS of some suspicious transactions involving Spitzer's account:
The investigation began last year when banks reported irregular transfers to the Internal Revenue Service, which traced them back to Mr Spitzer and discovered they were made to a high-priced prostitution ring, an unnamed law enforcement official told the Associated Press (AP) news agency.
2. According to the NYT, Spitzer's name was allegedly discovered in court papers filed in the criminal investigation of four individuals allegedly involved with the prostitution ring:
Mr. Spitzer’s involvement with the prostitution ring came to light in court papers filed last week, the officials said, as federal prosecutors charged four people with operating the service, Emperor’s Club V.I.P. Mr. Spitzer was caught on a federal wiretap discussing payments and arranging to meet a prostitute in a Washington hotel room last month. The affidavit, which did not identify Mr. Spitzer by name, indicated that he had used the prostitution service before, although it was not clear how often.
So what was the impetus for the investigation? Did it start by the FBI's investigation into an ongoing prostitution ring, and Spitzer just happened to be swept up in it? Or did the banks' contact to the IRS cause it to begin investigating Spitzer specifically, which in turn led to the investigation of the prostitution ring?

If it began as an investigation of Spitzer, several questions must be answered. First, why is it that any banking transaction was suspect enough to warrant notifying the IRS? Surely $4,000 expenditures every now and then are not so extraordinary that the federal government must get involved. What about the transactions was suspect? Did they think that Spitzer was evading taxes? Surely not, since he's a public official and has significant disclosure requirements above and beyond the average taxpayer.

If it all began as a result of an investigation of the prostitution ring, how and when did the "suspicious" banking transactions become relevant? Did the investigators have some circumstantial evidence that Spitzer was patronizing prostitutes but needed to dig into his financial records to see if any payments confirmed those accounts? If so, wouldn't it be a bit of a twisting of facts to say that the bank brought them to the attention of the IRS, and not the other way around?

That Spitzer made so many powerful enemies cannot be disregarded when looking into this matter. The reality is that an obscene number of lawmakers make use of prostitutes' services on a regular basis, as do corporate heads - if this were not the case then there would be no such thing as $4,000 hookers, much less so-called "high class prostitution rings." That Spitzer is the lone public figure to be fingered in this investigation should speak volumes. The sketchy facts surrounding the origins of this investigation are even more telling.

Again, no defense for his actions, if the allegations are true. However, it is a private misdeed. What is more important: (1) In judging Spitzer's character, how has he conducted himself in office and what he has done to serve the public in his public capacity?; and (2) In judging the events at hand, how was the investigation brought about, how was it conducted, and what are the end results of the investigation in its entirety? The investigation and the results are a public concern because it was conducted 100% with public funds and in the public interest. Spitzer is of interest only because he is a public official and our only interest in him is his conduct in that position.

I hope Spitzer is as wise in confronting this issue as he's been in all of the other tasks before him; I hope he asks the hard questions and finds out how this came about, and defends himself - not defends his actions, but brings light to the unfathomable breach of public trust that was, no doubt, the impetus behind the investigation.

Let's face it - if Spitzer goes down, if he resigns and never again holds public office, we all lose. As common citizens, we will have lost an invaluable insider, one who was willing to stand up to the wealthy and powerful and fight for what was right. If Spitzer resigns, the bad guys will win yet again.

Wagging the Dog

Yesterday the New York Times broke the story about NY Governor Eliot Spitzer's alleged involvement with a prostitute in a Washington hotel room. From what we know, this information resulted from a federal wire tap. Spitzer, going by the name "Client 9," was recorded in a telephone call in which he allegedly ordered the girl in mid-February.

Am I the only one that finds it curious that the FBI and IRS, under the authority of a 98-year old law, are expending untold amounts of federal taxpayer money to investigate a high-class prostitution ring? Why is it that said prostitution ring just happened to count Eliot Spitzer among its clients, and why is Spitzer the first (and perhaps only?) name announced in connection with it? Given that this prostitution ring operated out of New York and apparently serviced D.C., surely there are business titans and other politicos involved. Aren't their names worthy of disclosure?

It seems rather clear to me - Spitzer pissed off a lot of wealthy, powerful people and those people wanted to make sure he paid. His crackdown on Wall Street was maverick; his pursuit of payola and the major record labels/radio stations involved was damn near suicidal. However, he did both because they were the right things to do.

I have admired Spitzer from afar for both of these matters; he seemed willing to do what no other member of the executive or legislative branch had the stomach for. He conducted himself as though he was beholden to no one other than the people. He did more good for this country on behalf of the state of New York than most people will ever know.

And now media outlets throughout the country are calling for his head, as are, of course, the Republicans. Is it any wonder that the news media so vehemently calling for his resignation also felt, directly or indirectly, the sting of his investigations in his previous life in the attorney general's office?

Something about this whole mess stinks - it's reminiscent of the Tennessee Waltz investigation in my home state a couple of years ago, where a number of Democratic state legislators were wrapped up in a bribery sting. Details are somewhat sketchy; a fake company was set up and law makers were induced into taking bribes to vote on legislation benefiting the fake company. I never learned exactly why the investigation was launched, or by whom. However, what I do know is that it was conducted by the FBI and some very prominent Democrats fell from grace as a result.

I am by no means excusing Spitzer's actions. However, I'm also realistic enough to know that politicians will be politicians. Absent being a murderer, rapist, drunk driver, Ken Lay, or other serious criminal whose actions impact the lives of others, I don't really give a damn. It sounds cliche, but what Spitzer does on his own time is his own business. While I question the circumstances and methods of Tennessee Waltz, bribery is a violation of the official's office and directly impacts the people. Having sex with a prostitute, however, is 100% personal and, in the grand scheme of things, a modest transgression; the consequences of its disclosure will do unfathomable harm to him personally and to his family. He will pay a hefty price where a price should be paid - at home.

However, how does this impact him professionally? Why is it that we're so quick to toss Spitzer out on his ear, and yet the very real criminal happenings at the White House and in other areas of the executive branch aren't even mentioned in the same breath as resignation?

Consider this US News blog posting, which identifies all the stories regarding Spitzer, most of which point to his unfitness and inability to continue to serve, and then the next story is entitled, "Democrats Sue For Bush Aides' Testimony." This article is about the Democrats trying to get at the heart of some U.S. Attorney firings. Not coincidentally, the judge set to hear the case is a Bush appointee and also heard the case brought in an attempt to reveal documents pertaining to Cheney's secret energy planning meetings (ruled in favor of the VP). Oh yeah, and this same judge is also a member of the FISA court. All three of these topics involve very, very serious breaches of the public trust, violations of law that go to the core of this country's existence, and the only head to role has been Alberto Gonzalez, and even it had to be hacked and sawed and twisted for months before it came loose.

[Speaking of FISA, I wonder if the warrant the FBI obtained to wiretap Spitzer's phone was issued as a part of the FISA process; if the FBI engaged in its dragnet form of listening in, found the goods, then asked FISA to permit its investigation going forward.]

Spitzer, a politician who actually did some measurable good in his time, will likely get swept to the side by the drumbeat of the old guard, all under the guise of restoring honor and integrity to public office; in reality, all we will have done is extinguished one of the brightest and most ardent public advocates that American politics has seen in 40 years. Like MLK, JFK and his baby brother, Bobby, we'll never know what great things this country could have accomplished.

Monday, March 10, 2008

How Do Artists Get Paid in Unconventional Delivery Services?

Bruce Houghton asks the question today: How much of the money that labels are making on deals like imeem, Spiral Frog and YouTube will ever make it to the artists? For instance:
Each service has made their own unique deals with labels and publishers for compensation. Some pay a fee per play or download. Others share a portion of ad revenue received; and rumors have a new MySpace music service trying to compensate labels with stock options.

But how much of that money will find its way to the artist and how many of these new deals conform with existing label and publishing contracts or the statutory rate legally due songwriters? I don't know of a single artist contract that mentions stock options or ad revenue as acceptable compensation.

More concerning than what the artist deals don't say is what the deals do say. Every single record deal I've ever seen has a convenient little clause, providing that regardless of how the rest of the contract could be interpreted, if the label earns money that is not specifically attributable to the artist's masters, the artist has no right to that income. Therefore, if the label licenses it's entire catalogue, or if the label agrees to get paid a flat fee or royalty payment for any and all use of the recordings it controls, then the individual artists get nothing.

This is usually one seemingly innocuous sentence in what are often 40-page contracts, though the impact could be millions of dollars. To the extent that ad-supported and other unconventional distribution methods become more prevalent, labels will profit and the artists will get nothing.

This is not a case of a new distribution method not accounted for in the old-school record deals - they have always been fairly good about describing future types of sales that aren't currently known. For instance, downloads were easy and, in fact, under a lot of older deals the artists get a huge benefit - a service offering downloads has only licensed that right from the label, and artists typically get paid 50% on a license, so some are getting nice checks from iTunes sales. This loophole has been closed and almost every label now defines downloads as a traditional sale and thus, payable at the standard record royalty. Nonetheless, a sale is a sale, and artists are getting paid.

However, there is no similar provision for ad-supported revenue. Sure, they might (and should) be considered licenses and, thus, compensable pursuant to the general license provision in the record deal. The problem is the meddling "specifically attributable" language - unless imeem provides a detailed accounting of every recording that it transmits, the artists are out of luck. Moreover, depending on the language of the record deal, even if the labels get a detailed accounting of uses, the artists may still not get paid because the label gets paid on the whole. If the dollars aren't tied to the transmission, the artist may get nothing.

Fixing this is up to the artist's attorney; this is a provision that I've focused on for a couple of years, with varying degrees of success. However, as ad-supported services become more prevalent, artists must be all the more persistent in fighting for their right to be paid on these uses.

Friday, March 07, 2008

Public Attitudes on File Sharing

Jon Healey wrote a couple days ago on a conversation he had with a professor-friend of his, who reported some findings of an informal survey of his music business students:
[T]his year's respondents said they download music regularly through file-sharing networks and other unauthorized sources, while buying music from iTunes intermittently (64% said they did so 1-4 times per month, with 5% saying more than 5 times). They were also asked to rate on a scale of 1 to 7 how nervous they were about being punished for illegal downloading, with 1 being "not concerned" and 7 being "extremely concerned." Two-thirds answered with a 1 (43%) or a 2 (24%). Only 4% put down a 5 or 6, and none went all the way to 7.
Yesterday, I was speaking with a friend of mine who is a very successful producer. We were talking about the status of the industry - the wrongheadedness of the major labels and publishers, the lack of a *real* voice for songwriters and recording artists, and what profound and irreversible damage that can be caused by seemingly well-intentioned kids like these students.

This producer and I unfortunately had come to the same conclusion without previously knowing it. If filesharing continues to go unchecked then one of two things will happen:

(1) Artists will continue to record the music that they want but will no longer be able to do it professionally, because it will no longer be economically viable to record an album (no matter how good digital technology may become, a basement tape will always sound like a basement tape).

(2) Artists will have to get their recording income from a private source, meaning that they will continue to record music, but it'll be for McDonald's, Exxon, Coca-Cola, Wal-Mart, or whatever other corporation needs a little ditty to go with its latest feel-good commercial. It was bad enough with major labels recording mediocre songs because they'd sell a lot of records. Imagine how bad it'd be if the bulk of recorded music were recorded to sell a product?

File-sharing and free media proponents might think this is crazy but I guaran-damn-tee you its so real its scary. We're already heading there - the 360 deals are just a precursor, where the creative recording process is getting mixed up with merchandising and the like. Artists are already relying more and more on alternative income streams (always did, really, just now the labels are suckling on the same tit). Recording budgets are going down and who's to say that, once labels have a solid 360 deal, they stop tying the term to album cycles and start focusing on terms of years, meaning the artist could be tied to a deal but no longer releasing albums?

Pointing to public consumption patterns, especially those of students, as an indication of the way of the future, or of what the market must have, or of what is right or of what is inevitable, can be characterized as the tail wagging the dog. It is also extremely reminiscent of the cocaine craze of the '70s. Everybody knew it was illegal; everybody knew it was a drug. They got a guilty pleasure out of it; it made them feel good; they thought it was harmless. They saw no reason why they shouldn't be able to do it. And there were a LOT of people doing it, rather openly, too.

This went on for several years before it became clear that cocaine was not harmless. It cost a lot of people their lives. For many of those who survived, it robbed them of their families, their careers, and/or their life savings. What started out as a helluva lot of fun and totally socially acceptable turned out to be devastating.

We're falling into the same trap with music, albeit on a different level and with different injuries. The act is filesharing music - just like bumping a line every now and then, it's really no big deal. However, the more music a person shares does not empty his pocket, it empties that of the artist. The long-term impact is that those who don't pay for music feel that they are entitled to get music for free. The more people who engage in this activity, the fewer there are to pay for music.

Rather than the widespread personal destruction caused by cocaine, the destruction from filesharing is social and impacts everyone. If left unchecked, filehsaring will destroy the recorded music industry and leave us with the options identified above. By that time, it will be too late.

This is also not unlike our addiction to oil and other natural resources. We use and use and use without concern for the consequences. People willingly blind themselves to the truth because it is inconvenient, because they like the way things are and don't want to change them.

Just because everybody is doing it doesn't make it right. I doubt anyone would honestly say that we should throw open the doors to all of our natural resources and exploit them until they're gone . . . while it would be convenient for all of us today, it's not right. We have a duty to protect our resources, and have a duty to come up with ways to produce cleaner, renewable energy.

I don't know the solution to the music industry woes. However, I know that the "if you can't beat 'em, join 'em" mentality is downright stupid. I also think that anyone who advocates for free recorded music is foolish and better damn-well have a brilliant idea for what we should do the day after. The problem is that so many of these people are spectators, yelling out from the sidelines with instructions on how to do things; some have risen to the level of commentators. However, none of these people must take responsibility for what happens if people follow their suggestions and things go tragically wrong. We'll all be royally and irreversibly screwed while the talking heads will have moved on to the next new thing, leaving artists holding the bag.

Saturday, March 01, 2008

musicFIRST Press Release

In its entirety:
Three Days, Three Performance Right Questions


February 25, 2008

CONTACT: Marty Machowsky



WASHINGTON, D.C., February 25, 2008 – The musicFIRST (Fairness in Radio Starting Today) Coalition today released three questions that members of Congress should consider asking the National Association of Broadcasters (NAB) and corporate radio representatives during the industry’s three-day lobbyfest in Washington this week. Big radio’s number one priority is to defeat legislation to create a fair performance right on radio for recording artists, musicians and record labels.

“It’s time for the NAB and corporate radio to answer the tough questions about their refusal to pay artists and musicians,” said Doyle Bartlett, executive director of the musicFIRST Coalition. “AM and FM music radio stations earn $16 billion each year in advertising revenue. But not a single penny goes to the artists and musicians whose creativity, whose heart, whose soul and whose passion brings to life the music that listeners tune in to hear.”

“There are many questions that the NAB and corporate radio lobbyists can not possibly answer with a clear conscious,” Bartlett said. “Here are just three:”

1. How can you justify taking someone’s intellectual property and making $16 billion in annual advertising revenue off that property without compensating the creators and owners of the property? This runs against all basic notions of fairness and respect. You might expect this is places like Iran, North Korea and China where there also is no performance right on radio, but not in the United States.

2. Why do you deserve a competitive advantage in the music marketplace? Artists and musicians are paid when their music is broadcast on satellite radio, Internet radio and digital music services delivered through satellite and cable television. You pay them when you stream your broadcast signal online, or in the future, through Internet streaming on mobile phones. And artists and musicians are compensated in every other country that is a member of the Organisation of Economic Co-Operation and Development (OECD) – countries like the United Kingdom, Canada, Japan, France, Spain, Belgium, Austria, Germany and Greece.

3. Which of your leaders is right: David Rehr, president of NAB, or W. Russell Withers, head of the Withers Broadcasting Group and chairman of the NAB Radio Board? Mr. Rehr calls paying artists for their work product a “performance tax.” Really, the loophole in copyright law he is trying to salvage is merely an elaborate payment avoidance scheme. On the other hand, when Mr. Withers was questioned before the Senate Commerce Committee during a hearing last year, he said, “I disagree with ‘performance tax.’ It’s a performance fee.” What is wrong with paying a fee for product that makes you money?

For decades AM and FM broadcasters have enjoyed an exemption from copyright law. Senators Patrick Leahy (D-VT) and Orrin Hatch (R-UT) and Representatives Howard Berman (D-CA) and Darrell Issa (R-CA) introduced the Performance Rights Act of 2007 (S. 2500 and H.R. 4789 ). The bills will close the loophole in copyright law and ensure that no radio platform is given a competitive edge over another and that all must pay a fair performance royalty to artists.

Creation of a fair performance right would compensate the performers, background singers, studio musicians and copyright holders for their talent and hard work when their recordings are broadcast on AM and FM radio.

NAB is hosting its annual State Leadership Conference in Washington, D.C. The conference runs three days, Monday, February 25th through Wednesday, February 27th. According to the NAB web site, the conference is “an annual event where broadcasters hear from prominent federal policymakers and meet with legislators to discuss issues that affect your business. The conference provides a unique platform to impact decisions made daily in the halls of Congress that can shape the future of the broadcast business for 2008 and beyond.”


People who love music understand that creativity, talent and hard work are required to bring it to life. The goal of the musicFIRST (Fairness in Radio Starting Today) Coalition is to ensure that aspiring performers, local musicians and well-known artists are compensated for their music when it is played both today and in the future. Of all the ways we listen to music, corporate radio is the only one that receives special treatment. Big radio has a free pass to play music – refusing to pay even a fraction of a penny to the performers that brought it to life. The musicFIRST (Fairness in Radio Starting Today) Coalition is committed to making sure everyone, from up-and-coming artists to our favorites from years-ago, is guaranteed Fair Pay for Air Play. For more information on the musicFIRST (Fairness in Radio Starting Today) Coalition please visit www.musicFIRSTcoalition.org.

Supporting organizations include: American Association of Independent Music (A2IM), American Federation of Musicians (AFM), American Federation of Television and Radio Artists (AFTRA), Christian Music Trade Association (CMTA), Music Managers Forum - USA (MMF- USA), The Latin Recording Academy, The Recording Academy, The Rhythm & Blues Foundation, Inc, Recording Artists’ Coalition (RAC), Recording Industry Association of America (RIAA), Society of Singers, SoundExchange and Vocal Group Hall of Fame.

Thursday, February 28, 2008

NAB Still Trying to Deceive

Unbelievable - Radio Ink reported yesterday on the National Association of Broadcaster's (NAB) new ad that is scheduled to run in several Capitol Hill publications. According to the article, the ad includes:
Free local radio provides valuable exposure and promotion to record labels and artists simply by playing their songs ... for free. But what are the artists getting from their record labels? Not much, according to a recent lawsuit filed by more than a dozen artists against the world's largest label, Universal Music.
Talking about misdirection bordering on negligent manipulation. Puffery, such as the allegations that the "performance tax" will put some radio stations out of business, is to be expected from an activist group. However, for the love of all things, what in the world does an artist's record royalty have to do with a performance royalty?! If anything, this is an argument in support of performance royalties, i.e., we can't trust labels to properly account to their artists for record sales, so recording artists should get paid a performance royalty from third-party organizations just like their songwriting counterparts (and like recording artists themselves get from online radio).

The NAB illustrates the lunacy of their position every time they talk about it. They, the representatives of a highly consolidated industry with a reprehensible record, are trying to play a sympathy card. They portray radio conglomerates as a social good because they don't charge the public to listen to their stations, but NAB fails to mention the billions of dollars made off of advertisements. They also fail to mention how insignificant a sound recording royalty would likely be to most operators' bottom lines.

I hope Congress doesn't let Clear Channel, Cumulus and their cohorts convince them that terrestrial radio (still) deserves special consideration; if the arguments that are gaining traction in Washington are as ridiculous as those in NAB's ad, the artists are going to be in serious trouble.

Tuesday, February 19, 2008

Universal Sued for Failure to Properly Account to Artists

AP says Universal is getting hit with a $6.07 million lawsuit for failure to properly account to a host of artists. According to the article, plaintiffs include Patti Page, and the estates of Count Basie, Sarah Vaughan, Woody Herman, Les Brown, Benny Goodman and the Mills Brothers.

Could It Be Comcast?

A couple of days ago, I wrote about the major labels' desire to employ internet service providers as their own private police force. For its part, Comcast no longer denies its throttling of internet traffic of suspected file sharers, and has come out to say that it has a duty to help cut off the flow of file sharing (though its justification is that file-sharing hogs the pipes and reduces transfer speeds for other customers).

This was in the back of my mind when I went to PirateBay to look for Windows Media Center (I promise, I only wanted to test it to see if it was any better than Nero, which I already have, for use in a home theater PC - damn, I'm a hypocrite). However, I noticed that it took a painfully long time for the main page to load. Once I refreshed, it came up pretty quickly. I then executed a search, and it hung again for about a minute. After a refresh, it seemed to load fine. These and several other problems got me to thinking - was Comcast trying to block all traffic with the domain, thepiratebay.org? Whatever was going on, it was enough to make me give up and go to bed. I'm sticking with Nero.

I've certainly made no secret of my disdain for companies who profit by giving away the creative works of others and while my sympathies are stronger with the music industry, I feel some for the software community as well (though programmers can always get a day job working their craft, while an artist's day job generally involves uttering the words, "Smoking or non-smoking?"). However, I totally disagree with any enforcement action against average citizens, which is precisely what Comcast is doing.

It would truly be freakish if an ISP could act as an all-seeing, all-knowing gatekeeper, preventing average joes from walking into that burlesque house of trading. We've been willing to lose some anonymity by taking our lives online but I'm not so sure that anyone is ready to be told where they can and cannot go, especially by a private corporation.

For some reason, it would "feel" better if lawmakers were to devise a way to make the torrent trackers go away through some legislative remedy - if officials shut a file sharer down, a lot of people would be upset, but eventually they'd get over it and either abandon the practice or hit the new spot. However, to be denied access to something just because an ISP says you can't go there leaves one feeling a bit screwed.

Friday, February 15, 2008

Another Morning Show Profanity "Slip"

Jane Fonda used the "C-word," as reported by Broadcasting & Cable, when describing her participation in The Vagina Monologues on NBC's Today show. There are some rumblings as to whether the FCC will take enforcement action against NBC.

B&C quoted Tim Winter, a former NBC employee and current president of the Parents Television Council (otherwise affectionately known as the Puritanical Tyrants Committee), as saying: "If an NBC employee used the ‘C-word’ to another employee, that employee would be suspended or even fired . . . While NBC’s apology is helpful, it is not enough -- millions of families were indeed offended."

So, according to Mr. Winter, an NBC employee's use of the C-word would get that employee fired? Really? Maybe, if they used it to describe a superior to his or her face, it could result in being terminated. However, when used in this context, I would imagine that several non-sanctioned dirty words might also lead to one's unemployment. For instance, if used with equal fervor, one might find herself looking for a new job if she told her boss, "You are such a butt muncher!" or, "You tampon!" or, "You Puritanical Tyrant!"

Alternatively, I could also see a dismissal for C-word usage if uttered in a sexually discriminating or harassing way but, in those same contexts, the more medically acceptable "vagina" would probably lead to a similar result.

Absent such use of the C-word, I highly doubt that any NBC employee would be fired for their language alone. Moreover, I doubt that "millions of families" were offended by Fonda's slip of tongue. Children whom are watching the show likely have no idea what "vagina" means, much less the socially unacceptable nicknames for the female anatomy. I also doubt that any alert parent would allow their children to continue watching a show where The Vagina Monologues were the topic of discussion (What were these conservative parents doing watching an interview with the wholly unpatriotic Jane Fonda, anyway? You know, the ones who still think she fights for the North Vietnamese?). Even if they were offended, are there not far more disturbing topics being discussed on a morning news show, like school shootings or wars or warrantless wire taps?

I know it's the PTA's mission to root out all instances of "profanity" on TV and bring the evil-speakers to justice, though I can't help but think that they could spend their time on a more worthwhile cause.

Wednesday, February 13, 2008

Using ISPs to Control File Sharing

Digital Music News reports today that the major labels might be gaining some traction in their bid to require internet service providers to play a role in stemming file sharing:
According to information surfacing Tuesday, British legislators are now proposing measures that would force ISPs to monitor their traffic, and restrict access for repeat offenders. An early-stage consultation paper outlines a three-strikes policy, though details are still being developed.
Once again, the majors and their legislative counterparts are taking the wrong-headed approach. Rather than focusing on the source, and perhaps finding new and creative ways to stop major sources of file sharing, they are going after the users employing the services. True, if some joe in Thailand is making tens of thousands of songs readily available to millions of people, they might want to shut that "user" down. However, it's really the commercial enterprises that enable the joe who should be pursued.

The problem with using ISPs as deputies in the file sharing battle is that they will necessarily monitor the traffic of all users to find the bad guys. This is akin to the U.S. government tapping AT&T to monitor all telephone calls and internet traffic to track terrorists - making everyone a suspect for the sake of catching a handful of evil-doers.

This approach also will presumably require some investigation into the files actually being transferred, since countless people will be moving large files for legitimate purposes. In my legal practice, for instance, we routinely accept and transmit legitimate copies of music files, trademark specimens, copyright deposit material, etc., and all of this could be viewed as suspect without context (even if they new the file types, we might still draw a red flag).

For a file sharing enterprise to be successful, people must know about it. If people know about it, law enforcement should not have a problem investigating it and gathering evidence specific to that enterprise sufficient to bring criminal charges in whatever jurisdiction necessary. Enlisting the help of ISPs is a simpleton approach and fraught with far more problems than solutions.

Tuesday, February 12, 2008

Radio Conglomerate Relief Act Gains Momentum

Radio Ink reports that there are now 148 House members signed on to the Local Radio Freedom Act, aka the Radio Conglomerate Relief Act. The purpose of this Act is to prevent imposition of a performance royalty for sound recordings, which is a recognized right throughout the industrialized world. Congress saw fit to impose a sound recording performance royalty on internet radio, yet apparently are set to refuse the same requirement of terrestrial radio. Are the two methods of delivery so different? They are in one crucial respect: Terrestrial radio enjoys one of the more powerful lobbies this nation has ever seen.

Among some of the preambles to the Act:

  • The U.S. radio and record industries "are the envy of the world, due to the symbioitic relationship that has existed among these industries for decades." Actually, most nations look at our radio industry as archaic and unfair for the very issue under consideration - no performance royalty for recording artists.
  • For 80 years, Congress has rejected calls to impose a "performance fee on local radio stations for simply playing music on the radio and upsetting the mutually beneficial relationship between local radio and the recording industry." Use of language, as I pointed out in an earlier post about this same topic, is critical. Notice that a royalty is described as a fee, two references to "local" radio when in reality we're concerned with major media companies, what is described as a mutually beneficial relationship when really it is radio who benefits by getting to play the music for free, which creates an audience, which in turn allows them to generate profits from advertising.
  • "Local radio stations provide free publicity and promotion to the recording industry and performers of music." True, though this also ignores the fact that the revenues generated by "local" radio stations like Clear Channel enabled it to build the single largest concert promotion company, which in turn used the power of its radio holdings to force artists into unfavorable tour deals.
  • "Congress found that 'the sale of many sound recordings and the careers of many performers benefited considerably from airplay and other promotional activities provided by both noncommercial and advertiser-supported, free over-the-air broadcasting.'" Sure it did, but what does this have to do with whether radio should pay a fee for its use of sound recordings? If recording artists benefit from radio, so have songwriters, and since the dawn of radio Congress saw fit to require radio to pay a royalty to them - why should recording artists be any different?
  • "Local radio broadcasters provide tens of thousands of hours of essential local news and weather information during times of national emergencies and natural disasters, such as September 11, and Hurricanes Katrina and Rita, as well as public affairs programming . . . all of which are jeopardized if local radio stations are forced to divert revenues to pay for a new performance fee." This is my favorite, considering the major proponents of this bill are those who consolidated the industry, and as a result of their consolidation, ensured that most of the Gulf Coast was left in the terrestrial dark after the storm, leaving low-powered stations as the only source of information for tens of thousands of residents (the same low-powered stations that the conglomerates have fought very hard to push off of the dial). These same companies have also been criticized repeatedly for their failure and inability to address local emergencies as a result of the consolidation.
  • "Many thousands of local radio stations will suffer severe economic hardship if any new performance fee is imposed, as will many other small businesses that play music including bars, restaurants, retail establishments." Again with the language, painting a picture of poor mom & pop radio stations having to shut down because of this fee, and of all the other businesses that will be impacted. This is no doubt drawing an analogy to songwriter performance royalties, which are required of all businesses performing music. However, the rules could always be written to only pertain to commercial radio and not an across-the-board performance royalty. There could also be a small, reasonable fee for secondary users like bars and restaurants, and an earnings floor so that small radio isn't unduly burdened. These seem to be far more reasonable solutions than to allow the conglomerates to ride the coattails of the small business struggle.
  • "The hardship that would result from a new performance fee would hurt American businesses, and ultimately the American consumers who rely on local radio for news, weather, and entertainment; and such a performance fee is not justified when the current system has produced the most prolific and innovative broadcasting, music, and sound recording industries in the world." The first part of this is completely bogus, as the conglomerates have already inflicted the damage they complain of through consolidation, i.e., local business have been shuttered and the American public largely has been robbed of the benefits of local radio. The second part is perhaps the most accurate and honest statement in this whole Act: Don't rock the boat.
The meat and potatoes of this Act is the following:

Resolved by the House of Representatives (the Senate concurring, That 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 can't be clear enough - a performance royalty on sound recordings is one thing that would benefit the artist just as much (if not more) than the labels or any other non-creative industry participant. Songwriters earn performance royalties and are paid these royalties from third-party performing right organizations. These royalties are almost never subject to recoupment by publishers. Recording artists would similarly be paid performing royalties from a third party, likely SoundExchange (yes, it's an arm of the RIAA but still pays directly to artists), and labels wouldn't be able to recoup advances and recording costs from these royalties, meaning the money goes directly into the pockets of artists.

While I'm no fan of finding new ways to feed the major labels' hunger for profit (even when they are running in the red), it is far more desirable to see them earn more revenue from recorded music as opposed to striking the new "360" deals that are becoming more prevalent. Rather than letting the majors dip even further into the artist's pocket, why not let radio start paying its fair share? In the end, it's always the artist who gets screwed, so why not encourage Congress to do what it hasn't done in our industry . . . ever. Stand up for the little guy. Stop protecting major corporations at the expense of those who are responsible for creating the music from which everyone but the creators seem to profit.

Consider this an informal call to arms - write your lawmakers and tell them to oppose the Radio Conglomerate Relief Act.

Friday, February 08, 2008

Does Providing Access to One's Own Computer Files Raise Self-Incrimination Concerns?

USA Today reports on a case concerning computer passwords and an individual's Fifth Amendment right against self-incrimination. Sebastien Boucher was crossing the U.S.-Canada border when he was stopped and searched by agents. He consented to the search and initially gave access to his computer.

Among the files reviewed by the agents was child pornography. Mr. Boucher was arrested and, following his arrest, officers attempted to access an area of the hard drive that was password protected. Mr. Boucher refused to provide the password and is defending his position by relying on the Fifth Amendment.

The USA Today article points to a couple previous cases that are somewhat related. In a federal court case concerning the search of a man's laptop in the LA airport, the federal judge suppressed the evidence gathered, ruling that electronic storage devices are extensions of the human memory and should not be opened to inspection without cause.

In Mr. Boucher's case, federal Magistrate Jerome Niedermeier followed a similar logic. According to a quote in the USA, Niedermeier held that, "Producing the password, as if it were a key to a locked container, forces Boucher to produce the contents of his laptop. . . . The password is not a physical thing. If Boucher knows the password, it only exists in his mind."

I'm no champion of law enforcement's rights of search and seizure and am generally opposed to several currently permissible searches (e.g., abuses of probable cause in traffic stop situations, overly broad searches incident to arrest, etc). I also strongly oppose the use of certain invasive search techniques for investigative purposes, such as key-stroke recorders and data communication monitoring.

However, I fail to see the correlation between the right against self-incrimination and providing access to a password. The court makes too much of the intellectual nature of a password - that the password only exists in Boucher's mind is far less important than what the password is. I also fail to see the logic behind a sweeping statement that electronic storage is an extension of the human memory. Both of these positions warrant certain judicial consideration, but not in Boucher's case.

First, a password is nothing more than a key. It is itself not incriminating unless the mere knowledge of that password could implicate someone in a crime. For instance, knowing the password to a secure server that was used for an unlawful purpose could in itself be evidence of the crime. Requiring this admission should be scrutinized under the Fifth Amendment.

The mere knowledge of the password in Boucher's case, however, has nothing to do with the crime for which he is charged. He might as well have the key to an indestructible bank safe that is believed to contain a murder weapon. His lawful possession of the key is immaterial, as it is the contents of the safe that are sought. We would have no problem compelling him to produce that key. Why should its intangible counterpart be any different?

The status of electronic storage as an extension of the human memory could be a closer call but is nonetheless inapplicable to Boucher. It could be argued that electronic documents authored by the defendant are essentially his own thoughts and recollections and can be self-incriminating. However, they are also no different than private notes or papers written by the defendant in pen and ink. If any such handwritten materials could be produced at a trial, their digital equivalent should have no greater (nor any less) protection.

In Boucher's case, the question is not one of personally authored material, or at least we should hope not. What the authorities seek is evidence of the crime itself, not his mental state. Possession of child pornography is not a crime of intent so there is no value (other than perhaps to determine length of sentence) to uncovering data concerning whether he intentionally obtained the child pornography. Along the same line, if in fact the authorities believe they might find evidence of Boucher being the author of child pornography, the discovery of those files would be no more self-incriminating since the tapes themselves are the evidence of the crime.

Rather than advocate for a wholesale ban on requiring disclosure of passwords, I hope privacy advocates will focus their attention on more acute questions of self-incrimination by drawing fair and reasonable lines between handing over the keys to a locked location and a disclosure that in itself would constitute (or be evidence of) a crime. I also hope that whatever resources are saved in narrowing their focus will be invested in fighting far more intrusive electronic investigative techniques, which pose a greater threat to a host of Constitutional rights.

Wednesday, February 06, 2008

Mechanical Licenses

Last week, William Patry wrote on his participation in the royalty rate setting hearings going on in DC. Today, articles from Digital Music News and Billboard discuss the same issue.

The National Music Publishers Association ("NMPA") continues to argue that, not only should users pay a performance royalty for the stream, they should also pay a mechanical license fee for the reproduction. Most people would call this "double dipping."

Admittedly, these questions arise because a liberal amount of duct tape has been applied to an antiquated copyright system that hardly made sense before the new technologies emerged. Rather than applying more bogus fixes, we should instead take a step back and look at the fundamentals of the desired result. Namely, how can we ensure writers and publishers are fairly compensated for uses of their works without unduly burdening the user?

In order to do this, we have to look at how the music is provided, how the provider is being compensated, and how the user consumes the music. There are a couple of clear cases - pure downloads (DRM'ed or unencrypted) are virtually identical to CDs and records. A copy is made that can be performed at will by the user, and the user is paying for that particular copy.

Non-interactive streams are also identical to their predecessor in that when the music is performed is dictated by the provider, not the user. Whether the provider earns income from advertisers or subscription is, for all practical purposes, immaterial because that income is not directly attributable to any single performance or single song. The whole of their income can be fairly attributed to the whole of the music performed. Therefore, it is impractical to levy a license fee strictly on a per-use basis.

The NMPA has been selective in how it would like to see certain uses be treated based on what would create the most wealth for its members, even if its position is contrary to logic or the common good. For instance, in 2006, it sought to have the Register of Copyrights find that ringtones were not digital phonograph deliveries ("DPD") but were in fact performances and, therefore, did not qualify for the statutory mechanical license. It went further to argue that these performances were unlicensed derivative works.

The Register issued her findings on October 16, 2006, and after a thoughtful analysis, concluded that ringtones were DPDs and qualified for a mechanical license under Section 115. The Register observed the definition of a DPD, namely, "each individual delivery of a phonorecord by digital transmission of a sound recording which results in a specifically identifiable reproduction by or for any transmission recipient of a phonorecord of that sound recording."

A ringtone, like a download, CD, or record, results in the same thing: a specific copy of the composition on a sound recording that is controlled by the user. The NMPA tried to argue against this by pointing out that ringtones are not played at the will of the user but instead are only performed when the phone rings. It further argued that because the performance could be perceived by others in public, it constituted a public performance.

A couple months after the Register's opinion was published, I asked the head of the NMPA whether this meant that publishers would stop insisting on a performance license for ringtones, since the Register made it clear that ringtones were DPDs. My presumption was that mechanical licenses for DPDs compensate the "mechanical" performance of music, while a "public performance" license compensates for "live" performances. In other words, the two are mutually exclusive - like sedans and pick-up trucks are both automobiles but no sedan can be a pick-up (El Caminos notwithstanding).

The NMPA took advantage of the Register's opinion and muddied the waters even further. The response to my question was that the NMPA did not agree that ringtones were DPDs but so long as that was the Register's opinion, they would insist on a mechanical license. The NMPA also did not agree with me that public performances and DPDs are mutually exclusive and pointed out that the Register did not say that ringtones weren't public performances, only that they were DPDs. Therefore, the NMPA's position was (and as far as I know, still is) that a ringtone requires both licenses.

Such far-fetched arguments are precisely why the debate has gotten to where it is today, and these same types of arguments are why the copyrights system was already flawed.

Now the NMPA is using its ringtone-based logic to maintain that interactive streams require two licenses and two fees. On the other side, digital radio services attempted to have the Register issue a ruling as to whether on-demand streams require a mechanical license at all. The royalty board refused to submit the question to the Register, finding that it was an issue of fact and not law.

The semantics are getting in the way of reaching a real solution. We should stop trying to put square pegs into round holes and look at what is really going on. Unlike ringtones, which are clearly and undeniably a DPD and DPD only, on-demand streams are a hybrid because users are getting to perform the music when they want, but yet never take title to a tangible medium that embodies the work. However, their use is limited like that of radio because they must be connected to the service in order to play the music, thus limiting their ability to perform the music. They must also continue paying a subscription fee (presuming there is one) and once they stop paying, they no longer have access to the music.

As much as I dislike the ASCAP and BMI royalty models, perhaps it is best to suggest a third, wholly distinct class of uses akin to their licenses. After all, our "mechanical" license owes its origin to the player piano, and it's name is indicative of what it permitted - the mechanical performance of music. A third class of use could shed the shortcomings of both performance licenses and mechanical licenses. It could be designed specifically for what it is intended to authorize.

This third class would include any use that allows users to select their performance but stops short of providing them with a permanent copy. The licenses for these uses could be set on a scale, the cost for which depends on these factors:

(1) the degree of access, i.e., unlimited performances versus a single performance per user, and/or the availability to the user (must user be connected to the service?);

(2) the duration of access, i.e., virtually indefinite versus a short time; and

(3) the payment method, i.e., free to the user and/or ad-supported, one-time fee, or a monthly subscription.

Considering each one of these factors will likely account for all the possible delivery methods and will allow enough flexibility so that the license system may grow. They are all relative to the same two extremes and where they fall in that continuum will determine what rate is appropriate.

No matter what happens, I hope that all parties involved stop thinking solely with their wallets and start focusing only on what is right and fair.

Thursday, January 31, 2008

Savagery in Court

The Electronic Frontier Foundation ("EFF") is participating in the defense of the Council on American-Islamic Relations ("CAIR") in a lawsuit filed by Michael Savage, host of the syndicated radio show, Savage Nation. Savage alleges copyright infringement and civil RICO violations arising out of CAIR's posting of sounds clips from Savage Nation on CAIR's website.

I caught this press release from CAIR, which was distributed by EFF, and includes a link to CAIR's motion for judgment on the pleadings.

This is a great read. Savage's comments are shocking (see pages 3-4 of the motion). His profoundly misguided lawsuit is only slightly less obscene. While I admittedly have not read Savages complaint, CAIR's motion paints a pretty clear picture of the happenings. In short, Savage spent about 4 1/2 minutes slamming Muslims (including taking some shots at CAIR), and CAIR posted excerpts on its website together with an article aptly entitled, "National Radio Host Goes On Anti-Muslim Tirade."

Unless CAIR grossly mischaracterizes the facts or there are serious omissions, Savage has seriously crossed the line. It's one thing to espouse hatred and intolerance, which is indefensible but nonetheless a necessary product of free speech in a free country, but it's quite another when that person tries to prevent someone else from exercising those very same rights. The wrongness is even further amplified when the first speaker is advocating for principles so contrary to those on which a free country is founded, namely, tolerance and inclusiveness, and the responder is merely setting the record straight.

I can't wait to see what happens with this one. I certainly wouldn't advocate for silencing Savage, as he is free to think and say what he wants. However, I hope the court tells Savage to do with this lawsuit what he told Muslims to do with their religion: "Shove it up your behind. I'm sick of you. . . . What sane nation that worships the U.S. Constitution, which is the greatest document of freedom ever written, would [tolerate a lawsuit, or radio host, for that matter] that tells them the exact opposite?"

Friday, January 25, 2008

FCC Approves Clear Channel Buyout

According to Radio Ink and The Wall Street Journal, the FCC has approved a $19.5 billion private equity buyout of Clear Channel Communications, led by Bain Capital Partners and Thomas H. Lee Partners. As a part of the agreement with the commission, Clear Channel will sell radio outlets in 42 markets, and is encouraged to sell those to female- or minority-owned businesses.

The always outspoken commissioner Michael Copps was quoted by Radio Ink:
"This case is a close call and one that I approach with decidedly mixed feelings," said Copps. "On the one hand, this transaction could lead to a measure of de-consolidation in the radio industry. The largest radio chain in the country will be divesting 42 radio stations in the top 100 markets. Although at this point we do not know who the purchasers will be, by definition they will be companies with far fewer stations than Clear Channel. At the same time, Clear Channel is in the process of selling many of its stations in smaller markets. So while the new company will remain a media giant—now re-focused on the largest markets—there are some potential public interest benefits to this deal. "

However, Copps repeated his earlier concerns about the effect of allowing private equity investors into the broadcasting business. "I have repeatedly called for the commission to examine the potential impact of private equity on our ability to ensure that broadcast licensees protect, serve and sustain the public interest. Unfortunately, that has not happened, and nothing in today’s order indicates that the commission has had a change of heart. Instead, we once again close our eyes and pretend that nothing has changed—as if these new entities are no different than our traditional broadcast licensees."
The deal must still be approved by the Justice Department.

Wednesday, January 23, 2008

What the . . . ?! Fleeting Expletives May Be on the Radar Again

Radio Ink reports that Diane Keaton's dropping of the f-bomb on Good Morning America last week may stoke the FCC fires on so-called fleeting expletives. Members of the activist group the American Family Association have reportedly lodged thousands of complaints to Keaton's slip-of-tongue.

A previous FCC attempt at regulating the occasional heat-of-the-moment cursing was overturned by the Second Circuit Court of Appeals. However, according to Radio Ink, bills have been introduced in both the House and Senate that would "
specifically allow the FCC to set a policy that single words or images can put a broadcaster in violation of the indecency rules."

Apparently the impetus for the expletive was lip envy:
"Keaton said that if she had lips like GMA host Diane Sawyer's, Keaton wouldn't have had to work on her 'fucking personality.'"

One might hope that the profanity causing such a dust-up would be worthy of the reaction. Unfortunately, Keaton's utterance is no more exciting or taboo than the Super Bowl Boobygate. If ultra-conservatives want to express outrage over nudity, why not wait until an actual boob is exposed and remains visible for more than 1/20th of a second? And if they're britches are going to get bound up by a naughty word, why waste their energy on such a casual utterance? (Wouldn't it me more effective to go after full frontal in a sex scene where the female participant repeatedly instructs the male participant as to how hard he should do what he is doing? At least that would be a twofer.)

To seek to control fleeting expletives - or really any modest amount of "bad" words - is puritanical on a level way out of proportion with the rest of American culture.

Tuesday, January 22, 2008

Some Not-So-Good Ideas Circulating

I've subscribed to Seth Godin's blog for many months. However, just recently I've seen two of my music-related sources cite to Seth's Blog as an authority for commentary on our industry. I always read Seth's daily anecdotes as general guidance in business philosophy, not specific business policy. He is insightful and has many years' experience. Unfortunately, none of them are in music. While I have great respect for him, Seth Godin's comments are being taken out of context by those within the industry and, rather than being viewed broadly as food for thought, are being construed as a road map for the industry's future.

First, I acknowledge that a main thrust of (and allure to) Seth's P.O.V. is his position as an outsider. For whatever reason, it seems every otherwise intelligent businessperson throws logic out the window when it comes to our industry - no one would advise an insurance salesman to lead a car dealership, or a coal operator to open a flower shop. Yet for some reason everyone thinks that either (a) the music industry is so screwed up that anyone within the industry is necessarily tarnished, or (b) the music industry is so easy that anyone can do it.

I've seen countless otherwise successful business people pour millions into their music startups - mainly publishing and record companies. 99 out of 100 fail. It's worse than the restaurant business. Let's face it, you need to have a knowledge of the industry before you can set out to change it.

Seth's two industry-related blogs are here and here. Admittedly, the latter is on film distribution, though it was discussed by a music-related news source, Digital Music News, and concerns digital media and copyrights, which is why I mention it here. I thought it shocking that Digital Music News picked it up due to the sheer impracticality of the primary suggestion - that movies be delivered for 50 cents a piece initially. The credit card fees alone would devour such a low fee. While I can't recall exactly what my processing fees were in my digital distribution days, I think it was a % of the transaction with a minimum of 26 cents. Our business model was to offer music "virtually for free," with a target price of $1.00 per live concert performance. After considering storage and bandwidth fees, as well as credit card fees, the least we could sell a show for was $5.00. While charging 50 cents per video is a nice idea in theory, it disregards reality and is a figure pulled out of thin air.

Seth's other post concerns the devaluation of recorded music through the digitization process, and is the position echoed by

Wednesday, January 09, 2008

Update on Investigation on FCC Chairman Martin

As the House Energy and Commerce Committee prepares for its investigation of FCC chairman Kevin Martin and his stewardship of the agency, it has ordered that he retain all e-mail and other communications, and that he not interfere with its investigation by retaliating against any FCC employees who might given information in the matter.

The story can be found in this story by Multichannel News.

Monday, January 07, 2008

The Ultimate Consolidation Has Begun: Live Nation Ticketing

When Clear Channel began gobbling up radio stations in 1997, accumulating a total of over 1,200 at one time, it was a concern. This consolidation was a direct result of the Telecommunications Act of 1996 and led to what many argue was a major blow to the music business.

In 2000, Clear Channel acquired SFX Entertainment, which was at the time the world's largest events promoter and producer. SFX was also a significant owner of concert venues and had gone on a significant buying spree prior to the acquisition.

Clear Channel got a lot of flack because it dominated the concert promotion business, owned so many venues and an overwhelming number of radio stations. It was widely believed that Clear Channel was leveraging its control in order to compete unfairly in the concert business. The message to artists was, Let Clear Channel promote your show or else you won't get your show advertised on our radio stations and we won't spin your record. Even if an artist was willing to take a chance with another promoter, they would be relegated to performing in second-tier venues in most markets since Clear Channel owned the most valuable venues.

Ticket prices went way up following the Clear Channel buying spree. I remember reading articles expressing complete shock that Clear Channel would be willing to drive prices so high so quickly. The result was many shows going undersold. The price for a ticket would later come down but apparently just low enough to generate some more sold out shows - they are, of course, still through the roof.

The cost of putting on a show in a Clear Channel venue also skyrocketed after consolidation. There were several rooms in which I used to promote where the cost literally doubled.

Pressure on Clear Channel became greater as its anti-competitive practices became more apparent. It was the connection between radio and concerts that chaffed the most - the major labels didn't like the "do or die" attitude they got when considering promoting their tours with someone else. This is perhaps the primary reason why Clear Channel spun off its concert business to form Live Nation in 2005.

To say "spin off" is a bit of a misnomer. With the diminishing importance of radio, Live Nation is the entity that came away with the real power. Since 2005, Live Nation has gotten largely into merchandising and, through its acquisition of Musictoday, is a significant website developer, fan club operator, shopping cart/order processor, and VIP ticket provider.

Ticketmaster, equally loathsome amongst music fans, has single-handedly dominated the ticketing industry for as long as many can remember. People have grown to dislike Ticketmaster even more in recent years as its service fees continue to skyrocket despite the huge cost savings to providing ticketing services online.

Both Live Nation and Ticketmaster have been equally dedicated to squeezing as much money as possible out of the concert-going public while keeping their costs at a minimum (i.e., contributing very little to the process). Now things are going to get even more interesting.

In its July 28, 2007 issue, Billboard reported that Live Nation may not re-up its contract with Ticketmaster and will instead opt to handle its own ticketing. Digital Music News reported this morning that Live Nation will announce its new ticketing plans on January 11. It is perhaps a sound business strategy for Live Nation but a travesty for artists and concert-goers.

Ticketmaster was by no means a check and balance to Live Nation and vice versa. However, by allowing Live Nation to control virtually every facet of the live concert event, together with merchandising, fan clubs, and artists' entire web presence, they can ensure that they control every aspect of an artists' career outside of the recorded album . . . and they are vying for that as well.

If we thought Ticketmaster was a threat with its exorbitant fees, and Clear Channel for its control of the airwaves, and the major labels for recorded music, what is to become of the future of music when Live Nation controls it all? They have proven that they will increase ticket prices to the highest extent possible, they will charge independent promoters ridiculous fees to put on shows in their venues. There is no reason to think that they will handle their ticketing business any better than Ticketmaster and will certainly not treat their artists any fairer than the majors. In fact, they will no doubt ensure that they will maximize their own profits at the expense of artists in the few arenas in which the artists used to make money.

This is a slippery slope, indeed. Clear Channel's mentality in the radio business showed that advertising was always a priority over music. Now, with Clear Channel-groomed business heads leading the Live Nation surge, what is to happen to the music industry when they, a single corporation, control it all?