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Napster Goes Before US Congress
cecil36 writes "Yahoo! is reporting that Napster is going through a congressional hearing. At the Senate Judiciary Committee hearing were Hank Berry, Napster interim chief, representatives from the recording industry, artists Alanis Morissette and Don Henley, and the MPAA's Jack Valenti. There appears to be support for online compulsory licensing (pay for rights to listen) in both the House and Senate, but Sen. Orrin Hatch (R-UT) is saying that this type of licensing could be in violation of international treaties."
The royalties are collected on all digital media branded for audio. In other words, if it says "audio", then it is covered. Data media, meaning DDS tapes (which can be used as DATs) and unbranded or "Data" branded CDs aren't.
If you purchase digital audio media branded, that is, marketed and sold as for audio use, then the importer or manufacturer had to pay a 3% royalty at the time the CD was manufactured or imported. If you use bulk or data-branded CDRs, no royalty has been paid.
Make no mistake, the royalty amount is small. That's 3% of the wholesale price, not the retail price. Still, it's the principle of the thing. If Congress is going to consider a small statutory royalty to cover home digital recording, then they should be aware that not only is there already a functioning law on the books that does just that, but that there is strong evidence that this law is actually beginning to function as intended by Congress.
The AHRA was passed in 1992, when the only people who used DAT were industry professionals, and a handful of Grateful Dead tape traders. We know that there's been no surge in DAT sales in the last three years. The only explanation for the exponential growth in the royalty fund revenues in the last three years is that the royalty fund is tracking the explosive growth in music branded CDRs -- which even the RIAA has to admit is fueled almost entirely by the internet, the MP3 revolution, and ultimately, Napster.
Embracing the AHRA as sanctioning file sharing would be such a clean solution. On the one hand, instead of trying to re-educate the public into believing that sharing is wrong, the new message to the public would be that if you want musicians and songwriters to be paid when you download, the way you do it is by using royalty-paid media to store your music, whatever that media may be. Perhaps it's a minidisk, or a CDR, or some future technology.
Now THAT is something that the public could understand, agree with, and feel good about doing.
On the other hand, voluntary media royalty prepayment benefits the music industry because it automatically does what DRM is ultimately supposed to do -- capture royalties on all copying. The main thrust of DRM is to try and either prevent copying or collect royalties. With royalty-prepaid media, royalties are collected on serial copying as well, so there's no need to prevent copying. Royalties are always collected! In fact, the more copying -- the more "anarchy", as one of the industry spokespeople put it, the more royalties paid!
Of course, the system falls apart if people don't use audio-branded CDRs. But look at the numbers. They are, because that's what the royalties are collected on, and they're exponentiating! If the government, Napster, and the recording industry were to come together, accept the AHRA, and start a public relations campaign that the slight extra cost of buying digital media with the word "audio" on the shrink-wrap is how musicians and songwriters get paid, I'll bet people would do it in a heartbeat, and the recording industry, and artists and songwriters as well, would make more money on voluntary media royalties then they ever would on trying to corner the market on and strictly control downloading music. Without having to lift a finger.
Statutory royalties are already being collected by the music industry. Every time someone purchases a CDR to fill with music downloaded from Napster, they pay a 3% royalty, which is put in a fund. 100% of this fund (minus some 12 cents paid to two individuals who have been fighting the system and demanding their royalties directly) is paid directly to an organization called Copyright Management Inc (CMI), which distributes the fund to copyright holders, songwriters, music publishers, and artists. Well, they distribute the funds to the various organizations that claim to represent those parties, such as ASCAP, BMI, etc. In the words of the copyright office:
The Settling Parties [which received 99.999% of the funds] receive all remaining royalty fees because they represent the interests of the remaining copyright owners entitled to receive a portion of these funds.
These "royalties", collected by law, are intended to compensate the music industry for all non-commercial copying of music. These royalties have been collected since 1992, and represent a substantial amount of money. These royalties are compounding by the year as more and more people purchase CDR burners, and blank media, and use them.
It turns out to be fairly difficult to find out exactly how much money has been collected in blank media royalties. here is the copyright office's website describing how the royalties were divided up. The acronym is DART, for "Digital Audio Recording Technology" If you look over the documents, you'll find that for every year that blank media statutory royalties have been collected, over 99.99% have gone to an organization called "Copyright Management Inc", which is a blanket organization that covers ASCAP, BMI, SESAC, HFA, SGA, and others. It's almost as if they don't really want the public to know how much money is being collected. No matter how hard you look, you'll never find actual dollar amounts -- only percentages. I was able to find out the actual dollar amounts though, from one of those two individuals who filed individual claims, and here they are:
Royalties collected on consumer digital audio recording devices and blank media:
1992 $118,228.42
1993 $520,162.84
1994 $521,999.64
1995 $473,592.20
1996 $397,152.52
1997 $969,178.06
1998 $1,978,457.93
1999 $3,551,030.86
2000 $5,285,246.32
Total: over 13 Million dollars so far.
The royalties collected prior to 1997 mostly represent sales of DAT recorders and tapes. The introduction of CD recorders and blank CDRs caused a large jump in the collected royalties, and surely the introduction of Napster is largely responsible for the enormous growth in royalties collected in 1999 and 2000.
In other words, people are buying enormous numbers of blank CDRs. Most of these CDRs are probably being filled with music. Much of that music probably comes from Napster. So Napster is directly fueling the growth of the DART fund, which, I will remind you, is, by law, paid to artists and songwriters as well as copyright holders. So next time someone says that Napster users don't pay for their music, you have the real answer. They are. Congress needs to be made aware of this 13 million dollars in royalties, and decide what rights are purchased by those "royalties." Either admit that Napster users are paying royalties when they burn their downloaded MP3s to CDRs, and allow Napster to continue, or establish a new statutory royalty system based on downloads, and scrap the royalty system based on blank media, because under the current system, the people pay royalties to the music industry on the one hand when they purchase their media, yet are told that they are not paying the music industry when they fill that media. The music industry is talking out of both sides of their mouth on this issue, and no one seems to want to call them on it.
When asked when music publishers might actually distribute songs on the Internet, Jack Valenti and Hilary Rosen responded, "Real Soon Now." When pressed how this might be expidited, they elaborated, "Well, we're shipping tons of ice to Napster, so when they go to Hell everything will freeze over faster."
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While this is just a Senate hearing, and the Senate is currently not debating any bills that could pass through, I thought that the best part of the article was the RIAA's new website: http://www.nofreelunchster.com/
:-) )
On it, they show how "hip" they are by putting anti-fair-use materials onto MP3s and distributing them for free! They even have a newsletter you can sign up for. (heh, I feel bad for Taco...I wonder how many Trolls will sign him up for that letter
Doh!
One thing that impressed me was that they had one of the smaller record label execs was speaking before them. I believe it was the head of TVT. One of his major points was that napster wasnt just popular becasue of the free as in beer nature of the music. He thought its major success was the freedom of choice that it provided, allowing easier access to new and unusual music, which honestly is the major reason I use it. Yes he did think that napster was breaking copyright laws, but he was ready to make a deal with them so they could actually still have the music trading, but the copyright could be taken care of and some sort of payment could be made. He definately sounded more intelligent than any of the other record execs. He was also concerned about the division between the larger labels and the independant labels in application of copyright laws. Kudos to the committee and to CSPAN for providing some airtime and publicity to a viewpoint we dont see in the regular debates on this issue.
"My head hurts, My feet stink, and I dont love Jesus." -Jimmy Buffett
1st year of copyright costs $1.
2nd year of copyright costs $3.
3rd year of copyright costs $9.
4th year of copyright costs $27.
5th year of copyright costs $81.
6th year of copyright costs $243.
7th year of copyright costs $729.
8th year of copyright costs $2,187.
9th year of copyright costs $19,683.
10th year of copyright costs $59,049.
11th year of copyright costs $177,147.
12th year of copyright costs $531,441.
13th year of copyright costs $1,594,323.
14th year of copyright costs $4,782,969.
15th year of copyright costs $14,348,907.
16th year of copyright costs $43,046,721.
17th year of copyright costs $129,140,163.
18th year of copyright costs $387,420,489.
19th year of copyright costs $1,162,261,467.
20th year of copyright costs $3,486,784,401.
and so on...
Keep paying for as long as you wish.... No need for an expiration date. The moment you fail to pay, though, your copyright expires and your IP becomes as public domain as classical music.
The music companies have just announced a joint venture to distribute tunes online. Doubt this hearing will result in much more than a hearing. Once the legal scribbling starts up on any type of "forced licensing" this sort of joint venture rules out the notion that the music companies are just being lazy.
I do not have a signature
Four words, very slowly for Mr. PHB: ALL ... YOU ... CAN ... EAT.
Once this happens the illegals will disappear. Until then, see you on ftp and Gnutella.
sulli
RTFJ.
Just for clarity... in case somebody isn't aware a "Compulsory License" cannot be summed up correctly as "pay for rights to listen". That quoted aside was a specific case of a compulsory license.
Compulsory licenses are those which the owner of some IP must grant regardless of who wishes to license their material.
For instance, if there were a compulsory license on NFL Football, any TV station that wished to broadcast a game could pony up a statutory amount of money and the NFL has no right to say "No, I don't want to do business with your" (nor do they have the right to say, "Okay, but you can't broadcast any game that any other station is already broadcasting, here's the list... and by the way, if you accept any advertising dollars from the XFL, you'll never get another NFL game as long as you live." (This is a purely hypothetical example, and has nothing to do with real extant circumstances)
Compulsory licenses are the "opposite" of voluntary licenses, in which the IP owner makes all and only the deals that they individually negotiate with the licensee
ASCAP and BMI (the people who collect royalties for radio performance) have voluntarily made their operations work -like- compulsory licenses, where anybody who ponies up a certain amount of money can play a certain amount of music (different rant about how ASCAP and BMI don't pay the people who's music is ACTUALLY played by the people who pay the fees... but they pay the people who are POPULAR *sigh*).
If most/all IP were under compulsory licenses... well, you wouldn't have to worry about AOL-Time Warner withholding all of their programming from other cable networks, and you wouldn't worry about Pfizer withholding all of their medicines from knock-off producers. Sounds great doesn't it? But like all things that foster competition in the delivery of IP, it reduces the strength of the Innovator's half of the copyright/patent bargain... and any time you WEAKEN that half, you WEAKEN the encouragement to innovate.
I don't know enough about markets to say whether the lost innovation would be made up for by the increased social welfare of a competitive market, but I wouldn't want to trust legislators with that decision either.
However, what does napster add to this debate? While they on the surface want to provide a similar application (on the backs of their user's bandwidth which is ugh, an ugly solution)... but who trusts napster now? Their $1 billion proposed package was nothing but a lot of hype... the economics of the situation on both sides seems poor for a deal like this that doesn't even include stable payment per user.
Having Hank Barry push for this kind of legislation groups the rest of the folks that suppport or would benefit from this into this attempt, which is nothing more than a company that promoted massive piracy gasping for it's last breaths. The industry (and the public) will be much better off when napster finally dies.