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CONFERENCE EXPLORES CHANGES IN MUSIC INDUSTRY
By Andrew Noyes, National Journal's Technology Daily, October 5, 2006

MONTREAL -- Problems plaguing the music industry vary by country, but one constant certainty remains: The sector is undergoing extensive change. That was the message that attendees of the Future of Music Coalition annual summit heard here Thursday.

Deliberations on copyright law and licensing reform, competition, and business strategy know no borders. As Congress weighs bills to ease digital music licensing and content protection on satellite and high-definition radio, similar debates are occurring elsewhere.

The European Union has wrangled with major label mergers and consumer activism around proprietary software and anti-piracy technology, and the World Intellectual Property Organization is continuing its work on negotiating a broadcasters' rights treaty.

In Canada, the birthplace of country crooner Shania Twain, rocker Alanis Morissette and other musicians, regulators also are altering their approach to music policy as new business models emerge and the political and economic stakes grow higher. The Future of Music Coalition, which was born amid the dot-com bust, weathered the storm as a beacon for the "musicians' middle class," Executive Director Jenny Toomey said. The "second wave" of digital distribution is "really happening now," particularly in the Unites States, she said.

Before Silicon Valley's epic slump, the coalition was engaged in discussions with other industry stakeholders who wanted to find "the solution to digital download problems." None were perfect but all were steps in the right direction, she said. That dialogue slowed and the "air was sucked out of the conversation" until recently, Toomey added.

A handful of music-licensing bills, H.R. 5553, H.R. 5361 and S. 2644, are moving through the House and Senate. They have prompted considerable debate in the chambers' Judiciary committees and among industry players.

Meanwhile, the coalition has lobbied hard on behalf of musicians in the past year, said Toomey, a punk rocker with a philosophy degree. The group fought radio stations' pay-for-play deals, which involved selling airtime to benefit artists. Investigations by New York Attorney General Eliot Spitzer led to multimillion-dollar settlements with major labels. Advancing legislation to increase the number of radio frequencies available for small, low-power FM stations has been another "huge win," she said. The National Association of Broadcasters has lobbied against the measure, which is part of a giant telecommunications bill that won Senate Commerce Committee approval in the summer.

Now in its sixth year, the coalition's work is not done, Toomey said. The longer an organization thrives, "the more you see the shades of gray," she said. The incongruent missions of recording labels, publishers, songwriters and the digital music sector show "it's not easy to find comfortable, middle-ground footing when the ground is shifting under your feet."

Reprinted with permission from National Journal's Technology Daily - "the standard for news and information on technology politics and policy." Subscription info here

MUSIC INDUSTRY PLAYERS SAY INDUSTRY HAS TO ADJUST
By Andrew Noyes, National Journal's Technology Daily, October 5, 2006

MONTREAL -- The core question faced by key players in the global music business is "how we can rebuild the industry in the context of an ongoing technological freak-out," Peter Jenner, secretary-general of the International Music Managers Forum, said here Thursday.

Jenner, the manager for singer-songwriter Billy Bragg, told the Future of Music Coalition policy conference that the "business is broken." Stakeholders can either "wail about it" or embrace the fact that "digital technology is fundamentally changing our business," he said.

The mass-production of the 19th and 20th centuries no longer exists, he said. Digital distribution means that the "consumer has become the distributor and manufacturer," which has been tough for "those who've built their business around past structures."

Jenner pointed to the "ongoing collapse of [physical music] sales in the U.S" as a taste of what's to come internationally unless the industry finds "a way of monetizing the chaos." Canadian Recording Industry Association President Graham Henderson acknowledged that the situation is worse in his country. Canada has lagged in adopting the "multiplicity of online services" that are available in the United States and in Europe.

He cited the booming area of musical ring tones for cellular telephones as an example. Global ring-tone revenue to carriers and content providers is predicted to reach $28 billion by 2009, according to the Yankee Group.

In Canada, compact disc purchases still dominate the music market, but sales have slipped, Henderson said. In other countries, "the new format is doing what it's supposed to do" by supplanting lost physical sales. "We have yet to see that in Canada," he said.

Speakers said the ring-tone illustration highlights another trend -- the convergence of telecommunications and music industries. "We're all sitting in each others laps in a way we never expected," Henderson said.

Former telecom industry official Eric de Fontenay said the sector's willingness to change was lubricated by pressure from government regulators. Music's evolution has been less harmonious because it lacks "a good referee to come in and set rules," he said. Fontenay, who now specializes in Internet brand development for recording artists, said the music industry erroneously bases the price of a download on the price of a CD. Companies are "scared of losing their share of the pie rather than looking at the size of the pie," he said.

But Kevin Arnold, who founded the Independent Online Distribution Alliance, noted major differences between the two fields. The telecom industry does not have as many middlemen, he said.

Master recordings' rights holders, publishers and songwriters all have to get paid, and countries' disparate licensing regimes have created a labyrinthine system, he said. But Future of Music Coalition General Counsel Walter McDonough countered that an FCC for the music industry is not the answer. "The last thing anyone would want is for the music industry to be regulated to that degree," he said.


Reprinted with permission from National Journal's Technology Daily - "the standard for news and information on technology politics and policy." Subscription info here

WAL-MART OR DRM: WHAT'S THE BIGGER MUSIC THREAT?
By Andrew Noyes, National Journal's Technology Daily, October 6, 2006

MONTREAL -- Digital-rights management for music has become a political and legal hot potato, but it is "not the grandest problem we have in the world," a former senior congressional adviser said here Friday.

Stacy Baird, who previously worked on technology issues for Sen. Maria Cantwell, D-Wash., and Rep. Howard Berman, D-Calif., said "things like Wal-Mart are a bigger problem than DRM" in preventing emerging artists from entering the marketplace.

Still, the debate over the anti-piracy technology is a core contributor to music industry in-fighting. Supporters say that the copy protection or playback limitations of such tools safeguard intellectual
property and build new online music models that let creators and labels get paid. Opponents claim that the technology has been ineffective and has led to consumer frustration.

Speaking at the Future of Music Coalition policy summit, Baird said critics of DRM and U.S. laws that make it illegal to bypass anti-piracy technologies are focusing on "a sliver of an industry." In the evolving "ethereal world of digital distribution, everybody is trying to fight to keep or get a piece" of the market, he said.

But Michael Geist, an Internet researcher at the University of Ottawa, has waged a war against DRM because he said the tools "can be used to take away rights that consumers have." Although a Copyright Office review of the Digital Millennium Copyright Act found no major problems with its anti-circumvention language, Geist said the law is flawed. He noted a "more unbiased review" of anti-circumvention methods by an Australian parliamentary panel, which flagged dozens of concerns.

Canada's interest in the DRM debate has grown since talk of enacting of anti-circumvention mandates began among lawmakers. "We will see copyright legislation this fall, and it will look a lot like DMCA," Geist predicted. He urged Parliament to first take a thoughtful look at DRM backlash in the United States. There is room in the music business for DRM, argued McCarthy Tetrault attorney Barry Sookman. The technology is "an enabler" and is "very pro-consumer." He added, "When creators get paid, more works are available, and that's good for consumers and good for business."

The real problem faced industry-wide, Sookman said, is that despite the U.S. Supreme Court's 2005 ruling against free online music-sharing services and the takedown of several such major and illegal sites, "there are still difficulties in competing with free."

Reprinted with permission from National Journal's Technology Daily - "the standard for news and information on technology politics and policy." Subscription info here

RADIO, AMERICAN STYLE -- AND CANADIAN STYLE
By Andrew Noyes, National Journal's Technology Daily, October 6, 2006

MONTREAL -- Radio promotion and airplay in the United States and Canada differ, yet both countries are grappling with an ever-changing industry, experts agreed Thursday at the Future of Music Coalition policy summit here.

In Canada, terrestrial radio is viewed not simply as a way to support the recording industry; it is an important cultural preservation tool. The government reserves 35 percent of airtime for homegrown artists and helps them pay for marketing, touring and business development.

The Radio Starmaker Fund, created by the Canadian Association of Broadcasters with regulators' blessing, has paid millions of dollars to emerging artists. Artists are "the center of our universe," said Chip Sutherland, the program's executive director. "We're just a machine that gives out money."

Compare that with U.S. radio, where the airwaves have arguably little societal connection but are an essential engine for music promotion -- so much so that a three-year, high-profile "payola" probe cost four major recording labels about $30 million.

Terryl Brown Clemons, a New York assistant deputy attorney general, helped investigate recording companies for paying stations to play their clients' tracks. The resulting multimillion-dollar settlements went toward statewide music education and appreciation programs.

U.S. regulators and the music industry may want to review their northern neighbor's model, she said. "There should be a discussion about a certain percentage of airplay that needs to be made available to local artists or at community level," she said. Meanwhile, her office's work in the payola area is not over. "We have investigations into several radio conglomerates and are in litigation with one," Clemons said.

Changes in the 1996 Telecommunications Act also illustrate a different style of U.S. policymaking, coalition Research Director Peter DiCola said. The law eliminated the national cap on radio-station ownership and doubled local ownership limits. In the United States, broadcasting companies can own eight stations in a market, he said. Clear Channel Communications, for example, increased its properties from 40 stations to 1,240 in several years' time. In Canada, most cities have a three-station cap, he said.

Glenn O'Farrell, who heads the CAB, said his country is "experiencing the same technological challenges and opportunities that exist elsewhere" after decades of stability. Canada's system has been "extraordinarily successful" but was the creation of an "island" mentality, he said. But new technologies -- like digital music and streaming online audio -- do not respect gatekeepers, putting pressure on "the regulatory model as we know it," O'Farrell said.

Despite competition from satellite radio, streaming audio and portable digital-music players, over-the-air radio is "still relevant" because of its community roots, DiCola said. That has made the sector "extremely complacent," said Jeff Leake, assistant program director for XM Satellite Radio. "They have never been as local as they should have been or could have been," he said.

Reprinted with permission from National Journal's Technology Daily - "the standard for news and information on technology politics and policy." Subscription info here