September 2005 Archives

On Wednesday, the full Senate Judiciary Committee held hearings on "Protecting Copyright and Innovation in a Post-Grokster World," with testimony from:

  • The Honorable Mary Beth Peters, U.S. Register of Copyrights, Copyright Office, Washington, D.C.
  • The Honorable Debra Wong Yang , U.S. Attorney for the Central District of California , and Chair of the Attorney General’s Advisory Committee , on Cyber/Intellectual Property Subcommittee , Los Angeles, CA
  • Marty Roe, Lead Singer, Diamond Rio, Nashville, TN
  • Cary Sherman, President, Recording Industry Association of America, Washington, D.C.
  • Gary Shapiro, President and Chief Executive Officer, Consumer Electronics Association, Arlington, VA
  • Mark Lemley, William H. Neukom Professor of Law, Stanford University Law School, and Director, Stanford Program in Law, Science and Technology, Stanford, CA
  • Ali Aydar, Chief Operating Officer, SNOCAP, San Francisco, CA
  • Sam Yagan, President, MetaMachine, Inc. (developer of eDonkey and Overnet), New York, New York

Details about the testimony continue after the jump...

Hollywood and IP

In an interview, Serenity writer/director Joss Whedon mentions that it might not be a bad idea for studios to look the other way about certain bootleg merchandise. The CulturePulp Q&A: Joss Whedon (be aware, the full interview will spoil major plot points of the film, but not this excerpt):

Q. You've also done an absolutely smashing job of ignoring the massive amounts of bootleg "Firefly" fan merchandise...

A. I'm a Deadhead, and where I come from, bootlegging's a good thing.

Q. If the movie's a hit, and more official merchandise starts coming out, do you think there's going to be a crackdown?

A. I have no idea. I never have a piece of merchandising; I haven't reached a place in the Hollywood DNA chain where I can actually ask for that. So it's not like I'm losing money.
But even if I was? You know, I'm doin' fine. I have a job. I'm doing just fine. And the fact that people are making this stuff? You can call it "bootlegging" or you can call it "free advertising."

Note that these are not knock-offs of official merchandise, or unlicensed shirts with the Serenity equivalent of a picture of Yoda or Bart Simpson, but fan-created products that have to do with minor plot points/secondary background information from the film and television show. These are a way to capture fan energy in ways that the studio or director might never contemplate.

I recently came across screenwriter Josh Friedman's blog, I find your lack of faith disturbing, which is very entertaining-- probably because he can, you know, actually write well. In addition, a couple of his posts can teach valuable lessons about entertainment law practice.

One post explains why credits matter in films: "A shared screenplay credit on WOTW [War of the Worlds] puts my son through school. K thru Graduate. All private if he wants. He can probably bring a friend."

Another post demonstrates why having a entertainment savvy lawyer is very important:

So he recommends me a cheap lawyer friend of his who I find out later only came to this "lawyer gig" late in life. What he really wants to do is park his Volvo near the beach and sleep. But hey, he's got one of those law degree thingies so I figure what the fuck. He then proceeds to negotiate a contract between me and the producers WHICH ALLOWS THEM TO OPTION MY SCRIPT FOR $2500 AND THEN RENEW SAID OPTION EVERY YEAR UNTIL THE END OF TIME.

Fewer Indecency Complaints

This week, the FCC released statistics showing that the number of indecency complaints received by the Commission declined significantly during the last quarter of the year. In the first quarter of 2005, the Commission received 157,016 complaints about indecency. In the second quarter, the Commission received a mere 6,161.

This chart looks at the number of complaints received by the FCC about indecent or obscene programming on broadcast television and radio since the beginning of 2002, by quarter. The increase in complaints can be attributed to large-scale mobilized operations that have participants send form letters. The Commission notes that the data may include duplicate complaints.

indecency_graph.png

Download: indecency_graph.pdf

In addition, during the second quarter of 2004, the Commission received 20 complaints about "Howard Stern Commentary."

Previously:

Shameless self promotion

Besides blawging, my other big revenue-negative hobby is music. In particular, I play saxophones and keys with The Bosch, and we're releasing a new album. It's called Buy One, Get One and will be available for the first time at the CD release party on Tuesday night, Sept. 27, at Pianos (158 Ludlow St. in New York), at 10pm.

Here is the track listing (links go to MP3 files):

  1. Come On, Phillie
  2. The Movie Director
  3. Metronome
  4. Matching Girlfriend
  5. Teenage Symphony
  6. Back to the Laboratory
  7. Zombie Killer
  8. Napoleon Invades Russia
  9. Tell the Doctor

The Author's Guild filed a lawsuit to prohibit Google from scanning copyrighted books without obtaining permissions from the copyright owners. The complaint in The Author's Guild v. Google Inc, alleges "Google has reproduced a digital copy of the Works without the copyright holders' permission and in violation of the authors' rights under the copyright laws."

On its corporate blog, Google comments: Google Print and the Authors Guild: "Google doesn’t show even a single page to users who find copyrighted books through this program (unless the copyright holder gives us permission to show more). At most we show only a brief snippet of text where their search term appears, along with basic bibliographic information and several links to online booksellers and libraries."

Google does not yet make the full text of these scanned books available to the public, even if it has copied the full text of the book.

Jason Schultz examines the rhetoric behind the complaint: Another inept physical property analogy re: Google's digital library program: "So far, however, none of the publishers can show a single shred of evidence that the Google search index will reduce their sales. If anything, Google has already made the case that it will increase sales. At any rate, the physical property analogy to breaking into someone's home is deeply flawed and misplaced, and publishers are doing a vast disservice to their industry and their authors by continuing to disseminate such flawed rhetoric."

The New York Times notes that not all rightsholders are opposed to the project: Writers Sue Google, Accusing It of Copyright Violation: "Some aspects of the Google Print program have encountered relatively little opposition, particularly one that invites publishers to submit their books to Google for scanning and inclusion in the Google search engine. Most of the large commercial publishing houses have submitted books to Google for scanning, in the hope that the program will lead users to find and buy their books more easily."

Wired's coverage looks at two arguments, the publishers' have the choice to withold consent and that high transaction costs could stifle a project with immense public benefit: Google Takes On Copyright Laws:

But many publishers' remain wary. To endorse Google's library initiative is to say 'it's OK to break into my house because you're going to clean my kitchen,' said Sally Morris, chief executive of the U.K.-based Association of Learned and Professional Society Publishers. 'Just because you do something that's not harmful or (is) beneficial doesn't make it legal.'

Many of the titles Google wants to scan are out of print and belong to no publisher at all. Jim Gerber, Google's director of content partnerships, says the company would get no more than 15 percent of all books ever published if it relied solely on publisher submissions.

On a first look, William Patry believes that the scanning program is a blatant violation of copyright: Scanning Documents:

While I think the project is fantastic and would love for it to come to pass (it would greatly faciliate and democratize scholarship and thereby significantly increase learning), as to works under copyright, it can only be done with permission. Absent permission, I see no way for it to be considered fair use or covered by Section 108.

The chutzpadik manner in which Google has gone about this is breathtaking, and indeed what they have done so far is, in my opinion, already infringing, that is the copying of the books even without making them available.

After learning more about the service, Patry comes to look at the situation from a fair use analysis predicated on market impact and decides that the full copying combined with a limited display is a fair use. Google Revisited

So in the Google project, why should we care if there are server copies? The purposes for the copies in connection with the Print Library project is to give people access to knowledge about the existence of the book as well as a tiny amount of text. That is of great help to researchers and hopefully to authors and publishers of the books too. It in no way harms copyright owners unless the project becomes something else, namely a full-text service which then is a market substitute.

Eric Goldman thinks that the full-text scanning and copying likely goes beyond the current scope of fair use: Comments on Google Print

This program has some obvious benefits to society; so much good content is "invisible" to the world because it's locked in a dead trees delivery mechanism, and the search costs of finding that information overwhelm the value of doing so. With Google Print, a lot of the world's knowledge will become newly discoverable by a large part of society.

My heart says Google Print is great and therefore we should interpret copyright law in a way to permit it. Unfortunately, my head says that this is highly suspicious under most readings of copyright law.

Siva Vaidhyanathan worries that this may not be the fight worth pursuing-- that Google will not only lose and be forced to discontinue indexing the printed word, but that it will have a negative impact on all users of the written word and all knowledge and culture. Google: Betting the Company: "It's not just Google betting the company. It's Google gambling with all of our rights under copyright -- both as copyright producers and users. Many good things could be washed away."

The Progress and Freedom Foundation's James DeLong compares digitization of books with digitization of music and ultimately thinks that Google will settle, Google suit: Copyright Infringement: "Bottom line, as I see it, the authors are in the right here, but Google ought to be able to negotiate reasonable terms, and gladly--if the service they are planning to provide has enormous potential value, why not pass on some to the authors? Everyone would win."

However, DeLong goes on to find that Google probably has a strong fair use case: Google Responds "To show only the limited info described by Google would, IMHO, pretty clearly be a fair use. So the authors must be objecting to the fact that an entire book is being copied without permission, even if it is then hidden in an electronic vault. But what is the objection, if only snippets are shown? Is it a fear of Napsterization -- that once the digital copy is made it could escape into the world? Or is it simply a naked assertion of right -- "copyright law says no copying, so you must pay me to do it, even if it would actually be in my interest to have snippets made available."

Fred von Lohmann conducts a fair use analysis and finds that Google comes out ahead on three of the four fair use factors, with the parties' even on the fourth factor: Author's Guild Sues Google.

Jonathan Band conducts a more extensive fair use analysis and also thinks that Google's use is fair use: The Google Print Library Project: A Copyright Analysis. In comparing the Google Print project with the Ninth Circuit's analysis in Kelly v. Arriba Soft and finds that the Google Print project uses less of the original source material than the Arriba Soft image search engine, is transformative, will have positive impact on the market, and should be considered a fair use.

Band notes that full-text indexing is done by Google and other search engines with web content (HTML, PDF, Word documents) already. The difference between the copying/caching of web pages and the copying/caching of books is that copying books involves a medium shift. By the norms of the internet, an online publisher who does not opt-out of this copying (such as by posting a robots.txt file) has impliedly consented to having her content copied, indexed and cached.

Mike Madison thinks that this is a case worth pursuing, since both sides are good (the rights of authors against promoting universal access to all information without being evil.) Google Sued; Books Disappearing: "If it manages to win, Google may be planting the seeds of the destruction of copyright as we know it. Depending on your point of view, that may not be a bad thing."

Susan Crawford argues that the public benefit adds to the argument for a finding of fair use: Why Google Is Right: "Google had a great idea. Let's make the books in the libraries of Harvard, Stanford, Oxford, and Michigan searchable. (Note -- the idea wasn't "let's give the books away." Not at all. The point is to make them searchable, not takeable.) There are all these wonderful books that these great libraries want to interest people in, but they're up flights of stairs, on dusty shelves, and in darkness. Let's make them searchable so that people know they're out there."

Larry Lessig also comes down on the side of finding Google's Use a fair use: Google Sued: "It is 1976 all over again. Then, like now, content owners turned to the courts to stop an extraordinary new technology. Then, like now, copyright is the weapon of choice. But then, like now, the content owners of course don’t really want the court to stop the new technology. Then, like now, they simply want to be paid for the innovations of someone else. Then, like now, the content owners ought to lose."

This case points to a more fundamental issue facing copyright law in the digital age: whether copying is the harm copyright law needs to prevent, or should the law focus on preventing unauthorized distributions. In traditional pre-Internet media, making copies, such as photocopies or audio cassette tapes, only serves to have a negative impact on the market for the original source work. With the internet, making a copy may be a mere precursor to a product that does not distribute mere copies of the original work, but uses the original work to create a public benefit without harming the market for that original work.

C.E. Petit questions whether most publishers have the authority to grant Google rights to make copies and notes that administrative costs are not part of the statutory fair use analysis: Speaking of Common Enemies…:

Not only is Google wrong in adopting an opt-out model when the Copyright Act explicitly requires opt-in (cf. 17 U.S.C. § 204(a)), it is wrong in assuming that the publisher has the authority to grant permission in the first place. Google—and Amazon (remember Search Inside the Book?)—would rather not deal with a large universe of authors.1 It would rather deal with a limited universe of publishers. The last time I checked, though, "administrative convenience" was not one of the four fair-use factors set out in 17 U.S.C. § 107

Petit goes on to note some of the flaws in the publisher's class definition: The Procedure Geek Looks at Author's Guild v Google: "The ultimate irony here is the usual mechanism of class remedies: Usually—as in the horribly structured "database settlement" also "brokered" of late by the Author's Guild—everyone who falls into the class definition is bound by the settlement unless they opt out. Given that opt-in/opt-out is precisely what is at issue in Google's program, flowing in the opposite direction, this seems rather silly."

Making a case for reform, Tim Wu argues that the fundamental role of copyright should be in regulating the dissemination of works in a 2004 Michigan Law Review article: Copyright's Communications Policy

The main challenges for twenty first century copyright are not challenges of authorship policy, but rather new and harder problems for copyright’s communications policy: copyright’s poorly understood role in regulating competition among rival disseminators. Since its inception, copyright has set important baselines upon which publishers and their modern equivalents do business. As the pace of technological change accelerates, copyright’s role in setting the conditions for competition is quickly becoming more important, even challenging for primacy the significance of copyright’s encouragement of authorship.

Ernest Miller and Joan Feigenbaum argue for reforming copyright law under this method in Taking the Copy Out of Copyright:

The advent of digital documents has illuminated this issue: In the digital realm, copying is not a good predictor of intent to infringe; moreover, copying of digital works is necessary for normal use of those works. We argue that the right to control copying should be eliminated as an organizing principle of copyright law. In its place, we propose as an organizing principle the right to control public distribution of the copyrighted work.

Even if the Google Print project is found to be a fair use, perhaps the law needs to be reformed to address unlawful distribution rather than unlawful copying. This will make it easier to offer more access to information at a lower cost, with greater certainty and less need to litigate whether every new development in search technology constitutes a fair use.

[FMC] IP in a post-Grokster World

IP in a post-Grokster World
Preeta Bansal Partner, Skadden Arps (moderator)
Chris Amenita Senior Vice President, ASCAP Enterprises Group
Mia Garlick General Counsel, Creative Commons
Cary Sherman President, RIAA
Siva Vaidhyanathan Assistant Professor of Culture and Communication, NYU
Don Verrilli Partner, Jenner & Block
Fred von Lohmann Senior Intellectual Property Attorney, EFF

Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd.

Bansal: This decision had something for everyone.

von Lohmann: Will this change the environment for p2p file sharing? Probably not. Fans enjoy having access to full catalog. We need to get artists paid. EFF likes a collective licensing approach-- allow sharers to keep doing what they're doing and still get the artists compensated. This is not going to solve our porblems any more than the 14,000 lawsuits against file sharers.

Bansal: Will this decision have a chilling effect on technology?

FvL: No fundamental objection to inducement standard. Grokster did not answer our other questions: can you build a tech if it turns out it can be used for infringing? Whenever you hvae to call lots of lawyers to figure out if you can create something, that is, by definition, a chilling effect, whether it is a sampling artist in his basement or an inventor in her garage. The effects may extend far beyond just P2P.

Verelli: The underlying activity (unlawful downloads of music and movies) is a problem of staggering scope. In the court of public opinion, there was a question of whether the activity is lawful. That debate is over, as far as the law is concerned, and will have an immense effect on public opinion. You can't go out an build a business based on expropriating other peoples' copyrights. The law in this area must strike a balance between protecting interests of copyright owners and allowing technological innovation. Increasing legitimate channels of distribution.

Bansal: What specific tools has Grokster added to the entertainment industry's tools?

PV: Inducement liability can be used against a business that is intentionally inducing copyright infringement for damages or injunctive relief. The inducement cause of action itself is a pretty potent cause of action.

Garlick: Ultimately, the lawyers are the ones who benefitted from Grokster. The fact-specific test means that lawyers have to get involved in product design, marketing development.

Bansal: Where does the public end up after Grokster?

Siva: The public remains confused and engaged at the same time. Is there evidence that p2p sharing has decreased since Grokster?

Verelli: Not as such, it is just a prediction, but companies will move to legit business models.

Siva: Remember that what people do is from what companies do. There are many non-commercial services. Souter managed to dodge the Sony issue. The real quesetion is how much liability to companies have for what consumers do downstream. But the effect will be on marketing, and that there will never be another product with -ster at the end of its name. That won't matter, because consumers aren't that dumb. I have seen no evidence that the usage of p2p has decreased since Grokster.

The problem is the internet. The internet makes this all possible. This is an almost uncontrollable system of communication at this point. Any sophmore computer science major can create a powerful p2p search engine.

The entertainment industry has been whacking moles for 6 years now, and it hasn't made a difference. People are still file sharing and supplementing it with other forms of distribution.

Bansal: But they're not profiting from it.

Siva: The individuals were never profiting from it and know how to stay ahead of the lawyers. And these are communications students who want to work for MTV, not computer science circuits.

Bansal: What's the response to Grokster in the recording industry?

Sherman: Lot's of behind the scenes acticity and unbelievable activity in terms of p2p companies still in existince rethinking their business models and licensing/settlement discussions that gives us a lot of hope with transformation to legit business models.

For example, iMesh may launch within a week as a legit service. This demonstrates the power that system can have when it's not hiding from the copyright law and taking advantage of knowing who the sharers are and what they want. p2p was always about community. This will be a combination social networking, dating and music sharing service.

We're seeing investment capital start to flow into services. Licensed p2p is the next phase.

Bansal: How does the prevalence of legit p2p models serve you?

Sherman: The goal was never to get rid of p2p, but to get rid of infringement. We've lived with physical piracy and will live with online piracy. We want to move people to legitimate p2p services where aartists are compensated.

[OK, so why didn't the industry license to Napster in 2000 and would have pretty much avoided the escalating file sharing wars of the last few years?]

Bansal: What is the impact on creators, and what's happening now in the actual marketplace?

Amenita: The decision helped clarify the marketplace. The general public now understood that the activity going on in Grokster was illegal. We never wanted to shut down the technology itself, but the way people use the decision.

Bansal: In Justice Breyer's opinion, this was the first time that the Court referred to creators separately from the entertainment industry. Creators were amici on both sides of the case.

Amenita: Business itself is not fair. What this decision did was clarify what one could expect to get compensated for. A handshake and a pat on the bat does not send kids to college.

Bansal: What will be the business models of the entertainment industry going forward? The celestial jukebox? The iTunes model? Live performances replace recordings as the driving force behind the industry? Open licensing?

Sherman: The variations on the per-track or subscription services will be interesting. There are some sites that will give out free music in exchange for watching an ad. Major corporations may begin to sponsor musicians (as patrons) and give away the music for free. There may be time-limited or limited quality free downloads. There may be a new relationship between artists and labels or artists and publishers-- like the WB e-label that lets artists release songs in various size chunks (singles, albums, EPs).

It will be easier to sell to niche markets on the internet.

Bansal: Has p2p raised the hand of aritsts in breaking the control of labels over the industry?

Sherman: Not necessarily p2p, but the internet. Word of mouth can have a big impact on the internet regardless of having music on p2p or a legit service. [Like MySpace.] Artists can still give away their music for free if the artist decides to .

Siva: The industry has gotten a good idea in the last 36 months after a slow start.

p2p and the internet are largely the same thing. What is legit p2p? Who controls it?

Sherman: Sometimes, it's actually a transfer from user to user, but the service tests whether it's a good copy and then transfers it from a user, or from a central server if there is no other good copy.

Siva: Distributed content with filters, and the filter is governed by the license terms. By moving towards this model, you're moving away from the true p2p model. in unfiltered p2p, you're talking about every member giving up something (bandwidth, disk space). Under this new system, how can you make it worth the time to give up the bandwidth and space, so what will the consumer get?

Sherman: That will be the interesting test-- will the sense of community to be enough to keep users engaged? But that's what's interest about iMesh it combines Friendster with p2p.

Bansal: What are some of the other legit p2p business models.

von Lohmann: The baseline reality is that BigChampagne reported that July 2005 saw a new high use of file sharing, which is interesting, because it comes after Grokster and during summer, where college students are at home and using p2p less.

If the goal is to restrict fans, to constrain fans, then the services will not work. But largely agrees with Sherman that experimentation is good. But today's services have high prices and limited selection and clearing tracks one by one is not a way that the. Music fans are still looking for something as good as napster Classic.

PlayLouder, an ISP in the UK, signed a deal with Sony BMG to let PlayLouder users freely share Sony BMG music among themselves. EFF has been suggesting a model like that. Yahoo can charge $5/month for access to their whole library. Users want more catalog, fewer restrictions.

We want a world where the instinct to be a fan does not depend on incompatible music files and seeing which service has excusives.

Bansal: Where's it all going to end up when we have unlimited hard drive space?

von Lohmann: The model where you have a blanket license is more flexible and more successfull than any other. Look at the PRO's. They've done a good job of being flexible. It's about getting paid, not getting

Bonsal: But what happens when users have all the music created already stored on their hard drive? Don't people pay for cable tv because they don't have enough storage?

von Lohmann: People pay for cable television because they want to see this season of the Sopranos, this season of Six Feet Under. Music fans are always buying new songs and new albums.

Sherman: PRO's don't license every listener in a restaurant. They license every business owner. In Fred's model, we have to license every single user or sue the individual who isn't licensed. Aren't we trying to get out of that game?

von Lohmann: With the internet, the kind of thing that used to have a factory to do can now be done by an individual at home. The fact that you can cut out the intermediaries and go directly to the fans is a great opportunity.

Garlick: p2p and the internet enables direct relationships between artists and fans, especially with things like Mmagnatune. Where Creative Commons is showing is that there are a variety of different ways to publish creative works for publicity.

Bonsal: What's coming?

Siva: It's hard to make predictions without data. All these companies will try different ways of doing this. Most will fail, some will succeed, and this will benefit all parties. Five years ago, some people were arguing that the RIAA would be out of business at this point-- even then that seemed far-fetched. However, we're not going back to the time when Backstreet Boys roamed the Earth.

Consumers are about to have a DRM revolt, largely because of the iPod, and will recognize that the only people who benefit from DRM are the companies that build weak DRM.

von Lohmann: For a century, every new tech that has been first attacked by the entertainment industry has ended up growing the entertainment industry: the player piano, radio, the VCR. The internet will not be the first technology for which this is not true. This is not the beginning of the end, but the beginning of the beginning for the entertainment industry on the internet. There will be more creativity and more competition, which will be great for artists and great for fans.

Sherman: DRM takes so many hits as being a limitation on consumers, when in fact is it an enabler of different business models that give consumers more choice to get more music at more prices for different types of uses. The problem needs to be solved, but that problem could be solved at the flick of a switch tomorrow if Apple and MSFT agree.

Amenita: One thing won't change. You need someone to create in the first place-- the songwriter. Since everyone believes that artists should be compensated, let's see the money.

Verrilli: The debate now isn't the same as 5 years ago. The debate 5 years ago was over whether copyright as a whole was a dinosaur. The question now is how to move forward in a way that respects copyright with a variety of different business models. The Supreme Court's decision has helped to take this forward. The risk calculus today is very different than it was 5 years ago.

Garlick: It's going to be about there being more choice and more flexibility as to what models will work. There is a new relationship between creators, business and users.

[FMC] Representative Rick Boucher (D-VA)

Mechanical license is outdated and needs to be updated from its paper-based, individual.

Reform should exempt buffering, cacheing and ephemeral copies from §115.

§114 places differing rates and services based on medium-- broadcast radio pays no fee, while satellite, digital cable and internet radio all pay different rates.

Archival copies of digital media should be a fair use.

Electronic database at the Copyright Office to replace the paper files on file at this time.

Need to have a safe harbor arrangement for use of song where it's not possible to find the copyright owner, and place royalties into an escrow fund held for the artists.

[FMC] Sampling and Shared Art

Rick Karr former NPR cultural correspondent/Technopop (moderator)
Whitney Broussard Partner, Selverne, Mandelbaum & Mintz
Jeff Chang Author, Can't Stop Won't Stop
Shannon Emamali Exec Director, DC Chapter, The Recording Academy
Bob Kohn Chairman and CEO, RoyaltyShare, Inc.
Hank Shocklee Music Industry Producer, Founder of Public Enemy, President of Shocklee Entertainment

[Unfortunately, Broussard isn't here for the panel...]

Has the law changed the aesthetics of hip-hop?

Siva: It's detracted from the sense of play in the art form. There was a beautiful libertarian moment in the late 70s where people could build something great out of what's around them.

To get through the Reagan years with any sense of optimism, I depedended on Public Enemy to make life seem beatuiful-- on George Clinton to make life seem hopeful.

We're thinking about cultural policy here. We should be very careful when we ask the government to influence or regulate cultural expression. We don't live in a society where people can do whatever they want with marketable cultural items.

We should ask is it contributing to the next generation of artists or locking in power for the already established?

--
Kohn:
Is a fan of sampling-- in particular, parody, satire-- to use a work to criticize the work itself (satire) or culture at large (parody.)

Feels somewhat responsible for the Bridgeport decision, which took 8 paragraphs from his book, where he was commenting on what the law is, not what the law should be. The law says that you're allowed to do sound-alike recordings. When you're sampling someone else's working, you're potentially infringing 2 separate works and the standard for the infringement is different.

--
Shocklee: Where is the menu items that a kid can go to and know if he's taking this how much he's going to have to pay for it? No one, not even in this room, knows the price of samples.

Emamali: Balance between sampler and samplee. There needs to be some type of system where, particularly aspiring artists, can go to to figure out how to sample legally, and then properly credit and compensate the samplee.

This has been a windfall for music publishers.

Chang: This has created two classes-- the super-sampler class who can afford to pay whatever it takes to get the record out, like Diddy or NAS. Any hip-hop jam will drop a sample Apache, but only NAS can afford to do that for a record. Hip-hop is not asking for any kind of OK for doing that.

Folks are doing that now on the indie level-- rappers and dance hall artists rhyming over The Cure.

The kids who were inspired by PE/Shocklee or by Pete Rock, they know that they're going to have to turn in a list of all the samples that go into a song, and try to give the credit (and royalties) to the brokest of all the sampled artists.

RK: Is there a better way we can structure this legally?

Kohn: There's an analog in the patent world, where developers have to work out licenses for patented processes. There's similar negotiations when placing music into films. These rules are essentially the establishment of property interests.

If you are creating something new, transforming, and using the work, like a Bob Dylan song, for parody or satire purposes,

If you don't know where you're sampling from, then don't do it. If you do, tell your lawyer and pay the fees to the rightsholder. If you're out there just to disobey the rules, you're going to get burned.

HS: We did go to the copyright owners, at least what we see on the record. We go out and make a deal with those people, then go out and get a call from someone else who is also a rightsholder.

Siva: The transaction costs are really high. There's no central place to go to find out who owns the master or who owns the publishing? The Copyright Office doesn't keep track of this.

HS: If I want to re-record a sample, the costs are really high, too. Taking a single Phil Collins snare hit for the sound, instead of going in, finding the same console, the same effects, the same mics. Should I have to go in and do all that, or can't I just take that one sound and do something completely new and different with it? Or does Phil need to be compensated for that? [About 20% of audience applauds heartily.] Should I have to compensate the engineer who got the sound? Because how much of that is the actual performance and how much of that is the vibe of the recording?

Kohn: Plugs his new company, Artist Share that attempts to manage the royalty relationships.

SE: We need to establish a threshold for what needs to be compensated and figure out a way to create a central info registry for that.

Siva: The Copyright Office is studying orphan works...

Karr: Suggests an arbitration panel for sampling that decides what a fair price is for sampling.

HS: The record companies have an incredible database of sampling claims. Sampling is not just limited to hip-hop artists anymore. The kids doing it don't understand how much it costs, especially when all the big pop hits on the radio are sample-based.

Peter Jenner: None of the sample money goes to the drummer or the guitar player who played the part that was sampled. The copyright law has gone completely up its own ass. Why does the composition copyright owner get to profit off of a few notes, but the musicians don't?

Siva: There hasn't been a good fair use case made in sampling law, with someone who took the subtleness and takes from the toe of the work, not the Vanilla Ice sample that goes to the heart of the work [The Nation.] The case law has not reflected the analysis.

Barbie Bayless: How do you come up with a rate sheet? How can all of us in the industry come up with a common rate?

HS: We don't know what people are charging. How can we give away more than 100% of publishing?

Karr: You take the heart of the work (Siva: like the riff from "Purple Haze"), then you should have to pay for it.

We have a situation where the market dictates what happens. If a mid-level hop-hop artist takes a sample from a Harry Chapin record, the hip-hop sampler has much less bargaining power.

RK: Statutory license?

SE: How do you set the rate? For some songs, 5 seconds is the essence of that song, then the law should have to take into account the difference.

RK: HS, what if some White Supremacist band samples PE?

HS: If they pay us, it's good. The sampling is about taking the sound. When you talk about paying that license, how little of a sample needs to be compensated?

SE: We're focusing so much on the payment.

Siva: Copyright law should be concerned with the work yet to be created. It's in the Constitution. Right now, this is a system with grand winners and grand losers. There are windfall profits and there are people who can't market what they create out of fear. A statutory license lowers these barriers to entry. It makes it possible for the next Public Enemy to pay a reasonable fee. It eliminates the hold-out problem. It's a market rigged by some agreement or state intervention that would work for more people in more situations.

Audience member who negotiated a lot of Polygram/James Brown sample licenses between 92 and 97: 50-50 split with the artist and the label. some of that actually did trickle down to the funky drummer. There are people who want to do well by the art form.

[FWIW, I think that sampling reform requires both the addition of a de minimis analysis to allow people to sample short (<2 seconds?) clips without permission and a complulsory license for samples that represent a larger, but still not central part of the work, and then a market-based system for sampling that goes to the heart of the work. More later.]


Useful links:
Bridgeport Music, Inc. v. Dimension Films (6th Cir., Jun. 2005).

Newton v. Diamond (9th Cir., Nov. 2004).

Astride Howell, Sample This: "The controversy surrounding digital sampling and the legal rules
of thumb generated in response reveal that there is quite a bit of mis-
understanding among musicians about copyright law and samplingthe songwriter or, by assignment, a music publisher."

Previously: Bridgeport, Audio Sampling and Transaction Costs

[FMC] George Clinton and Hank Shocklee

Special Interview with legendary funk artist George Clinton and Hank Shocklee Music Industry Producer, Founder of Public Enemy, President of Shocklee Entertainment. Hosted by Rick Karr

Clinton: "I thought it was a DJ on the radio talking over the record."

"I heard a guy rapping over "flashlight" and thought it was cool and record it. Then I learned that the kids in the Bronx were already doing it."

"The first artist found who sampled p/funk was De La Soul."

"It's just a new way of making music. The guitar, they didn't want it around, the saxophone wasn't in the orchestra. I always gravitate towards what people-- what parents hate-- cause that's the next big thing."

"When hip-hop came out I was glad to hear our songs [sampled], because we were getting on the radio."

"I'd figure out a way to make money of it. We went back on the road and started making money playing the long version of the songs."

Is sampling lazy?

"My mother called us lazy, too. She said that we just vamped-- got on a groove for 20 minutes and jammed and that was lazy. There are some people out there who aren't lazy. Hank Shocklee is not lazy... it's probably twice as hard to make that blend... That's not lazy there."

Some say that the sampling law has changed-- even killed-- hop-hop, that you need to have the budget of a [Dr.] Dre to do a sample-heavy record?

"If you clear beforehand, it's not bad. But when you take the whole song, or don't have permission, then it's going to cost."

[Enter Hank Shocklee]

HS: When the courts say that we have to get a license, who is that protecting? The artists?

GC: We haven't gotten hardly any of the money from the sampling.

HS: I know for a fact that we paid a LOT of money to Bridgeport. You look at the fact that these guys have been suing for a long period of time and a lot of money isbeing made and we should get a license for sampling, who is this actually benefitting? The original artist who made the song or the person who just happens to be the [rightsholder]?

HS: If I'm sampling 30 seconds of the song and using that for my whole song or if
Who determines who gets a license? Who determines the rates?

RK: What happens to the kid in his basement in

HS: If you took 8 bars of a song, then you'd have to get a license. Now, there's basically no parameters. If the sample only constitutes 1/8 of the song, how does that justify giving up 50% of the publishing?

[Remember, there are two different rights involved in clearing a sample-- the copyright in the composition and the copyright in the phonorecord. Based on the 9th Circuit's ruling in For the composition, there is a de minimis level of taking that is not copyright infringement, but based on the 6th Circuit decision in Bridgeport Music, there is no de minimis analysis for sampling of the phonorecord.

HS: 3 different publishers each wanted 50% of the publishing, but how do you give up 150% of royalties?

GC: Well, you have to do it beforehand.

HS: Should you be allowed to go backwards and basically sue people retroactively for something that was done in the past and was legal then?

HS: Sometimes, we sample because we want the performance, sometimes we want the sound, like the particular sound of a Moog synth. The best way to get that is from a recording that was already done.

HS: Sampling is not about stealing other people's material, it's about capturing some of that vibe.

GC: That's why we put out a [sample CD] where you can get the handclap, the guitar from Flashlight... I think that's the future of publishing, with a compulsory license for samples. We've had people that sampled our record from a [3rd generation sample].

HS: There's a difference between sampling the performance and sampling the sound. That would be like having to clear Fender every time you use a Rhodes, or Tama will charge you a royalty for the snare sound. [HS is making the case for a de minimis use analysis for sampling of sound recordings.]

HS: [plays 4 notes from Flashlight] How much should I pay for that? Talk to some producers, then want 10k, plus a rollover rate at 10k units, or 50% of publishing.

GC: What if you ask them in advance?

HS: This is what they seek when you ask in advance.

GC: When you cover a song, that's pennies a song.

RK: that's a compulsory rate.

GC: It's blackmail the way it is now. [for sound recordings]

HS: Is that the performance or is that the sound?

GC: That's recognizable. If you play the next part [one hit from Flashlight], that would be different.

HS: So what do I pay for this?

GC: The 6th Circuit says you've got to pay for it.

HS: Let's try to loop it [a one-note hit] and create something different. I could make it sound different, smooth out the glitches, change its pitch, change its tone. Now, when you're looking at sampling at that level, am I stealing a performance or creating?

RK: This [next panel] is such a let down...

[This interview was much more awesome than my notes reflect.]

Related Links
Bridgeport Music, Inc. v. Dimension Films (6th Cir., Jun. 2005).

Newton v. Diamond (9th Cir., Nov. 2004).

Astride Howell, Sample This: "The controversy surrounding digital sampling and the legal rules
of thumb generated in response reveal that there is quite a bit of mis-
understanding among musicians about copyright law and samplingthe songwriter or, by assignment, a music publisher."

Previously: Bridgeport, Audio Sampling and Transaction Costs

[FMC] Linky link

Derek Slater is also blogging FMC, in a more polished form than my rough notes, over at Billboard Postplay.

Coolfer is here, too: Future of Music Summit: Day One and Future of Music Summit: Day Two.

Herkko Hietanen is posting some real-time notes at Copyfraud.

[FMC] License to Cover: Section 115

Room 307: License to Cover: Section 115
Ken Kaufman Partner, Skadden Arps
David Jones Counsel, Subcommittee on Intellectual Property, Senate Judiciary Committee
Jonathan Potter Executive Director, DiMA
Josh Wattles Entertainment and Technology Attorney

---
Kaufman:
Compulsory has acted as a benchmark for negotiations.

What licenses are required for caching of streams?

It hsa become mroe and more difficult for mechanical rights societies to get rights to all works.

Proposals:
-abolition of all compulsories
-expansion of compulsories to public performance for reproduction,distribution rights for digital services.

---
Potter:
DiMA represents AOL, Yahoo, MSN, Apple-- legit services

There is a consensus among all constiuents that the system is broken-- legit services are having truble getting going because the music licensing system doesn't work.

The major victim? Songwriters. The price per song and price per performance composition royalties are getting hurt. Others? consumers-- all the music isn't available legitimately; services-- can't offer all the music they need to compete with Grokster & eDonkey.

3 or 4 ways to fix it-- discussed since 1999. Problem is that Congress is in the business of defining rights, publishers are asking Congress to set a rate.
The law was written to accomadte old-line industries and the laws just don't fit.

What's the price of modernization? Songwriters and publishers are seeking 2x-3x royalties.

NARAS: If the recording and publishing industries can't get together, then the industry (as a whole) can't compete with illegal P2P. The winners are Grokster and Kazaa, the losers are everybody else.

---
Wattles:
It's really only about money.

Impetus for change is coming from the tech side (unlicensed, uncompensated P2P draining the marketplace.)

The Yahoos and AOLs are simply buyers, publishers and labels are simply sellers.

Publishers only know how to think in terms for 200%-300% rate increases. On the other hand, streamers are selling music for nothing (marginally) and want to have to pay the publishers as little as possible.

The government really should get out of the way as much as possible.

The music industry has grown up around the mechanical compulsory since 1909 and pulling it out will bring dysfunction to the market. The public performance right is working while the mechanical isn't.

Publishers are the only group that has sold its product to multiple differentiated markets simultaneously-- to movies, record labels, ad agencies, etc. They know how to adjust to different markets. They also know how to ask for 4x too much money.

---
Jones:
Until there's a functioning market, there's no way to know what the market price is. Government is not well suited to setting prices.

This is a really screwed up area of law.

Some of the proposals:
-Outright repeal of §115. Some good principled arguments for it, but may be too much of a disruption to the market.
-Merging the rights
-Unilicense/super-agent-- not fully fleshed out-- anti-trust? who adjudicates?
-Collective licensing
-Making §115 a blanket license. This gets rid of some of the transaction costs. Who administers it? What's the scope of the license?

Potter: If any of us are giving music away for free, we're still paying the royalties to do so. One thing our companies are doing are competing on price, marketing and programming. Can't yet compete with Grokster on repertoire.

Potter: Performance or distribution/reproduction? An on-demand stream may substitute for a CD sold, but it is non-sensical to consider that a reproduction. because an activity might substitute for distribution doesn't mean that it should pay a mechanical. It's just a higher-value performance. A tethered download is not a performance, even though it may substitute for it.

In 1988, Canada eliminated the compulsory and has a copyright board...

Fred Von Lohmann (EFF): If everytime a new tech develops, there may be more chaos everytime there's something new. Move towards more collective licensing. Like Peters' proposal to eliminate §115 and replacing it with MRO's. Other than disruption and chaos, is there any principled reason for eliminating §115?

Potter: It is absurd to have to go back to Congress every time there is a new technology. Laws were written in ways that were microscopically written to apply only to existing uses. There is no admin agency that serves as a general regulatory body to serve as a rulemaking body for copyright law. THe party that doesn't want to modify the law can hold up reform in the morass that is Congress.

Wattles: Collective licensing is the solution for this particular, isolated, potentially major or minor use of music buy these online services. The price for legislative collective licensing is government stepping in and creating a regulated market. Let's try to make it about money, because that's something we all know how to make deals for. Is this the time to create architecture or an environment which creates a place to haggle with functional, interim solutions?

Potter: DiMA members pay ~5.25% of revenue total to ASCAP/BMI/SESAC for on-demand streaming. Publishers are getting ~8.5% from downloads.

Panel 05: Is Digital Distribution a Good Deal for Artists?
Walter McDonough General Counsel, Future of Music Coalition (moderator)
Kevin Arnold Founder/CEO, IODA
Slim Moon Owner, Kill Rock Stars
David Pakman Managing Director, eMusic/Dimensional Associates
David Printis President/CEO, DE-Urecords.com
Tim Quirk GM, Music Content and Programming, RealNetworks

Having an online presence allows a band to hang out and get drunk with its fans without actually hanging out and getting drunk.

No one is making a profit running a $0.99/download service. Labels are making money, artists hopefully are making money off of it. Apple is making money off iPod sales. Any of the other services making money are making money off of subscriptions.

Moon: Most of our costs [as a label] are marketing. Difference between 10 songs at $0.65/song and the cost of selling wholesale for $8.50 is larger than the cost of making the physical product.

It's the connection among people that will get people to enjoy music. Advocates for music make a big difference.

Rhapsody avoids caling its recommendations "picks or recommendations." Tries to recommend based on playing habits of listeners.
eMusic uses personality to cull its indie catalog and make recommendations with personality.

[FMC] State of the Union

Panel 04: State of the Union
Jim Griffin CEO, Cherry Lane Digital (moderator)
Mitch Bainwol Chairman and CEO, RIAA
Shawn Fanning Founder and Chief Strategy Officer, Snocap
Joe Henry ASCAP artist and songwriter/producer
Andrew Moss Senior Director, Technical Policy, Microsoft
Marybeth Peters Register, US Copyright Office
Gary Shapiro President and CEO, Consumer Electronics Associatio

-
Shapiro: HD Radio will be big. Every big company starts small.

RIAA's digital radio content restriction system will hamper the development of digital radio-- a strong defense of the right to do what you've always been able to do-- Audio TiVo.

Bainwol:
Thanks to Jim for keeping [him and Shapiro] separate, otherwise it may devolve into physical violence.

Rolling out HD Radio in a quick, expeditious way makes a ton of sense. Anything that enhances the experience of listening to music is a great thing. Why create a world that will eviscerate the future of music? HD Radio is about performance, not about a download. Made remarkable progress in the last two years and will make remarkable progress in the next two years.

-
Fanning:
Snocap isn't really a major shift between what he hoped to accomplish with Napster. As Napster classic began to build its business, there was no way t

Providing an open rights registry to connect creators and businesspeople who want to use the work.
Smaller companies that want to innovate will have an opportunity to
Providing more music to more people through more panels.

Strategy to start with major rightsholders and eventually open it up and create a level of awareness among the independent creative community. Allow the opportunity to get into multiple retail channels without having to do multiple direct deals.

-
Peters:
[Introduces Compulsory licensing reform.]
Digital phonograph delivery (DPD) was first performance right available to holders of phonorecord copyrights. Today, no one is sure what a DPD is today.

Heard that online b'casters were having problems getting rights from rightsholders.

Online streaming implicates 3 rights-- performance, reproduction,
Trying to look at a better way to effectuate music licensing.

Her own preferred solution is that the market generally works and that compulsory licenses should only work when there is complete market failure.

What kind of reform is possible?

§115 is reproduction and distribution. Publishers say there is a right to get reproduction and distribution rights when there is an interactive stream, but not when there is a non-interactive stream (just performance right.)

In Europe, there are societies that combine the ability to license reproduction and distribution of phonorecords along with the public performance right. Of course, those societies have other problems, but it is a one-stop shopping.

Copyright Office drafted a bill and 3 hearings. This was a trial balloon floated that didn't really have any viability.

The music industry has a problem to solve. If it is a revised statutory license, if it is a market solution, if it is MRO's (Music rights organizations), then we need to find it. Compulsory rates and the scope of a license are the big stumbling blocks.

Griffin: Do we need more competition and more intermediaries or fewer intermediaries and less competition in the licensing scheme.

Peters: Don't know what the route is, but the goal is to make the most efficient way to obtain rights. Is it efficient to go to 25 PRO's? Probably not. But the 3 PRO's here manage to compete effectively. There is an efficiency of scale in combining rights, but need to have more than 1 MRO to have competition, but at some point, there are too many.

Henry: There is plenty of choice for performers among PRO's. The point is communicating that music has value. It enriches the world and has real value.

Griffin: We are in a transition to world of 'we' to world of 'me'-- from broadcasting to narrowcasting. How do you reach your potential audience?

Henry: The basic concept is the same between downloads or 78's. There has never been more opportunity then there is now. There more opportunity now. It's potentially better for everybody. If there wasn't a lot more money to be made in the music business then there was 15 years ago, then we wouldn't be here talking about it.

-
Moss: We have to find an appropriate balance to enable ways for people who are creative for their way of life and allow people to enjoy the fruits of that creativity.

The problem with the analog hole exists because we are in a state of transition.

We're moving everything to digital. Creators will have the ability to decide how to distribute the fruits of their labor, in a way that encourages the people that use those tools that makes it exciting for the people who are using digital equipment to enjoy content. It's a fine line.

The transformation that we're going through now is a few ways out.

Griffin: There are legitimate reasons why people want to make copies (fair use, personal backup), but some creators want to restrict that right to complete and total restrictions on copying. CEA has always enjoyed copyright's leaky bucket.

Moss: It's a matter of balance. Creators should have the right to determine how content is used. If those rights are too restrictive, no one is going to want to use it, so neither the devices or content will be sold. In the last 5-10 years, there has been a major revolution in devices that create and distribute content (HD camcorders, computers.) We need the same sort of innovation that occurred on the tech side to happen on the business side.

Moss: Some magazines I buy subscription others I buy at the newsstand for a flight. There will always be different models. Balance needs to be struck by the rightsholders and creators.

Bainwol: We tend to reduce the debate to dichotomies-- rights vs. uses. We perfectly fine with timeshifting, with personal use. This not about being able to burn a copy for your car, or your boat, or your kid.

We need to find a balance between rights.

Half the songwriters in Nashville are out of business. Artists are suffering. The investors are hurting-- jobs are lost, artists are compromised. The more you invest, the more product you get, even when that product is culture.

Shapiro: I agree with everything that [Bainwol] said, except the last 4 minutes.

The growth in tech has been unparalleled and somewhat disenfranchised the RIAA members. Tech has made a way for people to ggo around the people who manufacture CD's. The RIAA member sales are not the measure of the health of the RIAA members. There is more creativity going on in the country than ever before.

Teenagers are putting more money into videogames than into music.

Everything that Peters said is about the interests of rightsholders. No one up here is talking about the interests of users. The rightsholders want to make the rights so broad and nebulous to make the most potential of such rights.

Cars are not restricted as to how fast they can go (no hardwired speed limit.)

We are being attacked. We develop products and technology that are not as dangerous as a speeding car.

We represent 2000 technologies that just want to invent stuff. No one represents consumers, and they're the ones that suffer.

-
Griffin: When the elephants fight, the grass suffers.

Bainwol: We're a small industry-- [CEA] dwarfs us.

We can solve these problems if you [Shapiro] tone down the rhetoric. We can have creativity and great technologgy at the same time.

Griffin: Joe [Henry], would you like to see the recording industry give up its compulsory over your work, so that you can negotiate the price of a mechanical license?

Henry: Sure. Why should there be a cap on the maximum earnings for a song?

Griffin: Mitch, are you ready to give that up? Should there be a free market?

Bainwol: The problem is piracy, not the compulsory. We like the idea of marketplace. We have a shared future here-- publishers, artists, songwriters, record labels are on the same team.

Griffin: Have compulsories worked well?

Peters: We may see more compulsories than fewer, which I'm not happy with. The outcry against eliminating the compulsory came from songwriters-- they feel they don't have the bargaining power to negotiate deals that pay them enough.

My goal is to empower the songwriters, and the the intermediaries have to be there to ensure that songwriters get the money. Most songwriters feel that doing away with the songwriters.

Griffin: Shawn, how do you listen to music these days?

Fanning: I'm not happy with the selection on the $0.99/song services.

Griffin: Do you still use P2P services to find music?

Fanning: No comment.

Griffin: Can you tell us which ones have the Shawn Fanning seal of approval? Do you think the market can bear the need to spend $10k to fill an iPod?

Fanning: I actually like subscription services. There are so many attributes of distribution channels online. There's no question that free P2P has grown far beyond what Napster was. But it's still not good. It will be possible to have services that provide users with reliable results and connect users with the best possible sources.

Griffin: Joe, has digital changed the way you create?

Henry: No longer a need to wait for people to get money from a major label to record my work. This has facilitated a lot more work getting done. That's fantastic. Nothing is cheapened by the fact that more people are participating.

Griffin: How do you listen to music?

Henry: I travel with an iPod, I live with it. I have a Mac-based stereo at home. I have a vinyl collection, but I'm not tied to it.

Griffin: Mitch, what devices do you use?

Bainwol: We have 4 iPods in my house, my kids bought some songs yesterday. I have a {Zen} (I think), still in box.

Griffin: Shawn, if you could spend a day with Mitch's family, what would you show them to rock their world? A celebrity audio makeover.

Fanning: [laughs] Um...

Griffin: WHat does MSFT have in store for the future?

Moss: We already have the ability to create, the ability to enjoy, and we're working on the ability to find. How to find new things, get recommendations, discovery.

Griffin: What's the difference btw Google and Napster (classic)?

Fanning: We still lack a sense of community combined with distribution of a broad base of content. Google enjoys a safe harbor with notice and takedown, while P2P doesn't have protection against use of works in grey area.

Peters: Many creators don't register with us. The goal is to find authors. ASCAP has a list, Snocap has a list. The benefit to our registry is that the data is available online. The people who need to find works will find them.

Shapiro: I'm a classical guy, because the copyrights have expired and I can do what I want. Consumers operate by fairness. They want to reward the creators. Kids know what's right. There are very few consumer advocates. We're working for technology companies. Even the government isn't working for the consumers.

Bainwol: Discussions about terms are irrelevant here. We're talking about people using music created in the last few years.

Henry: I'm fine with people covering or sampling, just so long as I'm paid for it.

Bainwol: The question here is not that we're going to permit timeshifting.

Shapiro: If timeshifting and personal use is legal, are you going to allow that in a statute?

Bainwol: We don't need a statute for that. We [RIAA] don't pursue timeshifting or personal uses.

Bainwol: Whatever comes along, we'll try. But, you ahve to get piracy contained, because there is a return for the investment and protect the integrity of the piracy. If we get distracted with these false fights, like whether it is ok to have 20 burns for your personal use. We know we need to be flexible with your models.

[FMC] Music Policy 101

Michael Bracy Policy Director, Future of Music Coalition (moderator)
Fred Cannon Senior VP, Government Relations, BMI
Mike Godwin Legal Director, Public Knowledge
Rebecca Greenberg National Director, Recording Artists' Coalition
Mike Mills Bass player, R.E.M.
Hal Ponder Director of Government Relations, AFM
Johanna Shelton Democratic Counsel, US House Energy and Commerce Committee
with FCC Commissioner Jonathan Adelstein staying on.

Greenberg: RAC is interested in musicians want to realize the value in their copyrights for themselves.

-
Godwin:
Thought Grokster turned out with the best result that anyone could ask for. Worryed that the Court would outlaw P2P technology in general. Technologists worry that outlawing P2P would outlaw the internet. At the PFF Aspen Summit, Pam Samuelson thought that the decision in Grokster was very good.

Public Knowledge has also worked to fight the broadcast flag. The flag would put the FCC in a position to completely regulate technology and be a gatekeeper for a whole sector of the economy. Now dealing with Congress to stop broadcast flag legislation.

RIAA is seeking content protection for digital radio. Digital radio is a nice, not revolutationary improvement. Digital radio is still lower quality than a CD. An MP3 at 128kbps is better sound quality than digital radio. Some part of the music industry sees this as an opportunity to authorize the FCC to put copy controls in place for recording stuff of radio broadcasts. That would be bad for consumers, general public and musicians, too. Don't necessarily want recording equipment to be turned against you.

--
Cannon:
There is a positive model out there: BMI, ASCAP, SESAC. We make money for creators and are growing and continuing to grow. We're being attacked by other organizations in the industry who are trying to take the PRO's piece of the pie.

on a Federal level, probably need to streamline licensing and reform it. There's a pie out there that's not going to grow, so it's going to be your royalties that are affected. Beware, beware, beware.

--
Ponder: The value of copyright is very valuable to AFM members and that

Performance rights is totally inequitable that songwriters get royalties while musicians get none. This inequity has increased since DMCA since 1995 which imposes a compulsory license on digital streaming, but not on traditional radio.

Cannon: We can make the pie bigger. Labels get bulk of the digital download (iTunes) price. Songwriters get nothing. Unhappy with AOL giving away music that creates commercial value for AOL, but not for songwriters.

Mills: Um, without songwriters there are no songs. Without performers there is no music. Of course, in REM, we do both ourselves, so the revenue streams are fungible, but they both have to be there.

Adelstein: FCC is trying to enhance the transition from analog to digital-- stations can do 3 digital stations in the same bandwidth it takes for one analog station.

Shelton: A number of calls that 2 major pieces of law are out of date: Copyright Act and Communications Act. So, this brings up the question of what is fair? Things have shaken out in court with Brand X and Grokster, and now there are discussions going on among the stakeholders, among the committees. Some of these issues are difficult for Members of Congress to figure out because there are so many different interests around as well as quickly changing tech. Very conscious making things future-proof and not having to redo things every time a new technology comes along.

Audience: Will payola investigation hit satellite radio, too?

Adelstein: Doesn't see why not. Sat. radio is broadcast, so regs apply. This is unlike indecency, which doesn't apply to sat. radio, because sat. radio is a subscription service.

Cannon: Going back to innovation and tech, remember that music drives technology.

Godwin: Technology development drives music, too. [For example, album format comes from tech limitations of the LP.] Don't want to create a policy that shuts doors to technological innovation. Public Knowledge worries that many of the ideas may stifle technological innovation.

Greenberg: Technology and artistic creators are not mutually exclusive. Can develop means to pay artists, and "we don't think they're asking too damn much." Like the ideas that allow creators to decide how their music is used.

Just about out of battery, so that's it for this session...

What is the FCC?
The FCC is a lot more than a place where we do indecency. Started when radio broadcasters interfered with each other and with marine communications. Regulates wired and wireless communications technology-- the traffic cop of all the spectrum (and .

The Commission is not really partisan. The things that get a lot of attention (like media ownership) are partisan votes, but generally communications policy is not political.

Who are you? Why is music important to you?
Thinking about ways to make music more vibrant. Localism in radio is important to musicians. Setting payola rules,

I like it all, and play it all, like bluegrass flute. Was in a band for a while, called the Screaming Elmers, and tried to blend all these roots rock together into this loud thing.

Media Ownership
I just walked into this situation where then-Chairman Powell was set to roll back ownership limits tremendously. Went out into the country to talk to people and found that people were unanimously against consolidiation-- radio had become homogenized and boring-- and people did not want what happened to radio to happen to television. The plan the Commission adopted was so bad that the 3rd Circuit struck it down.

Something like 1 in 100 people in the US contacted FCC about media ownership reform, and that grasroots effort had a major influence.

The Commission needs to listen to the consensus-- get feedback on draft proposals before adopting rulemaking. Plan to go and seek comments on media ownership reform.

Payola.
It wasn't until Eliot Spitzer came around to subpoena people and investigate payola, that the Commission found out it was true. The most widespread, flagrant, systematic abuse of FCC rules. Broadcast regulations require disclosure of pay-for-play schemes. Spitzher came out with such a vast array of evidence that the Commission has to step up and investigate. Spitzer has 2 rooms full of evidence that found violations of both NY state and federal law. Payola really saps the vitality of radio.

Is there a linkage between the structural reforms, payola, and more indecent content
Radio is losing its real life force and is also losing market share to satellite radio (and iPods and streaming). As these companies get larger and larger, there is a loss of the soul of music, like the local DJ who is in touch with the local music scene and can take a band from a local/regional exposure to break nationally.

What power does the FCC have over the radio stations to enforce payola regulations?
The FCC does have the authority to revoke license. Array of penalties available-- civil fines, consent decrees. If the broadcaster wants to retain its license, can put in place policies that will prevent payola. Radio station is required to operate in the public interest and follow rules. We knew there was smoke, but until Spitzer used subpoena power to get the evidence, we didn't really have the evidence as to what is going on.

Why isn't the Commission investigating like Spitzer? Does the FCC have subpoeana power?
Genreally, the FCC reacts to complaints, rather than investigating from the outset. Now, there's enough evidence just to go through that and figure out what violations of law occurred and be busy mining that information. FCC has subpoena power, but rarely uses it, generally only to pursue investigating complaints. There's institutional intertia that makes it difficult to investigate, but the Spitzer info is helpful. It would be a good idea to investigate on our own.

[FMC[ New Label/No Label Models

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Kristin Thomson Organizer, Future of Music Coalition (moderator)
John Buckman Founder/CEO, Magnatune
Brian Camelio Owner, ArtistShare
Melissa Ferrick Artist/CEO, Right On Records
Jerry Harrison Multi-platinum producer, Chairman & co-founder, GarageBand.com, member of Talking Heads
Joe Henry ASCAP artist and songwriter/producer
Sam Jennings Director, NPG Music Group Club (Prince)

Buckman: Magnatune is an attempt to create a record label that doesn't make CD's. What other digital distribution or ideas will pop-up. Don't be evil. Can license music online. Artists participate in revenue in a 50-50 split. Sign artists directly and sign second-tier genres (classical, electronica, metal, jazz,

Average listener spends 2hr 40 min on magnatune-- auditiioning music while doing other things manes it easier to sell music.

Can specify how much to pay for an album, between $5-$18. The average price people pay is $8.20.

Sells full-quality WAV files as well as MP3 files. No DRM. Creative Commons license. Trying to capture the Linux spirit. Allow non-commercial uses and remixes. Podcasters can use Magnatune music.

Licensing is a major focus. Trying to make it easy for creative people to license music-- all music is pre-cleared. Major revenue boost for artists.

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Camelio: AristShare isn't as much a label as it is an arts community. Find something to market that you cannot pirate, digitize or steal. There is nothing you can do to appropriate the creative process of a project.

Maria Schneider had a budget of $85,000 for her first ArtistShare album-- fully funded by fans, first album to win a grammy without a release in stores.

[This is a model that I've thought that artists could exploit-- fans would pay in advance for the album to fund the capital costs of the record.]

ArtistShare takes 15%. "Artists are making the money. I'm struggling."

Ferrick: Opened Right On Records by default in 2000. Wasn't seeing royalties from her indie label. Went to MyCorporation.com and incorporated. Owns all of her publishing.

Has distribution through Red Eye. Online through CD Baby.

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Harrison:
Garage Band developed an algorithm to deliver music, based on listener ratings.

Spent a lot of money on marketing during the dotcom hype

Is developing podcasting/audioblogging tools for artists.

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Henry
Starbucks is selling more and more records while the traditional music industry is selling fewer records each year.

Starbucks allowed him to go to these artists he was collaborating with and say on the date of release, it will sell 250,000 copies. Starbucks is taking that risk. S'bucks is exploiting a demographic and seeing things that the industry was not seeing. This is a finite period of success-- as this is successful, S'bucks will take on more and more records and might dilute its success. Deal with WB/Rhino to sell in traditional ways.

It should be alright to sell 20,000 records-- not every record has to sell 5 million copies.

If you're in the business of music, you shouldn't be there by accident.

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Jennings
Started NPG music club ~4 years ago, to empower the connection btw Prince and his biggest supporters. Eliminate the middle man.

Club members get access to download store and seats in the front at concerts. Prince was #1 tour in 2004. Last year, everyone who went to a show got a copy of Musicology. The price of the CD was built into the ticket and all CDs were manufactured by NPG, bypassing completely the label model. Had a deal with Sony for release in traditional channels.

When the tour started, Soundscan counted bundled sales for the chart, but later decided that bundled sales won't count for the charts. "If a million and a half people have your CD's, you don't really care if you chart."

Harrison: charting does help with radio airplay and MTV.

SJ: But then, Prince doesn't really need to get Top 40 airplay, and probably won't get MTV these days.

JB: Don't most people who go to the shows already have the CD? Or go to multiple shows, get multiple CDs?

SJ: That's another way to get distribution-- goes from fans to friends. It's a great way for an established artist to get his new music out to casual fans.

Henry: There are many ways the music can be successful.

Harrison: There have been other models. iTunes is like going back to the 50's for a singles-based, rather than album-based sales. going back to the 40's, records were really only promotion for the tour. Make sure that the live show is the one thing that's unique, and every night it's a little bit different, and the show is really good.

Henry: Playing live music is a different pursuit from making a record. Don't want the show to be a commercial for the album.

Harrison: Would you sell recorded copies of that show right after the show?

Henry: Sure.

JC: What the labels had for perceived value, the perceived value of that went way down (which is why labels want to control all rights now.) Always build you model around the live show.

Ferrick: Thinking of making live shows more interactive, tap into the community/local scene. Engage the audience, don't forget that they are intelligent, want to be entertained, want an experience.

JB: Command and control marketing is too expensive; the audience is too savvy (or cynical) to be sold to. It's the engagement of the audience-- a social movent-- the audience proselytized-- like Linux or the Talking Heads. You can't buy major market share anymore.

KT: Looking at the stats, the best-selling genres on Magnatune are Classical, electronic and baroque.

JB: Classical is the 3rd best selling genre on iTunes.

JB: When napster (classic) could snoop on people's hard drives, most people had at least 3 different radically different genres in their libraries. People are not music automatons. People get involved and then start to proselytize the music. It's all about connecting and creating something that people like enough to rave about.

Audience: Does putting out music under a CC license require foregoing performance royalties from a PRO?

JB: In the UK, yes. In the US that hasn't been a problem yet. Most of the music licensed on Magnatune isn't getting commercial airplay anyway. allowing non-commercial uses makes more exposure for the artists. The money is in the licensing, not in CD sales.

MF: Do artists have control over how their music can be used?

JB: Not through Magnatune. All music is pre-cleared, so we're providing a competitive advantage to our artists so that licensors can buy music for their uses without having to worry about obtaining clearances. That said, Magnatune does not blindly license to porn or other unsavory uses.

Harrison: The business is shrinking because the CD replacement is ending. Most of the major labels were bought with leveraged money, so they have to do a LOT of debt service. There may be a purging of this debt, either by bankruptcy or getting bought by deep pockets, and there will still be a place for the major label marketing budget and mega-success.

Camelio: The people to ask are the kids in junior high and high school now and figure out how they want to get music.

Henry: How do you survive long enough as a working musician to get good? A&R people have about 3 months for the album to do something. Artists have to find a way to keep doing what they're doing.

Harrison: It worries me that kids are growing up today hearing music only in an impoverished sonic version [as lossy, compressed MP3 files.]

Audience: Why is Magnatune's 50% take a good deal, while Ferrick was in a deal with a label that took 50% that was a bad deal?

Buckman: Magnatune is non-exclusive. Artists can still make money from other angles (licensing, CD Baby sales, sales at a show.)

Ferrick: 50% was after the label recouped, and the label was recouping for rent, and paper. Why are we the last people in line? Why don't the other people in the industry work as hard as the touring musicians? Yes, I'd like a royalty check
On Warner, 42,000, with $2 a record on budgets of $5k and $7k and saw nothing.
Sell 45,000 records on own label at $8/record, means real money.

Buckman: Anyone who's sharing in a percentage, you want them to get filthy rich, which means that you get filthy rich, too.

After finally getting to GW, only a few minutes late, there's wireless here, and we're on live from the Future of Music conference.

Guiiding Artists through tremendous change
Eric Brace Last Train Home and The Washington Post (moderator)
Charles Bissell The Wrens
Bertis Downs Advisor, R.E.M.
Michael Hausman President, Michael Hausman Artist Management
Peter Jenner Manager, Sincere Management/Secretary General, IMMF
Clyde Valentin Director, Hip Hop Theater Festival
Shoshana Zisk Management, George Clinton Enterprises

Bissell: Connections with audience (via 'net, podcasting, email) makes it possible to go outside the traditional model

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Valentin: From a theater, rather than music, background, but still, it's all about connecting with audiences.

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Zisk: "Let's put George Clinton on myspace, get an independent distributor, go with the hwole DIY approach."

[Aside-- Major artists, like Clinton, can take advantage of the increased revenue from selling directly, owning the master, owning the publishing, but have already taken advantage of getting name recognition on major label marketing budgets.]

SZ: George has distribution, owns the master and owns the publishing for the first time.

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Hausman: Artists need to go out and build a fanbase.
College and AAA radio isn't so much of an expense as getting on top 40. The indie promoters at this level are more like tastemakers than the gatekeepers who control access to stations.

After the crackdown on indie promotors, some stations won't talk to any independent radio promoter.

A project only works if it's going to ship enough records to make it worth my time.

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Jenner:
The internet and mobile phones are out there, and there will be money knocking around out there.
We're in the era-- we're in the railroad business and the first 707s are just rolling off the production lines, and it's very hard to work out how the train companies get into the airplane business.
The creative community wants to figure out how to get on the airplane and get fuel for the plane.
For the new media to work as an entertainment medium, it needs to have good music to make it worthwhile-- the music that appeals to them, while the record companies (who still control must of that music) don't want to give up what has worked.
How to get paid is the challenge, which is the problem that no single manager/artist/record company can resolve.
Suspect there has to be legislation, change in copyright laws.
It's a new model-- not a new way of selling records, a new way of getting music to the public.
Quite a lot of legislators will be very grateful if the creative community and consumers can get together on their own to figure out what work.

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SZ: Going direct makes a lot more work for the artists-- entering info into iTunes, then Napster, then Rhapsody, etc. Of course, IODA helps. The distributors are trying to get into the digital distribution space, too.

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CV: Content flows from space to space, genre to genre

MH: The job of managers and support people is to find talent, nurture talent and support talent, but the angles have changed. Selling records is no longer the benchmark.

EB: You can make a lot of money selling 10,000 records.

CB: The "sympathetic, like-minded" scene is more important than the NJ local scene (except at Maxwells).

CB: There's a lot less free time. The role of music is becoming relegated to a background for people's lives. Listening to music as a goal isn't so big anymore.

PJ: The legal services are very restrictive and limited. The challenge over the next few years is to get a sensitive, sensible collective licensing system, which means that the electronic distributors can provide the public with what they want. The unit cost is going to go down.

PJ: Music is becoming more of the soundtrack of your life, rather than something you sit down to have the maxell experience. Access, not ownership is what matters. Today's legal models make access very complex legally and that needs to get sorted out. The plethora of media means that mass marketing has become ridiculously expensive. The majar labels are hooked on mass marketing. George Clinton (or Billy Bragg or Aimee Mann) can afford to put out records today b/c they already have a following, so they can afford to put out records. Breaking new artists will require communities working together (ala, indie rock, hip-hop, etc.) Capitalism is killing music.

PJ: Home taping illegal usage is not killing music. We just need to find ways of getting the revenue streams going. Live music is like that-- it's much more intense than just listening at home. The need to get together as human beings.

BD: There are problems with the current model, but what revenue when there is none from Kaaza or Grokster?

MH: compulsory fee on ISP subscriptions, mobile phones, which permits access to non-commercial services. In America, the problem is we don't have a proper, sensible performance right.

BD: It seems like music has become less and less valluable.

MH: People are still happy to buy music-- after all, there's bottled water.

CV: What about the idea of selling music with concert tickets-- didn't Prince do that?

SZ: Yes, Prince included a copy of the CD with concert tickets and scanned those to count for Soundscan, Soundscan canged the rule because of Prince to exclude albums bundled with tickets.

Audience member (whose name I didn't catch): WeedShare solves all these problems. We may not have critical mass yet.

MH: I can't just throw my clients music out, because the internet isn't geography limited because they have foreign distribution deals that take advantage of having people working for us 'over there'

Weedshare would be great if we were building the industry from the ground up-- we're stuck in a model designed by Kafka with Rube Goldberg as his architect, and it's very difficult to change the status quo.

PJ: We may be shifting to a bifurcated model-- one copyright law for physical goods and then a new set of laws for the digital world.

MH: Be careful with what rights you give away.

PJ: Artists, never assign a copyright. License it, but never assign it. It's always a bad idea, but now it's suicidal.

[Audience member Tori Sparks]: How do indie artists take advantage of this when they are not yet at the level of a George Clinton, so that they can take advantage of the new environment.

PJ: think about genre sites and building with a community and build a crowd, a following. Do something which gets people talking about you and being your friends.

CB: There's a trickling down of buzz to revenue. Pitchfork -> download -> go to show -> buy stuff -> money. Community is very important. you end up working with the people that you already know and get along with and have similar things with.

[Brian Calhoun, Label Managing Systems]: What percentage of artists' revenue comes from the various streams?

SZ: George makes most money from touring than from anything else.

MH: A lot of artists have spikes from big licensing deals, but grossing from touring is high, though net isn't high, because touring is expensive. Licensing is the best value. We're trying to do as much in-house as possible.

SZ: A lot of P/funk members are int he band now, because they just kinda came up backstage or started hamming, thhen ended up in the band.

PJ: Artists should be much more open with their websites and getting fans to explore other music that the artists like.

Future of Music

I decided at just about the last minute to head down to DC for the Future of Music Conference at GW. I will be blogging as much as possible from the conference (depending, of course, on 'net and power access.)

If there are any readers who will be there, let me know!

Golf and IP

On Friday, Sept. 30, the NYSBA will have a program at Fordham about how to protect golf course design using copyright, trademark and trade dress law: Chipping in from the Fringe

Speakers will include Robert W. Clarida of Cowan, Liebowitz and Latman, renowned golf course architect Stephen Kay, designer of The Architects Club in Lopatcong, New Jersey, and Golf writer and lawyer, G. John Flemma. While golf-playing lawyers may find this program especially enjoyable, all lawyers interested in exploring the edges of copyright, and examining how copyright, trademark and trade dress concepts can be applied to subject matter not typically viewed as entitled to intellectual property protection will find the discussion fascinating.

(Via Pho.)