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Rosen House Testimony On Online Music Opportunities
The DPRA and the DMCA The revolution of the Internet and the proliferation of webcasters have raised a large number of questions, many of which are relevant to this hearing: whether and how copyright law should be changed to accommodate this new reality. When the 1995 Act was passed, we did not anticipate the volume of licensing issues the recording industry would face. Nor did we anticipate the rapid growth of this new business now called "webcasting." Because so many webcasters were faced with the need to have easy access to thousands of songs requiring complex licensing mechanisms, new rules were created and implemented in the Digital Millenium Copyright Act ("DMCA"). The DMCA thus provided for efficient licensing mechanisms for webcasters and others. While we, like other copyright interests, as well as the US Government, have historically been opposed to compulsory licensing, we thought that the blanket license model made sense in this unique environment for this specific purpose. We think the process set up by Congress and currently in place is a good one. The statutory license in the DMCA has worked to help all sides. It allows us to negotiate rates with webcasters on both an individual and industry-wide basis, and if an industry-wide agreement is not reached an arbitration panel will decide rates for qualifying webcasters based on rates already in the marketplace rates. We look forward to participating in this new process and watching it develop. Building the New Marketplace RIAA strongly believes the steps Congress has taken in the past five years are essential to the future of recorded music, and that the structure Congress has established is the right one. We are grateful to you, Chairman Coble, and to this Subcommittee, for your leadership in this regard. The goal of Congress, the RIAA on behalf of its members, webcasters, and others should be to build a legitimate marketplace for the music industry, and the current process is working to accomplish such goals. For example, we have been successfully negotiating licenses with webcasters for more than a year. The process is not easy because many webcasters have a steep learning curve before understanding the ground rules. But marketplace negotiations afford the parties the opportunity to create flexible and mutually beneficial agreements. We try to tailor the licenses to meet the needs of each individual company. Given the variety of business models employed by creative entrepreneurs, we realize this is not a one-size-fits-all business and our ability to negotiate with different entities in different ways works to the benefit of everyone. Of course, the royalties flowing from these licenses must be distributed. In addition, the Copyright Office has appointed us to collect and distribute certain other royalties. So we've been hard at work to set up a means to get the money to those who deserve it, the creators of the recordings. Royalties will be distributed based on reported performance information and a board made up of a cross section of the industry will oversee the process. We look forward to providing this service to all copyright owners, including the hundreds of independent record labels that have signed up with us. More important than what RIAA is doing, individual record companies and artists have also worked with a variety of new technology companies to develop fresh and exciting ways for consumers to enjoy copyrighted sound recordings. They are planning to work with webcasters to create even more personalized programming - artist specific channels or customized radio with a high degree of consumer interaction. They are redefining business models and forming unprecedented business relationships to develop legitimate ways to access copyrighted music online. All of the major labels have announced plans to start selling music as digital downloads this summer. EMI is working with Preview Systems and Supertracks; BMG with IBM, InterTrust and Microsoft; Warner with Sony's ATRAC3; Universal with Magex; and Sony with music distributor Alliance Entertainment's 35 retail accounts, including Peaches and National Record Mart. Major independent label Zomba will also sell downloads this summer, and independent label TVT will sell their music through MusicMaker.com's custom compilation CD service. With regard to webcasting and streaming, BMG has licensed almost all of its sound recordings to MusicBank.com, a service that allows users to store, manage, and listen to music over the Internet. Sony and Universal have announced plans to develop a subscription music service where users pay a monthly fee to access their sound recordings. The value of reaching fans has not been lost on Warner Music Group, along with other labels, who have invested in consumer music sites ArtistDirect.com (a fan community and artist merchandising site) and Listen.com (a directory for legitimate downloads and streams). On the artist front, Todd Rundgren has re-launched his music subscription service, where fans pay a monthly or annual fee to access his new music, to include other artists wanting to do the same. Chuck D runs the rap and hip-hop Web site Rapstation.com, which gives exposure to artists as well as digital music issues. And many more artists have used the Internet on their own and with fan community Web sites like Fanscape.com to build strong relationships with their fans, sell merchandise, and promote upcoming tours and releases. The Challenges Ahead But we still have work to do. Although marketplace negotiations have worked with many webcasters, industry-wide agreement has not yet been produced. Thus, it is likely that an arbitration panel will determine the rates for the other webcasters. One issue that has arisen in the course of negotiations is whether radio broadcast stations that webcast their local over-the-air AM/FM signal to Internet users throughout the world should be granted special treatment among webcasters. While there is no question that over-the-air transmissions of broadcast stations are exempt from the digital performance right in sound recordings, RIAA believes the law is just as clear that Internet streaming of that signal is subject to the digital performance right. In fact, Congress made clear that third parties such as Yahoo! Broadcast that retransmit over-the-air signals on the Internet are covered, so it would make no sense to allow the identical streaming to be exempt merely because a broadcast station performed the webcasting itself. A different result would give broadcasters a competitive advantage in an entirely new medium merely because they hold an FCC license that has no application to the Internet. RIAA has asked the Copyright Office to decide this issue. The Digital Media Association ("DiMA") has also filed a petition with the Copyright Office asking for a ruling concerning certain types of webcasting services that allow listeners to personalize the music they receive. DiMA claims that such services qualify for the statutory license as noninteractive services. In RIAA's view, these services fall squarely within the definition of "interactive service" as revised in the DMCA, and thus they require individually negotiated licenses from the copyright owners. In any event, RIAA believes that the personalization issue is highly fact-specific and inappropriate for rulemaking. As was discussed by the first panel of witnesses, it is very rare for Congress to grant compulsory licenses. Congress has not done so for webcasters that run a personalized service, and it should allow record companies to negotiate with these entities for individual licenses in the marketplace. Conclusion In sum, the ongoing negotiations are complex and challenging due to the many business models employed by webcasters and the lack of a single representative for all entities. But the marketplace is working. The system is working. And we believe that the current course of action is the correct one. Thank you again for the opportunity to appear today. I hope this background has been helpful, and I would be pleased to answer any questions you might have.
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