[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.
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.

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.

[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.