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Who Will Make the Rules? Music Industry Faces Off at DC Conference

by John Scott
05/21/2001

In what shapes up as an exhibition game for the Big League contests to come, music and movie industry lobbyists, artist representatives, a government official, and a reporter faced off in a debate on the future of digital entertainment. The outlook: threats, litigation, appeals, and (eventually) hearings before the Supreme Court. Most of the panelists who took part in this forum will no doubt be making their cases before Congress, the courts, and the media over the next several months and years.

The frontline in this war, it was noted, began with Napster and has continued with academics, lawsuits involving DeCSS, the Digital Millennium Copyright Act (DMCA), and services such as Gnutella and Aimster.

Panelists at the Digital Rights Management Panel, sponsored by Digital Media Wire, included:

Front and center was the longstanding dispute between the Recording Industry Association of America (RIAA) and providers of file-sharing software such as Napster, Gnutella and Aimster. Asked what can be done to prevent these and similar services from constructing and operating file sharing services, Russell Frackman, lead counsel for RIAA in its legal battle with Napster, responded that there will always be some piracy, but the key to slowing file-sharing violations will be to go after the facilitators of such technology, much in the way industries went after retail outlets and individuals that sold bootlegged 8-track tapes 30 years ago.

The RIAA has sent notices to entities like Aimster indicating that their service may run afoul of copyright laws and that they should make efforts to prevent abuses. The implicit threat contained in those letters is that if the services continue to facilitate the distribution of copyrighted material, they may find themselves in the unenviable legal position that befell Napster.

(For its part, Aimster took proactive measures earlier this month, ZDNet reported, going to federal court to ask for a "declarative judgement" that the service doesn't violate U.S. copyright law.)

Whack a mole

Related Articles:

Compulsory Licensing Testimony

Are We Promoting Piracy?

alt.napster

Jonathan Potter of the Digital Media Association, an alliance of companies that develop and deploy technologies to perform, promote and market music and video content on the World Wide Web and through other digital networks, took exception to the scattershot legal approach of "whack a mole" -- going after companies or people who could be facilitating file sharing. He argued that the record industry will be unable to stop file sharing if no other equally attractive service exists to fill the void. In China, for example, sales of pirated music and movies are rampant. Authorities are unwilling or unable to crack down on these operations since the industry offers no other product or service to satisfy the marketplace. If the marketplace desires a product, it will be provided -- regardless of whether the means of procuring that product is considered illegal. In the absence of nothing, the illegal service will continue.

The RIAA's Frackman argued that the industry cannot compete with a free product and still make money. And he claimed that there are currently legal means to obtain music over the Web. In response, Potter offered the examples of bottled water and TV cable. Both provide a substitute for a service that is otherwise available for almost free -- and there are no shortage of customers for either. Why hasn't the industry developed a service where the good sold is considered more valuable if acquired through a reputable source? Frackman did not respond to this analogy.

Can you make all the people happy all the time?

Is there an economic model that would satifsy recording companies, artists and consumers? Jenny Toomey, executive director of the Future of Music Coalition , responded that the current model of music distribution does not benefit the artists. She said that only 6-13% of royalties -- after the artist pays for studio time, promotions, and other miscellaneous expenses -- goes back to the artist. She argued that it is possible to develop a viable economic model, but only if the artist is recognized as a major draw. Fritz Attaway, general counsel for the Motion Picture Association of America, pointed out the movie industry is based on collective bargaining between the movie studios and the movie workforce, which helps to ensure that all involved receive compensation. He added, though, that there is an issue with payment of residuals (monies generated from reruns, commercials, etc.) and pointed out that currently every download of a movie is "unequivocally stealing from the movies studios," since the only way to legally watch a movie is to attend a showing in a theater or other authorized venue, rent the movie, or watch it on cable/broadcast TV.

Attaway asked the panel how movies would be produced if they became available for free over the Web. Since the costs to make the average motion picture is in the millions of dollars, his concern was that studios would be unable to recover their costs and make a profit if not for the current economic model. He further noted that cable and satellite broadcast companies have created an economic model around pay-per-view and pay-on-demand broadcast of media, and noted that major Hollywood studios are launching new services to allow for the viewing of movies via the Web.

Compulsory Licensing? Fat Chance

Comment on this articleDive into any of the speakers' comments: Should music be like cable TV? Is file-sharing the same as shoplifting? Why don't average users believe that file sharing is stealing?
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As the discussion turned from economic concerns to legislative concerns, Marybeth Peters, representing the United States Copyright Office, noted that Napster has been pushing for a compulsory license with which to compensate the recording industry, but Peters doubted that Congress would buy into that model, especially since the recording industry is against it. Peters called compulsory licensure a "hornet's nest," which brings to the fore many other complicated legal questions.

A House Judiciary Committee hearing on May 17 focused on a the issue of composition rights in online music distribution. According to Reuters, MP3.com's Michael Richards called for compulsory licensing, an idea decried by Lyle Lovett as "repugnant to those who believe in the free market and the sanctity of private property, including intellectual property." And as Peters predicted during the panel, committee members sneered at the compulsory licensing proposal.

Panelist Declan McCullagh, Washington bureau chief of Wired News, predicted that there would be no major legislation voted on in Congress in the next year dealing with digital copyright issues. The most interesting issue right now, according to McCullagh, is the DeCSS court case in which MPAA alleges that the 2600 Group's posting of DVD ripping tools violates the law. He said that he felt the judge is inclined to rule with the MPAA in this case. McCullagh also raised the issue of the SDMI contest, in which the computing community was challenged to break the current set of codes for encrypting digital media. He cited the recent letter from the SDMI Foundation to Prof. Edward Felten of Princeton asking that he not present his code- breaking results at the SDMI conference. McCullagh noted with concern that the industry seems willing to intimidate researchers in order to further their position.

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